25.4.2013   

EN

Official Journal of the European Union

L 115/1

(1)

Venture capital provides finance to undertakings that are generally very small, that are in the initial stages of their corporate existence and that display a strong potential for growth and expansion. In addition, venture capital funds provide undertakings with valuable expertise and knowledge, business contacts, brand equity and strategic advice. By providing finance and advice to those undertakings, venture capital funds stimulate economic growth, contribute to the creation of jobs and capital mobilisation, foster the establishment and expansion of innovative undertakings, increase their investment in research and development and foster entrepreneurship, innovation and competitiveness in line with the objectives of the Europe 2020 Strategy set out in the Commission Communication of 3 March 2010 entitled ‘Europe 2020: A strategy for delivering smart, sustainable and inclusive growth’ (Europe 2020) and in the context of the long-term challenges of the Member States, such as those identified in the report of the European Strategy and Policy Analysis System of March 2012 entitled ‘Global Trends 2030 — citizens in an interconnected and polycentric world’.

(2)

It is necessary to lay down a common framework of rules regarding the use of the designation ‘EuVECA’ for qualifying venture capital funds, in particular the composition of the portfolio of funds that operate under that designation, their eligible investment targets, the investment tools they may employ and the categories of investors that are eligible to invest in them by uniform rules in the Union. In the absence of such a common framework, there is a risk that Member States take diverging measures at national level having a direct negative impact on, and creating obstacles to, the proper functioning of the internal market, since venture capital funds that wish to operate across the Union would be subject to different rules in different Member States. Moreover, diverging quality requirements on portfolio composition, investment targets and eligible investors could lead to different levels of investor protection and generate confusion as to the investment proposition associated with qualifying venture capital funds. Investors should, furthermore, be able to compare the investment propositions of different qualifying venture capital funds. It is necessary to remove significant obstacles to cross-border fundraising by qualifying venture capital funds, to avoid distortions of competition between those funds, and to prevent any further likely obstacles to trade and significant distortions of competition from arising in the future. Consequently, the appropriate legal basis for this Regulation is Article 114 of the Treaty on the Functioning of the European Union (TFEU), as interpreted by consistent case law of the Court of Justice of the European Union.

(3)

It is necessary to adopt a Regulation establishing uniform rules applicable to qualifying venture capital funds and imposing corresponding obligations on their managers in all Member States that wish to raise capital across the Union using the designation ‘EuVECA’. Those requirements should ensure the confidence of investors that wish to invest in venture capital funds.

(4)

Defining the quality requirements for the use of the designation ‘EuVECA’ in the form of a regulation ensures that those requirements are directly applicable to the managers of collective investment undertakings that raise funds using that designation. This also ensures uniform conditions for the use of the designation by preventing diverging national requirements as a result of the transposition of a directive. Managers of collective investment undertakings that use the designation should follow the same rules across the Union, which will also boost the confidence of investors. This Regulation reduces regulatory complexity and the managers’ costs of compliance with often divergent national rules governing venture capital funds, especially for those managers that want to raise capital on a cross-border basis. It also contributes to eliminating competitive distortions.

(5)

As stated in the Commission Communication of 7 December 2011, entitled ‘An action plan to improve access to finance for SMEs’, the Commission was to complete its examination of tax obstacles to cross-border venture capital investments in 2012, with a view to presenting solutions in 2013 aimed at eliminating the obstacles while at the same time preventing tax avoidance and tax evasion.

(6)

It should be possible for a qualifying venture capital fund to be externally or internally managed. Where a qualifying venture capital fund is internally managed, the fund is also the manager and should therefore comply with all relevant requirements for managers under this Regulation and be registered in accordance with this Regulation. A qualifying venture capital fund which is internally managed should not, however, be permitted to be the external manager of other collective investment undertakings or of undertakings for collective investment in transferable securities (UCITS).

(7)

In order to clarify the relationship between this Regulation and other rules on collective investment undertakings and their managers, it is necessary to establish that this Regulation only apply to managers of collective investment undertakings, other than UCITS falling within the scope of Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) (4), which are established in the Union and are registered with the competent authority in their home Member State in accordance with Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Alternative Investment Fund Managers (5), provided that those managers manage portfolios of qualifying venture capital funds. However, external managers of qualifying venture capital funds that are registered in accordance with this Regulation should also be allowed to manage UCITS, subject to authorisation under Directive 2009/65/EC.

(8)

Furthermore, this Regulation applies only to managers of those collective investment undertakings with assets under management that in total do not exceed the threshold referred to in point (b) of Article 3(2) of Directive 2011/61/EU. The calculation of the threshold for the purposes of this Regulation is the same as for the threshold referred to in point (b) of Article 3(2) of Directive 2011/61/EU.

(9)

However, venture capital fund managers registered in accordance with this Regulation with assets under management that in total subsequently exceed the threshold referred to in point (b) of Article 3(2) of Directive 2011/61/EU, and that therefore become subject to authorisation with the competent authorities of their home Member State in accordance with Article 6 of that Directive, should be able to continue to use the designation ‘EuVECA’ in relation to the marketing of qualifying venture capital funds in the Union, provided that they comply with the requirements laid down in that Directive and that they continue to comply with certain requirements for the use of the designation ‘EuVECA’ specified in this Regulation at all times in relation to the qualifying venture capital funds. This applies both to existing qualifying venture capital funds and to qualifying venture capital funds established after exceeding the threshold.

(10)

Where managers of collective investment undertakings do not wish to use the designation ‘EuVECA’, this Regulation should not apply. In these cases, existing national rules and general Union rules should continue to apply.

(11)

This Regulation should establish uniform rules on the nature of qualifying venture capital funds, in particular on qualifying portfolio undertakings into which the qualifying venture capital funds are to be permitted to invest and the investment instruments to be used. This is necessary so that a clear demarcation line can be drawn between a qualifying venture capital fund and alternative investment funds that engage in other, less specialised, investment strategies, for example buyouts or speculative real estate investments, which this Regulation is not seeking to promote.

(12)

In line with the aim of precisely circumscribing the collective investment undertakings which are to be covered by this Regulation and in order to ensure a focus on providing capital to small undertakings in the initial stages of their corporate existence, qualifying venture capital funds should be deemed to be funds that intend to invest at least 70 % of their aggregate capital contributions and uncalled committed capital in such undertakings. Qualifying venture capital funds should not be permitted to invest more than 30 % of their aggregate capital contributions and uncalled committed capital in assets other than qualifying investments. This means that whereas the 30 % threshold should be the maximum limit for non-qualifying investments at all times, the 70 % threshold should be reserved for qualifying investments during the life of the qualifying venture capital fund. Those thresholds should be calculated on the basis of amounts investible after deduction of all relevant costs and holdings of cash and cash equivalents. This Regulation should set out the details necessary for the calculation of the thresholds.

(13)

The purpose of this Regulation is to enhance the growth and innovation of small and medium-sized enterprises (SMEs) in the Union. Investments in qualifying portfolio undertakings established in third countries can bring more capital to qualifying venture capital funds and thereby benefit SMEs in the Union. However, under no circumstances should this Regulation benefit investments made in portfolio undertakings established in third countries characterised by a lack of appropriate cooperation arrangements between the competent authorities of the home Member State of the manager of a qualifying venture capital fund and with each other Member State in which units or shares of the qualifying venture capital fund are intended to be marketed or by a lack of effective exchange of information in tax matters.

(14)

A qualifying venture capital fund should, as a first step, be established in the Union in order to be entitled to use the designation ‘EuVECA’ as established by this Regulation. The Commission should, within two years of the date of application of this Regulation, review the limitation on the use of the designation ‘EuVECA’ to funds established in the Union, taking into account experience of applying the Commission Recommendation regarding measures intended to encourage third countries to apply minimum standards of good governance in tax matters.

(15)

Managers of qualifying venture capital funds should be able to attract additional capital commitments during the life of that fund. Such additional capital commitments during the life of the qualifying venture capital fund should be taken into account when the next investment in assets other than qualifying assets is contemplated. Additional capital commitments should be permitted in accordance with criteria and subject to conditions set out in the qualifying venture capital fund’s rules or instruments of incorporation.

(16)

Qualifying investments should be in the form of equity or quasi-equity instruments. Quasi-equity instruments comprise a type of financing instrument, which is a combination of equity and debt, where the return on the instrument is linked to the profit or loss of the qualifying portfolio undertaking, and where the repayment of the instrument in the event of default is not fully secured. Such instruments include a variety of financing instruments such as subordinated loans, silent participations, participating loans, profit participating rights, convertible bonds and bonds with warrants. As a possible complement to — but not a substitute for — equity and quasi-equity instruments, secured or unsecured loans, such as bridge financing, granted by the qualifying venture capital fund to a qualifying portfolio undertaking in which the qualifying venture capital fund already holds qualifying investments, should be permitted, provided that no more than 30 % of the aggregate capital contributions and uncalled committed capital in the qualifying venture capital fund is used for such loans. Furthermore, to reflect existing business practices in the venture capital market, a qualifying venture capital fund should be allowed to buy existing shares of a qualifying portfolio undertaking from existing shareholders of that undertaking. Also, for the purposes of ensuring the widest possible opportunities for fundraising, investments into other qualifying venture capital funds should be permitted. To prevent dilution of the investments into qualifying portfolio undertakings, qualifying venture capital funds should only be permitted to invest into other qualifying venture capital funds, provided that those qualifying venture capital funds have not themselves invested more than 10 % of their aggregate capital contributions and uncalled committed capital in other qualifying venture capital funds.

(17)

The core activities of venture capital funds are providing finance to SMEs through primary investments. Venture capital funds should neither participate in systemically important banking activities outside of the usual prudential regulatory framework (so-called ‘shadow banking’) nor follow typical private equity strategies, such as leveraged buyouts.

(18)

In line with Europe 2020, this Regulation aims to promote venture capital investments into innovative SMEs anchored in the real economy. Credit institutions, investment firms, insurance undertakings, financial holding companies and mixed-activity holding companies should therefore be excluded from the definition of qualifying portfolio undertakings under this Regulation.

(19)

In order to put in place an essential safeguard that differentiates qualifying venture capital funds under this Regulation from the broader category of alternative investment funds which trade in issued securities on secondary markets, it is necessary to lay down rules so that qualifying venture capital funds make investments primarily in directly issued instruments.

(20)

In order to allow managers of qualifying venture capital funds a certain degree of flexibility in the investment and liquidity management of their qualifying venture capital funds, trading, such as in shares or participations in non-qualifying portfolio undertakings or acquisitions of non-qualifying investments, should be permitted up to a maximum threshold of 30 % of aggregate capital contributions and uncalled capital.

(21)

In order to ensure that the designation ‘EuVECA’ is reliable and easily recognisable for investors across the Union, only managers of qualifying venture capital funds which comply with the uniform quality criteria as set out in this Regulation should be eligible to use the designation ‘EuVECA’ when marketing qualifying venture capital funds across the Union.

(22)

In order to ensure that qualifying venture capital funds have a distinct and identifiable profile which is suited to their purpose, there should be uniform rules on the composition of the portfolio and on the investment techniques which are permitted for such funds.

(23)

In order to ensure that qualifying venture capital funds do not contribute to the development of systemic risks, and that such funds concentrate, in their investment activities, on supporting qualifying portfolio undertakings, the use of leverage at the level of the fund should not be permitted. Managers of qualifying venture capital funds should only be permitted to borrow, issue debt obligations or provide guarantees, at the level of the qualifying venture capital fund, provided that such borrowings, debt obligations or guarantees are covered by uncalled commitments and thus do not increase the exposure of the fund beyond the level of its committed capital. Cash advances from investors of qualifying venture capital funds that are fully covered by capital commitments from those investors do not increase the exposure of the qualifying venture capital fund and should therefore be allowed. Also, in order to permit the fund to cover extraordinary liquidity needs that might arise between a call of committed capital from investors and the actual reception of the capital in its accounts, short-term borrowing should be allowed provided that the amount of such borrowing does not exceed the fund’s uncalled committed capital.

(24)

In order to ensure that qualifying venture capital funds are only marketed to investors who have the experience, knowledge and expertise to make their own investment decisions and properly assess the risks that those funds carry, and in order to maintain investor confidence and trust in qualifying venture capital funds, certain specific safeguards should be laid down. Therefore, qualifying venture capital funds should only be marketed to investors who are professional clients or who can be treated as professional clients under Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments (6). However, in order to have a sufficiently broad investor base for investment into qualifying venture capital funds it is also desirable that certain other investors have access to qualifying venture capital funds, including high net worth individuals. For those other investors, however, specific safeguards should be laid down in order to ensure that qualifying venture capital funds are only marketed to investors that have the appropriate profile for making such investments. These safeguards exclude marketing through the use of periodic savings plans. Furthermore, investments made by executives, directors or employees involved in the management of a manager of a qualifying venture capital fund should be possible when investing in the qualifying venture capital fund that they manage, as such individuals are knowledgeable enough to participate in venture capital investments.

(25)

To ensure that only managers of qualifying venture capital funds that fulfil uniform quality criteria as regards their behaviour in the market use the designation ‘EuVECA’, there should be rules on the conduct of business and the relationship of those managers with their investors. For the same reason, uniform conditions concerning the handling of conflicts of interest by those managers should be established. Those rules and conditions should also require the managers to have the necessary organisational and administrative arrangements in place to ensure a proper handling of conflicts of interest.

(26)

Where a manager of a qualifying venture capital fund intends to delegate functions to third parties, the manager’s liability towards the venture capital fund and the investors therein should not be affected by such delegation of functions to a third party. Moreover, the manager should not delegate functions to the extent that, in essence, it can no longer be considered to be a manager of a qualifying venture capital fund and has become a letter-box entity. The manager should remain responsible for the proper performance of delegated functions and compliance with this Regulation at all time. The delegation of functions should not undermine the effectiveness of supervision of the manager, and, in particular, should not prevent the manager from acting, or the fund from being managed, in the best interests of its investors.

(27)

In order to ensure the integrity of the designation ‘EuVECA’ quality criteria as regards the organisation of a manager of a qualifying venture capital fund should be established. Therefore, uniform, proportionate requirements for the need to maintain adequate technical and human resources should be laid down.

(28)

In order to ensure the proper management of qualifying venture capital funds and the ability of their managers to cover potential risks arising from their activities, uniform, proportionate requirements for managers of qualifying venture capital funds to maintain sufficient own funds should be laid down. The amount of such own funds should be sufficient to ensure the continuity and proper management of qualifying venture capital funds.

(29)

It is necessary for the purpose of investor protection to ensure that the assets of the qualifying venture capital fund are properly evaluated. The rules or instruments of incorporation of qualifying venture capital funds should therefore contain provisions on the valuation of assets. This should ensure the integrity and transparency of the valuation.

(30)

In order to ensure that managers of qualifying venture capital funds which make use of the designation ‘EuVECA’ give sufficient account of their activities, uniform rules on annual reports should be established.

(31)

It is necessary, for the purposes of ensuring the integrity of the designation ‘EuVECA’ in the eyes of investors, that it is only used by managers of qualifying venture capital funds that are fully transparent as to their investment policy and their investment targets. Uniform rules on disclosure requirements that are incumbent on such managers in relation to their investors should therefore be laid down. In particular, there should be pre-contractual disclosure obligations related to the investment strategy and objectives of the qualifying venture capital funds, the investment instruments which are used, information on costs and associated charges, and the risk/reward profile of the investment proposed by a qualifying fund. In view of achieving a high degree of transparency, such disclosure requirements should also include information on how the remuneration of the managers is calculated.

(32)

In order to ensure effective supervision of the uniform requirements contained in this Regulation, the competent authority of the home Member State should supervise compliance of managers of qualifying venture capital funds with the uniform requirements set out in this Regulation. To that end, the managers that intend to market their qualifying funds under the designation ‘EuVECA’ should inform the competent authority of their home Member State of that intention. The competent authority should register the manager if all necessary information has been provided and if suitable arrangements to comply with the requirements of this Regulation are in place. Such registration should be valid across the entire Union.

(33)

In order to facilitate the efficient cross-border marketing of qualifying venture capital funds, registration of the manager should be effected as quickly as possible.

(34)

While safeguards are included in this Regulation to ascertain that funds are properly used, supervisory authorities should be vigilant in ensuring that those safeguards are complied with.

(35)

In order to ensure effective supervision of compliance with the uniform criteria laid down in this Regulation, rules on the circumstances under which information supplied to the competent authority in the home Member State needs to be updated should be established.

(36)

For the effective supervision of the requirements laid down in this Regulation, a process for cross-border notifications between the competent supervisory authorities, to be triggered by the registration of a manager of a qualifying venture capital fund in its home Member State should also be established.

(37)

In order to maintain transparent conditions for the marketing of qualifying venture capital funds across the Union, the European Supervisory Authority (European Securities and Markets Authority) (‘ESMA’), established by Regulation (EU) No 1095/2010 of the European Parliament and of the Council (7), should be entrusted with maintaining a central database listing managers of qualifying venture capital funds and the qualifying venture capital funds that they manage that are registered in accordance with this Regulation.

(38)

Where the competent authority of the host Member State has clear and demonstrable grounds for believing that a manager of a qualifying venture capital fund is acting in breach of this Regulation within its territory, it should promptly inform the competent authority of the home Member State, which should take appropriate measures.

(39)

If a manager of a qualifying venture capital fund persists in acting in a manner that is clearly in conflict with this Regulation despite the measures taken by the competent authority of the home Member State or because the competent authority of the home Member State fails to take measures within a reasonable timeframe, the competent authority of the host Member State should be able, after informing the competent authority of the home Member State, to take all the appropriate measures in order to protect investors, including the possibility of preventing the manager concerned from carrying out any further marketing of its venture capital funds within the territory of the host Member State.

(40)

In order to ensure the effective supervision of the uniform criteria established in this Regulation, this Regulation contains a list of supervisory powers that competent authorities must have at their disposal.

(41)

In order to ensure proper enforcement, this Regulation contains administrative penalties and other measures for the breach of key provisions of this Regulation, which are the rules on portfolio composition, on safeguards relating to the identity of eligible investors, and on the use of the designation ‘EuVECA’ only by managers of qualifying venture capital funds that are registered in accordance with this Regulation. A breach of those key provisions should entail, where appropriate, the prohibition of the use of the designation and the removal of the manager concerned from the register.

(42)

Supervisory information should be exchanged between the competent authorities in the home and host Member States and ESMA.

(43)

Effective regulatory cooperation among the entities tasked with supervising compliance with the uniform criteria set out in this Regulation requires that a high level of professional secrecy should apply to all relevant national authorities and to ESMA.

(44)

In order to specify the requirements set out in this Regulation, the power to adopt acts in accordance with Article 290 TFEU should be delegated to the Commission in respect of the types of conflicts of interests managers of qualifying venture capital funds need to avoid and the steps to be taken in that respect. It is of particular importance that the Commission carry out appropriate consultations during its preparatory work, including at expert level. The Commission, when preparing and drawing up delegated acts, should ensure a simultaneous, timely and appropriate transmission of relevant documents to the European Parliament and to the Council.

(45)

Technical standards in financial services should ensure consistent harmonisation and a high level of supervision across the Union. As a body with highly specialised expertise, it would be efficient and appropriate to entrust ESMA with the elaboration of draft implementing technical standards where these do not involve policy choices, for submission to the Commission.

(46)

The Commission should be empowered to adopt implementing technical standards by means of implementing acts pursuant to Article 291 TFEU and in accordance with Article 15 of Regulation (EU) No 1095/2010. ESMA should be entrusted with drafting implementing technical standards for the format of the notification referred to in this Regulation.

(47)

Within four years of the date of application of this Regulation, the Commission should conduct a review of this Regulation in order to assess the development of the venture capital market. The review should include a general survey of the functioning of the rules in this Regulation and the experience acquired in applying them. On the basis of the review, the Commission should submit a report to the European Parliament and to the Council accompanied, if appropriate, by legislative proposals.

(48)

Furthermore, within four years of the date of application of this Regulation, the Commission should start a review of the interaction between this Regulation and other rules on collective investment undertakings and their managers, in particular those of Directive 2011/61/EU. In particular, that review should address the scope of this Regulation assessing whether it is necessary to extend the scope to allow larger alternative investment funds managers to use the designation ‘EuVECA’. On the basis of the review, the Commission should submit a report to the European Parliament and to the Council accompanied, if appropriate, by legislative proposals.

(49)

In the context of that review, the Commission should evaluate any barriers that may have impeded the uptake of the funds by investors, including the impact on institutional investors of other regulation as may apply to them of a prudential nature. In addition, the Commission should gather data for assessing the contribution of the designation ‘EuVECA’ to other Union programmes, such as Horizon 2020, which also seek to support innovation in the Union.

(50)

In light of the Commission Communication of 6 October 2010 entitled ‘European 2020 Flagship Initiative: Innovation Union’ and the Commission Communication of 7 December 2011 entitled ‘An action plan to improve access to finance for SMEs’, it is important to ensure the effectiveness of public schemes across the Union to support the venture capital market, and the coordination and mutual coherence of different Union policies aimed at fostering innovation, including policies on competition and research. A key focus of Union policies on innovation and growth is green technology, given the objective of the Union to be a global leader on smart and sustainable growth and on energy and resource efficiency, including in respect of financing for SMEs. When reviewing this Regulation, the Commission should assess its impact on progress towards that objective.

(51)

ESMA should assess its staffing and resources needs arising from the assumption of its powers and duties in accordance with this Regulation and submit a report to the European Parliament, to the Council and to the Commission.

(52)

The European Investment Fund (EIF) invests, inter alia, in venture capital funds across the Union. The measures in this Regulation to allow for the easy identification of venture capital funds with defined common features should make it easier for the EIF to identify venture capital funds under this Regulation as possible investment targets. The EIF should therefore be encouraged to invest in qualifying venture capital funds.

(53)

This Regulation respects fundamental rights and observes the principles recognised in particular by the Charter of Fundamental Rights of the European Union, including the right to respect for private and family life (Article 7) and freedom to conduct a business (Article 16).

(54)

Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data (8) governs the processing of personal data carried out in the Member States in the context of this Regulation and under the supervision of the Member States competent authorities, in particular the public independent authorities designated by the Member States. Regulation (EC) No 45/2001 of the European Parliament and of the Council of 18 December 2000 on the protection of individuals with regard to the processing of personal data by the Community institutions and bodies and on the free movement of such data (9), governs the processing of personal data carried out by ESMA within the framework of this Regulation and under the supervision of the European Data Protection Supervisor.

(55)

This Regulation should be without prejudice to the application of State aid rules to qualifying venture capital funds.

(56)

Since the objectives of this Regulation, namely to ensure uniform requirements apply to the marketing of qualifying venture capital funds and to establish a simple registration system for managers of qualifying venture capital funds, thereby facilitating the marketing of qualifying venture capital funds throughout the Union, while taking full account of the need to balance safety and reliability associated with the use of the designation ‘EuVECA’ with the efficient operation of the venture capital market and the cost for its various stakeholders, cannot be sufficiently achieved by the Member States and can therefore, by reason of its scale and effects, be better achieved at Union level, the Union may adopt measures in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty on European Union. In accordance with the principle of proportionality, as set out in that Article, this Regulation does not go beyond what is necessary in order to achieve those objectives,

(a)

their assets under management in total do not exceed the threshold referred to in point (b) of Article 3(2) of Directive 2011/61/EU;

(b)

they are established in the Union;

(c)

they are subject to registration with the competent authorities of their home Member State in accordance with point (a) of Article 3(3) of Directive 2011/61/EU; and

(d)

they manage portfolios of qualifying venture capital funds.

(a)

comply with the requirements laid down in Directive 2011/61/EU; and

(b)

continue to comply with Articles 3 and 5 and points (c) and (i) of Article 13(1) of this Regulation.

(a)

‘collective investment undertaking’ means an AIF as defined in point (a) of Article 4(1) of Directive 2011/61/EU;

(b)

‘qualifying venture capital fund’ means a collective investment undertaking that:

(c)

‘manager of a qualifying venture capital fund’ means a legal person the regular business of which is managing at least one qualifying venture capital fund;

(d)

‘qualifying portfolio undertaking’ means an undertaking that:

(e)

‘qualifying investments’ means any of the following instruments:

(f)

‘relevant costs’ means all fees, charges and expenses which are directly or indirectly borne by investors and which are agreed between the manager of a qualifying venture capital fund and the investors therein;

(g)

‘equity’ means ownership interest in an undertaking, represented by the shares or other forms of participation in the capital of the qualifying portfolio undertaking, issued to its investors;

(h)

‘quasi-equity’ means any type of financing instrument which is a combination of equity and debt, where the return on the instrument is linked to the profit or loss of the qualifying portfolio undertaking and where the repayment of the instrument in the event of default is not fully secured;

(i)

‘marketing’ means a direct or indirect offering or placement at the initiative of the manager of a qualifying venture capital fund, or on its behalf, of units or shares of a venture capital fund it manages to or with investors domiciled or with a registered office in the Union;

(j)

‘committed capital’ means any commitment pursuant to which an investor is obliged, within the time frame laid down in the rules or instruments of incorporation of the qualifying venture capital fund, to acquire an interest in, or to make capital contributions to, that fund;

(k)

‘home Member State’ means the Member State where the manager of a qualifying venture capital fund is established and is subject to registration with the competent authorities in accordance with point (a) of Article 3(3) of Directive 2011/61/EU;

(l)

‘host Member State’ means the Member State, other than the home Member State, where the manager of a qualifying venture capital fund markets qualifying venture capital funds in accordance with this Regulation;

(m)

‘competent authority’ means the national authority which the home Member State designates, by law or regulation, to undertake the registration of managers of collective investment undertakings falling within the scope of this Regulation.

(a)

commit to investing a minimum of EUR 100 000; and

(b)

state in writing, in a separate document from the contract to be concluded for the commitment to invest, that they are aware of the risks associated with the envisaged commitment or investment.

(a)

act honestly, fairly and with due skill, care and diligence in conducting their activities;

(b)

apply appropriate policies and procedures for preventing malpractices that can reasonably be expected to affect the interests of the investors and the qualifying portfolio undertakings;

(c)

conduct their business activities in such a way as to promote the best interests of the qualifying venture capital funds they manage, the investors therein and the integrity of the market;

(d)

apply a high level of diligence in the selection and ongoing monitoring of investments in qualifying portfolio undertakings;

(e)

possess adequate knowledge and understanding of the qualifying portfolio undertakings in which they invest;

(f)

treat their investors fairly;

(g)

ensure that no investor obtains preferential treatment, unless such preferential treatment is disclosed in the rules or instruments of incorporation of the qualifying venture capital fund.

(a)

managers of qualifying venture capital funds, persons who effectively conduct the business of those managers, employees of, or any person who directly or indirectly controls or is controlled by, those managers, and the qualifying venture capital fund managed by those managers, or the investors therein;

(b)

the qualifying venture capital fund or the investors therein, and another qualifying venture capital fund managed by the same manager, or the investors therein;

(c)

the qualifying venture capital fund or the investors therein, and a collective investment undertaking or UCITS managed by the same manager, or the investors therein.

(a)

the types of conflicts of interest referred to in paragraph 2 of this Article;

(b)

the steps that managers of qualifying venture capital funds must take, in terms of structures and organisational and administrative procedures in order to identify, prevent, manage, monitor and disclose conflicts of interest.

(a)

the identity of that manager and any other service providers contracted by that manager in relation to their management of the qualifying venture capital funds, and a description of their duties;

(b)

the amount of own funds available to that manager and a detailed statement as to why that manager considers that amount to be sufficient for maintaining the adequate human and technical resources necessary for the proper management of its qualifying venture capital funds;

(c)

a description of the investment strategy and objectives of the qualifying venture capital fund, including:

(d)

a description of the risk profile of the qualifying venture capital fund and any risks associated with the assets in which the fund may invest or investment techniques that may be employed;

(e)

a description of the qualifying venture capital fund’s valuation procedure and of the pricing methodology for the valuation of assets, including the methods used for the valuation of qualifying portfolio undertakings;

(f)

a description of how the remuneration of the manager of a qualifying venture capital fund is calculated;

(g)

a description of all relevant costs and of the maximum amounts thereof;

(h)

where available, the historical financial performance of the qualifying venture capital fund;

(i)

the business support services and the other support activities provided by the manager of a qualifying venture capital fund or arranged through third parties in order to facilitate the development, growth or in some other respect the ongoing operations of the qualifying portfolio undertakings in which the qualifying venture capital fund invests, or, where these services or activities are not provided, an explanation of that fact;

(j)

a description of the procedures by which the qualifying venture capital fund may change its investment strategy or investment policy, or both.

(a)

the identity of the persons who effectively conduct the business of managing qualifying venture capital funds;

(b)

the identity of the qualifying venture capital funds, the units or shares of which are to be marketed and their investment strategies;

(c)

information on the arrangements made for complying with the requirements of Chapter II;

(d)

a list of Member States where the manager of a qualifying venture capital fund intends to market each qualifying venture capital fund;

(e)

a list of Member States where the manager of a qualifying venture capital fund has established, or intends to establish, qualifying venture capital funds.

(a)

the persons who effectively conduct the business of managing qualifying venture capital funds are of sufficiently good repute and are sufficiently experienced also in relation to the investment strategies pursued by the manager of a qualifying venture capital fund;

(b)

the information required under paragraph 1 is complete;

(c)

the arrangements notified according to point (c) of paragraph 1 are suitable for complying with the requirements of Chapter II;

(d)

the list notified under point (e) of paragraph 1 of this Article reveals that all of the qualifying venture capital funds are established in accordance with point (b)(iii) of Article 3.

(a)

a new qualifying venture capital fund; or

(b)

an existing qualifying venture capital fund in a Member State not mentioned in the list referred to in point (d) of Article 14(1).

(a)

request access to any document in any form, and to receive or take a copy thereof;

(b)

require the manager of a qualifying venture capital fund to provide information without delay;

(c)

require information from any person related to the activities of the manager of a qualifying venture capital fund or of the qualifying venture capital fund;

(d)

carry out on-site inspections with or without prior announcement;

(e)

take appropriate measures to ensure that a manager of a qualifying venture capital fund continues to comply with this Regulation;

(f)

issue an order to ensure that a manager of a qualifying venture capital fund complies with this Regulation and desists from a repetition of any conduct that may consist of a breach of this Regulation.

(a)

fails to comply with the requirements that apply to portfolio composition, in breach of Article 5;

(b)

markets, in breach of Article 6, the units and shares of a qualifying venture capital fund to non-eligible investors;

(c)

uses the designation ‘EuVECA’ but is not registered in accordance with Article 14;

(d)

uses the designation ‘EuVECA’ for the marketing of funds which are not established in accordance with point (b)(iii) of Article 3;

(e)

has obtained registration through false statements or any other irregular means, in breach of Article 14;

(f)

fails to act honestly, fairly or with due skill, care or diligence, in conducting their business, in breach of point (a) of Article 7;

(g)

fails to apply appropriate policies and procedures for preventing malpractices, in breach of point (b) of Article 7;

(h)

repeatedly fails to comply with the requirements under Article 12 regarding the annual report;

(i)

repeatedly fails to comply with the obligation to inform investors in accordance with Article 13.

(a)

take measures to ensure that the manager of a qualifying venture capital fund concerned complies with Articles 5 and 6, points (a) and (b) of Article 7 and Articles 12, 13 and 14;

(b)

prohibit the use of the designation ‘EuVECA’ and remove the manager of a qualifying venture capital fund concerned from the register.

(a)

the extent to which the designation ‘EuVECA’ has been used by managers of qualifying venture capital funds in different Member States, whether domestically or on a cross-border basis;

(b)

the geographical and sectoral distribution of investments undertaken by qualifying venture capital funds;

(c)

the appropriateness of the information requirements under Article 13, in particular whether they are sufficient to enable investors to take an informed investment decision;

(d)

the use of the different qualifying investments by managers of qualifying venture capital funds and, in particular, whether there is a need to adjust the qualifying investments in this Regulation;

(e)

the possibility of extending the marketing of qualifying venture capital funds to retail investors;

(f)

the effectiveness, proportionality and application of administrative penalties and other administrative measures provided for by Member States in accordance with this Regulation;

(g)

the impact of this Regulation on the venture capital market;

(h)

the possibility of allowing venture capital funds established in a third country to use the designation ‘EuVECA’, taking into account experience in applying the Commission Recommendation regarding measures intended to encourage third countries to apply minimum standards of good governance in tax matters;

(i)

the appropriateness of complementing this Regulation with a depositary regime;

(j)

an evaluation of any barriers that may have impeded investment into funds using the designation ‘EuVECA’, including the impact on institutional investors of other Union law of a prudential nature.

(a)

by 22 July 2017 as regards points (a) to (g), (i) and (j); and

(b)

by 22 July 2015 as regards point (h).

25.4.2013   

EN

Official Journal of the European Union

L 115/18

(1)

Increasingly, as investors also pursue social goals and are not only seeking financial returns, a social investment market has been emerging in the Union, comprising, in part, investment funds targeting social undertakings. Such investment funds provide funding to social undertakings that act as drivers of social change by offering innovative solutions to social problems, for example by helping to tackle the social consequences of the financial crisis, and by making a valuable contribution to meeting the objectives of the Europe 2020 Strategy set out in the Commission Communication of 3 March 2010 entitled ‘Europe 2020: A strategy for delivering smart, sustainable and inclusive growth’.

(2)

This Regulation is part of the Social Business Initiative established by the Commission in its Communication of 25 October 2011 entitled ‘Social Business Initiative — Creating a favourable climate for social enterprises, key stakeholders in the social economy and innovation’.

(3)

It is necessary to lay down a common framework of rules regarding the use of the designation ‘EuSEF’ for qualifying social entrepreneurship funds, in particular on the composition of the portfolio of funds that operate under that designation, their eligible investment targets, the investment tools they may employ and the categories of investors that are eligible to invest in them by uniform rules in the Union. In the absence of such a common framework, there is a risk that Member States take diverging measures at national level having a direct negative impact on, and creating obstacles to, the proper functioning of the internal market, since funds that wish to operate across the Union would be subject to different rules in different Member States. Moreover, diverging quality requirements on portfolio composition, investment targets and eligible investors could lead to different levels of investor protection and generate confusion as to the investment proposition associated with qualifying social entrepreneurship funds. Investors should, furthermore, be able to compare the investment propositions of different qualifying social entrepreneurship funds. It is necessary to remove significant obstacles to cross-border fundraising by qualifying social entrepreneurship funds, to avoid distortions of competition between those funds, and to prevent any further likely obstacles to trade and significant distortions of competition from arising in the future. Consequently, the appropriate legal basis for this Regulation is Article 114 of the Treaty on the Functioning of the European Union (TFEU), as interpreted by consistent case law of the Court of Justice of the European Union.

(4)

It is necessary to adopt a regulation establishing uniform rules applicable to qualifying social entrepreneurship funds and imposing corresponding obligations on their managers in all Member States that wish to raise capital across the Union using the designation ‘EuSEF’. Those requirements should ensure the confidence of investors that wish to invest in such funds. The regulation should not apply to existing national schemes that allow investment in social businesses and that do not use the designation ‘EuSEF’.

(5)

Defining the quality requirements for the use of the designation ‘EuSEF’ in the form of a regulation ensures that those requirements are directly applicable to the managers of collective investment undertakings that raise funds using that designation. This also ensures uniform conditions for the use of the designation by preventing diverging national requirements as a result of the transposition of a directive. Managers of collective investment undertakings that use the designation should follow the same rules across the Union, which will also boost the confidence of investors. This Regulation reduces regulatory complexity and the managers’ costs of compliance with often divergent national rules governing such funds, especially for those managers that want to raise capital on a cross-border basis. It also contributes to eliminating competitive distortions.

(6)

It should be possible for a qualifying social entrepreneurship fund to be externally or internally managed. Where a qualifying social entrepreneurship fund is internally managed, the fund is also the manager and should therefore comply with all relevant requirements for managers under this Regulation and be registered in accordance with this Regulation. A qualifying social entrepreneurship fund which is internally managed should not, however, be permitted to be the external manager of other collective investment undertakings or of undertakings for collective investment in transferable securities (UCITS).

(7)

In order to clarify the relationship between this Regulation and other rules on collective investment undertakings and their managers, it is necessary to establish that this Regulation only apply to managers of collective investment undertakings other than UCITS falling within the scope of Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 on the coordination of laws, regulations, and administrative provisions, relating to undertakings for collective investment in transferable securities (UCITS) (4), which are established in the Union and are registered with the competent authority in their home Member State in accordance with Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Alternative Investment Fund Managers (5), provided that those managers manage portfolios of qualifying social entrepreneurship funds. However, external managers of qualifying social entrepreneurship funds that are registered under this Regulation should also be allowed to manage UCITS, subject to authorisation under Directive 2009/65/EC.

(8)

Furthermore, this Regulation applies only to managers of those collective investment undertakings with assets under management that in total do not exceed the threshold referred to in point (b) of Article 3(2) of Directive 2011/61/EU. The calculation of the threshold for the purposes of this Regulation is the same as for the threshold of point (b) of Article 3(2) of Directive 2011/61/EU.

(9)

However, managers registered in accordance with this Regulation and with assets under management that in total subsequently exceed the threshold referred to in point (b) of Article 3(2) of Directive 2011/61/EU, and that therefore become subject to authorisation with the competent authorities of their home Member State in accordance with Article 6 of that Directive, should be able to continue to use the designation ‘EuSEF’ in relation to the marketing of qualifying social entrepreneurship funds in the Union, provided that they comply with the requirements laid down in that Directive and that they continue to comply with certain requirements for the use of the designation ‘EuSEF’ specified in this Regulation at all times in relation to the qualifying social entrepreneurship fund. This applies both to existing qualifying social entrepreneurship funds and to qualifying social entrepreneurship funds established after exceeding the threshold.

(10)

Where managers of collective investment undertakings do not wish to use the designation ‘EuSEF’ then this Regulation does not apply. In those cases, existing national rules and general Union rules should continue to apply.

(11)

This Regulation should establish uniform rules on the nature of qualifying social entrepreneurship funds, in particular on qualifying portfolio undertakings into which the qualifying social entrepreneurship funds are to be permitted to invest, and the investment instruments to be used. This is necessary so that a clear demarcation line can be drawn between a qualifying social entrepreneurship fund and alternative investment funds that engage in other, less specialised, investment strategies, for example buyouts, which this Regulation is not seeking to promote.

(12)

In order to ensure the necessary clarity and certainty, this Regulation should also lay down uniform criteria to identify social undertakings as qualifying portfolio undertakings. A social undertaking should be defined as an operator in the social economy, the main objective of which is to have a social impact rather than to make a profit for its owners or shareholders. It operates by providing goods and services for the market and uses its profits primarily to achieve social objectives. It is managed in an accountable and transparent manner, in particular, by involving employees, consumers and stakeholders that are affected by its commercial activities.

(13)

As the principal objective of social undertakings is to have a positive social impact rather than to maximise profits this Regulation should only promote support for qualifying portfolio undertakings that have the achievement of a measurable and positive social impact as their focus. A measurable and positive social impact could include the provision of services to immigrants who are otherwise excluded, or the reintegration of marginalised groups into the labour market by providing employment, training or other support. Social undertakings use their profits to achieve their primary social objective and are managed in an accountable and transparent way. Where, on an exceptional basis, a qualifying portfolio undertaking wishes to distribute profits to its shareholders and owners, it should have predefined procedures and rules on how profits are to be distributed. Those rules should specify that such distribution of profits does not undermine the primary social objective of the qualifying social portfolio undertaking.

(14)

Social undertakings include a large range of undertakings, taking various legal forms, which provide social services or goods to vulnerable, marginalised, disadvantaged or excluded persons. Such services include access to housing, healthcare, assistance for elderly or disabled persons, child care, access to employment and training as well as dependency management. Social undertakings also include undertakings that employ a method of production of goods or services which embodies their social objective, but the activities of which be outside the realm of the provision of social goods or services. Those activities include social and professional integration by means of access to employment for people disadvantaged in particular by insufficient qualifications or social or professional problems leading to exclusion and marginalisation. Those activities may also concern environmental protection with a societal impact, such as anti-pollution, recycling and renewable energy.

(15)

In line with the aim of precisely circumscribing the collective investment undertakings which are to be covered by this Regulation and in order to ensure a focus on providing capital to social undertakings, qualifying social entrepreneurship funds should be deemed to be funds that intend to invest at least 70 % of their aggregate capital contributions and uncalled committed capital in such undertakings. Qualifying social entrepreneurship funds should not be permitted to invest more than 30 % of their aggregate capital contributions and uncalled committed capital in assets other than qualifying investments. This means that whereas the 30 % threshold should be the maximum limit for non-qualifying investments at all times, the 70 % threshold should be reserved for qualifying investments during the life of the qualifying social entrepreneurship fund. Those thresholds should be calculated on the basis of amounts investible after deduction of all relevant costs and holdings of cash and cash equivalents. This Regulation should set out the details necessary for the calculation of the referred investment thresholds.

(16)

The purpose of this Regulation is to enhance the growth of social undertakings in the Union. Investments in qualifying portfolio undertakings established in third countries can bring more capital to qualifying social entrepreneurship funds and can thereby benefit social undertakings in the Union. However, under no circumstances should this Regulation benefit investments made in portfolio undertakings established in third countries characterised by a lack of appropriate cooperation arrangements between the competent authorities of the home Member State of the manager of the qualifying social entrepreneurship fund and with each other Member State in which the units or shares of the qualifying social entrepreneurship fund are intended to be marketed or by a lack of effective exchange of information in tax matters.

(17)

A qualifying social entrepreneurship fund should, as a first step, be established in the Union in order to be entitled to use the designation ‘EuSEF’ as established by this Regulation. The Commission should, within two years of the date of application of this Regulation, review the limitation on the use of the designation ‘EuSEF’ to funds established in the Union, taking into account experience of applying the Commission Recommendation regarding measures intended to encourage third countries to apply minimum standards of good governance in tax matters.

(18)

Managers of social entrepreneurship funds should be able to attract additional capital commitments during the life of a fund. Such additional capital commitments during the life of the qualifying social entrepreneurship fund should be taken into account when the next investment in assets other than qualifying assets is contemplated. Additional capital commitments should be permitted in accordance with criteria and subject to conditions set out in the qualifying social entrepreneurship fund’s rules or instruments of incorporation.

(19)

Taking into account the specific funding needs of social undertakings, it is necessary to achieve clarity regarding the types of instruments that a qualifying social entrepreneurship fund should use for such funding. Therefore, this Regulation lays down uniform rules on the eligible instruments to be used by a qualifying social entrepreneurship fund when making investments, which include equity and quasi-equity instruments, debt instruments, such as promissory notes and certificates of deposit, investments into other qualifying social entrepreneurship funds, secured or unsecured loans, and grants. To prevent dilution of the investments into qualifying portfolio undertakings, qualifying social entrepreneurship funds should only be permitted to invest in other qualifying social entrepreneurship funds where those other qualifying social entrepreneurship funds have not themselves invested more than 10 % of their aggregate capital contributions and uncalled committed capital into other qualifying social entrepreneurship funds.

(20)

The core activities of qualifying social entrepreneurship funds are to provide financing to social undertakings through primary investments. Qualifying social entrepreneurship funds should neither participate in systemically important banking activities outside of the usual prudential regulatory framework (so-called ‘shadow banking’) nor follow typical private equity strategies, such as leveraged buyouts.

(21)

To maintain the necessary flexibility in its investment portfolio, qualifying social entrepreneurship funds should be able to invest in assets other than qualifying investments to the extent that those other investments do not exceed the 30 % threshold for non-qualifying investments. Holdings of cash and cash equivalents should not be taken into account for the calculation of that threshold because such holdings are not to be considered as investments. Qualifying social entrepreneurship funds should invest in a manner consistent with their ethical investment strategy, for instance they should not undertake investments that finance the weapons industry, that risk breaches of human rights or that entail electronic waste-dumping.

(22)

In order to ensure that the designation ‘EuSEF’ is reliable and easily recognisable for investors across the Union only managers of qualifying social entrepreneurship funds that comply with the uniform quality criteria as set out in this Regulation should be eligible to use the designation ‘EuSEF’ when marketing qualifying social entrepreneurship funds across the Union.

(23)

In order to ensure that qualifying social entrepreneurship funds have a distinct and identifiable profile which is suited to their purpose, there should be uniform rules on the composition of the portfolio and on the investment techniques which are permitted for such funds.

(24)

In order to ensure that qualifying social entrepreneurship funds do not contribute to the development of systemic risks, and that such funds concentrate, in their investment activities, on supporting qualifying portfolio undertakings, the use of leverage at the level of the fund should not be permitted. Managers of qualifying social entrepreneurship funds should only be permitted to borrow, issue debt obligations or provide guarantees, at the level of the qualifying social entrepreneurship fund, provided that such borrowings, debt obligations or guarantees are covered by uncalled commitments and thus do not increase the exposure of the fund beyond the level of its committed capital. Cash advances from investors of qualifying social entrepreneurship funds that are fully covered by capital commitments from those investors do not increase the exposure of the qualifying social entrepreneurship fund and should therefore be allowed. Also, in order to permit the fund to cover extraordinary liquidity needs that might arise between a call of committed capital from investors and the actual reception of the capital in its accounts, short-term borrowing should be allowed provided that the amount of such borrowing does not exceed the fund’s uncalled committed capital.

(25)

In order to ensure that qualifying social entrepreneurship funds are only marketed to investors who have the experience, knowledge and expertise to make their own investment decisions and properly assess the risks that those funds carry, and in order to maintain investor confidence and trust in qualifying social entrepreneurship funds, certain specific safeguards should be laid down. Therefore, qualifying social entrepreneurship funds should only be marketed to investors who are professional clients or who can be treated as professional clients under Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments (6). However, in order to have a sufficiently broad investor base for investments into qualifying social entrepreneurship funds it is also desirable that certain other investors have access to these funds, including high net worth individuals. For those other investors, specific safeguards should be laid down in order to ensure that qualifying social entrepreneurship funds are only marketed to investors that have the appropriate profile for making such investments. Those safeguards exclude marketing through the use of periodic savings plans. Furthermore, investments made by executives, directors or employees involved in the management of a manager of a qualifying social entrepreneurship fund should be possible when investing in the qualifying social entrepreneurship funds they manage, as such individuals are knowledgeable enough to participate in such investments.

(26)

To ensure that only managers of qualifying social entrepreneurship funds that fulfil uniform quality criteria as regards their behaviour in the market use the designation ‘EuSEF’, there should be rules on the conduct of business and the relationship of those managers with their investors. For the same reason, uniform conditions concerning the handling of conflicts of interest by such managers should be established. Those rules and conditions should also require the manager to have the necessary organisational and administrative arrangements in place to ensure a proper handling of conflicts of interest.

(27)

Where a manager of a qualifying social entrepreneurship fund intends to delegate functions to third parties, the manager’s liability towards the qualifying social entrepreneurship fund and the investors therein should not be affected by such delegation of functions to a third party. Moreover, the manager should not delegate functions to the extent that, in essence, it can no longer be considered to be a manager of a qualifying social entrepreneurship fund and has become a letter-box entity. The manager should remain responsible for the proper performance of delegated functions and compliance with this Regulation at all time. The delegation of functions should not undermine the effectiveness of supervision of the manager, and, in particular, should not prevent the manager from acting, or the fund from being managed, in the best interests of its investors.

(28)

The creation of positive social impacts in addition to the generation of financial returns for investors is a key characteristic of investment funds targeting social undertakings, one which distinguishes them from other types of investment funds. This Regulation should therefore require that a manager of a qualifying social entrepreneurship fund put in place procedures for measuring the positive social impacts which are to be achieved by investment into qualifying portfolio undertakings.

(29)

Currently funds that target social outcomes or impacts typically assess and collate information on the extent to which social undertakings achieve the outcomes or impacts that they are targeting. There are a wide range of different kinds of social outcomes or impacts that a social undertaking might target. Different ways of identifying and measuring the social outcomes or impacts have thereby developed. For instance, a firm that seeks to employ disadvantaged persons may report on the numbers of such persons employed who would not otherwise have been employed and a firm that seeks to improve the rehabilitation of prisoners may assess its performance in terms of recidivism rates. The funds aid the social undertakings in preparing and providing information on their goals and achievements, and gathering it for investors. While information about social outcomes and impacts is very important for investors, it is difficult to compare between different social undertakings and different funds both because of the differences in social outcomes or impacts targeted and because of the variety of approaches. In order to encourage the greatest consistency and comparability of such information in the longer term and the greatest efficiency in the procedures for obtaining the information, delegated acts should be developed in this area. Such delegated acts should also ensure greater clarity for supervisors, qualifying social entrepreneurship funds and social undertakings.

(30)

In order to ensure the integrity of the designation ‘EuSEF’, quality criteria as regards the organisation of a manager of a qualifying social entrepreneurship fund should be established. Therefore, uniform, proportionate requirements for the need to maintain adequate technical and human resources should be laid down.

(31)

In order to ensure the proper management of qualifying social entrepreneurship funds and the ability of their managers to cover potential risks arising from their activities, uniform, proportionate requirements for managers of qualifying social entrepreneurship funds to maintain sufficient own funds should be laid down. The amount of such own funds should be sufficient to ensure the continuity and proper management of the qualifying social entrepreneurship funds.

(32)

It is necessary for the purpose of investor protection to ensure that the assets of qualifying social entrepreneurship funds are properly evaluated. The rules or instruments of incorporation of qualifying social entrepreneurship funds should therefore contain provisions on the valuation of assets. This should ensure the integrity and the transparency of the valuation.

(33)

In order to ensure that managers of qualifying social entrepreneurship funds which make use of the designation ‘EuSEF’ give sufficient account of their activities, uniform rules on annual reports should be established.

(34)

While safeguards are included in this Regulation to ascertain that funds are properly used, supervisory authorities should be vigilant in ensuring that those safeguards are complied with.

(35)

To ensure the integrity of the designation ‘EuSEF’ in the eyes of investors, it is necessary that the designation only be used by managers of qualifying social entrepreneurship funds that are fully transparent as to their investment policy and their investment targets. Uniform rules on disclosure requirements that are incumbent on managers in relation to its investors should therefore be laid down. Those rules should include those elements that are specific to investments into social undertakings, so that greater consistency and comparability of such information can be achieved. This includes information about the criteria and the procedures which are used to select particular qualifying portfolio undertakings as investment targets. This also includes information about the positive social impact to be achieved by the investment policy and how this should be monitored and assessed. To ensure the necessary confidence and the trust of investors in such investments, this further includes information about the assets of the qualifying social entrepreneurship fund which are not invested into qualifying portfolio undertakings and how these are selected.

(36)

In order to ensure effective supervision of the uniform requirements contained in this Regulation, the competent authority of the home Member State should supervise compliance of the manager of a qualifying social entrepreneurship fund with the uniform requirements set out in this Regulation. To that end, managers that intend to market their funds under the designation ‘EuSEF’ should inform the competent authority of their home Member State of that intention. The competent authority should register the manager if all necessary information has been provided and if suitable arrangements to comply with the requirements of this Regulation are in place. Such registration should be valid across the entire Union.

(37)

In order to facilitate the efficient cross-border marketing of qualifying social entrepreneurship fund, registration of the manager should be effected as quickly as possible.

(38)

In order to ensure effective supervision of compliance with the uniform criteria laid down in this Regulation, rules on the circumstances under which information supplied to the competent authority in the home Member State needs to be updated should be established.

(39)

For the effective supervision of the requirements laid down in this Regulation, a process for cross-border notifications between the competent supervisory authorities, to be triggered by the registration of a manager of a qualifying social entrepreneurship fund in its home Member State, should also be established.

(40)

In order to maintain transparent conditions for the marketing of qualifying social entrepreneurship funds across the Union, the European Supervisory Authority (European Securities and Markets Authority) (‘ESMA’) established by Regulation (EU) No 1095/2010 of the European Parliament and of the Council (7) should be entrusted with maintaining a central database listing all managers of qualifying social entrepreneurship fund and the qualifying social entrepreneurship funds that they manage that are registered in accordance with this Regulation.

(41)

Where the competent authority of the host Member State has clear and demonstrable grounds for believing that a manager of a qualifying social entrepreneurship fund is acting in breach of this Regulation within its territory, it should promptly inform the competent authority of the home Member State, which should take appropriate measures.

(42)

If a manager of a qualifying social entrepreneurship fund persists in acting in a manner that is clearly in conflict with this Regulation despite the measures taken by the competent authority of the home Member State or because the competent authority of the home Member State fails to take measures within a reasonable timeframe, the competent authority of the host Member State should be able, after informing the competent authority of the home Member State, to take all the appropriate measures in order to protect investors, including the possibility of preventing the manager concerned from carrying out any further marketing of its qualifying social entrepreneurship funds within the territory of the host Member State.

(43)

In order to ensure the effective supervision of the uniform criteria established, this Regulation contains a list of supervisory powers that competent authorities must have at their disposal.

(44)

In order to ensure proper enforcement, this Regulation contains administrative penalties and other measures for the breach of its key provisions, namely the rules on portfolio composition, on safeguards relating to the identity of eligible investors, and on the use of the designation ‘EuSEF’ only by managers of qualifying social entrepreneurship funds managers that are registered in accordance with this Regulation. A breach of those key provisions should entail, where appropriate, prohibition of the use of the designation and the removal of the manager concerned from the register.

(45)

Supervisory information should be exchanged between the competent authorities in the home and host Member States and ESMA.

(46)

Effective regulatory cooperation among the entities tasked with supervising compliance with the uniform criteria set out in this Regulation requires that a high level of professional secrecy should apply to all relevant national authorities and to ESMA.

(47)

The contribution of qualifying social entrepreneurship funds to the growth of a European market for social investments will depend on the take-up of the designation ‘EuSEF’ by managers of qualifying social entrepreneurship funds, the recognition of the designation by investors and the development of a strong eco-system for social enterprises across the Union that aids those enterprises in availing themselves of the financing options provided. To that end, all stakeholders, including market operators, competent authorities in Member States, the Commission and other relevant entities within the Union, should endeavour to ensure a high level of awareness of the possibilities presented by this Regulation.

(48)

In order to specify the requirements set out in this Regulation, the power to adopt acts in accordance with Article 290 TFEU should be delegated to the Commission in respect of specifying the types of goods and services or methods of production for goods and services embodying a social objective and the circumstances in which profits may be distributed to owners and investors, the types of conflicts of interest managers of qualifying social entrepreneurship funds need to avoid and the steps to be taken in that respect, the details of the procedures to measure the social impacts to be achieved by the qualifying portfolio undertakings, and the content and procedure for provision of information for investors. It is of particular importance that the Commission carry out appropriate consultations during its preparatory work, including at expert level, taking into account self-regulatory initiatives and codes of conduct. The consultations carried out by the Commission during its preparatory work regarding delegated acts on the details of the procedures to measure the social impacts to be achieved by the qualifying portfolio undertakings should involve relevant stakeholders and ESMA. The Commission, when preparing and drawing up delegated acts, should ensure a simultaneous, timely and appropriate transmission of relevant documents to the European Parliament and to the Council.

(49)

Technical standards in financial services should ensure consistent harmonisation and a high level of supervision across the Union. As a body with highly specialised expertise, it would be efficient and appropriate to entrust ESMA with the elaboration of draft implementing technical standards where these do not involve policy choices, for submission to the Commission.

(50)

The Commission should be empowered to adopt implementing technical standards by means of implementing acts pursuant to Article 291 TFEU and in accordance with Article 15 of Regulation (EU) No 1095/2010. ESMA should be entrusted with drafting implementing technical standards for the format of the notification referred to in this Regulation.

(51)

Within four years of the date of application of this Regulation, the Commission should carry out a review of this Regulation in order to assess the development of the market of qualifying social entrepreneurship funds across the Union. The review should include a general survey of the functioning of the rules in this Regulation and the experience acquired in applying them. On the basis of the review, the Commission should submit a report to the European Parliament and the Council accompanied, if appropriate, by legislative proposals.

(52)

Furthermore, within four years of the date of application of this Regulation, the Commission should start a review of the interaction between this Regulation and other rules on collective investment undertakings and their managers, in particular those of Directive 2011/61/EU. In particular, that review should address the scope of this Regulation assessing whether it is necessary to extend the scope to allow larger alternative investment funds managers to use the designation ‘EuSEF’. On the basis of the review, the Commission should submit a report to the European Parliament and to the Council accompanied, if appropriate, by legislative proposals.

(53)

In the context of that review, the Commission should evaluate any barriers that may have impeded the uptake of the funds by investors, including the impact on institutional investors of other regulation as may apply to them of a prudential nature. In addition, the Commission should gather data for assessing the contribution of the designation ‘EuSEF’ to other Union programmes such as Horizon 2020, which also seek to support innovation in the Union.

(54)

In relation to the Commission’s examination of tax obstacles to cross-border venture capital investments as provided for in the Commission Communication of 7 December 2011 entitled ‘An action plan to improve access to finance for SMEs’ and in the context of its review of this Regulation, the Commission should consider undertaking an equivalent examination of possible tax obstacles for social entrepreneurship funds and assess possible tax incentives aimed at encouraging social entrepreneurship in the Union.

(55)

ESMA should assess its staffing and resources needs arising from the assumption of its powers and duties in accordance with this Regulation and submit a report to the European Parliament, to the Council and to the Commission.

(56)

This Regulation respects fundamental rights and observes the principles recognised in particular by the Charter of Fundamental Rights of the European Union, including the right to respect for private and family life (Article 7) and freedom to conduct a business (Article 16).

(57)

Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data (8) governs the processing of personal data carried out in the Member States in the context of this Regulation and under the supervision of the Member States competent authorities, in particular the public independent authorities designated by the Member States. Regulation (EC) No 45/2001 of the European Parliament and of the Council of 18 December 2000 on the protection of individuals with regard to the processing of personal data by the Community institutions and bodies and on the free movement of such data (9), governs the processing of personal data carried out by ESMA within the framework of this Regulation and under the supervision of the European Data Protection Supervisor.

(58)

Since the objective of this Regulation, namely to develop an internal market for qualifying social entrepreneurship funds by laying down a framework for the registration of managers of qualifying social entrepreneurship funds, thereby facilitating the marketing of qualifying social entrepreneurship funds throughout the Union, cannot be sufficiently achieved by the Member States and can therefore, by reason of its scale and effects, be better achieved at Union level, the Union may adopt measures in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty on European Union. In accordance with the principle of proportionality, as set out in that Article, this Regulation does not go beyond what is necessary in order to achieve that objective,

(a)

their assets under management in total do not exceed the threshold referred to in point (b) of Article 3(2) of Directive 2011/61/EU;

(b)

they are established in the Union;

(c)

they are subject to registration with the competent authorities of their home Member State in accordance with point (a) of Article 3(3) of Directive 2011/61/EU; and

(d)

they manage portfolios of qualifying social entrepreneurship funds.

(a)

comply with the requirements laid down in Directive 2011/61/EU; and

(b)

continue to comply with Articles 3, 5, 10, Article 13(2) and points (d), (e) and (f) of Article 14(1) of this Regulation.

(a)

‘collective investment undertaking’ means an AIF as defined in point (a) of Article 4(1) of Directive 2011/61/EU;

(b)

‘qualifying social entrepreneurship fund’ means a collective investment undertaking that:

(c)

‘manager of a qualifying social entrepreneurship fund’ means a legal person the regular business of which is managing at least one qualifying social entrepreneurship fund;

(d)

‘qualifying portfolio undertaking’ means an undertaking that:

(e)

‘qualifying investments’ means any of the following instruments:

(f)

‘relevant costs’ means all fees, charges and expenses which are directly or indirectly borne by investors and which are agreed between the manager of a qualifying social entrepreneurship fund and the investors therein;

(g)

‘equity’ means ownership interest in an undertaking, represented by the shares or other forms of participation in the capital of the qualifying portfolio undertaking issued to its investors;

(h)

‘quasi-equity’ means any type of financing instrument which is a combination of equity and debt, where the return on the instrument is linked to the profit or loss of the qualifying portfolio undertaking and where the repayment of the instrument in the event of default is not fully secured;

(i)

‘marketing’ means a direct or indirect offering or placement at the initiative of the manager of a qualifying social entrepreneurship fund, or on its behalf, of units or shares of a qualifying social entrepreneurship fund that is managed by that manager to or with investors domiciled or with a registered office in the Union;

(j)

‘committed capital’ means any commitment pursuant to which an investor is obliged, within the time frame laid down in the rules or instruments of incorporation of the qualifying social entrepreneurship fund, to acquire an interest in, or to make capital contributions to, that fund;

(k)

‘home Member State’ means the Member State where the manager of a qualifying social entrepreneurship fund is established and is subject to registration with the competent authorities in accordance with point (a) of Article 3(3) of Directive 2011/61/EU;

(l)

‘host Member State’ means the Member State, other than the home Member State, where the manager of a qualifying social entrepreneurship fund markets qualifying social entrepreneurship funds in accordance with this Regulation;

(m)

‘competent authority’ means the national authority which the home Member State designates, by law or regulation, to undertake the registration of managers of collective investment undertakings falling within the scope of this Regulation.

(a)

commit to invest a minimum of EUR 100 000; and

(b)

state in writing, in a separate document from the contract that is concluded for the commitment to invest, that they are aware of the risks associated with the envisaged commitment.

(a)

act honestly, fairly and with due skill, care and diligence in conducting their activities;

(b)

apply appropriate policies and procedures for preventing malpractices that can reasonably be expected to affect the interests of the investors and the qualifying portfolio undertakings;

(c)

conduct their business activities in such a way as to promote the positive social impact of the qualifying portfolio undertakings in which they have invested, the best interests of the qualifying social entrepreneurship funds that they manage, the investors therein and the integrity of the market;

(d)

apply a high level of diligence in the selection and ongoing monitoring of investments in qualifying portfolio undertakings and the positive social impact of those undertakings;

(e)

possess adequate knowledge and understanding of the qualifying portfolio undertakings in which they invest;

(f)

treat their investors fairly;

(g)

ensure that no investor obtains preferential treatment, unless such preferential treatment is disclosed in the rules or instruments of incorporation of the qualifying social entrepreneurship fund.

(a)

managers of qualifying social entrepreneurship funds, persons who effectively conduct the business of those managers, employees of, or any person who directly or indirectly controls or is controlled by, those managers, and the qualifying social entrepreneurship fund managed by those managers, or the investors therein;

(b)

a qualifying social entrepreneurship fund or the investors therein, and another qualifying social entrepreneurship fund managed by the same manager, or the investors therein;

(c)

the qualifying social entrepreneurship fund or the investors therein, and a collective investment undertaking or UCITS managed by the same manager, or the investors therein.

(a)

the types of conflicts of interest referred to in paragraph 2 of this Article;

(b)

the steps that managers of a qualifying social entrepreneurship fund must take, in terms of structures and organisational and administrative procedures, in order to identify, prevent, manage, monitor and disclose conflicts of interest.

(a)

employment and labour markets;

(b)

standards and rights related to job quality;

(c)

social inclusion and protection of particular groups;

(d)

equal treatment, equal opportunities and non-discrimination;

(e)

public health and safety;

(f)

access to and effects on social protection and on health and educational systems.

(a)

details, as appropriate, of the overall social outcomes achieved by the investment policy and the method used to measure those outcomes;

(b)

a statement of any divestments in relation to qualifying portfolio undertakings that have occurred;

(c)

a description of whether divestments in relation to the other assets of the qualifying social entrepreneurship fund which are not invested into qualifying portfolio undertakings occurred on the basis of the criteria as referred to in point (f) of Article 14(1);

(d)

a summary of the activities that the manager of a qualifying social entrepreneurship fund has undertaken in relation to the qualifying portfolio undertakings as referred to in point (l) of Article 14(1);

(e)

information on the nature and purpose of the investments other than qualifying investments referred to in Article 5(1).

(a)

the identity of that manager and of any other service providers contracted by that manager in relation to their management, and a description of their duties;

(b)

the amount of own funds available to that manager, as well as a detailed statement as to why that manager considers that amount to be sufficient for maintaining the adequate human and technical resources necessary for the proper management of its qualifying social entrepreneurship funds;

(c)

a description of the investment strategy and objectives of the qualifying social entrepreneurship fund, including:

(d)

the positive social impact being targeted by the investment policy of the qualifying social entrepreneurship fund, including, where relevant, projections of such outcomes as may be reasonable, and information on past performance in this area;

(e)

the methodologies to be used to measure social impacts;

(f)

a description of the assets other than qualifying portfolio undertakings and the process and the criteria which are used for selecting these assets unless they are cash or cash equivalents;

(g)

a description of the risk profile of the qualifying social entrepreneurship fund and any risks associated with the assets in which the fund may invest or the investment techniques that may be employed;

(h)

a description of the qualifying social entrepreneurship fund’s valuation procedure and of the pricing methodology for valuing assets, including the methods used for valuing qualifying portfolio undertakings;

(i)

a description of how the remuneration of the manager of a qualifying social entrepreneurship fund is calculated;

(j)

a description of all relevant costs and of the maximum amounts thereof;

(k)

where available, the historical financial performance of the qualifying social entrepreneurship fund;

(l)

the business support services and the other support activities the manager of a qualifying social entrepreneurship fund is providing or arranging through third parties in order to facilitate the development, growth or in some other respect the ongoing operations of the qualifying portfolio undertakings in which the qualifying social entrepreneurship fund invests, or, where these services or activities are not provided, an explanation of that fact;

(m)

a description of the procedures by which the qualifying social entrepreneurship fund may change its investment strategy or investment policy, or both.

(a)

the content of the information referred to in points (c) to (f) and (l) of paragraph 1 of this Article;

(b)

how the information as referred to in points (c) to (f) and (l) of paragraph 1 of this Article can be presented in a uniform way in order to ensure the highest possible level of comparability.

(a)

the identity of the persons who effectively conduct the business of managing qualifying social entrepreneurship funds;

(b)

the identity of the qualifying social entrepreneurship funds, the units or shares of which are to be marketed and their investment strategies;

(c)

information on the arrangements made for complying with the requirements of Chapter II;

(d)

a list of Member States where the manager of a qualifying social entrepreneurship fund intends to market each qualifying social entrepreneurship fund;

(e)

a list of Member States where the manager of a qualifying social entrepreneurship fund has established, or intends to establish, qualifying social entrepreneurship funds.

(a)

the persons who effectively conduct the business of managing qualifying social entrepreneurship funds are of sufficiently good repute and are sufficiently experienced also in relation to the investment strategies pursued by the manager of a qualifying social entrepreneurship fund;

(b)

the information required referred to in paragraph 1 is complete;

(c)

the arrangements notified according to in point (c) of paragraph 1 are suitable for complying with the requirements of Chapter II;

(d)

the list notified according to point (e) of paragraph 1 reveals that all of the qualifying social entrepreneurship funds are established in accordance with point (b)(iii) of Article 3(1) of this Regulation.

(a)

a new qualifying social entrepreneurship fund; or

(b)

an existing qualifying social entrepreneurship fund in a Member State not mentioned in the list referred to in point (d) of Article 15(1).

(a)

request access to any document in any form, and to receive or take a copy of it thereof;

(b)

require the manager of a qualifying social entrepreneurship fund to provide information without delay;

(c)

require information from any person related to the activities of the manager of a qualifying social entrepreneurship fund or the qualifying social entrepreneurship fund;

(d)

carry out on-site inspections with or without prior announcement;

(e)

take appropriate measures to ensure that a manager of a qualifying social entrepreneurship fund continues to comply with this Regulation;

(f)

issue an order to ensure that a manager of a qualifying social entrepreneurship fund complies with this Regulation and desists from a repetition of any conduct that may consist of a breach of this Regulation.

(a)

fails to comply with the requirements that apply to the portfolio composition, in breach of Article 5;

(b)

markets, in breach of Article 6, the units and shares of a qualifying social entrepreneurship fund to non-eligible investors;

(c)

uses the designation ‘EuSEF’ but is not registered in accordance with Article 15;

(d)

uses the designation ‘EuSEF’ for the marketing of funds which are not established in accordance with point (b)(iii) of Article 3(1);

(e)

has obtained registration through false statements or any other irregular means in breach of Article 15;

(f)

fails to act honestly, fairly or with due skill, care or diligence, in conducting their business, in breach of point (a) of Article 7;

(g)

fails to apply appropriate policies and procedures for preventing malpractices, in breach of point (b) of Article 7;

(h)

repeatedly fails to comply with the requirements under Article 13 regarding the annual report;

(i)

repeatedly fails to comply with the obligation to inform investors in accordance with Article 14.

(a)

take measures to ensure that the manager of a qualifying social entrepreneurship fund concerned complies with Articles 5 and 6, points (a) and (b) of Article 7 and Articles 13, 14 and 15;

(b)

prohibit the use of the designation ‘EuSEF’ and remove the manager of a qualifying social entrepreneurship fund concerned from the register.

(a)

the extent to which the designation ‘EuSEF’ has been used by managers of qualifying social entrepreneurship funds in different Member States, whether domestically or on a cross-border basis;

(b)

the geographical and sectoral distribution of investments undertaken by qualifying social entrepreneurship funds;

(c)

the appropriateness of the information requirements under Article 14, in particular whether they are sufficient to enable investors to take an informed investment decision;

(d)

the use of the different qualifying investments by qualifying social entrepreneurship funds and what impact this has had on the development of social undertakings across the Union;

(e)

the appropriateness of establishing a European label for ‘social enterprises’;

(f)

the possibility of allowing social entrepreneurship funds established in a third country to use the designation ‘EuSEF’, taking into account experience in applying the Commission Recommendation regarding measures intended to encourage third countries to apply minimum standards of good governance in tax matters;

(g)

the practical application of the criteria for identifying qualifying portfolio undertakings, the impact of this on the development of social undertakings across the Union and their positive social impact;

(h)

an analysis of the procedures implemented by managers of qualifying social entrepreneurship funds so as to measure the positive social impact generated by the qualifying portfolio undertakings referred to in Article 10 and an assessment of the feasibility of introducing harmonised standards for measuring the social impact at Union level in a manner consistent with Union social policy;

(i)

the possibility of extending the marketing of qualifying social entrepreneurship funds to retail investors;

(j)

the appropriateness of including qualifying social entrepreneurship funds within eligible assets under Directive 2009/65/EC;

(k)

the appropriateness of complementing this Regulation with a depositary regime;

(l)

an examination of possible tax obstacles for social entrepreneurship funds and an assessment of possible tax incentives aimed at encouraging social entrepreneurship in the Union;

(m)

an evaluation of any barriers that may have impeded investment into funds using the designation ‘EuSEF’, including the impact on institutional investors of other Union law of a prudential nature.

(a)

by 22 July 2017 as regards points (a) to (e) and (g) to (m); and

(b)

by 22 July 2015 as regards point (f).

25.4.2013   

EN

Official Journal of the European Union

L 115/39

(1)

On 26 March 2010, the European Council agreed to the Commission’s proposal to launch a new strategy ‘Europe 2020’. One of the priorities of the Europe 2020 strategy is sustainable growth to be achieved by promoting a more resource-efficient, more sustainable and more competitive economy. That strategy put energy infrastructures at the forefront as part of the flagship initiative ‘Resource efficient Europe’, by underlining the need to urgently upgrade Europe’s networks, interconnecting them at the continental level, in particular to integrate renewable energy sources.

(2)

The target agreed in the conclusions of the March 2002 Barcelona European Council for Member States to have a level of electricity interconnections equivalent to at least to 10 % of their installed production capacity has not yet been achieved.

(3)

The communication from the Commission entitled ‘Energy infrastructure priorities for 2020 and beyond — A Blueprint for an integrated European energy network’, followed by the Council conclusions of 28 February 2011 and the European Parliament resolution (4), called for a new energy infrastructure policy to optimise network development at European level for the period up to 2020 and beyond, in order to allow the Union to meet its core energy policy objectives of competitiveness, sustainability and security of supply.

(4)

The European Council of 4 February 2011 underlined the need to modernise and expand Europe’s energy infrastructure and to interconnect networks across borders, in order to make solidarity between Member States operational, to provide for alternative supply or transit routes and sources of energy and to develop renewable energy sources in competition with traditional sources. It insisted that no Member State should remain isolated from the European gas and electricity networks after 2015 or see its energy security jeopardised by lack of the appropriate connections.

(5)

Decision No 1364/2006/EC of the European Parliament and of the Council (5) lays down guidelines for trans-European energy networks (TEN-E). Those guidelines have as objectives to support the completion of the Union internal energy market while encouraging the rational production, transportation, distribution and use of energy resources, to reduce the isolation of less-favoured and island regions, to secure and diversify the Union’s energy supplies, sources and routes, including through cooperation with third countries, and to contribute to sustainable development and protection of the environment.

(6)

Evaluation of the current TEN-E framework has clearly shown that this framework, while making a positive contribution to selected projects by giving them political visibility, lacks vision, focus, and flexibility to fill identified infrastructure gaps. The Union should therefore increase its efforts to meet future challenges in this field, and due attention should be paid to identifying potential future gaps in energy demand and supply.

(7)

Accelerating the refurbishment of existing energy infrastructure and the deployment of new energy infrastructure is vital to achieve the Union’s energy and climate policy objectives, consisting of completing the internal market in energy, guaranteeing security of supply, in particular for gas and oil, reducing greenhouse gas emissions by 20 % (30 % if the conditions are right), increasing the share of renewable energy in final energy consumption to 20 % (6) and achieving a 20 % increase in energy efficiency by 2020 whereby energy efficiency gains may contribute to reducing the need for construction of new infrastructures. At the same time, the Union has to prepare its infrastructure for further decarbonisation of its energy system in the longer term towards 2050. This Regulation should therefore also be able to accommodate possible future Union energy and climate policy objectives.

(8)

Despite the fact that Directive 2009/72/EC of the European Parliament and of the Council of 13 July 2009 concerning common rules for the internal market in electricity (7) and Directive 2009/73/EC of the European Parliament and of the Council of 13 July 2009 concerning common rules for the internal market in natural gas (8) provide for an internal market in energy, the market remains fragmented due to insufficient interconnections between national energy networks and to the suboptimal utilisation of existing energy infrastructure. However, Union-wide integrated networks and deployment of smart grids are vital for ensuring a competitive and properly functioning integrated market, for achieving an optimal utilisation of energy infrastructure, for increased energy efficiency and integration of distributed renewable energy sources and for promoting growth, employment and sustainable development.

(9)

The Union’s energy infrastructure should be upgraded in order to prevent technical failure and to increase its resilience against such failure, natural or man-made disasters, adverse effects of climate change and threats to its security, in particular as regards European critical infrastructures as set out in Council Directive 2008/114/EC of 8 December 2008 on the identification and designation of European critical infrastructures and the assessment of the need to improve their protection (9).

(10)

Transporting oil through land pipelines rather than over water can make an important contribution to lowering the environmental risk associated with the transportation of oil.

(11)

The importance of smart grids in achieving the Union’s energy policy objectives has been acknowledged in the communication from the Commission of 12 April 2011 entitled ‘Smart grids: from innovation to deployment’.

(12)

Energy storage facilities and reception, storage and regasification or decompression facilities for liquefied natural gas (LNG) and compressed natural gas (CNG) have an increasingly important role to play in the European energy infrastructure. The expansion of such energy infrastructure facilities forms an important component of a well-functioning network infrastructure.

(13)

The communication from the Commission of 7 September 2011 entitled ‘The EU Energy Policy: Engaging with Partners beyond Our Borders’ underlined the need for the Union to include the promotion of energy infrastructure development in its external relations with a view to supporting socio-economic development beyond the Union borders. The Union should facilitate infrastructure projects linking the Union’s energy networks with third-country networks, in particular with neighbouring countries and with countries with which the Union has established specific energy cooperation.

(14)

To ensure voltage and frequency stability, particular attention should be focused on the stability of the European electricity network under the changing conditions caused by the growing inflow of energy from renewable resources that are variable in nature.

(15)

The investment needs up to 2020 in electricity and gas transmission infrastructures of European relevance have been estimated at about EUR 200 billion. The significant increase in investment volumes compared to past trends and the urgency of implementing the energy infrastructure priorities requires a new approach in the way energy infrastructures, and in particular those of a cross-border nature, are regulated and financed.

(16)

The Commission Staff Working Paper for the Council of 10 June 2011 entitled ‘Energy infrastructure investment needs and financing requirements’ stressed that approximately half of the total investments needed for the decade up to 2020 are at risk of not being delivered at all or not in time due to obstacles related to the granting of permits, regulatory issues and financing.

(17)

This Regulation lays down rules for the timely development and interoperability of trans-European energy networks in order to achieve the energy policy objectives of the Treaty on the Functioning of the European Union (TFEU) to ensure the functioning of the internal energy market and security of supply in the Union, to promote energy efficiency and energy saving and the development of new and renewable forms of energy, and to promote the interconnection of energy networks. By pursuing these objectives, this Regulation contributes to smart, sustainable and inclusive growth and brings benefits to the entire Union in terms of competitiveness and economic, social and territorial cohesion.

(18)

It is essential for the development of trans-European networks and their effective interoperability to ensure operational coordination between electricity transmission system operators (TSOs). In order to ensure uniform conditions for the implementation of the relevant provisions of Regulation (EC) No 714/2009 of the European Parliament and of the Council of 13 July 2009 on conditions for access to the network for cross-border exchanges in electricity (10) in this respect, implementing powers should be conferred on the Commission. Those powers should be exercised in accordance with Regulation (EU) No 182/2011 of the European Parliament and of the Council of 16 February 2011 laying down the rules and general principles concerning mechanisms for control by Member States of the Commission’s exercise of implementing powers (11). The examination procedure should be used for the adoption of the guidelines on the implementation of operational coordination between electricity TSOs at Union level, given that those guidelines will apply generally to all TSOs.

(19)

The Agency for the Cooperation of Energy Regulators (the ‘Agency’) established by Regulation (EC) No 713/2009 of the European Parliament and of the Council (12) is allocated important additional tasks under this Regulation and should be given the right to levy fees for some of these additional tasks.

(20)

Following close consultations with all Member States and stakeholders, the Commission has identified 12 strategic trans-European energy infrastructure priorities, the implementation of which by 2020 is essential for the achievement of the Union’s energy and climate policy objectives. These priorities cover different geographic regions or thematic areas in the field of electricity transmission and storage, gas transmission, storage and liquefied or compressed natural gas infrastructure, smart grids, electricity highways, carbon dioxide transport and oil infrastructure.

(21)

Projects of common interest should comply with common, transparent and objective criteria in view of their contribution to the energy policy objectives. For electricity and gas, in order to be eligible for inclusion in the second and subsequent Union lists, projects should be part of the latest available 10-year network development plan. This plan should notably take account of the conclusions of the European Council of 4 February 2011 with regard to the need to integrate peripheral energy markets.

(22)

Regional groups should be established for the purpose of proposing and reviewing projects of common interest, leading to the establishment of regional lists of projects of common interest. In order to ensure broad consensus, these regional groups should ensure close cooperation between Member States, national regulatory authorities, project promoters and relevant stakeholders. The cooperation should rely as much as possible on existing regional cooperation structures of national regulatory authorities and TSOs and other structures established by the Member States and the Commission. In the context of this cooperation, national regulatory authorities should, when necessary, advise the regional groups, inter alia on the feasibility of the regulatory aspects of proposed projects and on the feasibility of the proposed timetable for regulatory approval.

(23)

In order to ensure that the Union list of projects of common interest (‘Union list’) is limited to projects which contribute the most to the implementation of the strategic energy infrastructure priority corridors and areas, the power to adopt and review the Union list should be delegated to the Commission in accordance with Article 290 of the TFEU, while respecting the right of the Member States to approve projects of common interest related to their territory. According to analysis carried out in the impact assessment accompanying the proposal that has led to this Regulation, the number of such projects is estimated at some 100 in the field of electricity and 50 in the field of gas. Taking into account this estimate, and the need to ensure the achievement of the objectives of this Regulation, the total number of projects of common interest should remain manageable, and therefore should not significantly exceed 220. The Commission, when preparing and drawing up delegated acts, should ensure the simultaneous, timely and appropriate transmission of relevant documents to the European Parliament and to the Council.

(24)

A new Union list should be established every two years. Projects of common interest that are completed or that no longer fulfil the relevant criteria and requirements as set out in this Regulation should not appear on the next Union list. For that reason, existing projects of common interest that are to be included in the next Union list should be subject to the same selection process for the establishment of regional lists and for the establishment of the Union list as proposed projects; however, care should be taken to minimise the resulting administrative burden as much as possible, for example by using to the extent possible information submitted previously, and by taking account of the annual reports of the project promoters.

(25)

Projects of common interest should be implemented as quickly as possible and should be closely monitored and evaluated, while keeping the administrative burden for project promoters to a minimum. The Commission should nominate European coordinators for projects facing particular difficulties.

(26)

Permit granting processes should neither lead to administrative burdens which are disproportionate to the size or complexity of a project, nor create barriers to the development of the trans-European networks and market access. The conclusions of the Council of 19 February 2009 highlighted the need to identify and remove barriers to investment, including by means of streamlining of planning and consultation procedures. Those conclusions were reinforced by the conclusions of the European Council of 4 February 2011 which again underlined the importance of streamlining and improving permit granting processes while respecting national competences.

(27)

The planning and implementation of Union projects of common interest in the areas of energy, transport and telecommunication infrastructure should be coordinated to generate synergies whenever to do so makes sense from an overall economic, technical, environmental or spatial planning point of view and with due regard to the relevant safety aspects. Thus, when the various European networks are being planned, preference could be given to integrating transport, communication and energy networks in order to ensure that as little land as possible is taken up, whilst ensuring, where possible, that existing or disused routes are reused, in order to reduce to a minimum any negative social, economic, environmental and financial impact.

(28)

Projects of common interest should be given ‘priority status’ at national level to ensure rapid administrative treatment. Projects of common interest should be considered by competent authorities as being in the public interest. Authorisation should be given to projects which have an adverse impact on the environment, for reasons of overriding public interest, when all the conditions under Council Directive 92/43/EEC of 21 May 1992 on the conservation of natural habitats and of wild fauna and flora (13) and Directive 2000/60/EC of the European Parliament and of the Council of 23 October 2000 establishing a framework for Community action in the field of water policy (14) are met.

(29)

The establishment of a competent authority or authorities integrating or coordinating all permit granting processes (‘one-stop shop’) should reduce complexity, increase efficiency and transparency and help enhance cooperation among Member States. Upon their designation, the competent authorities should be operational as soon as possible.

(30)

Despite the existence of established standards for the participation of the public in environmental decision-making procedures, additional measures are needed to ensure the highest possible standards of transparency and public participation for all relevant issues in the permit granting process for projects of common interest.

(31)

The correct and coordinated implementation of Directive 2011/92/EU of the European Parliament and of the Council of 13 December 2011 on the assessment of the effects of certain public and private projects on the environment (15), of Directive 2001/42/EC of the European Parliament and of the Council of 27 June 2001 on the assessment of the effects of certain plans and programmes on the environment (16), where applicable, of the Convention on access to information, public participation in decision-making and access to justice in environmental matters, signed in Aarhus on 25 June 1998 (17) (the ‘Aarhus Convention’), and of the Espoo Convention on environmental impact assessment in a transboundary context (the ‘Espoo Convention’) should ensure the harmonisation of the main principles for the assessment of environmental effects, including in a cross-border context. Member States should coordinate their assessments for projects of common interest, and provide for joint assessments, where possible. Member States should be encouraged to exchange best practice and administrative capacity-building for permit granting processes.

(32)

It is important to streamline and improve permit granting processes, while respecting — to the extent possible with due regard to the principle of subsidiarity — national competences and procedures for the construction of new infrastructure. Given the urgency of developing energy infrastructures, the simplification of permit granting processes should be accompanied by a clear time-limit for the decision to be taken by the respective authorities regarding the construction of the project. That time limit should stimulate a more efficient definition and handling of procedures, and should under no circumstances compromise the high standards for the protection of the environment and public participation. With regard to the maximum time limits established by this Regulation, Member States could nevertheless strive to further shorten them if feasible. The competent authorities should ensure compliance with the time limits, and Member States should endeavour to ensure that appeals challenging the substantive or procedural legality of a comprehensive decision are handled in the most efficient way possible.

(33)

Where Member States consider it appropriate, they may include in the comprehensive decision decisions taken in the context of: negotiations with individual landowners to granting access to, ownership of, or a right to occupy property; spatial planning which determines the general land use of a defined region, includes other developments such as highways, railways, buildings and nature protection areas, and is not undertaken for the specific purpose of the planned project; granting of operational permits. In the context of the permit granting processes, a project of common interest could include related infrastructure to the extent that it is essential for the construction or functioning of the project.

(34)

This Regulation, in particular the provisions on permit granting, public participation and the implementation of projects of common interest, should apply without prejudice to international and Union law, including provisions to protect the environment and human health, and provisions adopted under the Common Fisheries and Maritime Policy.

(35)

The costs for the development, construction, operation and maintenance of projects of common interest should in general be fully borne by the users of the infrastructure. Projects of common interest should be eligible for cross-border cost allocation when an assessment of market demand or of the expected effects on the tariffs have indicated that costs cannot be expected to be recovered by the tariffs paid by the infrastructure users.

(36)

The basis for the discussion on the appropriate allocation of costs should be the analysis of the costs and benefits of an infrastructure project on the basis of a harmonised methodology for energy-system-wide analysis, in the framework of the 10-year network development plans prepared by the European Networks of Transmission System Operators under Regulation (EC) No 714/2009 and Regulation (EC) No 715/2009 of the European Parliament and of the Council of 13 July 2009 on conditions for access to the natural gas transmission networks (18), and reviewed by the Agency. That analysis could take into consideration indicators and corresponding reference values for the comparison of unit investment costs.

(37)

In an increasingly integrated internal energy market, clear and transparent rules for cost allocation across borders are necessary in order to accelerate investment in cross-border infrastructure. The European Council of 4 February 2011 recalled the importance of promoting a regulatory framework attractive to investment in networks, with tariffs set at levels consistent with financing needs and the appropriate cost allocation for cross-border investments, while enhancing competition and competitiveness and taking account of the impact on consumers. When deciding on cross-border cost allocation, national regulatory authorities should ensure that its impact on national tariffs does not represent a disproportionate burden for consumers. The national regulatory authorities should also avoid the risks of double support for projects by taking into account actual or estimated charges and revenues. Those charges and revenues should be taken into account only insofar as they are designed to cover the costs concerned and as much as possible related to the projects. When an investment request takes into account benefits beyond the borders of the Member States concerned, the national regulatory authorities should consult the TSOs concerned on the project-specific cost-benefit analysis.

(38)

The existing internal energy market law requires that tariffs for access to gas and electricity networks provide appropriate incentives for investment. When applying the internal energy market law, national regulatory authorities should ensure a stable and predictable regulatory framework with incentives for projects of common interest, including long-term incentives, that are commensurate with the level of specific risk of the project. This applies in particular to innovative transmission technologies for electricity allowing for large scale integration of renewable energy, of distributed energy resources or of demand response in interconnected networks, and to gas transmission infrastructure offering advanced capacity or additional flexibility to the market to allow for short-term trading or back-up supply in case of supply disruptions.

(39)

This Regulation applies only to the granting of permits for, public participation in, and the regulatory treatment of projects of common interest within the meaning set out herein. Member States may nevertheless apply, by virtue of their national law, the same or similar rules to other projects which do not have the status of projects of common interest within the scope of this Regulation. As regards the regulatory incentives, Member States may apply, by virtue of their national law, the same or similar rules to projects of common interest falling under the category of electricity storage.

(40)

Member States that currently do not provide for a legal status of the highest national significance possible that is attributable to energy infrastructure projects in the context of permit granting processes should consider introducing such a status, in particular by evaluating if this would lead to a quicker permit granting process.

(41)

The European Energy Programme for Recovery (EEPR), established by Regulation (EC) No 663/2009 of the European Parliament and of the Council (19) has demonstrated the added value of leveraging private funding through significant Union financial assistance to allow the implementation of projects of European significance. The European Council of 4 February 2011 recognised that some energy infrastructure projects may require limited public finance to leverage private funding. In the light of the economic and financial crisis and budgetary constraints, targeted support, through grants and financial instruments, should be developed under the next multiannual financial framework, which will attract new investors into the energy infrastructure priority corridors and areas, while keeping the budgetary contribution of the Union to a minimum. The relevant measures should draw on the experience gained during the pilot phase following the introduction of project bonds to finance infrastructure projects.

(42)

Projects of common interest in the fields of electricity, gas and carbon dioxide should be eligible to receive Union financial assistance for studies and, under certain conditions, for works as soon as such funding becomes available under the relevant Regulation on a Connecting Europe Facility in the form of grants or in the form of innovative financial instruments. This will ensure that tailor-made support can be provided to those projects of common interest which are not viable under the existing regulatory framework and market conditions. It is important to avoid any distortion of competition, in particular between projects contributing to the achievement of the same Union priority corridor. Such financial assistance should ensure the necessary synergies with the Structural Funds, which will finance smart energy distribution networks of local or regional importance. A three-step logic applies to investments in projects of common interest. First, the market should have the priority to invest. Second, if investments are not made by the market, regulatory solutions should be explored, if necessary the relevant regulatory framework should be adjusted, and the correct application of the relevant regulatory framework should be ensured. Third, where the first two steps are not sufficient to deliver the necessary investments in projects of common interest, Union financial assistance could be granted if the project of common interest fulfils the applicable eligibility criteria.

(43)

Since the objective of this Regulation, namely the development and interoperability of trans-European energy networks and connection to such networks, cannot be sufficiently achieved by the Member States and can therefore be better achieved at Union level, the Union may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty on European Union. In accordance with the principle of proportionality, as set out in that Article, this Regulation does not go beyond what is necessary in order to achieve that objective.

(44)

Regulations (EC) No 713/2009, (EC) No 714/2009 and (EC) No 715/2009 should therefore be amended accordingly.

(45)

Decision No 1364/2006/EC should therefore be repealed,

(a)

addresses the identification of projects of common interest necessary to implement priority corridors and areas falling under the energy infrastructure categories in electricity, gas, oil, and carbon dioxide set out in Annex II (‘energy infrastructure categories’);

(b)

facilitates the timely implementation of projects of common interest by streamlining, coordinating more closely, and accelerating permit granting processes and by enhancing public participation;

(c)

provides rules and guidance for the cross-border allocation of costs and risk-related incentives for projects of common interest;

(d)

determines the conditions for eligibility of projects of common interest for Union financial assistance.

(1)

‘energy infrastructure’ means any physical equipment or facility falling under the energy infrastructure categories which is located within the Union or linking the Union and one or more third countries;

(2)

‘comprehensive decision’ means the decision or set of decisions taken by a Member State authority or authorities not including courts or tribunals, that determines whether or not a project promoter is to be granted authorisation to build the energy infrastructure to realise a project without prejudice to any decision taken in the context of an administrative appeal procedure;

(3)

‘project’ means one or several lines, pipelines, facilities, equipments or installations falling under the energy infrastructure categories;

(4)

‘project of common interest’ means a project necessary to implement the energy infrastructure priority corridors and areas set out in Annex I and which is part of the Union list of projects of common interest referred to in Article 3;

(5)

‘energy infrastructure bottleneck’ means limitation of physical flows in an energy system due to insufficient transmission capacity, which includes inter alia the absence of infrastructure;

(6)

‘project promoter’ means one of the following:

(7)

‘smart grid’ means an electricity network that can integrate in a cost efficient manner the behaviour and actions of all users connected to it, including generators, consumers and those that both generate and consume, in order to ensure an economically efficient and sustainable power system with low losses and high levels of quality, security of supply and safety;

(8)

‘works’ means the purchase, supply and deployment of components, systems and services including software, the carrying out of development and construction and installation activities relating to a project, the acceptance of installations and the launching of a project;

(9)

‘studies’ means activities needed to prepare project implementation, such as preparatory, feasibility, evaluation, testing and validation studies, including software, and any other technical support measure including prior action to define and develop a project and decide on its financing, such as reconnaissance of the sites concerned and preparation of the financial package;

(10)

‘national regulatory authority’ means a national regulatory authority designated in accordance with Article 35(1) of Directive 2009/72/EC or Article 39(1) of Directive 2009/73/EC;

(11)

‘commissioning’ means the process of bringing a project into operation once it has been constructed.

(a)

each individual proposal for a project of common interest shall require the approval of the Member States, to whose territory the project relates; if a Member State decides not to give its approval, it shall present its substantiated reasons for doing so to the Group concerned;

(b)

it shall take into account advice from the Commission that is aimed at having a manageable total number of projects of common interest.

(a)

ensure that only those projects that fulfil the criteria referred to in Article 4 are included;

(b)

ensure cross-regional consistency, taking into account the opinion of the Agency as referred to in Annex III.2(12);

(c)

take into account any opinions of Member States as referred to in Annex III.2(9); and

(d)

aim for a manageable total number of projects of common interest on the Union list.

(a)

the project is necessary for at least one of the energy infrastructure priority corridors and areas;

(b)

the potential overall benefits of the project, assessed according to the respective specific criteria in paragraph 2, outweigh its costs, including in the longer term; and

(c)

the project meets any of the following criteria:

(a)

for electricity transmission and storage projects falling under the energy infrastructure categories set out in Annex II.1(a) to (d), the project is to contribute significantly to at least one of the following specific criteria:

(b)

for gas projects falling under the energy infrastructure categories set out in Annex II.2, the project is to contribute significantly to at least one of the following specific criteria:

(c)

for electricity smart grid projects falling under the energy infrastructure category set out in Annex II.1(e), the project is to contribute significantly to all of the following specific criteria:

(d)

for oil transport projects falling under the energy infrastructure categories set out in Annex II.3, the project is to contribute significantly to all of the following specific criteria:

(e)

for carbon dioxide transport projects falling under the energy infrastructure categories set out in Annex II.4, the project is contribute significantly to all of the following specific criteria:

(a)

the urgency of each proposed project in order to meet the Union energy policy targets of market integration, inter alia through lifting the isolation of at least one Member State and competition, sustainability and security of supply;

(b)

the number of Member States affected by each project, whilst ensuring equal opportunities for projects involving peripheral Member States;

(c)

the contribution of each project to territorial cohesion; and

(d)

complementarity with regard to other proposed projects.

(a)

feasibility and design studies;

(b)

approval by the national regulatory authority or by any other authority concerned;

(c)

construction and commissioning;

(d)

the permit granting schedule referred to in Article 10(4)(b).

(a)

the progress achieved in the development, construction and commissioning of the project, in particular with regard to permit granting and consultation procedures;

(b)

where relevant, delays compared to the implementation plan, the reasons for such delays and other difficulties encountered;

(c)

where relevant, a revised plan aiming at overcoming the delays.

(a)

in so far as measures referred to in Article 22(7)(a), (b) or (c) of Directives 2009/72/EC and 2009/73/EC are applicable according to respective national laws, national regulatory authorities shall ensure that the investment is carried out;

(b)

if the measures of national regulatory authorities according to point (a) are not applicable, the project promoter shall choose a third party to finance or construct all or part of the project. The project promoter shall do so before the delay compared to the date of commissioning in the implementation plan exceeds two years;

(c)

if a third party is not chosen according to point (b), the Member State or, when the Member State has so provided, the national regulatory authority may, within two months of the expiry of the period referred to in point (b), designate a third party to finance or construct the project which the project promoter shall accept;

(d)

if the delay compared to the date of commissioning in the implementation plan exceeds two years and two months, the Commission, subject to the agreement and with the full cooperation of the Member States concerned, may launch a call for proposals open to any third party capable of becoming a project promoter to build the project according to an agreed timeline;

(e)

when points (c) or (d) are applied, the system operator in whose area the investment is located shall provide the implementing operators or investors or third party with all the information needed to realise the investment, shall connect new assets to the transmission network and shall generally make its best efforts to facilitate the implementation of the investment and the secure, reliable and efficient operation and maintenance of the project of common interest.

(a)

promote the projects, for which he has been designated European coordinator and the cross-border dialogue between the project promoters and all concerned stakeholders;

(b)

assist all parties as necessary in consulting concerned stakeholders and obtaining necessary permits for the projects;

(c)

if appropriate, advise project promoters on the financing of the project;

(d)

ensure that appropriate support and strategic direction by the Member States concerned are provided for the preparation and implementation of the projects;

(e)

submit every year, and if appropriate, upon completion of their mandate, a report to the Commission on the progress of the projects and on any difficulties and obstacles which are likely to significantly delay the commissioning date of the projects. The Commission shall transmit the report to the European Parliament and the Groups concerned.

(a)

the competent authority notifies the Commission of that delegation and the information therein is published by either the competent authority or the project promoter on the website referred to in Article 9(7);

(b)

only one authority is responsible per project of common interest, is the sole point of contact for the project promoter in the process leading to the comprehensive decision for a given project of common interest, and coordinates the submission of all relevant documents and information.

(a)

The pre-application procedure, covering the period between the start of the permit granting process and the acceptance of the submitted application file by the competent authority, shall take place within an indicative period of two years.

This procedure shall include the preparation of any environmental reports to be prepared by the project promoters.

For the purpose of establishing the start of the permit granting process, the project promoters shall notify the project to the competent authority of the Member States concerned in written form, and shall include a reasonably detailed outline of the project. No later than three months following the receipt of the notification, the competent authority shall, including on behalf of other authorities concerned, acknowledge or, if it considers the project as not mature enough to enter the permit granting process, reject the notification in written form. In the event of a rejection, the competent authority shall justify its decision, including on behalf of other authorities concerned. The date of signature of the acknowledgement of the notification by the competent authority shall serve as the start of the permit granting process. Where two or more Member States are concerned, the date of the acceptance of the last notification by the competent authority concerned shall serve as the date of the start of the permit granting process.

(b)

The statutory permit granting procedure, covering the period from the date of acceptance of the submitted application file until the comprehensive decision is taken, shall not exceed one year and six months. Member States may set an earlier date for the time-limit, if considered appropriate.

(a)

upon the acknowledgement of the notification pursuant to paragraph 1(a), the competent authority shall identify, in close cooperation with the other authorities concerned, and where appropriate on the basis of a proposal by the project promoter, the scope of material and level of detail of information to be submitted by the project promoter, as part of the application file, to apply for the comprehensive decision. The checklist referred to in Annex VI.1(e) shall serve as a basis for this identification;

(b)

the competent authority shall draw up, in close cooperation with the project promoter and other authorities concerned and taking into account the results of the activities carried out under point (a), a detailed schedule for the permit granting process in line with the guidelines set out in Annex VI.(2);

For projects crossing the border between two or more Member States, the competent authorities of the Member States concerned shall prepare a joint schedule, in which they endeavour to align their timetables;

(c)

upon receipt of the draft application file, the competent authority shall, if necessary, and including on behalf of other authorities concerned, make further requests regarding missing information to be submitted by the project promoter, which may only address subjects identified under point (a). Within three months of the submission of the missing information, the competent authority shall accept for examination the application in written form. Requests for additional information may only be made if they are justified by new circumstances.

(a)

a project-specific cost-benefit analysis consistent with the methodology drawn up pursuant to Article 11 and taking into account benefits beyond the borders of the Member State concerned;

(b)

a business plan evaluating the financial viability of the project, including the chosen financing solution, and, for a project of common interest falling under the category referred to in Annex II.2, the results of market testing; and

(c)

if the project promoters agree, a substantiated proposal for a cross-border cost allocation.

—

congestion rents or other charges,

—

revenues stemming from the inter-transmission system operator compensation mechanism established under Article 13 of Regulation (EC) No 714/2009.

(a)

an evaluation of the identified impacts, including concerning network tariffs, on each of the concerned Member States;

(b)

an evaluation of the business plan referred to in paragraph 3(b);

(c)

regional or Union-wide positive externalities, which the project would generate;

(d)

the result of the consultation of the project promoters concerned.

(a)

an exemption from Articles 32, 33, 34 and Article 41(6), (8) and (10) of Directive 2009/73/EC pursuant to Article 36 of Directive 2009/73/EC;

(b)

an exemption from Article 16(6) of Regulation (EC) No 714/2009 or an exemption from Article 32 and Article 37(6) and (10) of Directive 2009/72/EC pursuant to Article 17 of Regulation (EC) No 714/2009;

(c)

an exemption under Article 22 of Directive 2003/55/EC (20); or

(d)

an exemption under Article 7 of Regulation (EC) No 1228/2003 (21).

(a)

an exemption from Articles 32, 33, 34 and Article 41(6), (8) and (10) of Directive 2009/73/EC pursuant to Article 36 of Directive 2009/73/EC;

(b)

an exemption from Article 16(6) of Regulation (EC) No 714/2009 or an exemption from Article 32 and Article 37(6) and (10) of Directive 2009/72/EC pursuant to Article 17 of Regulation (EC) No 714/2009;

(c)

an exemption under Article 22 of Directive 2003/55/EC; or

(d)

an exemption under Article 7 of Regulation (EC) No 1228/2003.

(a)

the rules for anticipatory investment; or

(b)

the rules for recognition of efficiently incurred costs before commissioning of the project; or

(c)

the rules for providing additional return on the capital invested for the project; or

(d)

the any other measure deemed necessary and appropriate.

(a)

the incentives referred to in paragraph 1 on the basis of a benchmarking of best practice by national regulatory authorities;

(b)

a common methodology to evaluate the incurred higher risks of investments in electricity and gas infrastructure projects.

(a)

the project specific cost-benefit analysis pursuant to Article 12(3)(a) provides evidence concerning the existence of significant positive externalities, such as security of supply, solidarity or innovation;

(b)

the project has received a cross-border cost allocation decision pursuant to Article 12; or, for projects of common interest falling under the category set out in Annex II.1(c) and that therefore do not receive a cross-border cost allocation decision, the project shall aim to provide services across borders, bring technological innovation and ensure the safety of cross-border grid operation;

(c)

the project is commercially not viable according to the business plan and other assessments carried out, notably by possible investors or creditors or the national regulatory authority. The decision on incentives and its justification referred to in Article 13(2) shall be taken into account when assessing the project’s commercial viability.

(a)

the progress achieved for the planning, development, construction and commissioning of projects of common interest selected pursuant to Article 3, and, where relevant, delays in implementation and other difficulties encountered;

(b)

the funds engaged and disbursed by the Union for projects of common interest, compared to the total value of funded projects of common interest;

(c)

for the electricity and gas sectors, the evolution of the interconnection level between Member States, the corresponding evolution of energy prices, as well as the number of network system failure events, their causes and related economic cost;

(d)

permit granting and public participation, in particular:

(e)

regulatory treatment, in particular:

(f)

the effectiveness of this Regulation in contributing to the goals for market integration by 2014 and 2015, to the climate and energy targets for 2020, and, in the longer term, to the move toward a low-carbon economy by 2050.

(a)

general, updated information, including geographic information, for each project of common interest;

(b)

the implementation plan as set out in Article 5(1) for each project of common interest;

(c)

the main results of the cost-benefit analysis on the basis of the methodology drawn up pursuant Article 11 for the projects of common interest concerned, except for any commercially sensitive information;

(d)

the Union list;

(e)

the funds allocated and disbursed by the Union for each project of common interest.

(1)

Article 8 is amended as follows:

(2)

Article 11 is replaced by the following:

‘Article 11

Costs

The costs related to the activities of the ENTSO for Electricity referred to in Articles 4 to 12 of this Regulation, and in Article 11 of Regulation (EU) No 347/2013 shall be borne by the transmission system operators and shall be taken into account in the calculation of tariffs. Regulatory authorities shall approve those costs only if they are reasonable and appropriate.’;

(3)

in Article 18, the following paragraph is inserted:

‘4a.   The Commission may adopt guidelines on the implementation of operational coordination between transmission system operators at Union level. Those guidelines shall be consistent with and build upon the network codes referred to in Article 6 of this Regulation and build upon the adopted specifications and the Agency opinion referred to in Article 8(3)(a) of this Regulation. When adopting those guidelines, the Commission shall take into account differing regional and national operational requirements.

Those guidelines shall be adopted in accordance with the examination procedure referred to in Article 23(3).’;

(4)

in Article 23 the following paragraph is inserted:

‘3.   Where reference is made to this paragraph, Article 5 of Regulation (EU) No 182/2011 of the European Parliament and of the Council of 16 February 2011 laying down the rules and general principles concerning mechanisms for control by Member States of the Commission’s exercise of implementing powers (26) shall apply.

(1)

in Article 8(10), point (a) is replaced by the following:

(2)

Article 11 is replaced by the following:

‘Article 11

Costs

The costs related to the activities of the ENTSO for Gas referred to in Articles 4 to 12 of this Regulation, and in Article 11 of Regulation (EU) No 347/2013 shall be borne by the transmission system operators and shall be taken into account in the calculation of tariffs. Regulatory authorities shall approve those costs only if they are reasonable and appropriate.’.