EUROPEAN COMMISSION

Brussels, 9.11.2022

COM(2022) 597 final

2022/0371(COD)

Proposal for a

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

establishing an Instrument for providing support to Ukraine for 2023 (macro-financial assistance +)

EXPLANATORY MEMORANDUM

1.CONTEXT OF THE PROPOSAL

•Reasons for and objectives of the proposal

The coming months will be decisive to agree on additional support. This short-term support will require a coordinated international effort and close cooperation among international partners. The EU is steadfast in its support to Ukraine whose future lies within the EU. Continuing the support to Ukraine under an organised collective approach is a strong priority for the Union.

•Consistency with existing policy provisions in the policy area

•Consistency with other Union policies

2.LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY

•Legal basis

•Subsidiarity (for non-exclusive competence)

•Proportionality

•Choice of the instrument

3.RESULTS OF EX-POST EVALUATIONS, STAKEHOLDER CONSULTATIONS AND IMPACT ASSESSMENTS

•Ex-post evaluations/fitness checks of existing legislation

The proposal follows a series of macro-financial assistance operations provided to Ukraine since 2015. Past ex-post evaluations of previous MFA operations to Ukraine have shown that in general they were highly relevant in terms of their objectives, financial envelope and policy conditions. In particular, MFA operations proved crucial to support Ukraine in addressing its balance-of-payment problems and implementing key structural reforms to stabilise the economy and enhance the sustainability of its external position. They allowed for fiscal savings and financial benefits, and acted as catalyst for additional financial support and investor confidence. The conditionality attached to the MFA operations was found complementary to the related IMF programmes. It created a politically reinforcing effect that contributed to the mobilisation of the Ukrainian authorities around essential reforms, especially in structural policy areas that are less covered by other international donor programmes.

•Stakeholder consultations

•Collection and use of expertise

•Impact assessment

•Regulatory fitness and simplification

•Fundamental rights

4.BUDGETARY IMPLICATIONS

·Support to loans’ interest costs – no target volume can be set in advance as these costs will depend on the actual interest on the loans

·Non-repayable support for activities covered by the Memorandum of Understanding of the Instrument or

·To be channelled to the Neighbourhood, Development and International Cooperation Instrument – Global Europe (NDICI) and/or Humanitarian Aid for activities benefitting Ukraine.

5.OTHER ELEMENTS

•Implementation plans and monitoring, evaluation and reporting arrangements

•Detailed explanation of the specific provisions of the proposal

Chapter I of the Regulation concerns its general provisions.

Article 1 provides the subject of the Regulation, which is the establishment of an Instrument for providing the Union’s support for Ukraine.

Article 2 defines the general objective of the Instrument and lists its main specific objectives.

Article 3 describes the areas under which support may be provided in order to achieve the objectives of the Instrument.

Article 4 gives the amounts of support in terms of loans. It also provides for additional amounts for covering an interest rate subsidy and possible non-repayable support. Finally, the article sets the period of availability for the support.

Article 5 describes how Member States and interested third countries and parties may contribute to the Instrument.

Section 2 elaborates on the conditions of the support under the Instrument.

Article 6 sets the general precondition for granting the support under the Instrument.

Article 7 stipulates that the Commission will conclude with Ukraine a Memorandum of Understanding and provides information on its content, timing, and review.

Article 8 refers to the reporting requirements under the Memorandum of Understanding.

Section 3 gives provisions on how the support under the Instrument is released, on the assessment and information obligations.

Article 9 provides how the support under the Instrument is released.

Article 10 lays down the procedural steps for the release of the support.

Article 11 gives rules on the reduction, suspension and cancellation of the support.

Article 12 provides that the Commission shall assess the implementation of the support under the Instrument.

Article 13 defines how the European Parliament and the Council will be informed about the developments regarding the Instrument.

Chapter II of the Regulation gives specific provisions related to the implementation of the Instrument: Article 14 in regard to the borrowing and lending operations and derogations from Regulation (EU) 2021/947 with regard to the External Action Guarantee coverage and provisioning requirements, Article 15 – on the interest subsidy and Article 16 – on the financing agreement for the non-repayable support.

Chapter III of the Regulation describes the common and final provisions regarding comitology (Article 17), annual reporting (Article 18), and entry into force (Article 19).

2022/0371 (COD)

Proposal for a

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

establishing an Instrument for providing support to Ukraine for 2023 (macro-financial assistance +)

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the Functioning of the European Union, and in particular Article 212 thereof,

Having regard to the proposal from the European Commission,

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

Acting in accordance with the ordinary legislative procedure 6 ,

Whereas:

(1)An Association Agreement between the Union and Ukraine 7 , including a Deep and Comprehensive Free Trade Area, entered into force on 1 September 2017.

(2)In 2014, Ukraine embarked on an ambitious reform programme with the aim of stabilising its economy and improving the livelihoods of its citizens. The fight against corruption, as well as constitutional, electoral and judicial reforms, are among the top priorities on the agenda. The implementation of those reforms was supported by consecutive macro-financial assistance programmes, under which Ukraine has received assistance from the Union in the form of loans for a total of EUR 6.6 billion.

(3)The emergency macro-financial assistance, which was made available in the context of mounting threat, right before the Russian invasion, pursuant to Decision (EU) 2022/313 of the European Parliament and of the Council 8 , provided EUR 1.2 billion in loans to Ukraine, disbursed in two instalments, each of EUR 600 million, in March and May 2022.

(4)The Union’s exceptional macro-financial assistance of up to EUR 1 billion, made available pursuant to Decision (EU) 2022/1201 of the European Parliament and of the Council 9 , provided swift and urgent support to the Ukrainian budget and was fully disbursed in two tranches on 1 and 2 August 2022. That assistance constituted the first stage of the planned exceptional macro-financial assistance to Ukraine for up to EUR 9 billion, announced by the Commission in its Communication of 18 May 2022 entitled ‘Ukraine Relief and Reconstruction’ and endorsed by the European Council of 23-24 June 2022. 

(5)Decision (EU) 2022/1628 10 constituted a further step in the implementation of that envisaged Union’s exceptional macro-financial assistance. It established the basis for providing to Ukraine a further amount of up to EUR 5 billion in the form of loans on highly concessional terms, out of which EUR 2 billion were disbursed on 18 October, with the remaining EUR 3 billion should be disbursed by the end of 2022.

(6)Russia’s unprovoked and unjustified war of aggression against Ukraine since 24 February 2022 has caused Ukraine a loss of access to financial markets and a significant drop in public revenues, while public expenditure to address the humanitarian situation and to maintain the continuity of State services has increased markedly. In that very uncertain and volatile situation, the best estimates of Ukraine’s funding needs by the International Monetary Fund (IMF) in the summer of 2022 pointed to an extraordinary funding gap of around USD 39 billion in 2022, of which around half could be met thanks to the international assistance. The swift provision by the Union of the macro-financial assistance to Ukraine under Decision (EU) 2022/1628 was, given the extraordinary circumstances, considered to be an appropriate short-term response to the sizeable risks to Ukraine’s macro-financial stability. The further amount of up to EUR 5 billion of Union’s exceptional macro-financial assistance under Decision (EU) 2022/1628 was to support Ukraine’s macro-financial stabilisation, strengthen the immediate resilience of the country and sustain its capacity towards recovery, thereby contributing to the public debt sustainability of Ukraine and its ability to ultimately be in a position to repay its financial obligations.

(7)The Union, its Member States and European financial institutions have since the beginning of Russia’s war of aggression mobilised EUR 19.7 billion for Ukraine’s economic, social and financial resilience. This combines the support from the Union budget (EUR 12.4 billion), including the exceptional macro-financial assistance and support from the European Investment Bank and the European Bank for Reconstruction and Development, fully or partially guaranteed by the EU budget, as well as further financial support by Member States (EUR 7.3 billion).

(8)In addition, the Council decided on assistance measures to support the Ukrainian armed forces under the European Peace Facility, amounting to EUR 3.1 billion, and a military assistance mission in support of Ukraine with EUR 0.1 billion for the common costs. The Union and its Member States have also delivered unprecedented in kind emergency response via the EU Civil Protection Mechanism, constituting the largest emergency operation since the creation of the Mechanism, and channels millions of emergency items to Ukraine and the region.

(9)The European Council granted candidate status to Ukraine in June 2022. 11  Continuing strong support to Ukraine is a key priority for the Union. It requires an organised collective approach set out in this instrument, as the damage from Russia’s war of aggression on the Ukrainian economy, citizens and businesses is tremendous.

(10)Russia’s war of aggression against Ukraine represents a strategic geopolitical threat to the Union as a whole and requires Member States to stand strong and united. It is therefore essential that Union support be deployed rapidly and be able to adapt flexibly and gradually for immediate relief and short-term rehabilitation on the way to future reconstruction.

(11)In this context, the Instrument established under this Regulation aims at contributing to closing the funding gap of Ukraine in 2023, notably by providing highly concessional short-term financial relief to the state budget in a predictable, continuous, orderly and timely manner, including to finance the rehabilitation and initial support towards post-war reconstruction, where appropriate, with a view to supporting Ukraine on its path towards European integration.

(12)To attain the general objective, the assistance should be provided to support macro-financial stability in Ukraine, and to ease Ukraine’s external financing constraints. The Commission should implement the support in accordance with the key principles and objectives of the measures taken within the different areas of external action and other relevant Union policies.

(13)The provision of rehabilitation support, repair, and maintenance of critical functions and infrastructure as well as relief for people in need and for most affected areas in terms of material and social support, temporary housing, residential and infrastructural construction should also count among the main areas of support under the Instrument.

(14)The Instrument should also support strengthening the capacity of Ukrainian authorities to prepare for the future post-war reconstruction and for the early preparatory phase of the pre-accession process, as appropriate, including strengthening Ukraine’s institutions, reforming and reinforcing the effectiveness of public administration as well as transparency, structural reforms and good governance at all levels.

(15)The Instrument will support the Union’s external policy towards Ukraine. The Commission and the European External Action Service should work closely together throughout the support operation in order to coordinate, and ensure the consistency of, the Union’s external policy. The support to Ukraine under this Regulation continues contributing significantly to satisfying Ukraine’s funding needs as estimated by the IMF, World Bank and other international financial institutions, taking into account Ukraine’s capacity to finance itself with its own resources. The determination of the amount of the support also takes into account the expected financial contributions from bilateral and multilateral donors, as well as the pre-existing deployment of the Union’s other external financing instruments in Ukraine and the added value of the overall Union involvement.

(16)The situation of Ukraine requires a step-by-step approach whereby an instrument focusing on macro-financial stability as well as immediate relief and rehabilitation should be accompanied by continuous support under the Neighbourhood, Development and International Cooperation Instrument – Global Europe and the Humanitarian Aid Instrument.

(17)The Regulation should lay down the resources available for the Instrument for the period from 1 January 2023 to 31 December 2023 with possible disbursements until 31 March 2024. A maximum amount of EUR 18 billion should be made available in the form of loans. In addition, for the period from 1 January 2023 to 31 December 2027 the Regulation should provide for an interest rate subsidy. To ensure coverage of interest costs during the lifetime of the loans, contributions from Member States beyond 2027 should be renewed and continue as external assigned revenue unless covered through other means in future multiannual financial frameworks. Therefore it might be possible to extend the contributions from Member States beyond 2027.

(18)The Regulation should provide the possibility for the Member States to make available additional resources, as external assigned revenue, to be implemented under the Memorandum of Understanding of this Instrument. Such a possibility for additional contribution should also be made for third countries and interested parties as external assigned revenues, in accordance with Article 21(2), point (d) and (e) of Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the Council 12 . To foster synergies and complementarities, it is appropriate to allow that such additional contributions from Member States, from third countries and other third parties could also be made available to the programmes established under Regulation (EU) 2021/947 of the European Parliament and of the Council 13 and Council Regulation (EC) No 1257/96 14  to finance measures contributing to the objectives of this Instrument.

(19)Voluntary contributions by Member States should be irrevocable, unconditional and on demand. For this purpose, the Member State providing the support should enter into a contribution agreement within the meaning of Article 22(2) of Regulation (EU, Euratom) 2018/1046 with the Commission. The contribution agreement should cover the contribution to the interest rate subsidy and, should the Member State wish to provide them, also additional amounts.

(20)The support under the Instrument should be made available under the precondition that Ukraine continues to respect effective democratic mechanisms and its institutions, including a multi-party parliamentary system, the rule of law and to guarantee respect for human rights.

(21)The support under the Instrument should be linked to policy conditions to be set out in a memorandum of understanding. They should also include commitments to strengthen the country’s economic performance and resilience, the business environment, facilitate critical reconstruction and address challenges in the energy sector.

(22)The policy conditions should be complemented by stringent reporting requirements, aiming to ensure that the funds are used in an efficient, transparent and accountable manner.

(23)In view of the current situation in Ukraine it is appropriate to provide for a mid-term review of the memorandum of understanding.

(24)The support should be released subject to the respect of preconditions, satisfactory implementation and progress towards the implementation of the policy conditions.

(25)It is appropriate to provide for the possibility to reassess the funding needs of Ukraine and to reduce, suspend or cancel the support if they decrease fundamentally during the period of the disbursement of the Union’s support under the Instrument compared to the initial projections. It is also appropriate to provide for the possibility to suspend or cancel the disbursements in case the requirements for the release of the support under the Instrument are not fulfilled.

(26)In the current context of urgent financial needs of the country, it is appropriate to organise the financial assistance to Ukraine under the single funding method provided under Article 220a of Regulation (EU, Euratom) 2018/1046, which is expected to enhance the liquidity of Union’s bonds and the attractiveness and cost-effectiveness of Union’s issuance.

(27)Given the difficult situation of Ukraine caused by Russia’s war of aggression and to support it on its long-term stability path, it is appropriate to provide to Ukraine loans on highly concessional terms with a maximum duration of 35 years and start of the repayment of the principal not before 2033. It is also appropriate to derogate from Article 220(5), point (e) of Regulation (EU, Euratom) 2018/1046 and to allow that the Union has the possibility to cover the interest rate costs and waive to Ukraine the administrative costs. The interest rate subsidy should be granted as an instrument deemed appropriate to ensure the effectiveness of the support within the meaning of Article 220(1) of Regulation (EU, Euratom) 2018/1046. It should be financed from additional voluntary contributions by the Member States and should be available gradually as the agreements with the Member States have entered into force.

(28)Ukraine might request the subsidy of the interest rate and the waiver of administrative costs by end-March of each year.

(29)The financial liability from loans under this Regulation should not be supported by the External Action Guarantee, by derogation to Article 31(3), second sentence of Regulation (EU) 2021/947. The amounts necessary to cover any shortfall under the financial assistance to Ukraine available for 2023 should be mobilised in line with Article 2(3) of Council Regulation (EU, Euratom) 2020/2093 15 . The support should constitute financial assistance within the meaning of Article 220(1) of Regulation (EU, Euratom) 2018/1046. In considering the financial risks and the budgetary coverage, the provisioning should not be constituted for the financial assistance in the form of loans under this Instrument and, by derogation to Article 211(1) of the Regulation (EU, Euratom) 2018/1046, no provisioning rate as a percentage of the amount referred to in Article 4(1) should be set.

(30)It is appropriate that the Commission and Ukraine conclude a loan agreement for the loan support, within the framework of conditions set out in the MoU. In order to ensure that the Union’s financial interests linked to the support under the Instrument are protected efficiently, Ukraine should take appropriate measures on the prevention of and fight against fraud, corruption and any other irregularities linked to that assistance. In addition, provision should be made in the loan agreement and in the financing agreement for the Commission to carry out checks, for the Court of Auditors to carry out audits and for the European Public Prosecutor’s Office to exercise its competences, in accordance with Articles 129 and 220 of Regulation (EU, Euratom) 2018/1046.

(31)Since the objective of this Regulation cannot be sufficiently achieved by the Member States but can rather, 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.

(32)In order to ensure uniform conditions for the implementation of this Regulation, 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 16 .

(33)In view of the urgency entailed by the exceptional circumstances caused by Russia’s unprovoked and unjustified war of aggression, it is considered to be appropriate to invoke the exception to the eight-week period provided for in Article 4 of Protocol No 1 on the role of national Parliaments in the European Union, annexed to the Treaty on European Union, to the Treaty on the Functioning of the European Union and to the Treaty establishing the European Atomic Energy Community, 

(34)In light of the current situation in Ukraine, this Regulation should enter into force as a matter of urgency on the day following that of its publication in the Official Journal of the European Union.

HAVE ADOPTED THIS REGULATION:

Chapter I

Union’s support for Ukraine

Section 1

General provisions

Article 1

Subject matter

This Regulation establishes an Instrument for providing the Union’s support for Ukraine (the ‘Instrument’) in the form of loans, non-repayable support and an interest rate subsidy.

It lays down the objectives of the Instrument, its financing, the forms of Union funding under it and the rules for providing such funding.

Article 2

Objectives of the Instrument

1.The general objective of the Instrument shall be to provide short term financial relief in a predictable, continuous, orderly and timely manner, financing of rehabilitation and initial support towards post-war reconstruction, where appropriate, with a view to supporting Ukraine on its path towards European integration.

2.To reach the general objective, the main specific objectives shall in particular be to support:

(a)macro-financial stability, and to ease the Country’s external and internal financing constraints;

(b)a reform agenda gearing towards the early preparatory phase of the pre-accession process, as appropriate, including strengthening Ukraine’s institutions, reforming and reinforcing the effectiveness of public administration as well as transparency, structural reforms and good governance at all levels;

(c)rehabilitation of critical functions and infrastructure and relief for people in need

Article 3

Areas of support

To achieve its objectives, the Instrument shall support notably the following:

(a)the financing of Ukraine’s funding needs, with a view to maintaining the macro-financial stability of the country;

(b)rehabilitation, for instance in restoring critical infrastructure, such as energy infrastructure, water systems, transport networks, internal roads or bridges, or in strategic economic sectors and social infrastructure, such as healthcare facilities, schools, and housing for relocated persons, including temporary and social housing;

(c)sectoral and institutional reforms, including anti-corruption and judicial reforms, respect of the rule of law, good governance, and modernisation of the national and local institutions;

(d)preparation of the reconstruction of Ukraine;

(e)support for the alignment of the regulatory framework of Ukraine to that of the Union and the country’s integration into the single market, as well as strengthening economic development and improving competitiveness; 

(f)the strengthening of Ukraine’s administrative capacity through appropriate means, including the use of technical assistance.

Article 4

Available support under the Instrument

1.The support under the Instrument in the form of loans, shall be available for an amount of up to EUR 18 000 000 000 for the period from 1 January 2023 to 31 December 2023 with possible disbursement until 31 March 2024.

2.Additional support under the Instrument for the period from 1 January 2023 to 31 December 2027 shall also be available, subject to Article 5(1), for covering the expenditure pursuant to Article 15. This additional support may be available beyond 31 December 2027 subject to Article 5(1).

3.Additional amounts available in accordance with Article 5(2) and 5(4) of this Regulation may be implemented as non-repayable support where provided for in the Memorandum of Understanding to be concluded in accordance with Article 7 of this Regulation or in accordance with Regulation (EU) 2021/947 and Regulation (EC) No 1257/96 to finance measures achieving the objectives referred to in Article 2(2)(b) to (c) to in accordance with the rules of those Regulations.

4.    The amounts referred to in paragraph 3 may cover support expenditure for the implementation of the Instrument and for the achievement of its objectives, including administrative support associated with the preparation, follow-up, monitoring, control, audit and evaluation activities necessary for such implementation, as well as expenditure at headquarters and Union delegations for the administrative and coordination support needed for the Instrument, and to manage operations financed under the Instrument, including information and communication actions, and corporate information technology systems.      

Article 5
Contributions by Member States and third parties

1.Member States may contribute to the amounts referred to in Article 4(2). The relative share of the contribution of the Member State concerned to those amounts shall correspond to the relative share of that Member State in the total gross national income (GNI) of the Union. For the contributions for year n, the GNI-based relative share shall be calculated as the share in the total GNI of the Union, as resulting from the respective column in the revenue part of the last adopted annual Union budget or amending annual Union budget for the year n-1.

The support under the Instrument under this paragraph shall become available in respect of any amount set in an agreement with the respective Member State after that agreement enters into force.

2.Member States may contribute to the Instrument with additional amounts as referred to in Article 4(3).

3.The contributions referred to in paragraphs 1 and 2 shall constitute external assigned revenue in accordance with Article 21(2), point (a)(ii) of Regulation (EU, Euratom) 2018/1046.

4.Interested third countries and parties may also contribute to non-repayable support under the Instrument with additional amounts referred to in Article 4(3), in particular related to the specific objectives referred to in Article 2(2)(b) to (c). These contributions shall constitute external assigned revenue in accordance with Article 21(2), point (d) and (e) of Regulation (EU, Euratom) 2018/1046.

Section 2

Conditions of the support under the instrument

Article 6
Precondition for the support under the Instrument

1.A precondition for granting the support under this Instrument shall be that Ukraine continue to uphold and respect effective democratic mechanisms, including a multi-party parliamentary system, the rule of law, and guarantee respect for human rights.

2.The Commission and the European External Action Service shall monitor the fulfilment of the precondition set out in paragraph 1 throughout the period of the support provided under the Instrument, in particular before disbursements are made, taking, as appropriate, duly into account the regular enlargement report. It shall also take into account the circumstances in Ukraine and the consequences of the application there of martial law.

3.Paragraphs 1 and 2 of this Article shall apply in accordance with Council Decision 2010/427/EU 17 .

Article 7
Memorandum of Understanding

1.The Commission shall conclude with Ukraine a Memorandum of Understanding which shall in particular establish the policy conditions, the indicative financial planning and the reporting requirements, as referred to in Article 8.

The policy conditions shall be linked, as appropriate, in the context of the overall situation in Ukraine, to the objectives and their implementation referred to respectively in Article 2 and Article 3 and to the precondition set out in Article 6. They shall include commitment to the principles of sound financial management with focus on anti-corruption, fight against organised crime, anti-fraud and avoidance of conflict of interests and the establishment of a transparent and accountable framework for the management of rehabilitation and, where appropriate, reconstruction.

2.The MoU may be reviewed by the Commission at mid-term. The Commission may amend the MoU following the review.

3.The MoU shall be adopted and amended in accordance with the examination procedure referred to in Article 17(2).

Article 8
Reporting requirements

1.Reporting requirements for Ukraine shall be included in the MoU and shall ensure, in particular, the efficiency, transparency and accountability of the use of the support provided under the Instrument.

2.The Commission shall verify, at regular intervals, the implementation of the reporting requirements and the progress made towards fulfilling the policy conditions set out in the MoU. The Commission shall inform the European Parliament and the Council of the results of that verification.

section 3

Release of the support under the Instrument, assessment and information obligations

Article 9
Release of the support under the Instrument

1.Subject to the requirements referred to in Article 10, the support under the Instrument shall be made available by the Commission in instalments. The Commission shall decide on the timeframe for the disbursement of each instalment. An instalment may be disbursed in one or more tranches.

2.The release of the support under the Instrument shall be managed by the Commission based on its assessment of the implementation of the policy conditions included in the MoU.

Article 10
Decision on release of the support under the Instrument

1.Ukraine shall submit a request for funds ahead of the disbursement of each instalment accompanied by a report in accordance with the provisions of the MoU.

2.The Commission shall decide on the release of the instalments subject to its assessment of the following requirements:

(a)respect for the precondition set out in Article 6;

(b)the satisfactory implementation of the reporting requirements agreed in the MoU;

(c)satisfactory progress towards the implementation of the policy conditions set out in the MoU.

(d)Before the maximum amount of the support under the Instrument is disbursed, the Commission shall verify the fulfilment of all the policy conditions set out in the MoU.

Article 11
Reduction, suspension and cancellation of the support under the Instrument

1.If the funding needs of Ukraine decrease fundamentally during the period of the disbursement of the Union’s support under the Instrument compared to the initial projections, the Commission may reduce the amount of the support, suspend it or cancel it.

2.Where the requirements set out in Article 10(2) are not met, the Commission shall suspend or cancel the disbursement of the support under the Instrument. 

Article 12
Assessment of implementation of the support under the Instrument

During the implementation of the Instrument, the Commission shall assess, by means of an operational assessment, which may be conducted together with the operational assessment provided for under Decision (EU) 2022/1201 and Decision (EU) 2022/1628, the soundness of Ukraine’s financial arrangements, the administrative procedures, and the internal and external control mechanisms which are relevant to the assistance.

Article 13
Information to the European Parliament and to the Council

The Commission shall inform the European Parliament and the Council of developments regarding the Instrument, including disbursements thereof, and developments in the operations referred to in Article 9, and shall provide those institutions with the relevant documents in due time. In case of suspension or cancellation pursuant to Article 11(2), it shall without delay inform the European Parliament and the Council of the reasons for the suspension or cancellation.

Chapter II
Specific provisions related to the implementation of the support

Article 14
Borrowing and lending operations

1.In order to finance the support under the Instrument in the form of loans, the Commission shall be empowered, on behalf of the Union, to borrow the necessary funds on the capital markets or from financial institutions in accordance with Article 220(a) of Regulation (EU, Euratom) 2018/1046.

2.The detailed terms of the support under the Instrument in the form of loans shall be laid down in a loan agreement in accordance with Article 220 of Regulation (EU, Euratom) 2018/1046, to be concluded between the Commission and Ukraine. The loans shall have a maximum duration of 35 years.

3.By derogation to Article 31(3), second sentence of Regulation (EU) 2021/947, macro-financial assistance provided to Ukraine in the form of loans under this Instrument shall not be supported by the External Action Guarantee.

No provisioning for the loans under this Regulation shall be constituted and, by derogation to Article 211(1) of the Regulation (EU, Euratom) 2018/1046, no provisioning rate as a percentage of the amount referred to in Article 4(1) shall be set.

Article 15
Interest rate subsidy 

1.By derogation from Article 220(5), point (e), of Regulation (EU, Euratom) 2018/1046 and subject to available resources, the Union may bear interest by granting an interest rate subsidy and cover administrative costs related to the borrowing and lending, with the exception of costs related to early repayment of the loan, in respect of the loans under this Regulation.

2.Ukraine may request the interest rate subsidy and coverage of the administrative costs by the Union each year.

Article 16
Financing agreement for non-repayable support

The detailed terms of the non-repayable support referred to in Article 4(3) shall be laid down in a financing agreement to be concluded between the Commission and Ukraine. By derogation from Article 220 (5) of Regulation (EU, Euratom) 2018/1046, the financing agreement shall contain only provisions referred to in points (a) to (c) of Article 220(5) thereof. The financing agreement shall include provisions on the protection of the Union’s financial interests, checks, audits, prevention of fraud and other irregularities, and the recovery of funds.

Chapter III
Common and final provisions

Article 17
Committee procedure

1.The Commission shall be assisted by a committee. That committee shall be a committee within the meaning of Regulation (EU) No 182/2011.

2.Where reference is made to this paragraph, Article 5 of Regulation (EU) No 182/2011 shall apply.

Article 18

Annual report

1.The Commission shall submit to the European Parliament and to the Council, an assessment of the implementation of Chapter I, including an evaluation of that implementation. That report shall:

(a)examine the progress made in implementing the Union’s support under the Instrument;

(b)assess the economic situation and prospects of Ukraine, as well as the implementation of the requirements and conditions referred to in Section 2 of Chapter I;

(c)indicate the connection between the requirements and conditions set out in the MoU, Ukraine’s ongoing macro-financial situation and the Commission’s decisions to release the instalments of the support under the Instrument.

2.Not later than two years after the end of the availability period, the Commission shall submit to the European Parliament and to the Council an ex-post evaluation report, assessing the results and efficiency of the completed Union’s support under the Instrument and the extent to which it has contributed to the aims of the assistance.

Article 19
Final provisions

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

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

Done at Brussels,

LEGISLATIVE FINANCIAL STATEMENT

1.FRAMEWORK OF THE PROPOSAL/INITIATIVE

1.1.Title of the proposal/initiative

1.2.Policy area(s) concerned

1.3.The proposal/initiative relates to:

1.4.Objective(s)

1.4.1.General objective(s)

1.4.2.Specific objective(s)

1.4.3.Expected result(s) and impact

1.4.4.Indicators of performance

1.5.Grounds for the proposal/initiative

1.5.1.Requirement(s) to be met in the short or long term including a detailed timeline for roll-out of the implementation of the initiative

1.5.2.Added value of Union involvement (it may result from different factors, e.g. coordination gains, legal certainty, greater effectiveness or complementarities). For the purposes of this point 'added value of Union involvement' is the value resulting from Union intervention which is additional to the value that would have been otherwise created by Member States alone.

1.5.3.Lessons learned from similar experiences in the past

1.5.4.Compatibility with the Multiannual Financial Framework and possible synergies with other appropriate instruments

1.5.5.Assessment of the different available financing options, including scope for redeployment

1.6.Duration and financial impact of the proposal/initiative

1.7.Management mode(s) planned

2.MANAGEMENT MEASURES

2.1.Monitoring and reporting rules

2.2.Management and control system(s)

2.2.1.Justification of the management mode(s), the funding implementation mechanism(s), the payment modalities and the control strategy proposed

2.2.2.Information concerning the risks identified and the internal control system(s) set up to mitigate them

2.2.3.Estimation and justification of the cost-effectiveness of the controls (ratio of "control costs ÷ value of the related funds managed"), and assessment of the expected levels of risk of error (at payment & at closure)

2.3.Measures to prevent fraud and irregularities

3.ESTIMATED FINANCIAL IMPACT OF THE PROPOSAL/INITIATIVE

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

3.2.Estimated financial impact of the proposal on appropriations

3.2.1.Summary of estimated impact on operational appropriations

3.2.2. Summary of estimated impact on administrative appropriations

3.2.3.Compatibility with the current multiannual financial framework

3.2.4.Third-party contributions

3.3.Estimated impact on revenue

LEGISLATIVE FINANCIAL STATEMENT

1.FRAMEWORK OF THE PROPOSAL/INITIATIVE

1.1 Title of the proposal/initiative

1.2 Policy area(s) concerned (Programme cluster)

1.3 The proposal/initiative relates to:

 a new action 

◻ a new action following a pilot project/preparatory action 18  

◻ the extension of an existing action 

◻ a merger or redirection of one or more actions towards another/a new action 

1.4 Objective(s)

1.4.1 General objective(s)

1.4.2 Specific objective(s)

1.4.3 Expected result(s) and impact

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

1.4.4 Indicators of performance

Specify the indicators for monitoring progress and achievements.

1.5 Grounds for the proposal/initiative

1.5.1 Requirement(s) to be met in the short or long term including a detailed timeline for roll-out of the implementation of the initiative

1.5.2 Added value of Union involvement (it may result from different factors, e.g. coordination gains, legal certainty, greater effectiveness or complementarities). For the purposes of this point 'added value of Union involvement' is the value resulting from Union intervention which is additional to the value that would have been otherwise created by Member States alone.

1.5.3 Lessons learned from similar experiences in the past

1.5.4 Compatibility with the Multiannual Financial Framework and possible synergies with other appropriate instruments

1.5.5 Assessment of the different available financing options, including scope for redeployment

1.6 Duration and financial impact of the proposal/initiative

☒ limited duration

–◻    in effect from [DD/MM]YYYY to [DD/MM]YYYY

–☒ Financial impact in 2023 for loan support, and during the repayment period for support in the form of interest rate subsidy, financed by external assigned revenue unless covered through other means in future multiannual financial frameworks.

◻ unlimited duration

–Implementation with a start-up period from YYYY to YYYY,

–followed by full-scale operation.

1.7 Management mode(s) planned 20  

☒ Direct management by the Commission

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

–◻    by the executive agencies

◻ Shared management with the Member States

◻ Indirect management by entrusting budget implementation tasks to:

–◻ third countries or the bodies they have designated;

–◻ international organisations and their agencies (to be specified);

–◻ the EIB and the European Investment Fund;

–◻ bodies referred to in Articles 70 and 71 of the Financial Regulation;

–◻ public law bodies;

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

–◻ bodies governed by the private law of a Member State that are entrusted with the implementation of a public-private partnership and that are provided with adequate financial guarantees;

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

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

Comments

2.MANAGEMENT MEASURES

2.1 Monitoring and reporting rules

Specify frequency and conditions.

2.2 Management and control system(s)

2.2.1 Justification of the management mode(s), the funding implementation mechanism(s), the payment modalities and the control strategy proposed

2.2.2 Information concerning the risks identified and the internal control system(s) set up to mitigate them

2.2.3 Estimation and justification of the cost-effectiveness of the controls (ratio of "control costs ÷ value of the related funds managed"), and assessment of the expected levels of risk of error (at payment & at closure)

2.3 Measures to prevent fraud and irregularities

Specify existing or envisaged prevention and protection measures, e.g. from the Anti-Fraud Strategy.

3.ESTIMATED FINANCIAL IMPACT OF THE PROPOSAL/INITIATIVE

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

·New budget lines requested

In order of multiannual financial framework headings and budget lines.

3.2 Estimated financial impact of the proposal on appropriations

3.2.1 Summary of estimated impact on operational appropriations

The proposed expenditure linked to the Instrument for providing support to Ukraine will be covered by a maximum amount of EUR 18 000 000 000 in the form of loans stemming from borrowing operations of the Union.

Amounts stemming from specific voluntary contributions from Member States (as external assigned revenue) would be used for the following purposes:

support to loans’ interest costs subsidy– no target volume can be set in advance as these costs will depend on the actual interest on the loans;

·activities covered by the Memorandum of Understanding of the Instrument;

·be rechannelled to the Neighbourhood, Development and International Cooperation Instrument – Global Europe (NDICI) and/or Humanitarian Aid for activates benefitting Ukraine.

Moreover, third countries and parties may make available extra resources to those described above, as external assigned revenue to contribute to the Memorandum of Understanding of the Instrument or to be rechannelled to NDICI and/or Humanitarian Aid for activates benefitting Ukraine.

This section should be filled in using the 'budget data of an administrative nature' to be firstly introduced in the Annex to the Legislative Financial Statement (Annex V to the internal rules), which is uploaded to DECIDE for interservice consultation purposes.

EUR million (to three decimal places)

3.2.2 Summary of estimated impact on administrative appropriations

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

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

EUR million (to three decimal places)

The appropriations required for human resources and other expenditure of an administrative nature will be met by appropriations from the DG that are already assigned to management of the action and/or have been redeployed within the DG, together if necessary with any additional allocation which may be granted to the managing DG under the annual allocation procedure and in the light of budgetary constraints.

Estimated requirements of human resources

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

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

Estimate to be expressed in full time equivalent units

XX is the policy area or budget title concerned.

The human resources required will be met by staff from the DG who are already assigned to management of the action and/or have been redeployed within the DG, together if necessary with any additional allocation which may be granted to the managing DG under the annual allocation procedure and in the light of budgetary constraints.

Description of tasks to be carried out:

3.2.3 Compatibility with the current multiannual financial framework

Loans will be funded from borrowings of the EU on the financial markets.

–◻can be fully financed through redeployment within the relevant heading of the Multiannual Financial Framework (MFF).

–◻    requires use of the unallocated margin under the relevant heading of the MFF and/or use of the special instruments as defined in the MFF Regulation.

–☒    requires a revision of the MFF.

3.2.4 Third-party contributions

The proposal/initiative:

–☒    does not provide for co-financing by third parties 26

–◻provides for the co-financing by third parties estimated below:

Appropriations in EUR million (to three decimal places)

3.3 Estimated impact on revenue

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

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

–◻    on own resources

–☑on other revenue

–please indicate, if the revenue is assigned to expenditure lines ☑    

EUR million (to three decimal places)

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

(1)    COM/2022/233 final

(2)    Council Decision (EU, Euratom) 2020/2053 of 14 December 2020 on the system of own resources of the European Union and repealing Decision 2014/335/EU, Euratom, OJ L 424, 15.12.2020, p. 1.

(3)    Council Regulation (EU, Euratom) 2020/2093 of 17 December 2020 laying down the multiannual financial framework for the years 2021 to 2027, OJ L 433I, 22.12.2020, p. 11.

(4)    Regulation (EU) 2021/947 of the European Parliament and of the Council of 9 June 2021 establishing the Neighbourhood, Development and International Cooperation Instrument – Global Europe, amending and repealing Decision No 466/2014/Union of the European Parliament and of the Council and repealing Regulation (EU) 2017/1601 of the European Parliament and of the Council and Council Regulation (EC, Euratom) No 480/2009 (Text with EEA relevance), OJ L 209, 14.6.2021, p. 1.

(5)    Council Regulation (EC) No 1257/96 of 20 June 1996 concerning humanitarian aid (OJ L 163, 2.7.1996, p. 1).

(6)    Position of the European Parliament of ... 2022 (not yet published in the Official Journal) and decision of the Council of ... 2022.

(7)    Association Agreement between the European Union and the European Atomic Energy Community and their Member States, of the one part, and Ukraine, of the other part (OJ L 161, 29.5.2014, p. 3).

(8)    Decision (EU) 2022/313 of the European Parliament and of the Council of 24 February 2022 providing macro-financial assistance to Ukraine (OJ L 55, 28.2.2022, p. 4).

(9)    Decision (EU) 2022/1201 of the European Parliament and of the Council of 12 July 2022 providing exceptional macro-financial assistance to Ukraine (OJ L 186, 13.7.2022, p. 1).

(10)    Decision (EU) 2022/1628 of the European Parliament and of the Council of 20 September 2022 providing exceptional macro-financial assistance to Ukraine, reinforcing the common provisioning fund by guarantees by the Member States and by specific provisioning for some financial liabilities related to Ukraine guaranteed under Decision No 466/2014/EU, and amending Decision (EU) 2022/1201 (OJ L 245, 22.9.2022, p. 1).

(11)    European Council conclusions, 23-24 June 2022.

(12)      Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the Council of 18 July 2018 on the financial rules applicable to the general budget of the Union, amending Regulations (EU) No 1296/2013, (EU) No 1301/2013, (EU) No 1303/2013, (EU) No 1304/2013, (EU) No 1309/2013, (EU) No 1316/2013, (EU) No 223/2014, (EU) No 283/2014, and Decision No 541/2014/EU and repealing Regulation (EU, Euratom) No 966/2012 (OJ L 193, 30.7.2018, p. 1).

(13)    Regulation (EU) 2021/947 of the European Parliament and of the Council of 9 June 2021 establishing the Neighbourhood, Development and International Cooperation Instrument – Global Europe, amending and repealing Decision No 466/2014/Union of the European Parliament and of the Council and repealing Regulation (EU) 2017/1601 of the European Parliament and of the Council and Council Regulation (EC, Euratom) No 480/2009 (Text with EEA relevance), OJ L 209, 14.6.2021, p. 1.

(14)    Council Regulation (EC) No 1257/96 of 20 June 1996 concerning humanitarian aid (OJ L 163, 2.7.1996, p. 1).

(15)      Council Regulation (EU, Euratom) 2020/2093 of 17 December 2020 laying down the multiannual financial framework for the years 2021 to 2027 (OJ L 433I, 22.12.2020, p. 11).

(16)      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 (OJ L 55, 28.2.2011, p. 13).

(17)    Council Decision 2010/427/EU of 26 July 2010 establishing the organisation and functioning of the European External Action Service (OJ L 201, 3.8.2010, p. 30).

(18)    As referred to in Article 58(2)(a) or (b) of the Financial Regulation.

(19)    COM/2022/233 final

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

(21)    Year N is the year in which implementation of the proposal/initiative starts. Please replace "N" by the expected first year of implementation (for instance: 2021). The same for the following years.

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

(23)    AC= Contract Staff; AL = Local Staff; END= Seconded National Expert; INT = agency staff; JPD= Junior Professionals in Delegations.

(24)    Sub-ceiling for external staff covered by operational appropriations (former ‘BA’ lines).

(25)    AC= Contract Staff; AL = Local Staff; END = Seconded National Expert; INT = agency staff; JPD= Junior Professionals in Delegations.

(26)    Third parties contributions will be in the form of assigned revenue presented in the section below.

(27)    Year N is the year in which implementation of the proposal/initiative starts. Please replace "N" by the expected first year of implementation (for instance: 2021). The same for the following years.

(28)    As regards traditional own resources (customs duties, sugar levies), the amounts indicated must be net amounts, i.e. gross amounts after deduction of 20 % for collection costs.