European Court of Justice ruling may end An Post’s social welfare contract

THE European Court of Justice (ECJ) is to issue a ruling tomorrow week that could force An Post to relinquish its annual contract worth around €37 million to make social welfare payments on behalf of the Government.

It is widely expected that the judgement by the ECJ will compel the Government to put the lucrative contract to provide payments to almost one million social welfare recipients out to tender.

Such a ruling could also place a question mark over the future viability of a large number of rural postal offices.

The European Commission in Brussels has taken the case against the Government for its alleged breach of EU legislation relating to the awarding of contracts for what are termed “non priority services.”

The case dates back to the decision by the then Minister for Social Welfare, Charlie McCreevy, in December 1992 to award An Post with a contract to pay social welfare payments through its network of post offices.

The contract was awarded without being advertised or put out to tender.

In May 1999, the Government decided to extend the contract until December 2002, although it subsequently suspended this decision following an investigation of a complaint by EU officials in Brussels.

Despite the suspension of the contract, An Post continues to provide the same service on an ad hoc basis in order to ensure the continuity of payments to social welfare recipients.

The European Commission maintains that although the nature of the contract is not specifically covered by EU law on public procurement services, the value and national scale of the contract should have resulted in it being put out to tender.

However, the Government claims that Brussels is incorrect in its interpretation of the relevant pieces of EU legislation.

The position of the Government was also supported by Denmark, Finland, France and the Netherlands.

The Government subsequently reached an agreement with Brussels to leave the An Post contract in place on an ad hoc basis pending the outcome of the current case.

The loss of the contract for An Post could also place the troubled State-owned company into further financial difficulties despite the declining value of the deal, which fell from €37.7m in 2005 to e36.6m last year.

An Post chief executive Donal Connell recently noted that a growing number of social welfare recipients were choosing to receive their payments by alternative methods than their local post office.

The postal service arranges over-the-counter payments of social welfare monies which are worth around €6.4 billion to around 938,000 social welfare recipients each year.

The ECJ is expected to rule against the Government as it is likely to concur with a legal opinion delivered by an advocate general of the court in September 2006.

Although the ECJ is not bound to adhere to this opinion, it is seen as a reliable barometer of the ultimate ruling in the vast majority of cases which come before the Luxembourg -based court.