Emily O’Reilly criticises Brussels for awarding contract to BlackRock

The European Ombudsman, Emily O'Reilly, has sharply criticised the European Commission for its failure to assess a potential conflict of interest in awarding a contract to US investment giant, BlackRock, for research into an area of financial regulation that could affect the company and its clients.

Ms O’Reilly has called on the commission to improve its guidelines for assessing bidders for contracts relating to public policy, and to strengthen provisions regarding conflicts of interest in Financial Regulation, the EU legislation which governs public procurement procedures funded by the EU budget.

It follows her examination of the awarding of a contract by Brussels to BlackRock Investment Management, to carry out a study on integrating environmental, social and governance objectives into EU banking rules.

Complaints

The Ombudsman had received three complaints about the contract, including two from members of the European Parliament.

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BlackRock was the only large investment manager out of nine firms which bid for the contract.

“An application by a company to carry out a study meant to feed into policy that will regulate that company’s business interests should have resulted in significantly more critical scrutiny by the commission,” said Ms O’Reilly.

“One cannot adopt a tick box approach to the awarding of certain contracts,” she added.

Ms O’Reilly also noted that BlackRock had optimised its chances of securing the contract by submitting an “exceptionally low” tender bid price, which she said could be perceived as an attempt to assert influence over an investment area of relevance to its clients.

BlackRock’s clients include large fossil fuel companies and large investment banks. It is also a member of several lobby groups that have made representations about new EU rules for banks.

“Questions should have been asked about motivation, pricing strategy and whether internal measures taken by the company to prevent conflicts of interest were really adequate,” said Ms O’Reilly.

“Winning the contract may enable the company to gain insights and assert influence over a growing investment area of major and increasing relevance to its clients and therefore to the company itself,” she said.

Rules

The Ombudsman said the existing applicable rules were not sufficiently robust nor clear enough to allow EU officials to find a conflict of interest other than in a very narrow range of professional conflicts.

While Ms O’Reilly believed the commission could have done more to verify if BlackRock should not have been awarded the contract due to a conflict of interest, she claimed the underlying problem was the current EU rules on public procurement.

The Ombudsman said she would bring the matter to the attention of EU legislators.

“The EU is set for unprecedented levels of spending and investment in the coming years with significant links to the private sector. Citizens need to be sure that contracts involving EU funds are awarded only after a strong vetting process. The current rules fall short of providing this guarantee,” said Ms O’Reilly.

As the existing guidelines on assessing conflicts of interest were too vague, the Ombudsman did not make a finding of maladministration by the commission in the case.