Regulation (EU) 2017/1601 of the European Parliament and of the CouncilDangos y teitl llawn

CHAPTER III U.K. EFSD GUARANTEE AND EFSD GUARANTEE FUND

Article 7 U.K. The EFSD Guarantee

1. The Union shall, after careful consideration of the viability of a project, provide an irrevocable and unconditional guarantee on first demand to the eligible counterpart for the financing and investment operations covered by this Regulation.

2. The EFSD Guarantee shall support financing and investment operations in partner countries in Africa and the European Neighbourhood.

3. The EFSD Guarantee shall be granted as a guarantee on first demand in respect of the instruments referred to in Article 10 and in compliance with the eligibility criteria set out in Article 9.

Article 8 U.K. Requirements for the use of the EFSD Guarantee

1. The granting of the EFSD Guarantee shall be subject to the conclusion of the respective EFSD guarantee agreement between the Commission on behalf of the Union and the eligible counterpart.

2. The investment period during which the EFSD guarantee agreements for supporting financing and investment operations can be concluded with the eligible counterparts shall last until 31 December 2020.

3. The maximum period allowed for eligible counterparts to conclude agreements with co-financing private sector partners, financial intermediaries or final beneficiaries shall be four years after the conclusion of the relevant EFSD guarantee agreement.

Article 9 U.K. Eligibility criteria for the use of the EFSD Guarantee

1. The financing and investment operations eligible for support through the EFSD Guarantee in accordance with the purpose of the EFSD set out in Article 3 shall be consistent and aligned with Union policies, in particular the Union’s development policy and European Neighbourhood Policy, as well as with the partner countries’ strategies and policies. Such operations shall take into account other Union and international support to ensure complementarity with other initiatives and shall support the following objectives:

(a) contributing to sustainable development in its economic, social and environmental dimensions, and to the implementation of the 2030 Agenda and, where appropriate, the European Neighbourhood Policy, with a particular focus on the eradication of poverty, the creation of decent jobs, economic opportunities, skills and entrepreneurship, promoting in particular gender equality and the empowerment of women and young people, while pursuing and strengthening the rule of law, good governance and human rights;

(b) contributing to the implementation of the Union’s migration policy, including, where appropriate, the New Partnership Framework with third countries under the European Agenda on Migration;

(c) contributing, by promoting sustainable development, to addressing specific root causes of migration, including irregular migration, as well as fostering the resilience of transit and host communities, and contributing to the sustainable reintegration of migrants returning to their countries of origin, with due regard to the strengthening of the rule of law, good governance and human rights;

(d) strengthening socioeconomic sectors and areas and related public and private infrastructure, including renewable and sustainable energy, water and waste management, transport, information and communications technologies, as well as environment, sustainable use of natural resources, sustainable agriculture and blue growth, social infrastructure, health, and human capital, in order to improve the socioeconomic environment;

(e) providing finance and support to private and cooperative sector development, with a particular focus on local companies and micro, small and medium-sized enterprises, while addressing market failures, limiting market distortions and encouraging the contribution of European companies to the EFSD objectives;

(f) addressing bottlenecks to private investments by providing financial instruments, which may be denominated in the local currency of the partner country concerned, including first loss guarantees to portfolios, guarantees to private sector projects such as loan guarantees for small and medium-sized enterprises, and guarantees for specific risks for infrastructure projects and other risk capital;

(g) leveraging private sector financing, with a particular focus on micro, small and medium-sized enterprises, by addressing bottlenecks and obstacles to investment;

(h) contributing to climate action and environmental protection and management, thus producing climate co-benefits, allocating at least 28 % of the financing to investments that contribute to climate action, renewable energy and resource efficiency.

2. The EFSD Guarantee shall support financing and investment operations which address market failures or sub-optimal investment situations and which:

(a) provide additionality;

(b) ensure complementarity with other initiatives, making sure that EFSD Guarantee operations are clearly distinct, in particular from the external lending mandate operations managed by the EIB;

(c) ensure alignment of interest by providing adequate risk sharing by the respective eligible counterpart and other prospective partners;

(d) are economically and financially viable, with due regard to the possible support from, and co-financing by, private and public partners to the project, while taking into account the specific operating environment and capacities of countries identified as experiencing fragility or conflict, LDCs and heavily indebted poor countries where more concessional terms can be given;

(e) are technically viable and are sustainable from an environmental and social point of view;

(f) maximise, where possible, the mobilisation of private sector capital;

(g) respect the development effectiveness principles as set out in the Busan Partnership for Effective Development Cooperation and reaffirmed in Nairobi in 2016, including ownership, alignment, focus on results, transparency and mutual accountability, as well as the objective of untying aid;

(h) are designed so as to fulfil the criteria for ODA established by the OECD-DAC, taking into account the specificities of private sector development; and

(i) are implemented with full respect for internationally agreed guidelines, principles and conventions, including the Principles for Responsible Investment, UN Guiding Principles on Business and Human Rights, OECD Guidelines for Multinational Enterprises, the UN Food and Agriculture Organization’s Principles for Responsible Investment in Agriculture and Food Systems, and International Labour Organization conventions, as well as international human rights law.

3. Financing and investment operations may combine, on a case-by-case basis, financing from different Union instruments to the extent that it is needed for the success of the investment project backed by the EFSD and as long as this does not lead to reduced financing for other developmental objectives.

4. Taking due account of the advice provided by the strategic board, the Commission shall, after consulting the operational boards and informing the European Parliament and the Council, set up investment windows for specific regions, specific partner countries, or both, for specific sectors, or for specific projects, specific categories of final beneficiaries, or both to be funded by instruments referred to in Article 10 to be covered by the EFSD Guarantee up to a fixed amount. The information provided by the Commission to the European Parliament and to the Council shall specify how the investment windows are aligned with the requirements set out in Article 3 and this Article and their detailed funding priorities. The EIB should provide a written opinion on banking related matters to accompany each proposal for investment windows. All requests for financial support within investment windows shall be made to the Commission.

The choice of investment windows shall be duly justified by an analysis of the market failure or sub-optimal investment situations. Such analysis shall be carried out by the Commission in cooperation with potentially eligible counterparts and stakeholders.

Within the Africa Investment Platform, a significant share of the EFSD Guarantee shall be allocated to fragile and conflict-affected countries, landlocked countries and LDCs.

5. The Commission shall assess the operations supported by the EFSD Guarantee against the eligibility criteria set out in paragraphs 1 and 2, where possible drawing on the existing result measurement systems of eligible counterparts. The Commission shall publish the result of its assessment for each investment window on an annual basis.

Article 10 U.K. Eligible instruments for the EFSD Guarantee

1. The EFSD Guarantee shall be used to cover the risks for the following instruments:

(a) loans, including local currency loans;

(b) guarantees;

(c) counter-guarantees;

(d) capital market instruments;

(e) any other form of funding or credit enhancement, insurance, and equity or quasi-equity participations.

2. Eligible counterparts may provide the instruments listed in paragraph 1 under an investment window or individual project administered by an eligible counterpart. They may be provided for the benefit of partner countries, including countries experiencing fragility or conflict or countries facing challenges in reconstruction and post-conflict recovery, for the benefit of those partner countries’ institutions, including their public national and private local banks and financial institutions, as well as for the benefit of private sector entities of those partner countries. In countries experiencing fragility or conflict, and other countries, where justified, support may be provided to public sector investments that have relevant effects on private sector development.

Article 11 U.K. Eligibility and selection of counterparts

1. The eligible counterparts for the purposes of the EFSD Guarantee shall be:

(a) the EIB and the European Investment Fund;

(b) public law bodies;

(c) international organisations and their agencies;

(d) bodies governed by private law with a public service mission to the extent that they provide adequate financial guarantees;

(e) bodies governed by the private law of a Member State that provide adequate financial guarantees, by way of derogation from point (vii) of point (c) of Article 58(1) of Regulation (EU, Euratom) No 966/2012;

(f) bodies governed by the private law of a partner country that provide adequate financial guarantees, by way of derogation from point (vii) of point (c) of Article 58(1) of Regulation (EU, Euratom) No 966/2012.

2. Eligible counterparts shall comply with the rules and conditions provided for in Article 60 of Regulation (EU, Euratom) No 966/2012. In the case of bodies governed by the private law of a Member State or a partner country, preference shall be given to those bodies that disclose information related to environment, social and corporate governance criteria.

The EFSD Guarantee shall be implemented whenever possible under the lead of a European eligible counterpart in line with the criteria set out in this Regulation. The Commission shall ensure an effective, efficient and fair use of available resources among eligible counterparts, while promoting cooperation between them.

The Commission shall ensure fair treatment for all eligible counterparts and shall ensure that conflicts of interest are avoided throughout the implementation period of the EFSD. In order to ensure complementarity, the Commission may request any relevant information from eligible counterparts about their non-EFSD operations.

3. The Commission shall select the eligible counterparts pursuant to Article 61 of Regulation (EU, Euratom) No 966/2012.

4. The European Parliament or the Council may invite eligible counterparts to an exchange of views concerning financing and investment operations covered by this Regulation.

Article 12 U.K. Coverage and terms of the EFSD Guarantee

1. Without prejudice to paragraph 2, the EFSD Guarantee shall not, at any time, exceed EUR 1 500 000 000.

2. Member States and EFTA countries may contribute to the EFSD Guarantee Fund in the form of guarantees or cash. Subject to the opinion of the strategic board and approval by the Commission, other contributors may contribute in the form of cash.

The Commission shall inform the European Parliament and the Council without delay of the contributions confirmed.

The amount of the EFSD Guarantee exceeding the amount indicated in paragraph 1 shall be granted on behalf of the Union.

Aggregate net payments from the general budget of the Union under the EFSD Guarantee shall not exceed EUR 1 500 000 000. Without prejudice to paragraph 4, payments for guarantee calls shall be made, where necessary, by the contributing Member States or other contributors on pari passu basis with the Union.

A contribution agreement shall be concluded between the Commission, on behalf of the Union, and the contributor, and shall contain, in particular, provisions concerning the payment conditions.

3. The EFSD Guarantee shall only become available when a contribution in cash of EUR 400 000 000 from the 11^th EDF to the general budget of the Union has been confirmed.

4. The contributions made by the Member States in the form of a guarantee may only be called for payments of guarantee calls after the funding from the general budget of the Union increased by any other cash contributions has been used on payments of guarantee calls.

At the request of the Member States in the strategic board, their contributions may be earmarked for the initiation of projects in specific regions, countries, sectors or existing investment windows.

Any contribution may be used to cover guarantee calls regardless of earmarking.

5. At least EUR 400 000 000 of EFSD Guarantee coverage shall be allocated for investments in the partner countries eligible under the 11^th EDF throughout the implementation period of the EFSD Guarantee, in line with the objectives of the ACP-EU Partnership Agreement.

6. At least EUR 100 000 000 of EFSD Guarantee coverage shall be allocated for investments in the partner countries in the eastern and southern neighbourhoods, in accordance with Regulation (EU) No 232/2014.

Article 13 U.K. Implementation of EFSD guarantee agreements

1. The Commission, on behalf of the Union, shall conclude EFSD guarantee agreements with the eligible counterparts selected pursuant to Article 11 and paragraph 4 of this Article on the granting of the EFSD Guarantee, which shall be unconditional, irrevocable, at first demand, and in favour of the selected eligible counterpart.

2. One or more EFSD guarantee agreements shall be concluded for each investment window between the Commission and the eligible counterpart or eligible counterparts selected. In order to address specific needs, the EFSD Guarantee may be granted for individual financing or investment operations. Agreements may be concluded with a consortium of two or more eligible counterparts.

All EFSD guarantee agreements shall, upon request, be made available to the European Parliament and to the Council, taking into account the protection of confidential and commercially sensitive information.

3. EFSD guarantee agreements shall contain, in particular, provisions concerning the following:

(a) detailed rules on the provision of the EFSD Guarantee, including its arrangements on the coverage and its defined coverage of portfolios and of projects of specific types of instruments, as well as a risk analysis of projects and project portfolios, including at sectoral, regional and national levels;

(b) the objectives and purpose of this Regulation, a needs assessment and an indication of the expected results, taking into account the promotion of corporate social responsibility and responsible business conduct, including, in particular, by respect for the internationally agreed guidelines, principles and legal instruments referred to in point (i) of Article 9(2);

(c) the remuneration of the guarantee, which is to reflect the risk level, and the possibility for the remuneration to be partly subsidised in order to give more concessional terms in duly justified cases, in particular in the countries referred to in point (d) of Article 9(2);

(d) requirements for the use of the EFSD Guarantee, including payment conditions, such as specific time frames, interest to be paid on due amounts, expenses and recovery costs and possibly necessary liquidity arrangements;

(e) claims procedures, including, but not limited to, triggering events and waiting periods, and procedures regarding the recovery of claims;

(f) the monitoring, reporting and evaluation obligations pursuant to Articles 16 and 17;

(g) clear and accessible complaints procedures for third parties that could be affected by the implementation of projects supported by the EFSD Guarantee.

4. The Commission, when concluding EFSD guarantee agreements with eligible counterparts, shall take due account of:

(a) the advice and guidance of the strategic and regional operational boards, in accordance with Articles 5 and 6;

(b) the objectives of the investment window;

(c) the experience and operational, financial and risk management capacity of the eligible counterpart;

(d) the amount of own resources, as well as private sector co-financing, that the eligible counterpart is ready to mobilise for the investment window.

5. The eligible counterpart shall approve financing and investment operations following its own rules and procedures and in compliance with the terms of the EFSD guarantee agreement.

6. The EFSD Guarantee may cover:

(a) for debt instruments, the principal and all interests and amounts due to the selected eligible counterpart, but not received by it in accordance with the terms of the financing operations after an event of default has occurred;

(b) for equity investments, the amounts invested and their associated financing costs;

(c) for other financing and investment operations referred to in Article 9(2), the amounts used and their associated funding costs;

(d) all relevant expenses and recovery costs related to an event of default, unless deducted from recovery proceeds.

7. EFSD guarantee agreements shall lay down detailed rules on the cover, requirements, eligibility, eligible counterparts, and procedures.

Article 14 U.K. The EFSD Guarantee Fund

1. The EFSD Guarantee Fund shall constitute a liquidity cushion from which the eligible counterparts shall be paid in the event of a call on the EFSD Guarantee pursuant to the relevant EFSD guarantee agreement.

2. The EFSD Guarantee Fund shall be endowed by:

(a) contributions from the general budget of the Union and other sources;

(b) voluntary contributions from Member States and other contributors;

(c) returns on invested resources of EFSD Guarantee Fund;

(d) amounts recovered from defaulting debtors in accordance with the recovery provisions laid down in EFSD guarantee agreements;

(e) revenues and any other payments received by the Union in accordance with EFSD guarantee agreements.

3. Revenues of the EFSD Guarantee Fund as provided for in points (c) and (e) of paragraph 2 of this Article shall constitute internal assigned revenue in accordance with Article 21(4) of Regulation (EU, Euratom) No 966/2012.

4. The resources of the EFSD Guarantee Fund referred to in paragraph 2 shall be directly managed by the Commission and invested in accordance with the principle of sound financial management following appropriate prudential rules. By 30 June 2019, the Commission shall submit to the European Parliament and to the Council an independent external evaluation of the advantages and disadvantages of entrusting the financial management of the assets of the Guarantee Fund for external actions, as established by the Council Regulation (EC, Euratom) No 480/2009(1), and of the EFSD to the Commission, to the EIB, or to a combination of the two, taking into account the relevant technical and institutional criteria used in comparing asset management services, including the technical infrastructure, comparison of costs for the services given, institutional set-up, reporting, performance, accountability and expertise of each institution and the other asset management mandates for the general budget of the Union. The evaluation shall be accompanied, where appropriate, by a legislative proposal.

5. Endowments to the EFSD Guarantee Fund shall be used to reach an appropriate level of provisioning to cover the total EFSD Guarantee obligations. The provisioning rate shall be at 50 % of the total EFSD Guarantee obligations covered by the general budget of the Union.

6. Following an assessment of the adequacy of the level of the EFSD Guarantee Fund in accordance with the report provided for under Article 16(3), the following payments shall be made:

(a) without prejudice to paragraph 8 of this Article, any surplus shall be paid to the general budget of the Union;

(b) any replenishment of the EFSD Guarantee Fund shall be paid in annual tranches over a maximum period of three years starting from year n+1.

7. From 1 January 2021, if, as a result of calls on the EFSD Guarantee, the level of resources in the Guarantee Fund falls below 50 % of the provisioning rate referred to in paragraph 5, the Commission shall submit a report on:

(a) the cause of the shortfall, with detailed explanations; and

(b) where deemed necessary, any exceptional measures that may be required to replenish the EFSD Guarantee Fund.

8. After a call on the EFSD Guarantee, endowments to the EFSD Guarantee Fund provided for in points (c), (d) and (e) of paragraph 2 of this Article exceeding the resources necessary to reach the provisioning rate at the level referred to in paragraph 5 of this Article or any surplus provided for in point (a) of paragraph 6 of this Article shall first be used within the limits of the maximum period provided for in Article 8(3) to restore the EFSD Guarantee up to its initial amount.

Article 15 U.K. Funding of the EFSD Guarantee Fund from the general budget of the Union

A contribution of EUR 350 000 000 shall be provided by the general budget of the Union.

(1)

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).