EUROPEAN COMMISSION

Brussels, 14.9.2016

COM(2016) 586 final

2016/0281(COD)

Proposal for a

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

on the European Fund for Sustainable Development (EFSD) and establishing the EFSD Guarantee and the EFSD Guarantee Fund

EXPLANATORY MEMORANDUM

1.CONTEXT OF THE PROPOSAL

•Reasons for and objectives of the proposal

On 7 June 2016, the Commission adopted a Communication on establishing a new Partnership Framework with third countries under the European Agenda for Migration. 1 Alongside a variety of measures proposed to address the most urgent needs of refugees as well as supporting host communities, the Commission calls for a long term strategy by which the EU will promote the sustainable development goals of the 2030 Agenda and thus continue to address root causes of migration.

This is also in line with the EU Global Strategy for Foreign and Security Policy with embeds challenges such as migration in the overall EU foreign policy, ensuring coherence and synergies with European Development and Neighbourhood policies and European economic diplomacy.

The European Council of 28 June 2016 invited the Commission to present a proposal for an ambitious External Investment Plan (EIP) by September 2016. The EIP will be based on three pillars working hand in hand: a new investment fund (pillar 1); technical assistance (pillar 2), to help local authorities and companies to develop a higher number of sustainable projects and attract investors; and finally a range of dedicated thematic, national and regional EU development cooperation programmes combined with structured political dialogue targeted at improving the investment climate and overall policy environment in the countries concerned (pillar 3). Pillar 3 of the EIP is the link between the European Fund for Sustainable Development (EFSD) and the broad partnership between the EU and its partner countries. This partnership materialises in political and in policy dialogue that the Commission undertakes through EU delegations and political contacts.

Pillar 1 will be implemented through the EFSD. The EFSD will have the key objective of providing an integrated financial package to finance investments starting in the regions of Africa and the Neighbourhood  2 .

The EFSD will be composed of regional investment platforms, which will combine financing from existing blending facilities 3  and the EFSD Guarantee. It will operate as a "one-stop shop" to receive financing proposals from financial institutions and public or private investors and deliver a wide range of financial support to eligible investments.

The key objective of the EFSD is to provide an integrated financial package to finance investments starting in regions of Africa for countries that are signatories to the Partnership Agreement between the members of the African, Caribbean and Pacific (ACP) Group of States of the one part, and the European Community and its Member States, of the other part, signed in Cotonou on 23 June 2000 ('Cotonou Agreement') 4  and the Neighbourhood, thereby creating growth and employment opportunities, maximising additionality, delivering innovative products and crowding-in private sector funds. The EFSD is expected to mobilise up to EUR 44 000 000 000 investments with funds from the general budget of the Union and other sources of EUR 3 350 000 000 until 2020.

•Consistency with existing policy provisions in the policy area

•Consistency with other Union policies

The EIP is part of the EU new Partnership Framework with third countries under the European Agenda for Migration.

The Plan is aligned with the reviewed European Neighbourhood Policy (ENP) 10 which focuses on supporting economic development in partner countries, to progressively achieve stabilisation and transition from emergency to structural response. It is also aligned with the Addis Ababa Action Agenda on Financing for Development. 

The EFSD is coherent with the EU policies in the area of climate change as it will contribute to the implementation of the Paris Agreement on Climate Change (COP 21) 11 including its international climate finance commitments. As explained in the Commission Communication The Road from Paris: assessing the implications of the Paris Agreement 12 , the Paris Agreement is an opportunity for economic transformation, jobs and growth. It is a central element in achieving broader sustainable development goals, as well as the EU priorities of investment, competitiveness, circular economy, research, innovation and energy transition.

2.LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY

•Legal basis

•Subsidiarity (for non-exclusive competence) and proportionality

•Choice of the instrument

3.STAKEHOLDER CONSULTATIONS AND COLLECTION OF EXPERTISE

•Stakeholder consultations

•Collection and use of expertise

The Commission has established extensive experience with similar instruments, such as the European Fund for Strategic Investment (EFSI) 13 for EU internal policies and several financial instruments and structured grants supported by the EU blending facilities for EU external policies 14 . The objective has been to mobilise additional investment, in particular from private investors, through the provision of partial guarantees or risk cushions on a first-loss or pari passu basis to financial institutions, typically the public financial institutions currently present in EU Blending in external action, which themselves provide support (through loans, guarantees, equity or similar products). 

•Fundamental rights

4.BUDGETARY IMPLICATIONS

5.OTHER ELEMENTS

•Implementation plans and monitoring, evaluation and reporting arrangements

•Detailed explanation of the specific provisions of the proposal

The Commission will be advised by a Strategic Board and two Operational Boards, one for each Regional Investment Platform. The Commission will manage the EFSD Secretariat, which will ensure the performance of all tasks and functions needed to fulfil the objectives of the EIP. The Strategic Board, co-chaired by representatives of the Commission and of the High Representative of the Union for Foreign Affairs and Security Policy and composed of the Member States and the EIB, will give strategic guidance and help the Commission set overall investment goals as regards the use of the EFSD Guarantee, ensuring coordination and coherence between the Regional Investment Platforms and with the External Lending Mandate, the Resilience Initiative and the ACP Investment Facility managed by the EIB. The EIB will actively contribute through advisory functions to the Commission as regards the operational management of the guarantee.

A sound technical assessment and due diligence as well as a swift implementation of individual projects will be ensured. The bankability and risk of the projects will be assessed by the eligible counterparts and verified by independent experts to ensure the credibility vis-à-vis the private sector, before the investment proposals are approved by the Commission. The detailed practical modalities of how to implement the guarantee will be decided for each investment window.

2016/0281 (COD)

Proposal for a

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

on the European Fund for Sustainable Development (EFSD) and establishing the EFSD Guarantee and the EFSD Guarantee Fund

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the Functioning of the European Union, and in particular Articles 209(1) and 212(2) thereof,

Having regard to the proposal from the European Commission,

After transmission of the draft legislative act to the national parliaments,

Acting in accordance with the ordinary legislative procedure,

Whereas:

(1)The Union's ambitious External Investment Plan (EIP) is needed to support investments starting in Africa and the Union's Neighbourhood as a means to promote the sustainable development goals of the United Nations 2030 Agenda for Sustainable Development ('the 2030 Agenda') as well as the commitments under the recently revised European Neighbourhood Policy thus addressing root causes of migration. It should also contribute to the implementation of the Paris Agreement on Climate Change (COP 21).

(2)The EIP should incorporate the Union commitment under the Addis Ababa Action Agenda on Financing for Development. It should also allow European investors and private companies, including small and medium-sized enterprises, to participate more effectively to sustainable development in partner countries.

(3)This is in line with the Union Global Strategy for Foreign and Security Policy which embeds challenges such as migration and resilience in the overall EU foreign policy, ensuring coherence and synergies with European development and Neighbourhood policies.

(4)The EIP should provide an integrated financial package to finance investments starting in regions of Africa for countries that are signatories to the Partnership Agreement between the members of the African, Caribbean and Pacific Group of States of the one part, and the European Community and its member States, of the other part, signed in Cotonou on 23 June 2000 22  and the Neighbourhood countries, thereby creating growth and employment opportunities, maximising additionality, delivering innovative products, and crowding-in private sector funds.

(5)The European Fund for Sustainable Development (EFSD) should be composed of regional investment platforms, which will combine financing from existing blending facilities and the EFSD Guarantee. The existing blending facilities for Africa are created by Commission Decision C(2015)5210 and by Commission Implementing Decision C(2016)3436 for the Neighbourhood. Each regional investment platform should have an operational board that supports the Commission in defining regional and sectorial investment goals, regional, sectorial and thematic investment windows, formulates opinions on the blending operations and discusses the use of the EFSD Guarantee in line with the investment windows to be defined.

(6)Furthermore, the EFSD should operate as 'one-stop-shop' to receive financing proposals from financial institutions and public or private investors and deliver a wide range of financial support to eligible investments. The EFSD Guarantee should be backed by the EFSD Guarantee Fund. The EFSD should deploy innovative instruments to support investments and involve the private sector.

(7)Coordination and coherence of the EFSD with the European Investment Bank's (EIB) external lending mandate as set out in Decision [to be adopted], including the EIB resilience initiative, as well as with the ACP Investment Facility 23  should be ensured through the Strategic Board of the EFSD. 

(8)Moreover, the Strategic Board should support the Commission in setting strategic guidance and overall investment goals. The Strategic Board should also support coordination and coherence between the regional platforms. This should ensure complementarity of the various instruments in external action. The Strategic Board should be co-chaired by the Commission and the High Representative of the Union for Foreign Affairs and Security Policy to ensure consistency and coherence with Union external policy objectives and partnership frameworks with third countries.

(9)The EFSD Guarantee should be granted to eligible counterparts for financing and investment operations or guarantee instruments for an initial investment period up to 31 December 2020.

(10)In order to provide for flexibility, increase the attractiveness for the private sector and maximise the impact of the investments it is appropriate to provide for a derogation from Article 58(1)(c)(vii) of Regulation (EU) No 966/2012 of the European Parliament and the Council 24 by which the eligible counterparts who are bodies governed by private law could also be bodies which are not entrusted with the implementation of a public-private partnership and could also be bodies governed by the private law of a partner country. 

(11)The Commission should conclude guarantee agreements with the eligible counterparts setting out the specific provisions under which the EFSD Guarantee is granted to them. These guarantee agreements should provide the legal basis for adequate risk sharing, thus providing incentives for the eligible counterparts to provide financing, as well as the mechanisms and procedures for potential calls on the EFSD Guarantee.

(12)The Union should make available a guarantee of EUR 1 500 000 000 to establish the EFSD Guarantee. Member States and other contributors are invited to contribute further to support the EFSD Guarantee Fund in the form of cash (Member States and other contributors) or guarantees (Member States) in order to increase the liquidity cushion and thus allow the increase of the total volume of EFSD Guarantee. The Union should make available a guarantee of EUR 1 500 000 000 to establish the EFSD Guarantee. Member States, public financial institutions and other contributors should be invited to provide additional funding to the EFSD Guarantee Fund under conditions that should be established in an agreement to be concluded between the Commission on behalf of the Union and all the contributors.

(13)The EFSD Guarantee Fund should be established as a liquidity cushion in the event of a call on the EFSD Guarantee. To reach a level that adequately reflects EU financial liabilities in relation to the EFSD Guarantee, the Union should make available EUR 750 000 000.

(14)In order to increase the impact of the EFSD Guarantee in view of the needs in the regions concerned, Member States should have the possibility of providing contributions in the form of a guarantee or cash. Those contributions could be earmarked by region, sector or investment window.

(15)As the funds of the EDF are to be used for the countries eligible under the 11th European Development Fund (EDF) 25 , it requires the allocation of a minimum of EUR 400 000 000 of EFSD Guarantee coverage for investments throughout the implementation period of the EFSD Guarantee. The EFSD Guarantee should only become available when EUR 400 000 000 of 11th EDF funds have been allocated to the EFSD Guarantee Fund. 

(16)The Commission should report annually to the European Parliament and the Council on the financing and investment operations covered by the EFSD Guarantee with a view to ensuring accountability to the European citizens. The report should be made public in order to allow relevant stakeholders, including civil society, to express their views. The Commission should also report annually to the European Parliament and the Council on the management of the EFSD Guarantee Fund so that accountability and transparency are ensured.

(17)In order to take into account lessons learned and allow for further evolvement of the EFSD, the functioning of the EFSD and the use of the EFSD Guarantee Fund should be evaluated by the Commission. The application of this Regulation should be evaluated independently in order to assess the level of conformity of the implementation with the legal basis, but also to establish the applicability and practicability of the Regulation in the achievement of its objectives.

(18)In order to protect the financial interests of the Union, with a view to establishing whether there has been fraud, corruption, money laundering or any other illegal activity affecting the financial interests of the Union in connection with any financing and investment operations covered by this Regulation, the European Anti-Fraud Office (OLAF) is entitled to carry out investigations in accordance with Regulation (EU, Euratom) No 883/2013 of the European Parliament and of the Council 26 , Council Regulation (Euratom, EC) No 2185/96 27 and Council Regulation (EC, Euratom) No 2988/95. 28

(19)In order to contribute to the international fight against tax fraud, tax evasion and moneylaundering, the eligible counterparts should not support any activities carried out for illegal purposes and should not participate in any financing or investment operation through a vehicle located in a non-cooperative jurisdiction.

(20)In order to fulfil the political commitments of the EU on renewable energy and climate change a minimum share of 20% for the funding allocated under the EFSD should be devoted to financing and investment operations relevant for these sectors.

HAVE ADOPTED THIS REGULATION:

CHAPTER I

INTRODUCTORY PROVISIONS

Article 1
Subject matter

1. This Regulation establishes the European Fund for Sustainable Development (EFSD), the EFSD Guarantee and the EFSD Guarantee Fund.

2. For the purposes of paragraph 1, this Regulation provides for the Commission on behalf of the Union to conclude guarantee agreements with the eligible counterparts as defined in Article 10.

Article 2
Definitions

For the purposes of this Regulation, the following definitions apply:

(1) 'regional investment platforms' means blending facilities in line with Article 4 (1) e) of Regulation (EU) No 236/2014 of the European Parliament and the Council 29  and with Article 40 of Council Regulation (EU) 2015/323 30 for the contribution from the 11th European Development Fund (EDF) combined with the granting of the EFSD Guarantee as set out in Article 6. 

(2) 'investment window' means a targeted area for support by the EFSD Guarantee to portfolios of investments in specific regions, countries or sectors and implemented via the regional investment platforms;

(3) 'contributor' means a Member State, an international financial institution or a public institution of a Member State, a public agency or other entities contributing in cash grants or in guarantees to the EFSD Guarantee Fund;

(4) 'partner countries' means countries that are signatories to the Partnership Agreement between the members of the African, Caribbean and Pacific Group of States of the one part, and the European Community and its member States, of the other part, signed in Cotonou on 23 June 2000 31 , countries that are listed in Annex I to Regulation (EU) No 232/2014 of the European Parliament and of the Council 32 as well as countries that are eligible for geographic cooperation under Regulation (EU) No 233/2014 of the European Parliament and of the Council 33 .

(5) 'additionality' means the principle ensuring that the EFSD Guarantee support may not be aimed at replacing the support of a Member State, private funding or another Union financial intervention, as well as that it is aimed at addressing market failures and avoiding crowding out other public or private investments.

CHAPTER II

EUROPEAN FUND FOR SUSTAINABLE DEVELOPMENT

Article 3
Purpose

1. The purpose of the EFSD as an integrated financial package shall be to support through the supply of financing capacity in the form of grants, guarantees and other financial instruments to eligible counterparts investments and increased access to financing starting in African and Neighbourhood partner countries.

2. The EFSD shall contribute to the achievement of the Sustainable Development Goals of the 2030 Agenda with a particular focus on sustainable growth, job creation, socio-economic sectors and on the support to micro, small and medium sized enterprises, thus addressing root causes of migration and contributing to sustainable reintegration of returned migrants in their countries of origin while maximising additionality, delivering innovative products and crowding in private sector funds.

Article 4
Structure of the EFSD

1. The EFSD shall be composed of regional investment platforms, which will combine financing from existing blending facilities and the EFSD Guarantee.

2. The management of the EFSD shall be ensured by the Commission.

Article 5
Strategic board of the EFSD

1. In the management of the EFSD the Commission shall be assisted by a strategic board.

It shall provide strategic guidance and support the Commission in setting overall investment goals as regards the use of the EFSD Guarantee. The strategic board shall also support overall coordination and coherence between the regional investment platforms and with the external lending mandate operations managed by the EIB, including the EIB resilience initiative.

2. The strategic board shall be composed of representatives of the Commission and of the High Representative of the Union for Foreign Affairs and Security Policy (High Representative), of the Member States and of the EIB. The Commission may invite other contributors to become members of the strategic board having regard where appropriate to the view of the board. Partner Countries and relevant regional organisations, the eligible counterparts and the European Parliament may be given observer status, where appropriate. The strategic board shall be co-chaired by the Commission and the High Representative.

CHAPTER III

EFSD GUARANTEE AND EFSD GUARANTEE FUND

Article 6
The EFSD Guarantee

1. The Union shall provide an irrevocable and unconditional guarantee on first demand to the eligible counterpart for the financing and investment operations covered by this Regulation starting in the African and Neighbourhood partner countries.

2. The EFSD Guarantee shall be granted as a guarantee on first demand in respect of the instruments referred to in Article 9 and in compliance with the eligibility criteria referred to in Article 8.

Article 7
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 initial 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 financial intermediaries or final beneficiaries shall be four years after the conclusion of the relevant guarantee agreement.

Article 8
Eligibility criteria for the use of the EFSD Guarantee

1. The financing and investment operations eligible for support through the EFSD Guarantee shall be consistent and aligned with Union policies, in particular development and neighbourhood policies of the Union, the partner countries' strategies and policies and aim at supporting the following general objectives:

(a)contribute to economic and social development, with particular focus on sustainability and job creation (in particular for youth and women), thus addressing root causes of migration and contributing to sustainable reintegration of returned migrants in their countries of origin;

(b)target socio-economic sectors, in particular infrastructure including sustainable energy, water, transport, information and communications technologies, environment, sustainable use of natural resources and blue growth, social infrastructure, human capital, in order to improve the socio-economic environment;

(c)provide finance in favour of micro-, small- and medium-sized enterprises with a particular focus on private sector development;

(d)provide financial instruments aimed at addressing the bottlenecks to private investments, 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;

(e)maximise private sector leverage by addressing bottlenecks to investment.

2. The EFSD Guarantee shall support financing and investment operations which in particular:

(a)provide additionality;

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

(c)are economically and financially viable, taking also into account the possible support from, and co-financing by, private and public partners to the project;

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

(e)maximise the mobilisation of private sector capital.

3. On a case by case basis the Commission may allow combined financing from different Union instruments.

4. The Commission may define investment windows for specific regions or partner countries or for both, for specific sectors, for specific projects or for specific categories of final beneficiaries or for both to be funded by instruments referred to in Article 9 to be covered by the EFSD Guarantee up to a fixed amount. All requests for financial support within investment windows shall be made to the Commission.

Article 9
Eligible instruments for the EFSD Guarantee

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

(a)loans;

(b)guarantees;

(c)counter-guarantees;

(d)capital market instruments;

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

2. The instruments listed in paragraph 1 may be provided by eligible counterparts or contributors including private investors under an investment window or individual project administered by an eligible counterpart for the benefit of partner countries including fragile and conflict-affected countries and these partner countries' institutions including their public national and private local banks and financial institutions as well as private sector entities of the partner countries.

Article 10
Eligibility and selection of counterparts

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

(a)the European Investment Bank 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 derogation from Article 58(1)(c)(vii) of Regulation (EU) No 966/2012

(f)bodies governed by the private law of a partner country that provide adequate financial guarantees, by derogation from Article 58(1)(c)(vii) of Regulation (EU) 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.

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

Article 11
Coverage and terms of the EFSD guarantee agreements

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

2. Member States may contribute to the EFSD Guarantee Fund in the form of guarantees or cash. Subject to Commission approval, other contributors may contribute, in the form of cash.

The amount of the 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. Payments for guarantee calls shall be made, where necessary, by the contributing Member States or other contributors on pari passu basis with the Union, without prejudice to paragraph 4.

A contribution agreement shall be concluded between the Commission, on behalf of the Union, and the contributor, which 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 11th European Development Fund (EDF) 34 to the general budget of the Union has been confirmed. 

The Member States may contribute to the EFSD Guarantee in the form of guarantees or cash.

The Commission shall inform the European Parliament and the Council about the contributions 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, the contributions made by them may be earmarked for the initiation of projects in specific regions, countries, sectors or 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 11th EDF throughout the implementation period of the EFSD Guarantee.

Article 12
Implementation of the EFSD guarantee agreements

1. The Commission on behalf of the Union shall conclude EFSD guarantee agreements with the eligible counterparts selected pursuant to Article 10 and paragraph 4, on the granting of the EFSD Guarantee, which shall be unconditional, irrevocable, at first demand, in favour of the selected eligible counterpart.

2. One or more 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 can be concluded with a consortium of two or more eligible counterparts.

3. The 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;

(b)the remuneration of the guarantee;

(c)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;

(d)provisions and procedures regarding the recovery of claims;

(e)provisions regarding the monitoring, reporting and evaluation obligations pursuant to Articles 15 and 16.

4. The Commission shall decide whether to conclude guarantee agreements with eligible counterparts taking due account of:

(a)the objectives of the investment window;

(b)the experience and the operational and financial capacity of the counterpart;

(c)the amount of own resources that the counterpart is ready to mobilise for the investment window.

5. The approval of financing and investment operations shall be made by the eligible counterpart following its own rules and procedures and in compliance with the terms of the 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 8(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. The guarantee agreements shall lay down detailed rules on the cover, requirements, eligibility, eligible counterparts, and procedures.

Article 13
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)possible 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 the guarantee agreements;

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

3. Revenues of the EFSD Guarantee Fund as provided for in points (c) and (e) of paragraph 2 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 and shall follow appropriate prudential rules.

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 15(3), the following payments shall be made:

(a)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 during a maximum period of 3 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 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 exceeding the resources necessary to reach the provisioning rate at the level referred to in paragraph 5 shall be used within the limits of the initial investment period provided for in Article 7(2) to restore the EFSD Guarantee up to its initial amount.

Article 14
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.

CHAPTER IV

REPORTING, ACCOUNTING AND EVALUATION

Article 15
Reporting and accounting

1. The Commission shall submit an annual report to the European Parliament and to the Council on the financing and investment operation covered by the EFSD Guarantee. This report shall be made public. It shall include the following elements:

(a)an assessment of the financing and investment operations in operation and covered by the EFSD Guarantee, sector, country and regional levels and their compliance with this Regulation;

(b)an assessment of the added value, the mobilisation of private sector resources, the estimated and actual outputs and the outcomes and impact of the financing and investment operations covered by the EFSD Guarantee on an aggregated basis, including the impact on employment creation;

(c)an assessment of the compliance with the requirements concerning the use of the EFSD Guarantee and key performance indicators established for each proposal submitted;

(d)an assessment of the leverage effect achieved by the operations covered by the EFSD Guarantee;

(e)the financial amount transferred to beneficiaries and an assessment of financing and investment operations by each counterpart on an aggregated basis;

(f)an assessment of the added value of financing and investment operations of the eligible counterparts, and of the aggregate risk associated with those operations;

(g)detailed information on calls on the EFSD Guarantee, losses, returns, amounts recovered and any other payments received;

(h)the financial reports on financing and investment operations of the eligible counterparts covered by this Regulation audited by an independent external auditor.

2. For the purposes of the Commission's accounting, its reporting of the risks covered by the EFSD Guarantee and its management of the EFSD Guarantee Fund, the eligible counterparts with whom a guarantee agreement has been concluded shall provide the Commission and Court of Auditors annually with the financial reports on financing and investment operations covered by this Regulation audited by an independent external auditor, containing, among other, information on:

(a)the risk assessment of financing and investment operations of the eligible counterparts including information on the Union liabilities measured in compliance with the accounting rules of the Union set by the accounting officer of the Commission based on the internationally accepted accounting standards for the public sector;

(b)the outstanding financial obligation for the Union arising from the EFSD Guarantee provided towards the eligible counterparts and their financing and investment operations, broken down by individual operations.

The Counterparts shall upon request provide to the Commission any additional information necessary to fulfil the Commission's obligations in relation to this Regulation.

3. By 31 March of each year, the Commission shall submit to the European Parliament, to the Council and to the Court of Auditors, in the context of the financial statements of the Commission, the required information on the situation of the EFSD Guarantee Fund. In addition, it shall, by 31 May of each year, submit to the European Parliament, to the Council and to the Court of Auditors an annual report on the management of the EFSD Guarantee Fund in the previous calendar year, including an assessment of the adequacy of the provisioning and the level of the Guarantee Fund and of the need for its replenishment.

The annual report shall contain the presentation of the financial position of the EFSD Guarantee Fund at the end of the previous calendar year, the financial flows during the previous calendar year as well as the significant transactions and any relevant information on the financial accounts. The report shall also include information about the financial management, the performance, and the risk of the guarantee fund at the end of the previous calendar year.

Article 16
Evaluation and review

1. By 31 December 2020, the Commission shall evaluate the functioning of the EFSD. The Commission shall submit its evaluation report to the European Parliament and the Council, containing an independent evaluation of the application of this Regulation. This report shall be submitted without delay by the Commission in the event that the approved financing and investment operations absorb in full the amount of the EFSD Guarantee available before 30 June 2020.

2. By 31 December 2020 and every three years thereafter, the Commission shall evaluate the use of the EFSD Guarantee Fund. The Commission shall submit its evaluation report to the European Parliament and the Council. That evaluation report shall be accompanied by an opinion of the Court of Auditors.

CHAPTER V

GENERAL PROVISIONS

Article 17
Transparency and public disclosure of information

In accordance with its transparency policies and general Union principles on access to documents and information, the eligible counterparts shall make publicly available on their websites information relating to all financing and investment operations covered by the EFSD Guarantee under this Regulation, relating in particular to the manner in which those operations contribute to the requirements of this Regulation.

Article 18
Auditing by the Court of Auditors

1. The external audit of the activities undertaken in accordance with this Regulation shall be carried out by the Court of Auditors in accordance with Article 287 of the Treaty on the Functioning of the European Union (TFEU).

2. For the purpose of paragraph 1 of this Article, the Court of Auditors shall, at its request and in accordance with Article 287(3) TFEU, be granted access to any document or information necessary to carry out its task.

Article 19
Anti-fraud measures

1. The Commission or the eligible counterparts shall notify the European Anti-Fraud Office (OLAF) promptly and provide it with the necessary information when, at any stage of the preparation, implementation or closure of financing and investment operations covered by this Regulation, they have grounds for suspecting fraud, corruption, money laundering or any other illegal activity that may affect the financial interests of the Union.

2. OLAF may carry out investigations, including on-the-spot checks and inspections, in accordance with the provisions and procedures laid down in Regulation (EU, Euratom) No 883/2013 of the European Parliament and of the Council, Council Regulation (Euratom, EC) No 2185/96 and Council Regulation (EC, Euratom) No 2988/95 in order to protect the financial interests of the Union, with a view to establishing whether there has been fraud, corruption, money laundering or any other illegal activity affecting the financial interests of the Union in connection with any financing and investment operations covered by this Regulation. OLAF may transmit any information obtained in the course of its investigations to the competent authorities of the Member States concerned.

Where such illegal activities are proven, the eligible counterparts shall undertake recovery efforts with respect to its financing and investment operations covered by this Regulation that are concerned by such activities.

Article 20
Excluded activities and non-cooperative jurisdictions

1. In their financing and investment operations, the eligible counterparts shall not support any activities carried out for illegal purposes, including money laundering, terrorist financing, organised crime, tax fraud and tax evasion, corruption, and fraud affecting the financial interests of the Union. The eligible counterparts shall not participate in any financing or investment operation through a vehicle located in a non-cooperative jurisdiction, in accordance with its policy towards weakly regulated or non-cooperative jurisdictions based on policies of the Union, the Organisation for Economic Co-operation and Development or the Financial Action Task Force.

2. In its financing and investment operations, the eligible counterpart shall apply the principles and standards set out in Union law on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing and in particular Regulation (EU) 2015/847 of the European Parliament and of the Council 35 and Directive (EU) 2015/849 of the European Parliament and of the Council 36 . The eligible counterparts shall make both direct funding and funding via intermediaries under this Regulation contingent upon the disclosure of beneficial ownership information in accordance with Directive (EU) 2015/849.

CHAPTER VI

FINAL PROVISIONS

Article 21
Entry into force

This Regulation shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union.

This Regulation shall be binding in its entirety and directly applicable in all Member States.

Done at Brussels,

LEGISLATIVE FINANCIAL STATEMENT

1.FRAMEWORK OF THE PROPOSAL/INITIATIVE

1.1.Title of the proposal/initiative

1.2.Policy area(s) concerned in the ABM/ABB structure

1.3.Nature of the proposal/initiative

1.4.Objective(s)

1.5.Grounds for the proposal/initiative

1.6.Duration and financial impact

1.7.Management mode(s) planned

2.MANAGEMENT MEASURES

2.1.Monitoring and reporting rules

2.2.Management and control system

2.3.Measures to prevent fraud and irregularities

3.ESTIMATED FINANCIAL IMPACT OF THE PROPOSAL/INITIATIVE

3.1.Heading(s) of the multiannual financial framework and expenditure budget line(s) affected

3.2.Estimated impact on expenditure 

3.2.1.Summary of estimated impact on expenditure

3.2.2.Estimated impact on operational appropriations

3.2.3.Estimated impact on appropriations of an administrative nature

3.2.4.Compatibility with the current multiannual financial framework

3.2.5.Third-party contributions

3.3.Estimated impact on revenue

LEGISLATIVE FINANCIAL STATEMENT

1.FRAMEWORK OF THE PROPOSAL/INITIATIVE

1.1.Title of the proposal/initiative

1.2.Policy area(s) concerned in the ABM/ABB structure 37  

1.3.Nature of the proposal/initiative

 The proposal/initiative relates to a new action 

◻ The proposal/initiative relates to a new action following a pilot project/preparatory action 38  

◻ The proposal/initiative relates to the extension of an existing action 

◻ The proposal/initiative relates to an action redirected towards a new action 

The EFSD will be composed of Regional Investment Platforms combining the existing blending facilities in external action and the new EFSG Guarantee.

1.4.Objective(s)

1.4.1.The Commission's multiannual strategic objective(s) targeted by the proposal/initiative

1.4.2.Specific objective(s) and ABM/ABB activity(ies) concerned

1.4.3.Expected result(s) and impact

Specify the effects which the proposal/initiative should have on the beneficiaries/groups targeted.

1.4.4.Indicators of results and impact

Specify the indicators for monitoring implementation of the proposal/initiative.

1.5.Grounds for the proposal/initiative

1.5.1.Requirement(s) to be met in the short or long term

1.5.2.Added value of EU involvement

1.5.3.Lessons learned from similar experiences in the past

1.5.4.Compatibility and possible synergy with other appropriate instruments

1.6.Duration and financial impact

 Proposal/initiative of limited duration

–    Proposal/initiative initially in effect from 2017 to 2020

–Financial impact from 2017 to 2020 with reference to the signature of Agreements with the eligible counterparts.     
The maximum duration of the EFSD Guarantee agreements under which a contract between an Eligible Counterpart and the beneficiary or financial intermediary can be signed shall be four years.

◻ Proposal/initiative of unlimited duration

–Indicative implementation start-up period:

–followed by full-scale operation.

1.7.Management mode(s) planned 40  

X Direct management by the Commission (for the management of the EFSD Guarantee Fund)

–X by its departments, including by its staff in the Union delegations;

–◻    by the executive agencies

◻ Shared management with the Member States

 Indirect management by entrusting budget implementation tasks to (for the Facilities backed by the EFSD guarantee):

–X international organisations and their agencies;

–X the EIB and the European Investment Fund;

–X public law bodies;

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

–X bodies governed by the private law of a partner country that provide adequate financial guarantees, by derogation from Article 58(1)(c)(vii) of Regulation (EU) No 966/2012;

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

–◻ persons entrusted with the implementation of specific actions in the CFSP pursuant to Title V of the TEU, and identified in the relevant basic act.

–If more than one management mode is indicated, please provide details in the 'Comments' section.

Comments

2.MANAGEMENT MEASURES

2.1.Monitoring and reporting rules

Specify frequency and conditions.

2.2.Management and control systems

2.2.1.Risk(s) identified

2.2.2.Information concerning the internal control system set up

2.2.3.Estimate of the costs and benefits of the controls and assessment of the expected level of risk of error

2.3.Measures to prevent fraud and irregularities

Specify existing or envisaged prevention and protection measures.

3.ESTIMATED FINANCIAL IMPACT OF THE PROPOSAL/INITIATIVE

3.1.Heading(s) of the multiannual financial framework and expenditure budget line(s) affected

New budget lines requested

In order of multiannual financial framework headings and budget lines.

3.2.Estimated impact on expenditure

3.2.1.Summary of estimated impact on expenditure

EUR million (to three decimal places)

If more than one heading is affected by the proposal / initiative:

EUR million (to three decimal places)

EUR million (to three decimal places)

3.2.2.Estimated impact on operational appropriations

–◻    The proposal/initiative does not require the use of operational appropriations

–X    The proposal/initiative requires the use of operational appropriations, as explained below:

Commitment appropriations in EUR million (to three decimal places)

3.2.3.Estimated impact on appropriations of an administrative nature

3.2.3.1.Summary

–◻    The proposal/initiative does not require the use of appropriations of an administrative nature

–X    The proposal/initiative requires the use of appropriations of an administrative nature, as explained below:

–Administrative expenditure. EUR million (to three decimal places)

The appropriations required for human resources and other expenditure of an administrative nature will be met by appropriations from the managing DG, together if necessary with any additional allocation which may be granted to the managing DG under the annual allocation procedure and in the light of budgetary constraints.

3.2.3.2.Estimated requirements of human resources

–◻ The proposal/initiative does not require the use of human resources.

–x    The proposal/initiative requires the use of human resources, as explained below:

Estimate to be expressed in full time equivalent units

XX is the policy area or budget title concerned.

The human resources required will be met by staff from the managing DG, together if necessary with any additional allocation which may be granted to the managing DG under the annual allocation procedure and in the light of budgetary constraints.

Description of tasks to be carried out:

3.2.4.Compatibility with the current multiannual financial framework

–◻    The proposal/initiative is compatible with the current multiannual financial framework.

–X The proposal/initiative will entail reprogramming of the relevant heading in the multiannual financial framework.

–X    The proposal/initiative requires application of the contingency margin of the multiannual financial framework.

3.2.5.Third-party contributions

–The proposal/initiative does not provide for co-financing by third parties.

–X The proposal/initiative provides for the co-financing estimated below:

Appropriations in EUR million (to three decimal places)

3.3.Estimated impact on revenue

–◻    The proposal/initiative has no financial impact on revenue.

–◻    The proposal/initiative has the following financial impact:

–◻    on own resources

–X    on miscellaneous revenue

EUR million (to three decimal places)

For miscellaneous 'assigned' revenue, specify the budget expenditure line(s) affected.

Specify the method for calculating the impact on revenue.

(1) COM(2016) 385

(2) As defined for Africa by the Cotonou Agreement (OJ L 287, 04.11.2010), and for the EU Neighbourhood by 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).

(3) For Africa, see Commission Decision (2015)5210 and for the Neighbourhood Commission Implementing Decision (2016)3436.

(4) OJ L 317, 15.12.2000 as last amended by OJ L 287, 4.11.2010.

(5) JOIN(2015) 50 final

(6) OJ(2006/C 46/01)

(7) COM(2011) 637 final

(8) SWD(2015) 182 final

(9) COM(2014) 263 final

(10) JOIN(2015) 50 final

(11) COM(2015) 81 final/2

(12) COM(2016) 110

(13) Regulation (EU) 2015/1017 of the European Parliament and Council of 25 June 2015 on the European Fund for Strategic Investment Advisory Hub and the European Investment project Portal and amending regulations (EU)No1291/2013 and (EU) no1316/2013- the European Fund for Strategic Investments, OJ L 169/1,1.7.2015

(14) For Africa, see Commission Decision (2015)5210 and for the Neighbourhood. Commission Decision (2016)3436 for the Neighbourhood

(15) JOIN(2015) 50 final

(16) (2006/C 46/01)

(17) COM(2011) 637 final

(18) SWD(2015) 182 final

(19) OJ L 210/1, 6.8.2013

(20) COM(2015) 5210

(21) COM(2016) 3436

(22) OJ L 317, 15.12.2000 as last amended by OJ L 287, 4.11.2010

(23) Annex II to the Cotonou Agreement

(24) Regulation (EU, Euratom) No 966/2012 of the European Parliament and the Council of 25 October 2012 on the financial rules applicable to the general budget of the Union and repealing Council Regulation (EC, Euratom) No 1605/2002 (OJ L 298, 26.10.2012, p. 1).

(25) Internal Agreement between the Representatives of the Governments of the Member States of the European Union, meeting within the Council, on the financing of European Union aid under the multiannual financial framework for the period 2014 to 2020, in accordance with the ACP-EU Partnership Agreement and on the allocation of financial assistance for the Overseas Countries and Territories to which Part Four of the Treaty on the Functioning of the European Union applies (OJ L 210, 6.8.2013, p. 1).

(26) Regulation (EU, Euratom) No 883/2013 of the European Parliament and of the Council of 11 September 2013 concerning investigations conducted by the European Anti-Fraud Office (OLAF) and repealing Regulation (EC) No 1073/1999 of the European Parliament and of the Council and Council Regulation (Euratom) No 1074/1999 (OJ L 248, 18.9.2013, p. 1).

(27) Council Regulation (Euratom, EC) No 2185/96 of 11 November 1996 concerning on-the-spot checks and inspections carried out by the Commission in order to protect the European Communities' financial interests against fraud and other irregularities (OJ L 292, 15.11.1996, p. 2).

(28) Council Regulation (EC, Euratom) No 2988/95 of 18 December 1995 on the protection of the European Communities financial interests (OJ L 312, 23.12.1995, p. 1).

(29) Regulation (EU) No 236/2014 of the European Parliament and 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, 15.03.2014, p. 95).

(30) Council Regulation (EU) 2015/323 of 2 March 2015 on the financial regulation applicable to the 11th European Development Fund (OJ L 58, 03.03.2015, p.17).

(31) OJ L 317, 15.12.2000 as last amended by OJ L 287, 4.11.2010

(32) 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).

(33) 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).

(34) Internal Agreement between the Representatives of the Governments of the Member States of the European Union, meeting within the Council, on the financing of European Union aid under the multiannual financial framework for the period 2014 to 2020, in accordance with the ACP-EU Partnership Agreement and on the allocation of financial assistance for the Overseas Countries and Territories to which Part Four of the Treaty on the Functioning of the European Union applies, OJ L 210, 6.8.2013, p. 1.

(35) Regulation (EU) 2015/847 of the European Parliament and of the Council of 20 May 2015 on information accompanying transfers of funds and repealing Regulation (EC) No 1781/2006 (OJ L 141, 5.6.2015, p. 1).

(36) Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, amending Regulation (EU) No 648/2012 of the European Parliament and of the Council, and repealing Directive 2005/60/EC of the European Parliament and of the Council and Commission Directive 2006/70/EC (OJ L 141, 5.6.2015, p. 73).

(37) ABM: activity-based management; ABB: activity-based budgeting.

(38) As referred to in Article 54(2)(a) or (b) of the Financial Regulation.

(39) C(2015) 5210 final, 29.7.2015, Commission Decision on the individual measure "Creation of the Africa Investment Facility" under the 11th European Development Fund

(40) Details of management modes and references to the Financial Regulation may be found on the BudgWeb site: https://myintracomm.ec.europa.eu/budgweb/EN/man/budgmanag/Pages/budgmanag.aspx  

(41) Year N is the year in which implementation of the proposal/initiative starts.

(42) Technical and/or administrative assistance and expenditure in support of the implementation of EU programmes and/or actions (former 'BA' lines), indirect research, direct research.

(43) One Contractual Agent will be financed by the European External Action Service (EEAS) budget to support policy liaison functions.

(44) Outputs are products and services to be supplied (e.g. number of student exchanges financed, number of km of roads built, etc.).

(45) Year N is the year in which implementation of the proposal/initiative starts.

(46) Technical and/or administrative assistance and expenditure in support of the implementation of EU programmes and/or actions (former 'BA' lines), indirect research, direct research.

(47) AC= Contract Staff; AL = Local Staff; END= Seconded National Expert; INT = agency staff; JED= Junior Experts in Delegations.

(48) Part of the external staff required will be met by internal redeployment of external staff financed by ENI administrative support line / EDF in proportion to the operational appropriations redeployed for the action.

(49) Sub-ceiling for external staff covered by operational appropriations (former 'BA' lines).

(50) As regards traditional own resources (customs duties, sugar levies), the amounts indicated must be net amounts, i.e. gross amounts after deduction of 25% for collection costs.