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III Preparatory acts

COURT OF AUDITORS

2019/C 45/01 Opinion No 10/2018 (pursuant to Article 322(1) TFEU) concerning the proposal for a Regulation of the European Parliament and of the Council establishing the Neighbourhood, Development and Inter national Cooperation Instrument [COM(2018) 460 final] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

C 45

Volume 62

4 February 2019 Information and Notices

Official Journal of the European Union

English edition

Contents

EN

III

(Preparatory acts)

COURT OF AUDITORS

OPINION No 10/2018

(pursuant to Article 322(1) TFEU)

concerning the proposal for a Regulation of the European Parliament and of the Council establishing the Neighbourhood, Development and International Cooperation Instrument

[COM(2018) 460 final]

(2019/C 45/01)

CONTENTS

Paragraph Page

Summary I-IV 2

Introduction 1-9 2

PART I: GENERAL REMARKS 10-19 4

Simplification and coherence 13-14 4

Flexibility 15-16 5

Accountability 17-18 5

EDF specific arrangements 19 5

PART II: SPECIFIC REMARKS 20-68 5

Title I — General provisions (Articles 1-9) 20 5

Chapter I — Programming (Articles 10-15) 21-29 5

Chapter II — Specific provisions for the Neighbourhood (Articles 16-18) 30-38 6

Chapter III — Action plans, measures and implementing methods (Articles 19-25)

39-48 7

Chapter IV — EFSD+, budgetary guarantees and financial assistance to third countries (Articles 26-30)

49-57 8

Chapter V — Monitoring, reporting and evaluation (Articles 31-32) 58-65 9

Conditions for attestation by the Court 66-68 10

ANNEX — Analysis of the Commission’s proposal and the Court’s suggestions 11

EN 4.2.2019 Official Journal of the European Union C 45/1

THE COURT OF AUDITORS OF THE EUROPEAN UNION,

Having regard to the Treaty on the Functioning of the European Union, and in particular Article 322(1) thereof;

Having regard to the Multiannual Financial Framework (MFF) 2021-2027 as outlined in the communication ‘A modern Budget for a Union that Protects, Empowers and Defends – The Multiannual Financial Framework 2021-2027’ ( 1 );

Having regard to Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the Council of 18 July 2018 on the financial rules applicable to the general budget of the Union ( 2 );

Having regard to Court Opinion No 1/2017 concerning the proposal for a Regulation of the European Parliament and of the Council on the financial rules applicable to the general budget of the Union ( 3 );

Having regard to the Commission's proposal for a Regulation of the European Parliament and the Council establishing the Neighbourhood, Development and International Cooperation Instrument ( 4 );

Having regard to the Council's request of 9 July 2018 for an opinion on the abovementioned proposal;

Whereas the object of the proposal is to streamline a number of instruments within one broad instrument, thereby providing an opportunity to rationalise management and oversight systems, and so reduce the administrative burden for stakeholders;

HAS ADOPTED THE FOLLOWING OPINION:

Summary

I. The Proposal is made in the context of the Multiannual Financial Framework (MFF) 2021-2027 ( 5 ). The Proposal envisages a major restructuring of the Union’s external action instruments by merging several of them into a broad new one: the Neighbourhood, Development and International Cooperation Instrument, which will apply as of 1 January 2021.

II. The rationale behind the Proposal is to ‘simplify ways of working’ while increasing the coherence and consistency of its interventions, and to be more flexible in responding to unforeseen challenges and crises. Overall, the Proposal achieves these goals.

III. Integrating the EDF into the NDICI addresses an inconsistency between the EDF budgetary process and accountability process. Through the Proposal, the European Parliament would gain budgetary and legislative power. Consequently, the democratic oversight of EU development aid would improve.

IV. This opinion makes suggestions on how to bring clarity to the Proposal by partly reorganising some provisions and making others more specific.

Introduction

1. On 14 June 2018, the Commission published a proposal (‘the Proposal’) for a Neighbourhood, Development and International Cooperation Instrument ( 6 ) (NDICI), as well as annexes to the Proposal for a Neighbourhood, Development and International Cooperation Instrument ( 7 ).

2. The Proposal is made in the context of the Multiannual Financial Framework (MFF) 2021-2027 ( 8 ), as outlined in its communication ‘A Modern Budget for a Union that Protects, Empowers and Defends – The Multiannual Financial Framework for 2021-2027’. The communication sets the main priorities and overall budgetary framework for EU external action programmes under the heading ‘Neighbourhood and the World’, including the establishment of the Neighbourhood, Development and International Cooperation Instrument.

EN C 45/2 Official Journal of the European Union 4.2.2019

( 1 ) COM(2018) 321 final, Communication ‘A modern Budget for a Union that Protects, Empowers and Defends – The Multiannual Financial Framework for 2021-2027’ from the Commission to the European Parliament, the European Council and the Council, the European Economic and Social Committee and the Committee of the Regions.

( 2 ) OJ L 193, 30.7.2018, p. 1, ‘the Financial Regulation’. ( 3 ) OJ C 91, 23.3.2017, p. 1. ( 4 ) COM(2018) 460 final. ( 5 ) COM(2018) 321 final, as cited above. ( 6 ) Proposal for a Regulation of the European Parliament and the Council establishing the Neighbourhood, Development and Inter

national Cooperation Instrument, COM(2018) 460 final. ( 7 ) Annexes to the Proposal for a Regulation of the European Parliament and the Council establishing the Neighbourhood, Development

and International Cooperation Instrument, COM(2018) 460 final, Annexes 1 to 7. ( 8 ) COM(2018) 321 final, Communication ‘A modern Budget for a Union that Protects, Empowers and Defends – The Multiannual

Financial Framework for 2021-2027’ from the Commission to the European Parliament, the European Council and the Council, the European Economic and Social Committee and the Committee of the Regions.

3. In the MFF 2014-2020, a number of financing instruments coexist under heading 4 (‘Global Europe’), most of which will expire on 31 December 2020. Under the MFF 2021-2027, the Proposal envisages a major restructuring of the Union’s external action instruments by merging several of them into a broad new one: the Neighbourhood, Development and International Cooperation Instrument, which will apply as of 1 January 2021. The current instruments/programmes to be merged/integrated are:

— the Development Cooperation Instrument ( 9 ) (DCI);

— the European Development Fund ( 10 ) (EDF);

— the European Instrument for Democracy and Human Rights ( 11 ) (EIDHR);

— the European Neighbourhood Instrument ( 12 ) (ENI);

— the Partnership Instrument ( 13 ) (PI);

— the Instrument contributing to Stability and Peace ( 14 ) (IcSP);

— the Instrument for Nuclear Safety Cooperation ( 15 ) (INSC);

— the External Lending Mandate ( 16 ) (ELM);

— a Guarantee Fund for external action ( 17 );

— the European Fund for Sustainable Development (EFSD), its Guarantee and its Guarantee Fund ( 18 );

— Macro-Financial Assistance ( 19 ) (MFA); and

— the Common Implementing Regulation ( 20 ) (CIR).


( 9 ) Regulation (EU) No 233/2014 of the European Parliament and of the Council of 11 March 2014 establishing a financing instrument for development cooperation for the period 2014-2020. (OJ L 77, 15.3.2014, p. 44).

( 10 ) Internal Agreement on the 11th EDF (OJ L 210, 6.8.2013, p. 1); Council Regulation (EU) 2015/322 of 2 March 2015 on the implementation of the 11th European Development Fund, (OJ L 58, 3.3.2015, p. 1); Council Decision (EU) 2015/334 of 2 March 2015 (OJ L 58, 3.3.2015, p. 75).

( 11 ) Regulation (EU) No 235/2014 of the European Parliament and of the Council of 11 March 2014 establishing a financing instrument for democracy and human rights worldwide (OJ L 77, 15.3.2014, p. 85).

( 12 ) Regulation (EU) No 232/2014 of the European Parliament and of the Council of 11 March 2014 establishing a European Neighbourhood Instrument (OJ L 77, 15.3.2014, p. 27).

( 13 ) Regulation (EU) No 234/2014 of the European Parliament and of the Council of 11 March 2014 establishing a Partnership Instrument for cooperation with third countries (OJ L 77, 15.3.2014, p. 77).

( 14 ) Regulation (EU) No 230/2014 of the European Parliament and of the Council of 11 March 2014 establishing an instrument contributing to stability and peace (OJ L 77, 15.3.2014, p. 1).

( 15 ) Council Regulation (Euratom) No 237/2014 of 13 December 2013 establishing an Instrument for Nuclear Safety Cooperation (OJ L 77, 15.3.2014, p. 109). It is proposed that only a limited number of activities pertaining to the peaceful use of nuclear energy (see Annex II(6)(i)) should come under the NDICI. A complementary instrument will be created in line with the specific procedures of the Euratom Treaty: the European Instrument for Nuclear Safety (EINS). It is proposed that this instrument should cover actions (and financing for nuclear-related activities) pertaining to nuclear safeguards, support for the infrastructure and training, and transfers of EU expertise.

( 16 ) Decision (EU) No 2018/412 of the European Parliament and of the Council of 14 March 2018 amending Decision 466/2014/EU granting an EU guarantee to the European Investment Bank against losses under financing operations supporting investment projects outside the Union (OJ L 76, 19.3.2018, p. 30).

( 17 ) Council Regulation (EC,Euratom) No 480/2009 of 25 May 2009 establishing a Guarantee Fund for external actions (OJ L 145, 10.6.2009, p. 10).

( 18 ) Regulation (EU) 2017/1601 of the European Parliament and of the Council of 26 September 2017 establishing the European Fund for Sustainable Development (EFSD), the EFSD Guarantee and the EFSD Guarantee Fund (OJ L 249, 27.9.2017, p. 1).

( 19 ) Except Macro-Financial Assistance grants. Macro-Financial Assistance will be activated on a case-by-case basis, as needed. ( 20 ) Regulation (EU) No 236/2014 of the European Parliament and of the Council of 11 March 2014 laying down common rules and

procedures for the implementation of the Union's instruments for financing external action (OJ L 77, 15.3.2014, p. 95). The CIR applies to a number of instruments under heading 4 ‘Global Europe’ of the MFF 2014-2020.

4. According to recital 8 of the Proposal, the implementation of the NDICI shall be guided by the five priorities established in the Global Strategy for the European Union’s Foreign and Security Policy (Global Strategy) ( 21 ). Furthermore, recital 9 highlights the importance of the new European Consensus on Development ( 22 ) (the Consensus), which provides the framework for a common approach to development cooperation by the Union and its Member States. The Consensus aims to implement the 2030 Agenda for Sustainable Development ( 23 ) and the Addis Ababa Action Agenda ( 24 ).

5. The objective of the Neighbourhood, Development and International Cooperation Instrument is ‘to uphold and promote the Union’s values and interests worldwide in order to pursue the objectives and principles of its external action’ ( 25 ).

6. The funding proposed for the implementation of the NDICI for the 2021-2027 period is 89,2 billion euros ( 26 ).

7. One of the main changes of the NDICI is to integrate the EDF, which is currently outside the budget. With a budget of 30,5 billion euros for the 2014-2020 period, the EDF is the largest external instrument ( 27 ). The current EDF(s) ( 28 ) and the NDICI will run in parallel until the funds are exhausted.

8. The Commission proposes that the Proposal will support the framework for implementing the successor partnership to the current Cotonou agreement ( 29 ). This approach is the reverse of the current one, under which the Cotonou agreement has supported the EDFs.

9. Our analysis includes a number of general remarks (Part I), specific remarks (Part II) and a list of specific drafting suggestions (Annex).

PART I: GENERAL REMARKS

10. The NDICI is an ambitious proposal, which:

(a) merges several programmes and instruments (budgetary and off-budget) into one instrument;

(b) includes geographic programmes, thematic programmes and rapid response actions;

(c) includes many different forms of funding (grants, procurement contracts, budget support, contributions to trust funds, financial instruments, budgetary guarantees, blending and debt relief).

This makes the NDICI a very comprehensive and complex instrument.

11. The rationale behind the Proposal is to ‘simplify ways of working’ while increasing the coherence and consistency of its interventions, and to be more flexible in responding to unforeseen challenges and crises ( 30 ).

12. Overall, the Proposal will simplify the legislative framework in the area of external aid. It will provide greater flexibility for budgetary instruments and similar flexibility for the items previously included in the EDF.

Simplification and coherence

13. The simplification sought by the Commission essentially entails merging several budgetary instruments and the EDF into a broad instrument.


( 21 ) ‘Shared vision, Common Action: A Stronger Europe, A global Strategy for the European Union’s Foreign and Security Policy’, 19.6.2016.

( 22 ) ‘The New European Consensus on Development: Our World, Our Dignity, Our Future’, Joint Statement by the Council and the Representatives of the governments of the Member States meeting within the Council, the European Parliament and the European Commission, 8.6.2017.

( 23 ) ‘Transforming our world: the 2030 Agenda for Sustainable Development’, Resolution adopted by the United Nations General Assembly on 25 September 2015 (A/RES/70/1).

( 24 ) ‘Addis Ababa Action Agenda on the Third International Conference on Financing for Development’, adopted on 16 June 2015 and endorsed by the United Nations General Assembly on 27 July 2015 (A/RES/69/313).

( 25 ) Articles 3(5), 8 and 21 of the consolidated version of the Treaty on the European Union (TEU). ( 26 ) Article 6(1) of the Proposal. ( 27 ) A significant part of the African Peace Facility, which is currently being funded by the EDF, will remain off-budget. In comparison,

the budget for heading 4 ‘Global Europe’ for the 2014-2020 period amounts to 66,3 billion euros. ( 28 ) For the 8th, 9th and 10th EDFs, the commitment period has expired; the commitment period for the 11th EDF will end in 2020,

Article 1(5) of the Internal Agreement on the 11th EDF – (OJ L 210, 6.8.2013, p. 1); Council Regulation (EU) 2015/322 (OJ L 58, 3.3.2015, p. 1).

( 29 ) See recital 20 of the Proposal. ( 30 ) Explanatory memorandum to the Proposal, point 1 ‘Context of the Proposal’.

14. Although the Proposal goes in the right direction and reduces gaps and overlaps ( 31 ), coherence and consistency depend on the implementation arrangements that are chosen, as well as on the Commission’s supervision and management arrangements. For example, capacity building in the area of peace and security can be financed geographically and thematically under the Proposal and implemented by separate Commission departments, EU delegations or EU trust funds. Furthermore, similar actions might also be financed under the CFSP (CSDP training missions not covered by the ‘Athena mechanism’) or under the proposed European Peace Facility.

Flexibility

15. The communication on the new MFF 2021-2027 ( 32 ) stressed that ‘it will in addition be essential that the rules governing the Neighbourhood, Development and International Cooperation Instrument include similar flexibility provisions to those in place for the current European Development Fund’.

16. In order to respond more flexibly to unforeseen challenges and crises, the Proposal involves two main measures: introducing an 11 % ‘emerging challenges and priorities cushion’ (Article 6(3)) and softening the rules on annuality by making it easier to carry over commitments and make decommitments available again to the original budget line (Article 25).

Accountability

17. Our 2017 EDF annual report ( 33 ) drew attention to an inconsistency between the EDF budgetary process and the accountability process. The European Parliament (EP) does not intervene in the establishment of the EDF budget and its rules, or in the allocation of relevant resources. However, it does decide whether to grant discharge to the European Commission for the way it has managed the EDF as part of a specific annual discharge procedure. Integrating the EDF into the NDICI addresses this inconsistency and strengthens the European Parliament’s democratic oversight of EU development aid. Consequently, the democratic control of EU development aid has improved. By means of the Proposal, the European Parliament will gain budgetary and legislative power.

18. Recital 44 stresses the obligation for the Commission to include in ‘(…) agreements with third countries and territories and with international organisations, and any contract or agreement resulting from the implementation of the Regulation should contain provisions expressly empowering the Commission, the Court of Auditors and OLAF to conduct such audits, on-the-spot checks and inspections, according to their respective competences and ensuring that any third parties involved in the implementation of Union funding grant equivalent rights’. The Commission and legislators should consider reinforcing in such agreements the obligation to forward to the Court of Auditors, at its request, any document or information it needs to carry out its task.

EDF specific arrangements

19. Several material points relating to the EDF, such as the use of remaining funds, special reserves and decommitted amounts, the future of the Cotonou agreement and of the ACP Investment Facility, are not covered by the Proposal and will depend on a decision by the Member States when the current Cotonou agreement expires in 2020 and on any subsequent agreement with the ACP countries. This creates uncertainty for partner countries.

PART II: SPECIFIC REMARKS

Title I — General provisions (Articles 1-9)

20. The recitals stress the importance of gender equality and women’s empowerment, climate change, migration and civil society organisations. However, gender equality and climate change are not explicitly mentioned in the specific objectives in Article 3(2).

Chapter I — Programming (Articles 10-15)

21. As regards programming, other than a chapter on Neighbourhood-related issues (Chapter II) that is inspired by the respective provisions for the ENI ( 34 ), the Proposal is mostly based on the DCI Regulation ( 35 ). This is the case of the geographic programmes in particular.


( 31 ) The impact assessment of the Proposal (SWD(2018) 337 final) identifies fewer gaps and overlaps between instruments as one justification for the change in the architecture of the external instruments, page 19.

( 32 ) COM(2018) 321 final, A Modern Budget for a Union that Protects, Empowers and Defends. The Multiannual Financial Framework for 2021-2027, footnote 16.

( 33 ) Annual report on the activities funded by the 8th, 9th, 10th and 11th European Development Funds for the financial year 2017, paragraph 45 (OJ C 357, 4.10.2018, p. 315).

( 34 ) Regulation (EU) No 232/2014, as cited above. ( 35 ) Regulation (EU) No 233/2014, as cited above.

22. As regards thematic programmes, the Proposal also takes on board programming provisions from other existing instruments (e.g. the IcSP ( 36 ), and the PI ( 37 )). As these instruments are mainly of a thematic nature and in certain respects include very similar provisions, the Proposal results in a significantly simpler set of provisions (particularly as far as programming documents are concerned).

23. Article 11 of the Proposal introduces a number of programming principles, which exclusively address geographic programmes. Although by their very nature it is clear that some principles apply only to this type of programmes (e.g. as regards synchronising the programming period with the partner countries’ strategy cycles), others do not apply exclusively to geographic programmes. An example of this is the principle that programming documents for geographic programmes should be results-based (Article 11(5)); in our view, this should also apply to thematic programmes.

24. The Commission and legislators should consider:

applying the principle that programming documents for geographic programmes should be results-based to thematic programmes as well.

25. Article 11(1) of the Proposal calls for dialogue between the Union, the Member States and the partner countries with a view to programming action. However, we find no reference to this dialogue either in the description of the process of adopting, approving, amending and/or reviewing the multiannual indicative programmes (MIPs) (Article 14), or in the definition of the contents of programming documents (Articles 12 and 13), e.g. the inclusion of a reference to the main stakeholders consulted during the programming procedure.


including in the Proposal the missing reference to the dialogue between the Union, Member States and partner countries.

27. The wording of numbers 3 and 4 of Article 14 only differs insofar as one addresses geographic programmes (number 3), while the other addresses thematic programmes (number 4), as does the final part of number 3 (which also includes ‘following a crisis or post-crisis situation’). The Annex contains a suggestion for re-formulation.

28. Article 15 deals with the ‘emerging challenges and priorities cushion’. It is not clear why this article comes under ‘Programming’ (Chapter I).


moving Article 15, ‘emerging challenges and priorities cushion’, to section ‘General provisions’, after Article 6. This modification would make the order of the articles more logical as Article 15 refers to Article 6.

Chapter II — Specific provisions for the Neighbourhood (Articles 16-18)

30. The Proposal dedicates a separate chapter to ‘Specific provisions for the Neighbourhood’, consisting of three articles related to programming. The proposed structure makes the Proposal more difficult to read.

31. Article 16(2) relates to the programming principles for ‘Neighbourhood’. Although the content of this paragraph is about programming principles, the Article is entitled 'Programming documents'. This is not in keeping with the structure applied in Chapter I, where Programming Principles (Article 11) and Programming Documents (Article 12) come under separate Articles.

32. Article 16(2) states 'By way of derogation from Article 11(2) …'. However, the content of the two paragraphs and the partner country's criteria used for programming are partly similar.

33. In Article 17, the Commission proposes a ‘performance-based approach’. However, this relates only to ‘Neighbourhood’ countries, insofar as only they have characteristics that could be compared using performance indicators.

34. Although a similar mechanism was also included under the 11th EDF ( 38 ) ‘in order to provide incentives for result- oriented reforms’, this is not the case under the current Proposal.


( 36 ) Regulation (EU) No 230/2014, as cited above. ( 37 ) Regulation (EU) No 234/2014, as cited above. ( 38 ) Regulation (EU) 2015/322, as cited above, Article 7(2).

35. Furthermore, the mid-term review report of the ENI ( 39 ) stated that: ‘The implementation of the incentive-based approach defined in the ENI provided significantly higher financial resources to those partners that have made the strongest progress on political reforms but its impact on leveraging further reforms, in particular in other countries, still needs to be demonstrated. The ENI has not been able to provide sufficient incentives to those countries reluctant to engage in political reforms.’ The Proposal has not changed the existing mechanism of the performance-based approach.


applying a similar mechanism for the ‘performance based-approach’ to the whole Proposal. This modification would ensure that the ‘performance based-approach’ is not limited to ‘Neighbourhood’ countries.

37. The concept of the performance-based approach in Article 17 is the same as the incentive-based approach for the ENI ( 40 ); only the terminology differs. The concept has not been adjusted to reflect the Financial Regulation’s focus on performance and results ( 41 ).


deleting Chapter II, ‘Specific provisions for the Neighbourhood’, and including the articles under Chapter I, 'Programming', keeping the specific provisions for the Neighbourhood to a strict minimum. This modification would make the proposal easier to read.

Chapter III — Action plans, measures and implementing methods (Articles 19-25)

39. As regards implementation, the Proposal is mainly based on the CIR ( 42 ) and takes on board the implementation provisions of some of the existing instruments.

40. Compared to the existing framework, the Proposal includes a significantly simpler list of the types of measures that can be adopted (individual, special, support and exceptional assistance measures). In our opinion, a description of (some of) the situations in which individual measures are to be adopted would make the proposal clearer.

41. Article 19(4) concerns exceptional assistance measures. By analogy with the support measures, which are governed by one specific article (Article 20) exceptional assistance measures should be treated in a separate article, by virtue of their being exceptional.

42. In Article 21, the Commission proposes ceilings (10 million euros and 20 million euros, respectively), below which action plans and measures do not need to be adopted ‘by means of implementing acts adopted in accordance with the examination procedure’. These ceilings are double those of the 11th EDF ( 43 ). In the case of programmes already financed under the budget, the ceilings have also doubled. Increasing the thresholds for those exceptions where an implementing act is not required weakens oversight arrangements.

43. Article 25 of the Proposal goes beyond the Financial Regulation by:

(a) allowing unused commitment and payment appropriations to be automatically carried over and committed up to 31 December of the following financial year;

(b) making available again those commitment appropriations that correspond to the amount of decommitments made as a result of total or partial non-implementation of an action;

(c) not applying the third subparagraph of Article 114(2) of the Financial Regulation ( 44 );


( 39 ) SWD(2017) 602, Commission staff working document - Evaluation of the European Neighbourhood Instrument Accompanying the document – Report from the Commission to the European Parliament and the Council – Mid-term review of External Financing Instruments.

( 40 ) Regulation (EU) No 232/2014 as cited above, Article 4(2) and (3). ( 41 ) ‘The concept of performance as regards the budget should be clarified. Performance should be linked to the direct application of the

principle of sound financial management. The principle of sound financial management should also be defined, and a link should be established between objectives set and performance indicators, results and economy, efficiency and effectiveness in the use of appropriations. For reasons of legal certainty, while avoiding conflicts with existing performance frameworks of the different programmes, performance terminology - in particular output and results- should be defined’ (Financial Regulation, Recital 9).

( 42 ) Regulation (EU) No 236/2014, as cited above. ( 43 ) Article 9(4) of Regulation (EU) 2015/322, as cited above. ( 44 ) ‘In external actions, where the global budgetary commitment gives rise to a financing agreement concluded with a third country, the

financing agreement shall be concluded by 31 December of year n+1. In that case, the global budgetary commitment shall cover the total costs of legal commitments implementing the financing agreement entered into within a period of three years following the date of conclusion of the financing agreement.’

(d) introducing a derogation from Article 209(3) of the Financial Regulation concerning the repayments and revenues generated by a financial instrument.

44. In the explanatory memorandum, the Commission states that these provisions are needed to import the flexibilities of the EDF, i.e. unallocated funds and multiannuality. Making exceptions to the Financial Regulation introduces an element of additional complexity when applying legislation.

45. Article 25(1) includes the provision that the ‘carried-over amount shall be used first in the following financial year. However, Article 12(2) of the Financial Regulation states that the institution ‘shall first use the appropriations authorised for the current financial year and shall not use the appropriations carried over until the former are exhausted’.

46. Article 25(2) of the Proposal adds an exception to the provisions of Article 15 of the Financial Regulation ( 45 ) by allowing decommitments made as a result of total or partial non-implementation of an action to be made available again to the original budget line.

47. The provisions of Article 25 provide more flexibility in the implementation of the NDICI’s budget. However, the impact of greater flexibility on the management of the funds needs to be assessed given the potential loss of accountability, i.e. less responsibility for the proper management of appropriations.

48. Funds decommitted from previous EDFs can be re-committed under the ongoing EDF, subject to a specific decision by the Council. If no specific decision is taken, the funds are allocated to a special reserve, pending allocation ( 46 ). Under the general budget, decommitted funds from the previous programming period are cancelled. It is not clear if Article 25(2) also applies to funds decommitted after the MFF expires ( 47 ). If this is the case, a specific provision should be included in the Proposal.

Chapter IV — EFSD+, budgetary guarantees and financial assistance to third countries (Articles 26-30)

49. Chapter IV focuses on EFSD+ and External Action Guarantee.

50. We note that the budgetary guarantee can be managed more efficiently with a common provisioning fund.

51. Although the EIB was the only bank in charge of the ELM and the main partner in the EFSD, it is not clear what its future role will be ( 48 ).

52. Article 27(2) lists three conditions with which the External Action Guarantee needs to comply. Necessary achievement of a leverage and a multiplier effect based on a target range of values specified in an ex-ante evaluation for the budgetary guarantee is not stated as one of the criteria ( 49 ).

53. The Commission and legislators should consider

adding leverage to the list of conditions with which the External Action Guarantee needs to comply. This modification would make the list of conditions for the External Action guarantee more complete.

54. According to Article 26(4), the provisioning rate shall range between 9 % and 50 %. Although it is specified when a provisioning rate of 9 % is applied, no information is provided when a higher rate (up to a maximum of 50 %) is applied.


( 45 ) Article 15(3) allows decommitments to be made available again only when they relate to research projects. ( 46 ) Article 1(4) of the Internal Agreement on the 11th EDF (OJ L 210, 6.8.2013, p. 1), as cited above. ( 47 ) Similar to the special reserve mechanism of the EDF, Article 1(4) of the Internal Agreement on the 11th EDF (OJ L 210, 6.8.2013,

p. 1), as cited above. ( 48 ) Recital 33 of the Proposal: ‘The EFSD+ should support the External Investment Plan and combine blending and budgetary guarantee

operations covered by the External Action Guarantee, including those covering sovereign risks associated with lending operations, previously carried out under the external lending mandate to the European Investment Bank. Given its role under the Treaties and its experience over the last decades in supporting Union policies, the European Investment Bank should remain a natural partner for the Commission for the implementation of operations under the External Action Guarantee.’

( 49 ) See Articles 209(2)(d) and 219(3) of the Financial Regulation.

55. The instruments listed in Article 27(3) entail various risks. Loans in local currency and equity participation have a very high inherent risk. For example, the ACP Investment Facility had rules that limited equity participation to non- controlling minority holdings. In addition, there were also exposure limits for equity participation and loans in local currency (no more than 20 % of the total endowment). Operational agreements should contain similar provisions.

56. Recital 35 of the Proposal states that the guarantee should be priced in order to avoid market distortions. Similarly, Article 209(2)(c) of the Financial Regulation states that the remuneration of external action guarantees shall not distort competition in the internal market. Article 29(3)(d) of the Proposal stipulates that External Action Guarantee agreements should contain ‘the remuneration of the guarantee’, but clarification could be included to stress that market distortions should be avoided. Furthermore, the Proposal does not include any information on how the guarantee should be priced and under what circumstances it could be subsidised. In operational agreements, further clarification is needed about how the guarantee should be priced and under what circumstances it could be subsidised.

57. Terminology is used inconsistently, e.g. financial assistance, macro-financial assistance, and macro-financial assistance loans.

Chapter V — Monitoring, reporting and evaluation (Articles 31-32)

58. Article 31, ‘Monitoring and reporting’, refers mainly to the instrument; Article 32, ‘Evaluation’, deals only with how it is evaluated. The Proposal does not distinguish between evaluation of the instrument and evaluation of actions.

59. Article 31(2) of the Proposal stipulates that ‘progress with respect to expected results should be monitored on the basis of clear, transparent and, where appropriate, measurable indicators’. Indicators may be quantitative or qualitative, but should always be measurable in order to be useful. ‘Where appropriate’ should therefore be deleted.


clearly distinguishing between evaluation of actions and the NDICI Regulation. This modification would make the Proposal clearer by specifying which articles apply to actions as opposed to those which apply to the NDICI Regulation itself.

61. Annex VII of the Proposal provides a list of key performance indicators to ‘help measure the Union’s contribution to the achievement of its specific objectives’.

62. Some key performance indicators refer to several specific objectives, while for other indicators, it is not clear to which specific objective they apply. In the case of other specific objectives, there are no indicators at all.


linking specific objectives and key performance indicators better. When key performance indicators are clearly linked to specific objectives, the achievement of those objectives can be followed up more effectively.

64. Article 32(1) envisages an interim evaluation of the Proposal, but does not provide any details about its purpose and content.


extending the requirements of Article 32(2) concerning the final evaluation of the Regulation to the interim evaluation, where relevant. This modification would clarify the requirements which an interim evaluation needs to satisfy.


Conditions for attestation by the Court

66. In our Strategy for 2018-2020, we signalled our aim to move towards an ‘attestation engagement’ for our Statement of Assurance.

67. We acknowledge that the objective of the Proposal is not to define or describe the management and control system, or the overall internal control framework and its mandatory components ( 50 ).

68. However, we note that the current Proposal does not make sufficient provision for the management and control systems to include an internal control framework whose design would allow the Court to pursue the move towards an attestation engagement.

This Opinion was adopted by the Court of Auditors in Luxembourg at its meeting of 13 December 2018.

For the Court of Auditors

Klaus-Heiner LEHNE President


( 50 ) Section 2 of the annexed ‘Legislative Financial Statement’ indicates how the Commission intends to put management measures in place.


AN

NEX

Ana

lysi

s of

the

Com

mis

sion

’s p

ropo

sal

and

the

Cou

rt’s

sug

gest

ions

The

follo

win

g dr

aftin

g su

gges

tions

ref

lect

som

e -

but

not

all -

con

sider

atio

ns r

aise

d in

thi

s O

pini

on. I

t is

the

legi

slato

rs’ r

espo

nsib

ility

to t

ake

acco

unt o

f the

se p

oint

s an

d in

corp

orat

e th

em

in t

he a

ppro

pria

te a

rtic

les

of t

he p

ropo

sed

Regu

latio

n.

Text

in

the

prop

osal

C

ourt

’s s

ugge

stio

n C

omm

ents

Art

icle

8

Gen

eral

Prin

ciples

3.

The

Uni

on s

hall

supp

ort,

as a

ppro

pria

te, t

he i

mpl

emen

ta

tion

of b

ilate

ral,

regi

onal

and

mul

tilat

eral

coo

pera

tion

and

dial

ogue

, pa

rtne

rshi

p ag

reem

ents

and

tria

ngul

ar c

oope

ratio

n.

3.

The

term

‘tr

iang

ular

co

oper

atio

n’

shou

ld

be

spec

ified

.

TITL

E II

IMPL

EMEN

TATI

ON

OF

THIS

REG

ULA

TIO

N

TITL

E II

IMPL

EMEN

TATI

ON

OF

THIS

REG

ULA

TIO

N

TITL

E II

IMPL

EMEN

TATI

ON

OF

THIS

REG

ULA

TIO

N

Cha

pter

I

Prog

ram

min

g C

hapt

er I

Pr

ogra

mm

ing

Art

icle

14

A

dopt

ion

and

amen

dmen

t of

mul

tiann

ual

indi

cativ

e pr

ogra

mm

es

Art

icle

14

A

dopt

ion

and

amen

dmen

t of

mul

tiann

ual

indi

cativ

e pr

ogra

mm

es

3.

Mul

tiann

ual

indi

cativ

e pr

ogra

mm

es

for

geog

raph

ic

prog

ram

mes

may

be

revi

ewed

whe

re n

eces

sary

for

effe

ctiv

e im

plem

enta

tion,

in

pa

rtic

ular

w

here

th

ere

are

subs

tant

ive

chan

ges

in t

he p

olic

y fr

amew

ork

refe

rred

to

in A

rtic

le

7 or

fo

llow

ing

a cr

isis

or p

ost-c

risis

situa

tion.

3.

Mul

tiann

ual

indi

cativ

e pr

ogra

mm

es

for

geog

raph

ic

prog

ram

mes

m

ay

be

revi

ewed

w

here

ne

cess

ary

for

effe

ctiv

e im

plem

enta

tion,

in

pa

rtic

ular

w

here

th

ere

are

subs

tant

ive

chan

ges

in t

he p

olic

y fr

amew

ork

refe

rred

to

in A

rtic

le

7 or

, in

th

e ca

se o

f ge

ogra

phic

pro

gram

mes

, fo

llow

ing

a cr

isis

or p

ost-

crisi

s sit

uatio

n.

4.

Mul

tiann

ual

indi

cativ

e pr

ogra

mm

es

for

them

atic

pr

ogra

mm

es m

ay b

e re

view

ed w

here

nec

essa

ry f

or e

ffect

ive

impl

emen

tatio

n,

in

part

icul

ar

whe

re

ther

e ar

e su

bsta

ntiv

e ch

ange

s in

the

pol

icy

fram

ewor

k re

ferr

ed t

o in

Art

icle

7.

4.

Mul

tiann

ual

indi

cativ

e pr

ogra

mm

es

for

them

atic

pr

ogra

mm

es

may

be

re

view

ed

whe

re

nece

ssar

y fo

r ef

fect

ive

impl

emen

tatio

n,

in

part

icul

ar

whe

re

ther

e ar

e su

bsta

ntiv

e ch

ange

s in

the

pol

icy

fram

ewor

k re

ferr

ed t

o in

Art

icle

7.


Text

in

the

prop

osal

C

ourt

’s s

ugge

stio

n C

omm

ents

5.

On

duly

just

ified

impe

rativ

e gr

ound

s of

urg

ency

, suc

h as

cr

ises

or i

mm

edia

te t

hrea

ts t

o de

moc

racy

, th

e ru

le o

f la

w,

hum

an

right

s or

fu

ndam

enta

l fr

eedo

ms,

the

Com

miss

ion

may

am

end

mul

tiann

ual

indi

cativ

e pr

ogra

mm

es r

efer

red

to

in A

rtic

les

12 a

nd 1

3 of

thi

s Re

gula

tion

by i

mpl

emen

ting

acts

ad

opte

d in

ac

cord

ance

w

ith

the

urge

ncy

proc

edur

e re

ferr

ed t

o in

Art

icle

35

(4).

5 4.

On

duly

jus

tifie

d im

pera

tive

grou

nds

of u

rgen

cy,

such

as

crise

s or

imm

edia

te t

hrea

ts to

dem

ocra

cy, t

he r

ule

of la

w, h

uman

rig

hts

or f

unda

men

tal

free

dom

s, th

e Co

mm

issio

n m

ay a

men

d m

ultia

nnua

l in

dica

tive

prog

ram

mes

ref

erre

d to

in

Art

icle

s 12

an

d 13

of

this

Regu

latio

n by

im

plem

entin

g ac

ts a

dopt

ed i

n ac

cord

ance

w

ith

the

urge

ncy

proc

edur

e re

ferr

ed

to

in

Art

icle

35

(4).

Cha

pter

II

Spec

ific

prov

isio

ns f

or t

he N

eigh

bour

hood

C

hapt

er I

I Sp

ecifi

c pr

ovis

ions

for

the

Nei

ghbo

urho

od

Art

icle

17

Pe

rform

ance

-bas

ed a

ppro

ach

1.

Indi

cativ

ely

10 %

of

the

finan

cial

env

elop

e se

t ou

t in

A

rtic

le 4

(2)(a

) to

sup

plem

ent

the

coun

try

finan

cial

allo

catio

ns

refe

rred

to in

Art

icle

12

shal

l be

allo

cate

d to

par

tner

cou

ntrie

s lis

ted

in A

nnex

I

in o

rder

to

impl

emen

t th

e pe

rfor

man

ce-

base

d ap

proa

ch.

The

perf

orm

ance

-bas

ed a

lloca

tions

sha

ll be

de

cide

d on

the

bas

is of

the

ir pr

ogre

ss t

owar

ds d

emoc

racy

, hu

man

rig

hts,

rule

of

la

w,

coop

erat

ion

on

mig

ratio

n,

econ

omic

gov

erna

nce

and

refo

rms.

The

prog

ress

of

part

ner

coun

trie

s sh

all

be a

sses

sed

annu

ally

.

Art

icle

17

Pe

rform

ance

-bas

ed a

ppro

ach

1.

Indi

cativ

ely

10 %

of

th

e fin

anci

al

enve

lope

se

t ou

t in

A

rtic

le

4(2)

(a) 6

(2)(a

) to

sup

plem

ent

the

coun

try

finan

cial

allo

ca

tions

ref

erre

d to

in

Art

icle

12

sha

ll be

allo

cate

d to

par

tner

co

untr

ies

liste

d in

A

nnex

I

in

orde

r to

im

plem

ent

the

perf

orm

ance

-bas

ed a

ppro

ach.

The

per

form

ance

-bas

ed a

lloca

tions

sh

all

be

deci

ded

on

the

basis

of

th

eir

prog

ress

to

war

ds

dem

ocra

cy, h

uman

rig

hts,

rule

of

law

, coo

pera

tion

on m

igra

tion,

ec

onom

ic

gove

rnan

ce

and

refo

rms.

The

prog

ress

of

pa

rtne

r co

untr

ies

shal

l be

ass

esse

d an

nual

ly.

Cha

pter

III

A

ctio

n Pl

ans,

mea

sure

s an

d im

plem

entin

g m

etho

ds

Cha

pter

III

A

ctio

n Pl

ans,

mea

sure

s an

d im

plem

entin

g m

etho

ds

Art

icle

23

Fo

rms

of E

U f

undi

ng a

nd m

ethod

s of

im

plem

enta

tion

Art

icle

23

Fo

rms

of E

U f

undi

ng a

nd m

ethod

s of

im

plem

enta

tion

Budg

et s

uppo

rt a

s re

ferr

ed t

o in

poi

nt

(c)

of p

arag

raph

1,

in

clud

ing

thro

ugh

sect

or r

efor

m p

erfo

rman

ce c

ontr

acts

, sh

all

be b

ased

on

coun

try

owne

rshi

p, m

utua

l ac

coun

tabi

lity

and

shar

ed c

omm

itmen

ts t

o un

iver

sal

valu

es,

dem

ocra

cy,

hum

an

right

s, th

e ru

le o

f la

w, a

nd a

ims

at s

tren

gthe

ning

par

tner

ship

s be

twee

n th

e U

nion

an

d pa

rtne

r co

untr

ies.

It sh

all

incl

ude

rein

forc

ed

polic

y di

alog

ue,

capa

city

de

velo

pmen

t, an

d im

prov

ed

gove

rnan

ce,

com

plem

entin

g pa

rtne

rs'

effo

rts

to

colle

ct m

ore

and

spen

d be

tter

in o

rder

to

supp

ort

sust

aina

ble

and

incl

usiv

e ec

onom

ic g

row

th a

nd j

obs

and

pove

rty

erad

ica

tion.

4.

Budg

et s

uppo

rt a

s re

ferr

ed t

o in

poi

nt

(c)

of p

arag

raph

1,

incl

udin

g th

roug

h se

ctor

ref

orm

per

form

ance

con

trac

ts,

shal

l be

pr

ovid

ed i

n ac

cord

ance

with

Art

icle

23

6 of

the

Fin

anci

al R

egu

la

tion.

Iit

shal

l be

bas

ed o

n co

untr

y ow

ners

hip,

mut

ual

acco

unt

abili

ty a

nd s

hare

d co

mm

itmen

ts t

o un

iver

sal

valu

es,

dem

ocra

cy,

hum

an r

ight

s, th

e ru

le o

f la

w,

and

aim

s at

str

engt

heni

ng p

art

ners

hips

be

twee

n th

e U

nion

an

d pa

rtne

r co

untr

ies.

It sh

all

incl

ude

rein

forc

ed p

olic

y di

alog

ue,

capa

city

dev

elop

men

t, an

d im

prov

ed

gove

rnan

ce,

com

plem

entin

g pa

rtne

rs'

effo

rts

to

colle

ct m

ore

and

spen

d be

tter

in o

rder

to

supp

ort

sust

aina

ble

and

incl

usiv

e ec

onom

ic g

row

th a

nd jo

bs a

nd p

over

ty e

radi

catio

n.


Text

in

the

prop

osal

C

ourt

’s s

ugge

stio

n C

omm

ents

Any

dec

ision

to

prov

ide

budg

et s

uppo

rt s

hall

be b

ased

on

budg

et s

uppo

rt p

olic

ies

agre

ed b

y th

e U

nion

, a

clea

r se

t of

el

igib

ility

crit

eria

and

a c

aref

ul a

sses

smen

t of

the

risk

s an

d be

nefit

s.

Any

dec

ision

to p

rovi

de b

udge

t su

ppor

t sha

ll be

bas

ed o

n bu

dget

su

ppor

t po

licie

s ag

reed

by

the

Uni

on,

a cl

ear

set

of e

ligib

ility

cr

iteria

and

a c

aref

ul a

sses

smen

t of

the

risk

s an

d be

nefit

s.

4.

Budg

et s

uppo

rt s

hall

be d

iffer

entia

ted

in s

uch

a w

ay a

s to

re

spon

d be

tter

to t

he p

oliti

cal,

econ

omic

and

soc

ial c

onte

xt o

f th

e pa

rtne

r co

untr

y, t

akin

g in

to a

ccou

nt s

ituat

ions

of

frag

ility

.

4.

Budg

et s

uppo

rt s

hall

be d

iffer

entia

ted

in s

uch

a w

ay a

s to

re

spon

d be

tter

to t

he p

oliti

cal,

econ

omic

and

soc

ial

cont

ext

of

the

part

ner

coun

try,

tak

ing

into

acc

ount

situ

atio

ns o

f fr

agili

ty.

Whe

n pr

ovid

ing

budg

et

supp

ort

in

acco

rdan

ce

with

A

rtic

le

236

of

the

Fina

ncia

l Re

gula

tion,

th

e Co

mm

issio

n sh

all

clea

rly d

efin

e an

d m

onito

r cr

iteria

for

bud

get

supp

ort

cond

ition

ality

, inc

ludi

ng p

rogr

ess

in r

efor

ms

and

tran

spar

ency

, an

d sh

all

supp

ort

the

deve

lopm

ent

of p

arlia

men

tary

con

trol

, na

tiona

l aud

it ca

paci

ties

and

incr

ease

d tr

ansp

aren

cy a

nd p

ublic

ac

cess

to

info

rmat

ion.

Whe

n pr

ovid

ing

budg

et s

uppo

rt in

acc

orda

nce

with

Art

icle

236

of

the

Fin

anci

al R

egul

atio

n, t

The

Com

miss

ion

shal

l cle

arly

def

ine

and

mon

itor

crite

ria f

or b

udge

t su

ppor

t co

nditi

onal

ity, i

nclu

ding

pr

ogre

ss i

n re

form

s an

d tr

ansp

aren

cy,

and

shal

l su

ppor

t th

e de

velo

pmen

t of

par

liam

enta

ry c

ontr

ol,

natio

nal

audi

t ca

paci

ties

and

incr

ease

d tr

ansp

aren

cy a

nd p

ublic

acc

ess

to i

nfor

mat

ion.

5.

Disb

urse

men

t of

the

bud

get

supp

ort

shal

l be

bas

ed o

n in

dica

tors

de

mon

stra

ting

satis

fact

ory

prog

ress

be

ing

mad

e to

war

ds

achi

evin

g th

e ob

ject

ives

ag

reed

w

ith

the

part

ner

coun

try.

5.

Disb

urse

men

t of

the

bud

get

supp

ort

shal

l be

bas

ed o

n in

dica

tors

de

mon

stra

ting

satis

fact

ory

prog

ress

be

ing

mad

e to

war

ds a

chie

ving

the

obj

ectiv

es a

gree

d w

ith t

he p

artn

er c

ount

ry.

6.

Fina

ncia

l in

stru

men

ts u

nder

thi

s Re

gula

tion

may

tak

e fo

rms

such

as

lo

ans,

guar

ante

es,

equi

ty

or

quas

i-equ

ity,

inve

stm

ents

or

pa

rtic

ipat

ions

, an

d ris

k-sh

arin

g in

stru

men

ts,

whe

neve

r po

ssib

le a

nd i

n ac

cord

ance

with

the

prin

cipl

es l

aid

dow

n in

Art

icle

20

9(1)

of

the

Fina

ncia

l Reg

ulat

ion

unde

r th

e le

ad o

f th

e EI

B, a

mul

tilat

eral

Eur

opea

n fin

ance

ins

titut

ion,

su

ch a

s th

e Eu

rope

an B

ank

for

Reco

nstr

uctio

n an

d D

evel

op

men

t, or

a b

ilate

ral

Euro

pean

fin

ance

ins

titut

ion,

suc

h as

bi

late

ral

deve

lopm

ent

bank

s, po

ssib

ly p

oole

d w

ith a

dditi

onal

ot

her

form

s of

fin

anci

al s

uppo

rt,

both

fro

m M

embe

r St

ates

an

d th

ird p

artie

s.

6. 5

. Fi

nanc

ial

inst

rum

ents

und

er t

his

Regu

latio

n m

ay t

ake

form

s su

ch

as

loan

s, gu

aran

tees

, eq

uity

or

qu

asi-e

quity

, in

vest

men

ts

or

part

icip

atio

ns,

and

risk-

shar

ing

inst

rum

ents

, w

hene

ver

poss

ible

and

in

acco

rdan

ce w

ith t

he p

rinci

ples

lai

d do

wn

in A

rtic

le

209(

1) o

f th

e Fi

nanc

ial

Regu

latio

n un

der

the

lead

of

the

EIB,

a m

ultil

ater

al E

urop

ean

finan

ce i

nstit

utio

n, s

uch

as t

he E

urop

ean

Bank

for

Rec

onst

ruct

ion

and

Dev

elop

men

t, or

a

bila

tera

l Eu

rope

an f

inan

ce i

nstit

utio

n, s

uch

as b

ilate

ral

deve

lop

men

t ba

nks,

poss

ibly

poo

led

with

add

ition

al o

ther

for

ms

of

finan

cial

sup

port

, bot

h fr

om M

embe

r St

ates

and

thi

rd p

artie

s.

Cont

ribut

ions

to

Uni

on f

inan

cial

inst

rum

ents

und

er t

his

Regu

la

tion

may

be

mad

e by

Mem

ber

Stat

es a

s w

ell

as a

ny e

ntity

re

ferr

ed t

o in

Art

icle

62

(1)(c

) of

the

Fin

anci

al R

egul

atio

n.

Cont

ribut

ions

to

Uni

on f

inan

cial

ins

trum

ents

und

er t

his

Regu

la

tion

may

be

mad

e by

Mem

ber

Stat

es a

s w

ell

as a

ny e

ntity

re

ferr

ed t

o in

Art

icle

62

(1)(c

) of

the

Fin

anci

al R

egul

atio

n.


Text

in

the

prop

osal

C

ourt

’s s

ugge

stio

n C

omm

ents

7.

Thos

e fin

anci

al

inst

rum

ents

m

ay

be

grou

ped

into

fa

cilit

ies

for

impl

emen

tatio

n an

d re

port

ing

purp

oses

. 7.

Th

ose

finan

cial

ins

trum

ents

may

be

grou

ped

into

fac

ilitie

s fo

r im

plem

enta

tion

and

repo

rtin

g pu

rpos

es.

8.

The

Uni

on's

fund

ing

shal

l no

t ge

nera

te o

r ac

tivat

e th

e co

llect

ion

of s

peci

fic t

axes

, dut

ies

or c

harg

es.

8. 6

. Th

e U

nion

's fu

ndin

g sh

all

not

gene

rate

or

activ

ate

the

colle

ctio

n of

spe

cific

tax

es, d

utie

s or

cha

rges

.

9.

Taxe

s, du

ties

and

char

ges

impo

sed

by p

artn

er c

ount

ries

may

be

elig

ible

for

fin

anci

ng u

nder

thi

s Re

gula

tion.

9.

7.

Taxe

s, du

ties

and

char

ges

impo

sed

by p

artn

er c

ount

ries

may

be

elig

ible

for

fin

anci

ng u

nder

thi

s Re

gula

tion.

Cha

pter

IV

EF

SD+,

bud

geta

ry g

uara

ntee

s an

d fin

anci

al a

ssis

tanc

e to

th

ird

coun

trie

s

Cha

pter

IV

EF

SD+,

bu

dget

ary

guar

ante

es

and

finan

cial

as

sist

ance

to

th

ird

coun

trie

s

Cha

pter

IV

EF

SD+,

bu

dget

ary

guar

ante

es

and

finan

cial

as

sist

ance

to

thir

d co

untr

ies

Art

icle

26

Sc

ope

and

finan

cing

6.

The

EFSD

+ an

d th

e Ex

tern

al

Act

ion

Gua

rant

ee

may

su

ppor

t fin

anci

ng

and

inve

stm

ent

oper

atio

ns

in

part

ner

coun

trie

s in

the

geo

grap

hica

l are

as r

efer

red

to i

n A

rtic

le 4

(2).

The

prov

ision

ing

of t

he E

xter

nal

Act

ion

Gua

rant

ee s

hall

be

finan

ced

from

th

e bu

dget

of

th

e re

leva

nt

geog

raph

ic

prog

ram

mes

est

ablis

hed

by A

rtic

le

6(2)

(a)

and

shal

l be

tra

ns

ferr

ed i

nto

the

com

mon

pro

visio

ning

fun

d. T

he E

FSD

+ an

d th

e Ex

tern

al A

ctio

n G

uara

ntee

may

also

sup

port

ope

ratio

ns in

be

nefic

iarie

s lis

ted

in A

nnex

I

of R

egul

atio

n IP

A

III.

The

fund

ing

for

thes

e op

erat

ions

und

er t

he E

FSD

+ an

d fo

r th

e pr

ovisi

onin

g of

th

e Ex

tern

al

Act

ion

Gua

rant

ee

shal

l be

fin

ance

d fr

om t

he R

egul

atio

n IP

A.

The

prov

ision

ing

of t

he

Exte

rnal

A

ctio

n G

uara

ntee

fo

r lo

ans

to

third

co

untr

ies

refe

rred

to

in

A

rtic

le

10(2

) of

Re

gula

tion

EIN

S sh

all

be

finan

ced

from

Reg

ulat

ion

EIN

S.

6.

Ther

e is

a la

ck o

f in

form

atio

n re

gard

ing

wha

t w

ill b

e do

ne w

ith e

.g.

reve

nues

and

any

pay

men

ts

rece

ived

by

the

Uni

on i

n ac

cord

ance

with

gua

rant

ee

or

loan

ag

reem

ents

, am

ount

s re

cove

red

from

de

faul

ting

debt

ors,

retu

rns

on

inve

stm

ents

of

th

e re

sour

ces

held

in

th

e co

mm

on

prov

ision

ing

fund

. Th

ere

is al

so

no

info

rmat

ion

rega

rdin

g an

y co

sts

invo

lved

.

7.

The

prov

ision

ing

refe

rred

to

in A

rtic

le

211(

2) o

f th

e Fi

nanc

ial

Regu

latio

n sh

all

be c

onst

itute

d on

the

bas

is of

the

U

nion

's to

tal

outs

tand

ing

liabi

litie

s ar

ising

fro

m e

ach

oper

at

ion,

incl

udin

g op

erat

ions

sig

ned

befo

re 2

021

and

guar

ante

ed

by t

he U

nion

. Th

e an

nual

am

ount

of

prov

ision

ing

requ

ired

may

be

cons

titut

ed d

urin

g a

perio

d of

up

to s

even

yea

rs.

7.

The

setti

ng

of

a pr

ovisi

onin

g ra

te

refe

rred

to

in

A

rtic

le

211(

2) o

f th

e Fi

nanc

ial

Regu

latio

n sh

all

be c

onst

itute

d on

the

bas

is of

bas

ed o

n th

e U

nion

's to

tal

outs

tand

ing

liabi

litie

s ar

ising

fro

m e

ach

oper

atio

n, i

nclu

ding

ope

ratio

ns s

igne

d be

fore

20

21 a

nd g

uara

ntee

d by

the

Uni

on.T

hat

amou

nt s

hall

excl

ude

the

cont

ribut

ions

ref

erre

d to

in

Art

icle

20

8(2)

of

the

Fina

ncia

l Re

gula

tion

(see

A

rtic

le

211(

1)

FR).

The

annu

al

amou

nt

of

prov

ision

ing

requ

ired

may

be

cons

titut

ed d

urin

g a

perio

d of

up

to s

even

yea

rs.

7.

It se

ems

that

Art

icle

211

(6)

and

Art

icle

211

(7)

of t

he F

inan

cial

Reg

ulat

ion

have

not

bee

n ta

ken

into

ac

coun

t, ev

en t

houg

h th

ey a

re v

ery

impo

rtan

t. W

e be

lieve

th

at

the

Com

miss

ion

shou

ld

imm

edia

tely

in

form

th

e Eu

rope

an

Parli

amen

t an

d th

e Co

unci

l, an

d sh

ould

pr

opos

e ad

equa

te

repl

enish

men

t m

easu

res

whe

re a

cou

ntry

in

rece

ipt

of E

U f

inan

cial

as

sista

nce

fails

to

pay

on a

mat

urity

.


Text

in

the

prop

osal

C

ourt

’s s

ugge

stio

n C

omm

ents

Hav

e th

e pr

ovisi

ons

of

Art

icle

20

9(3)

an

d A

rtic

le

209(

4)

of

the

Fina

ncia

l Re

gula

tion

been

co

rrec

tly t

aken

in

to

acco

unt

in

the

prop

osal

? Se

e al

so A

rtic

le

29(6

) be

low

.

8.

The

bala

nce

of a

sset

s by

31

Dec

embe

r 20

20 i

n th

e EF

SD

Gua

rant

ee

Fund

an

d in

th

e G

uara

ntee

fu

nd

for

exte

rnal

ac

tions

es

tabl

ished

re

spec

tivel

y by

Re

gula

tion

EU

2017

/160

1 of

the

Eur

opea

n Pa

rliam

ent

and

the

Coun

cil

and

Coun

cil

Regu

latio

n (E

C, E

urat

om)

No

480/

2009

sha

ll be

tr

ansf

erre

d in

to

the

com

mon

pr

ovisi

onin

g fu

nd

for

the

purp

ose

of p

rovi

sioni

ng i

ts r

espe

ctiv

e op

erat

ions

und

er t

he

sam

e sin

gle

guar

ante

e pr

ovid

ed f

or i

n pa

ragr

aph

4 of

thi

s A

rtic

le.

8.

The

bala

nce

of a

sset

s by

31

Dec

embe

r 20

20 i

n th

e EF

SD

Gua

rant

ee F

und

and

in t

he G

uara

ntee

fun

d fo

r ex

tern

al a

ctio

ns

esta

blish

ed r

espe

ctiv

ely

by R

egul

atio

n (E

U) N

o 20

17/1

601

of th

e Eu

rope

an P

arlia

men

t an

d th

e Co

unci

l an

d Co

unci

l Re

gula

tion

(EC,

Eu

rato

m)

No

480/

2009

sh

all

be

tran

sfer

red

into

th

e co

mm

on p

rovi

sioni

ng f

und

for

the

purp

ose

of p

rovi

sioni

ng i

ts

resp

ectiv

e op

erat

ions

und

er t

he s

ame

singl

e gu

aran

tee

prov

ided

fo

r in

par

agra

ph 4

5 of

thi

s A

rtic

le.

Art

icle

27

El

igib

ility

and

sele

ction

of

oper

atio

ns a

nd c

ount

erpa

rts

2.

The

Exte

rnal

Act

ion

Gua

rant

ee s

hall

supp

ort

finan

cing

an

d in

vest

men

t op

erat

ions

com

plia

nt w

ith t

he c

ondi

tions

set

ou

t in

poi

nts

(a)

to (

c) o

f A

rtic

le

209(

2) o

f th

e Fi

nanc

ial

Regu

latio

n an

d th

at:

2.

Plea

se n

ote

that

thi

s is

not

in a

ccor

danc

e w

ith

Art

icle

21

9(3)

of

th

e Fi

nanc

ial

Regu

latio

n,

as

poin

t (d

) m

entio

ning

le

vera

ge

and

the

mul

tiplie

r ef

fect

of

budg

etar

y gu

aran

tees

is

not

incl

uded

. W

as

it om

itted

by

acci

dent

?

(a)

ensu

re c

ompl

emen

tarit

y w

ith o

ther

ini

tiativ

es;

(b)

are

econ

omic

ally

and

fin

anci

ally

via

ble,

with

due

reg

ard

to

the

poss

ible

sup

port

fro

m,

and

co-fi

nanc

ing

by,

priv

ate

and

publ

ic

part

ners

to

th

e pr

ojec

t, w

hile

ta

king

in

to

acco

unt

the

spec

ific

oper

atin

g en

viro

nmen

t an

d ca

paci

ties

of c

ount

ries

iden

tifie

d as

exp

erie

ncin

g fr

agili

ty o

r co

nflic

t, Le

ast

Dev

elop

ed

Coun

trie

s an

d he

avily

in

debt

ed

poor

co

untr

ies

whi

ch m

ay b

enef

it fr

om c

once

ssio

nal

term

s;

(c)

are

tech

nica

lly v

iabl

e an

d ar

e su

stai

nabl

e fr

om a

n en

viro

nm

enta

l an

d so

cial

poi

nt o

f vi

ew.


Text

in

the

prop

osal

C

ourt

’s s

ugge

stio

n C

omm

ents

5.

Elig

ible

cou

nter

part

s sh

all

com

ply

with

the

rul

es a

nd

cond

ition

s pr

ovid

ed f

or i

n A

rtic

le

62(2

)(c)

of t

he F

inan

cial

Re

gula

tion.

In

the

case

of

bodi

es g

over

ned

by t

he p

rivat

e la

w

of

a M

embe

r St

ate

or

a th

ird

coun

try

whi

ch

have

co

ntrib

uted

to

the

Exte

rnal

Act

ion

Gua

rant

ee i

n ac

cord

ance

w

ith A

rtic

le 2

8 of

this

Regu

latio

n, p

refe

renc

e sh

all b

e gi

ven

to

thos

e bo

dies

tha

t di

sclo

se in

form

atio

n re

late

d to

env

ironm

ent,

soci

al a

nd c

orpo

rate

gov

erna

nce

crite

ria.

5.

Elig

ible

co

unte

rpar

ts

shal

l co

mpl

y w

ith

the

rule

s an

d co

nditi

ons

prov

ided

fo

r in

A

rtic

le

62(2

)(c)6

2(1)

(c)

of

the

Fina

ncia

l Re

gula

tion.

In

the

case

of

bodi

es

gove

rned

by

the

priv

ate

law

of

a M

embe

r St

ate

or a

thi

rd c

ount

ry w

hich

hav

e co

ntrib

uted

to

the

Exte

rnal

Act

ion

Gua

rant

ee in

acc

orda

nce

with

A

rtic

le

28 o

f th

is Re

gula

tion,

pre

fere

nce

shal

l be

giv

en t

o th

ose

bodi

es t

hat

disc

lose

inf

orm

atio

n re

late

d to

env

ironm

ent,

soci

al

and

corp

orat

e go

vern

ance

crit

eria

.

Art

icle

28

Co

ntrib

utio

n fro

m o

ther

don

ors

to t

he E

xter

nal

Acti

on G

uara

ntee

1.

Mem

ber

Stat

es,

third

cou

ntrie

s an

d ot

her

third

par

ties

may

con

trib

ute

to t

he E

xter

nal

Act

ion

Gua

rant

ee.

By

dero

gatio

n fr

om

the

seco

nd

sub-

para

grap

h of

A

rtic

le

218(

2) o

f th

e Fi

nanc

ial

Regu

latio

n, t

he c

ontr

actin

g pa

rtie

s to

the

Agr

eem

ent

on t

he E

urop

ean

Econ

omic

Are

a m

ay c

ontr

ibut

e in

the

for

m o

f gu

aran

tees

or

cash

.

1.

The

rele

vant

art

icle

of

the

FR u

ses

the

wor

d ‘m

ay’,

so i

t is

uncl

ear

why

it

is a

dero

gatio

n.

Cont

ribut

ion

from

thi

rd c

ount

ries

othe

r th

an t

he c

ontr

actin

g pa

rtie

s to

the

Agr

eem

ent

on t

he E

urop

ean

Econ

omic

Are

a an

d fr

om o

ther

thi

rd p

artie

s sh

all

be i

n th

e fo

rm o

f ca

sh a

nd

subj

ect

to a

ppro

val

by t

he C

omm

issio

n.

The

Com

miss

ion

shal

l in

form

the

Eur

opea

n Pa

rliam

ent

and

the

Coun

cil

with

out

dela

y of

the

con

trib

utio

ns c

onfir

med

.

At

the

requ

est

of t

he M

embe

r St

ates

, the

ir co

ntrib

utio

ns m

ay

be e

arm

arke

d fo

r th

e in

itiat

ion

of a

ctio

ns i

n sp

ecifi

c re

gion

s, co

untr

ies,

sect

ors

or e

xist

ing

inve

stm

ent

win

dow

s.

2.

Cont

ribut

ions

in

th

e fo

rm

of

a gu

aran

tee

shal

l no

t ex

ceed

50

% o

f th

e am

ount

ref

erre

d to

in

Art

icle

26

(2)

of

this

Regu

latio

n.

2.

Cont

ribut

ions

in

the

form

of

a gu

aran

tee

shal

l no

t ex

ceed

50

% o

f th

e am

ount

ref

erre

d to

in

Art

icle

26

(2)2

6(3)

of

this

Regu

latio

n.


Text

in

the

prop

osal

C

ourt

’s s

ugge

stio

n C

omm

ents

Art

icle

29

Im

plem

enta

tion

of E

xter

nal

Acti

on G

uara

ntee

agr

eem

ents

Art

icle

29

Im

plem

enta

tion

of E

xter

nal

Acti

on G

uara

ntee

agr

eem

ents

5.

The

Exte

rnal

Act

ion

Gua

rant

ee m

ay c

over

: 5.

Th

e Ex

tern

al A

ctio

n G

uara

ntee

may

cov

er:

(a)

for

debt

ins

trum

ents

, th

e pr

inci

pal

and

all

inte

rest

s an

d am

ount

s du

e to

the

sel

ecte

d el

igib

le c

ount

erpa

rt,

but

not

rece

ived

by

it

in

acco

rdan

ce

with

th

e te

rms

of

the

finan

cing

ope

ratio

ns a

fter

an e

vent

of

defa

ult

has

occu

rred

;

(a)

for

debt

ins

trum

ents

, th

e pr

inci

pal

and

all

inte

rest

s an

d am

ount

s du

e to

the

sel

ecte

d el

igib

le c

ount

erpa

rt,

but

not

rece

ived

by

it

in

acco

rdan

ce

with

th

e te

rms

of

the

finan

cing

ope

ratio

ns a

fter

an e

vent

of

defa

ult

has

occu

rred

;

(a)

for

equi

ty i

nves

tmen

ts,

the

amou

nts

inve

sted

and

the

ir as

soci

ated

fin

anci

ng c

osts

; (a

b) f

or

equi

ty

inve

stm

ents

, th

e am

ount

s in

vest

ed

and

thei

r as

soci

ated

fin

anci

ng c

osts

;

(b)

for

othe

r fin

anci

ng a

nd i

nves

tmen

t op

erat

ions

ref

erre

d to

in

Art

icle

27

(2),

the

amou

nts

used

and

the

ir as

soci

ated

fu

ndin

g co

sts;

(bc)

for

oth

er f

inan

cing

and

inve

stm

ent

oper

atio

ns r

efer

red

to in

A

rtic

le

27(2

)27(

3),

the

amou

nts

used

and

the

ir as

soci

ated

fu

ndin

g co

sts;

(c)

all r

elev

ant

expe

nses

and

rec

over

y co

sts

rela

ted

to a

n ev

ent

of d

efau

lt, u

nles

s de

duct

ed f

rom

rec

over

y pr

ocee

ds.

(cd)

all

rele

vant

exp

ense

s an

d re

cove

ry c

osts

rel

ated

to

an e

vent

of

def

ault,

unl

ess

dedu

cted

fro

m r

ecov

ery

proc

eeds

.

6.

(b)

the

outs

tand

ing

finan

cial

obl

igat

ion

for

the

Uni

on

arisi

ng f

rom

the

EFS

D+

oper

atio

ns p

rovi

ded

to t

he e

ligib

le

coun

terp

arts

and

the

ir fin

anci

ng a

nd i

nves

tmen

t op

erat

ions

, br

oken

dow

n by

ind

ivid

ual

oper

atio

ns.

6.

(b)

Art

icle

219

(6)

of t

he F

inan

cial

Reg

ulat

ion

is no

t fu

lly c

ompl

ied

with

.

Cha

pter

V

Mon

itori

ng, r

epor

ting

and

eval

uatio

n C

hapt

er V

M

onito

ring

, rep

ortin

g an

d ev

alua

tion

Art

icle

31

M

onito

ring

and

repo

rting

A

rtic

le

31

Mon

itorin

g an

d re

porti

ng

2.

The

Com

miss

ion

shal

l re

gula

rly m

onito

r its

act

ions

and

re

view

pr

ogre

ss

mad

e to

war

ds

deliv

erin

g ex

pect

ed

resu

lts,

cove

ring

outp

uts

and

outc

omes

.

2.

The

Com

miss

ion

shal

l re

gula

rly m

onito

r its

act

ions

and

re

view

pr

ogre

ss

mad

e to

war

ds

deliv

erin

g ex

pect

ed

resu

lts,

cove

ring

outp

uts

and

outc

omes

.


Text

in

the

prop

osal

C

ourt

’s s

ugge

stio

n C

omm

ents

Prog

ress

with

res

pect

to

expe

cted

res

ults

sho

uld

be m

onito

red

on

the

basis

of

clea

r, tr

ansp

aren

t an

d, w

here

app

ropr

iate

, m

easu

rabl

e in

dica

tors

. In

dica

tors

sha

ll be

kep

t at

a l

imite

d nu

mbe

r to

fac

ilita

te t

imel

y re

port

ing.

Prog

ress

with

res

pect

to

expe

cted

res

ults

sho

uld

be m

onito

red

on

the

basis

of

clea

r, tr

ansp

aren

t and

, whe

re a

ppro

pria

te, m

easu

rabl

e in

dica

tors

. In

dica

tors

sh

all

be

kept

at

a

limite

d nu

mbe

r to

fa

cilit

ate

timel

y re

port

ing.

6.

The

annu

al

repo

rt

prep

ared

in

20

21

shal

l co

ntai

n co

nsol

idat

ed i

nfor

mat

ion

from

ann

ual

repo

rts

conc

erni

ng t

he

perio

d fr

om 2

014

to 2

020

on a

ll fu

ndin

g fr

om t

he R

egu

latio

ns

refe

rred

to

in

A

rtic

le

40(2

), in

clud

ing

exte

rnal

as

signe

d re

venu

es

and

cont

ribut

ions

to

tr

ust

fund

s, an

d of

ferin

g a

brea

kdow

n of

sp

endi

ng

by

coun

try,

us

e of

fin

anci

al

inst

rum

ents

, co

mm

itmen

ts

and

paym

ents

. Th

e re

port

sha

ll re

flect

the

mai

n le

sson

s le

arnt

and

the

fol

low

-up

to t

he r

ecom

men

datio

ns o

f th

e ex

tern

al e

valu

ativ

e ex

erci

ses

carr

ied

out

in p

revi

ous

year

s.

6.

The

annu

al

repo

rt

prep

ared

in

20

21

shal

l co

ntai

n co

nsol

idat

ed i

nfor

mat

ion

from

ann

ual

repo

rts

conc

erni

ng t

he

perio

d fr

om 2

014

to 2

020

on a

ll fu

ndin

g fr

om t

he R

egul

atio

ns

refe

rred

to

in A

rtic

le40

(2)

39(2

), in

clud

ing

exte

rnal

ass

igne

d re

venu

es

and

cont

ribut

ions

to

tr

ust

fund

s, an

d of

ferin

g a

brea

kdow

n of

spe

ndin

g by

cou

ntry

, use

of

finan

cial

inst

rum

ents

, co

mm

itmen

ts a

nd p

aym

ents

. Th

e re

port

sha

ll re

flect

the

mai

n le

sson

s le

arnt

and

the

fol

low

-up

to t

he r

ecom

men

datio

ns o

f th

e ex

tern

al e

valu

ativ

e ex

erci

ses

carr

ied

out

in p

revi

ous

year

s.

ISSN 1977-091X (electronic edition) ISSN 1725-2423 (paper edition)

EN