Today's EPO, Europe's second-largest institution, rejects science and facts

Summary: The Staff Union of the European Patent Office (SUEPO) highlights the degree of shamelessness, audacity and the sheer nerve EPO administration now has; when objectively refuted and presented with evidence to show that it is wrong the management responds "with mere hand-waving"

BACK in summer a document outlining the flaws in the so-called 'study' about the EPO's financial situation was preceded by this concise text:

The EPO’s financial situation has always been good, and right now it is excellent. Financial studies claiming the contrary are usually a prelude for cuts in staff benefits. The 2019 study by Mercer and Wyman is no exception.

Although the EPO’s currently makes a budget surplus of about €400m /year (20% of the budget), Mercer and Wyman predict an overall €3.8bn deficit by 2038 and endorse the President’s suggestion to add a €1.9-2bn “buffer” when closing the alleged gap.

The principal means planned to fill the alleged gap will be a reform of the annual adjustment method for the staff’s salaries and pensions. Ernst & Young has performed an analysis which fully confirmed our earlier findings. Comparing the key assumptions of the 2019 study with those of other EPO documents, Ernst & Young found that the 2019 study consistently took a more conservative approach. It is clear that the EPO has no deficit. On the contrary, under normal circumstances the EPO will continue to generate surpluses.

The EPO already has an operating surplus of about €400m/year. What is the President planning to do with the additional €2bn that he plans to save on the back of staff by changing the salary adjustment method?

As we noted earlier this week, Benoît Battistelli and António Campinos basically gamble -- for personal gain -- with billions of euros of money that the EPO's isn't even supposed to hoard. It's a massive scandal waiting to break out (the corporate media is too full of cowards and too corruptible to make this a front page story).

The full document reads as follows:

25.05.2020 su20028cp – 0.2.1/4.2.1/0.3.2

Background to the Ernst & Young analysis

Introduction The EPO’s financial situation has always been good, and right now it is excellent. Financial studies claiming the contrary are usually a prelude for cuts in staff benefits. The 2019 study by Mercer and Wyman is no exception. Although the EPO’s currently makes a budget surplus of about €400m /year (20% of the budget), Mercer and Wyman predict an overall €3.8bn deficit by 2038 and endorse the President’s suggestion to add a €1.9-2bn “buffer” when closing the alleged gap. The principal means planned to fill the alleged gap will be a reform of the annual adjustment method for the staff’s salaries and pensions^1,2.

Deaf ears SUEPO and the Staff Committee quickly pointed out that there are major flaws in the 2019 financial study³. Representatives of the EPO pensioners’ association did the same⁴. Assuming that expenditure continues to rise with no increase in income – as Mercer and Wyman did for the EPO – is unrealistic and leads to dire predictions for any organisation. But the President and the delegates in the Administrative Council clearly did not want to listen.

Heading for a conflict We expect the Administrative Council to approve the new salary adjustment method in their upcoming meeting. If so, then the only route to challenge that decision will be legal, with the ILO-AT as the final instance. Like the Council, ILO-AT is more inclined to listen to the EPO’s administration than to EPO staff. The staff representation is not heard at all – neither the Staff Committee nor SUEPO have any standing at ILO-AT. We therefore wanted to have a professional counter-study to provide staff with authoritative support in the complaints that will inevitably follow an unfavorable decision by the Council.

What were the conditions? Our first approach to Ernst & Young was met with hesitancy to accept the mandate. It was made clear to us that they would not comment on the EPO study other than on the basis of solid documentary evidence available in the public domain. For that, they proposed to compare the assumptions used in the 2019 study with those used in the 2016 study by Deloitte and other data sources published by the EPO. We agreed to this proposal since it increases the credibility of the analysis. But Ernst & Young also demanded very stringent use restrictions that we could not accept. After intense discussions we agreed on a

____ ¹ The SUEPO Salary Simulator estimates your personal financial loss. In a video we look back at the last months and explain the impact of the new method on our future salaries and pensions. ² “The Salary Adjustment Procedure (SAP) – Timeline”, su20026cp, 19.05.2020. This paper provides an overview of what happened over the last months. ³ The Financial Study: Yet Another Hoax (sc19070cp, sc19071cp, sc19076cp and sc19081cp) ⁴ Letter to the AC by the EPO Pensioners’ Association, ex19151cl, 26.11.2019

---

compromise: copies of the document can be given to the EPO’s President, the Vice-Presidents, the Council delegates and various other political actors as well as ILO-AT, but we have no permission to publish the document on the SUEPO websites and our members are to be given protected read-on access only.

The results Even with their very stringent approach (requiring contradictory published EPO documents or obvious methodological flaws, before commenting), Ernst & Young fully confirmed our earlier findings⁵. Comparing the key assumptions of the 2019 study with those of other EPO documents, Ernst & Young found that the 2019 study consistently took a more conservative approach.

Ernst & Young estimated what they called the “illustrative impact” of those highly conservative assumptions. Their main findings are the following:

- more realistic assumptions (in line with those of the RFPPS actuaries) for the contribution levels to the RFPSS and the EPOTIF reduce the alleged gap by €2.3bn - more realistic assumptions of the return on the RFPPS and EPOTIF assets in line with other EPO documents reduce the gap by €4.0bn, - taking into account expected future income from patents existing in 2038 (omitted in the 2019 study) reduces the alleged gap by €4.7bn, - assuming that EPO internal fees will rise with inflation (rather than stay constant until 2038) reduces the gap by €1.6bn. - Ernst & Young further pointed out a methodological error in the 2019 study that inflates the gap by €1.3bn.

The conclusion ... Ernst & Young warned us that the above amounts cannot simply be added up because some are interdependent. Nevertheless, it is clear that the EPO has no deficit. On the contrary, under normal circumstances the EPO will continue to generate surpluses. We note that the EPO did not communicate its alleged gap outside the EPO. The external auditors who assess the financial situation of the EPO every year see no gap needing urgent action. The same applies to the actuaries of the RFPSS. The systematic bias towards unrealistically high levels of caution in the 2019 financial study and the purely internal communication show the clear intention of the EPO to convince staff that there is a financial gap where there is none for the purpose of reducing staff benefits.

... and a question This nevertheless leaves us with the old question: cui bono? As indicated above, the EPO already has an operating surplus of about €400m/year.

What is the President planning to do with the additional €2bn that he plans to save on the back of staff by changing the salary adjustment method?

SUEPO Central

____ ⁵ “Selected analyses by Ernst & Young of the 2019 Financial Study of the European Patent Office”, su20025cp, 19.05.2020. SUEPO members can ask for access to the Ernst & Young analysis by sending an email to requestaccessreport@suepo.org including full name and place of employment.

Not so long afterwards SUEPO also wrote to the management -- in an open letter to Campinos and his friend (whom he gave a high-paying job):

10 June 2020 su20030cl – 0.3.1

Open letter

To: President, VP4 Cc: AC delegations

Ernst & Young analysis of the 2019 Financial Study of the European Patent Office

Dear Mr Campinos, Dear Ms Simon,

You have on various occasions criticized the analysis by Ernst & Young of the 2019 Financial Study.

More recently you seemed to focus on the indication “reliance restricted” which is written on the second page of the analysis by Ernst & Young. You seemed to imply that this indication renders the findings meaningless.

However, an indication which means in legal terms the same as “reliance restricted” can also be found in the Financial Study (CA/46/19, pages 133-134) and in the follow-up document (CA/83/19, page 235). Such an indication is indeed standard for external expert opinions. We cite:

“This report is not intended for general circulation or publication, nor is it to be reproduced, quoted or distributed for any purpose without the prior written permission of Oliver Wyman. There are no third party beneficiaries with respect to this report, and Oliver Wyman does not accept any liability to any third party” (CA/46/19, page 132, €§1 & CA/83/19, page 135, €§1)

We resent the repeated attempts of the administration to discredit the Ernst & Young analysis. We are still waiting for serious comments on the substance of the analysis. The findings of Ernst & Young, confirming earlier observations by SUEPO, staff representation and by the pensioners’ association, raise serious questions about the actions taken by the administration during the last year in order to reform the salary adjustment method, which cannot be dismissed with mere hand-waving.

Also in order to avoid a protracted legal battle, we urge you to enter into a discussion on the substance of the matter with the aim of reaching a solution appropriate under current circumstances and which is acceptable to staff.

Sincerely yours, SUEPO Central

In their message to staff they said: "we addressed Mr Campinos and Ms Simon (VP4) to urge them to enter into a discussion on the substance..." (echoing the above)

The staff is being told that much of the blame should be put squarely on Campinos and his friend. "Mr Campinos and Ms Simon (VP4)," they say, "have on various occasions criticized the analysis by Ernst & Young of the 2019 Financial Study on purely formal aspects."

What do Mr Campinos and Ms Simon even know about studies? Have they ever conducted any? They're not scientists and they don't study anything. They're just propagandists in formal clothing and no sense of shame. ⬆