EU sues IBM and two European companies over troubled border system, FT reports

Nov 9 (Reuters) - The European Union has sued IBM, French IT group Atos and Italian defence contractor Leonardo over repeated delays in developing its new smart border system, the Financial Times reported on Monday, citing internal communications.

EU-Lisa, the agency responsible for the operational management of large-scale IT systems in the area has sued the firms, according to the newspaper.

The Entry/Exit System electronically records the entry and exit of non-EU nationals at the bloc's external borders. The system applies across the 29 countries in the Schengen area and is designed to identify visa overstayers, combat identity fraud and curb illegal migration.

EU-Lisa told the FT that the legal proceedings had "no impact on the functioning of the Entry/Exit System (EES)," adding that the dispute relates to delays in the delivery of the EES at the time of the system development and is not related to the operation of the EES.

Reuters could not immediately verify the report. IBM, Leonardo, Atos, and EU-LISA did not immediately respond to a request for comment sent outside regular business hours. 

In 2019, the EU agency awarded a core EES contract to a consortium including IBM Belgium, Atos Belgium and Leonardo. The six-year contract covered implementation and maintenance of the central Entry/Exit System. 

In an October 2021 letter seen by FT, Atos Belgium and IBM Belgium contested "both the principle ... and the calculation" of a fine imposed by the agency, arguing that delays stemmed from external factors, including the COVID-19 pandemic.

A few months later, in February 2022, the three companies pushed back against new deadlines set by EU-Lisa. 

(Reporting by Preetika Parashuraman in Bengaluru; Editing by Nivedita Bhattacharjee)