# EUR-Lex - 52014PC0495 - EN

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# 52014PC0495

**Proposal for a COUNCIL DECISION on the signature and provisional application of the Agreement for scientific and technological cooperation between the European Union and the Faroe Islands associating the Faroe Islands to Horizon 2020 - the Framework Programme for Research and Innovation (2014-2020) /* COM/2014/0495 final - 2014/0227 (NLE) */**

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EXPLANATORY MEMORANDUM

1.           CONTEXT OF THE PROPOSAL

On 18 March 2014 the Council authorised the
Commission to open negotiations, on behalf of the European Union, with the Faroe
Islands in order to conclude an Agreement between the European Union and the Faroe
Islands associating the Faroe Islands to Horizon 2020 - the Framework Programme
for Research and Innovation (2014-2020).

The negotiations between both parties were
completed and resulted in the attached draft agreement text which is in line
with the negotiation directives issued by the Council.

The Commission proposes that the Council:

– 
decides on the signature and provisional
application of the Agreement on behalf of the European Union.

2.           LEGAL ELEMENTS OF THE
PROPOSAL

The proposal for a Council decision is
based on Articles 186 and 218(5) and 218(8) of the Treaty on the Functioning of
the European Union.

2014/0227 (NLE)

Proposal for a

COUNCIL DECISION

on the signature and provisional
application of the Agreement for scientific and technological cooperation
between the European Union and the Faroe Islands associating the Faroe Islands to Horizon 2020 - the Framework Programme for Research and Innovation
(2014-2020)

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the
Functioning of the European Union, and in particular Article 186 in conjunction
with Article 218(5) and the first subparagraph of Article 218(8) thereof,

Having regard to the proposal from the
European Commission,

Whereas:

(1)       Horizon 2020 – the
Framework Programme for Research and Innovation (2014-2020) was established by
Regulation (EU) No 1291/2013 of the European Parliament and the Council[1] ("Horizon
2020").

(2)       On 18 March 2014 the
Council authorised the Commission to open negotiations, on behalf of the Union,
with the Faroe Islands, in order to conclude an Agreement for scientific and
technological cooperation between the European Union and the Faroe Islands
associating the Faroe Islands to Horizon 2020.

(3)       These negotiations have
been successfully completed and subject to its conclusion at a later date, the
Agreement should be signed on behalf of the European Union.

HAS DECIDED AS FOLLOWS:

Article 1

The signing of the Agreement for scientific
and technological cooperation between the European Union and the Faroe Islands
associating the Faroe Islands to Horizon 2020 - the Framework Programme for
Research and Innovation is hereby approved on behalf of the Union, subject to
the conclusion of that Agreement.

The text of the Agreement to be signed is attached
to this Decision.

Article 2

The Council Secretariat General shall
establish the instrument of full powers to sign the Agreement, subject to its
conclusion, for the person(s) indicated by the negotiator of the Agreement.

Article 3

This Decision shall be published in the Official
Journal of the European Union.

Done at Brussels,

For
the Council

The
President

LEGISLATIVE FINANCIAL STATEMENT

1.           FRAMEWORK OF THE
PROPOSAL/INITIATIVE

1.1.        Title of the
proposal/initiative

Proposal for Council Decision on the Signature and provisional
application of an Agreement for scientific and technological cooperation
between the European Union and the Faroe Islands associating the Faroe Islands
to Horizon 2020 - the Framework Programme for Research and Innovation
(2014-2020).

1.2.        Policy area(s) concerned
in the ABM/ABB structure[2]

Policy strategy and coordination of the Directorates-General RTD,
JRC, AGRI, EAC, CNECT, ENER, ENTR and MOVE.

1.3.        Nature of the
proposal/initiative

þ The proposal/initiative relates to a new action

 ̈ The proposal/initiative relates to a new action
following a pilot project/preparatory action[3]

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

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

1.4.        Objective(s)

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

To associate the Faroe Islands to Horizon 2020 – the Framework
Programme for Research and Innovation (2014-2020). Participation of the Faroe Islands as asociated country in Horizon 2020 is to be seen as continuation of their
participation in the 7th Framework Programme.

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

Specific objective

ABM/ABB activity(ies) concerned

To strengthen the EU's industrial leadership and competitiveness in
a global context and reinforce the excellence of EU research.

1.4.3.     Expected result(s) and
impact

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

This Agreement should enable the Faroe Islands and the Union to
derive mutual benefit through participation in Horizon 2020 - the Union's new Framework programme for Research and Innovation (2014-2020) and to upgrade and
intensify their cooperation in areas of mutual scientific and technological
interest.

1.4.4  Indicators and result and impact

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

- Number of proposals presented by the Faroe Islands compared to the
number of proposals selected for funding under Horizon 2020 as a whole and in
the different pillars of Horizon 2020;

- Number of applicants from the Faroe Islands in the proposals
submitted and retained for funding;

- Number of entities from the Faroe Islands obtaining funding and
the share of the funding obtained in the Horizon 2020 Specific programme
compared to the Faroe Island's relative participation in that programme.

- Number of Faroese grant agreements signed.

1.5.        Grounds for the
proposal/initiative

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

This Decision will allow the Faroe Islands to participate in most of
the Horizon 2020 calls for proposals as associated country and for its research
entities to obtain funding if selected. They will need to pay a financial
contribution to ensure association status.

1.5.2.     Added value of EU
involvement

The Faroe Islands pay a yearly financial contribution for its
participation as associated country which is added to the EU budget.

In turn, cooperation will contribute to the Union's scientific
excellence and competitiveness, given the Faroes close proximity to the EU as a
northern European neighbour.

1.5.3.     Lessons learned from
similar experiences in the past

The Faroe Islands were associated to the Seventh EU Research
Framework Programme (FP7) from 2010. They are thus familiar with cooperation on
R&I with the EU and can also build upon the successful projects and actions
granted under FP7.

1.5.4.     Compatibility and possible
synergy with other appropriate instruments

Horizon 2020 is compatible with other Union funding instruments.

1.6.        Duration and financial
impact

þ Proposal/initiative of limited
duration

– 
þ  Proposal/initiative in effect from 01/01/2014 to 31/12/2020

– 
þ  Financial impact from 01/01/2014 to 31/12/2023

 ̈ Proposal/initiative of unlimited
duration

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

– 
followed by full-scale operation.

1.7.        Management mode(s) planned[4]

From the 2014 budget

þ Direct management by the Commission

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

– 
þ  by the executive agencies;

 ̈ Shared management with the Member States

þIndirect management by delegating
implementation tasks to:

– 
 ̈ third countries or the bodies they have designated;

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

– 
þ the EIB and the European Investment Fund;

– 
 ̈ bodies referred to in Articles 208 and 209 of the Financial
Regulation;

– 
 ̈ public law bodies;

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

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

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

2.           MANAGEMENT MEASURES

2.1.        Monitoring and reporting
rules

Specify frequency and
conditions.

The Commission will regularly evaluate all the actions carried out
under the Agreement, which will also be subject to regular monitoring of the
implementation of this Agreement in the EU-Faroe Islands Research and
Innovation Committee, as set up in Art.4 of the Agreement. This evaluation will
cover:

a) Performance indicators relating to the Horizon 2020 Specific
Programme:

- Number of proposals presented by the Faroe Islands compared to the
number of proposals selected for funding under Horizon 2020 as a whole and in
the different pillars of Horizon 2020;

- Number of applicants from the Faroe Islands in the proposals
submitted and retained for funding;

- Number of entities from the Faroe Islands obtaining funding and
the share of the funding obtained in the Horizon 2020 Specific programme
compared to the Faroe Islands' relative participation in that programme.

- Number of grant agreements signed with entities from the Faroe Islands.

b) Gathering of information:

On the basis of data from the Horizon 2020 programme, upon request
and on the basis of information exchanged at the EU-the Faroe Islands
Committee.

c) Overall evaluation:

The Commission will evaluate the Faroe Islands' overall
participation under Horizon 2020 in the light of the duration of its
association.

2.2.        Management and control
system

2.2.1.     Risk(s) identified

No risks identified.

2.2.2.     Information concerning the
internal control system set up

Annex III to the Agreement specifies the rules governing the Faroe Islands' financial contribution to Horizon 2020.

A review (on the basis of the data concerning participation of
Faroese legal entities in indirect and direct actions under Horizon 2020 in the
years 2014-2016) of the proportionality factor governing the Faroes financial
contribution to the Programme is foreseen in the Agreement. This review is to
take place in the fourth year of application of the Agreement.

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

N/A

2.3.        Measures to prevent fraud
and irregularities

Specify existing or
envisaged prevention and protection measures.

Such measures are laid down in Annex IV to the Agreement on the
financial control of Faroese participants in the Programme covered by the
Agreement.

When
the implementation of the Framework Programme calls for the use of external
contractors or entails granting financial contributions to third parties, the
Commission will carry out, where appropriate, financial audits, in particular
if it has reason to doubt the realistic nature of work performed or described
in the activity reports.

The
 Union's financial audits will be carried out either by its own staff or by
accounting experts approved according to the law of the audited party. The Union will choose the latter freely, while avoiding any risks of conflicts of interest
which might be indicated to it by the party subject to the audit. In addition,
the Commission will make sure, in carrying out the research activities, that
the financial interests of the Union are protected by effective checks and,
where irregularities are detected, by deterrent and proportionate measures and
penalties.

In
order to achieve this aim, rules on checks, measures and penalties, with
reference to Regulations No 2988/95, No 2185/96 and No 883/2013 will be
incorporated in all contracts used in the implementation of the Framework
Programme.

In
particular, the following points will have to be provided for in the contracts:

-
the introduction of specific contractual clauses to protect the financial
interests of the EU in carrying out checks and controls in relation to the work
performed;

-
the carrying out of administrative checks as part of anti-fraud measures, in
accordance with Regulations No 2185/96, No 883/2013;

-
the application of administrative penalties for all intentional or negligent
irregularities in the implementation of the contracts, in accordance with the
Framework Regulation No 2988/95, including a blacklisting mechanism;

-
The fact that decisions taken by the Commission in application of Art. 299 TFEU
to enforce recovery of amounts due and unpaid by Faroese beneficiaries
following to their participation to “Horizon 2020” will be enforceable in the Faroe Islands.

-
In addition and as a routine measure, a control programme in respect of
scientific and budgetary aspects will be carried out by the responsible staff
in the DG for Research and Innovation; an internal audit will be carried out by
the Internal Audit unit of DG Research and Innovation; and local inspections
will be undertaken by the European Court of Auditors.

3.           ESTIMATED FINANCIAL
IMPACT OF THE PROPOSAL/INITIATIVE

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

· Existing budget lines

In order of
multiannual financial framework headings and budget lines.

Heading of multiannual financial framework || Budget line || Type of expenditure || Contribution

Number Heading || Diff./non-diff. ([5]) || from EFTA countries[6] || from candidate countries[7] || from third countries || within the meaning of Article 21(2)(b) of the Financial Regulation

1a ||  08.01.05 08.01.05.01 08.01.05.03 || non-diff. || YES || YES || YES || YES

· New budget lines requested

In order of multiannual financial framework
headings and budget lines.

Heading of multiannual financial framework || Budget line || Type of expenditure || Contribution

Number [...][Heading..........................................................] || Diff./non-diff. || from EFTA countries || from candidate countries || from third countries || within the meaning of Article 21(2)(b) of the Financial Regulation

|| [...][XX.YY.YY.YY] || || YES/NO || YES/NO || YES/NO || YES/NO

3.2.        Estimated impact on
expenditure

3.2.1.     Summary of estimated impact
on expenditure

EUR million (to three decimal places)

Heading of multiannual financial framework || 1a || Competitiveness for Growth and Employment

DG: <.......> || || || 2014 || 2015 || 2016 || 2017 || 2018 || 2019 || 2020 || TOTAL

Ÿ Operational appropriations || || || || || || || ||

Number of budget line || Commitments || (1) || || || || || || || ||

Payments || (2) || || || || || || || ||

Number of budget line || Commitments || (1a) || || || || || || || ||

Payments || (2a) || || || || || || || ||

Appropriations of an administrative nature financed from the envelope of specific programmes[8] || || || || || || || ||

Number of budget line 08 01.05 || || (3) || 0.087 || 0.087 || 0.087 || 0.087 || 0.087 || 0.087 || 0.087 || 0.609

Number of budget line 08.01.05.01 || || (4) || 0.082 || 0.082 || 0.082 || 0.082 || 0.082 || 0.082 || 0.082 || 0.574

Number of budget line 08.01.05.03 || || (5) || 0.005 || 0.005 || 0.005 || 0.005 || 0.005 || 0.005 || 0.005 || 0.035

Ÿ TOTAL operational appropriations || Commitments || (6) || || || || || || || ||

Payments || (7) || || || || || || || ||

Ÿ TOTAL appropriations of an administrative nature financed from the envelope for specific programmes || (8) || 0.087 || 0.087 || 0.087 || 0.087 || 0.087 || 0.087 || 0.087 || 0.609

TOTAL appropriations for HEADING 1a of the multiannual financial framework || Commitments || =6+ 8 || 0.087 || 0.087 || 0.087 || 0.087 || 0.087 || 0.087 || 0.087 || 0.609

Payments || =7+8 || 0.087 || 0.087 || 0.087 || 0.087 || 0.087 || 0.087 || 0.087 || 0.609

Heading of multiannual financial framework || 5 || " Administrative expenditure "

EUR million (to three decimal places)

|| || || Year N || Year N+1 || Year N+2 || Year N+3 || Enter as many years as necessary to show the duration of the impact (see point 1.6) || TOTAL

DG: <.......> ||

Ÿ Human resources || || || || || || || ||

Ÿ Other administrative expenditure || || || || || || || ||

TOTAL DG <.......> || Appropriations || || || || || || || ||

TOTAL appropriations for HEADING 5 of the multiannual financial framework || (Total commitments = Total payments) || 0.012 || 0.012 || 0.012 || 0.012 || 0.012 || 0.012 || 0.012 || 0.084

EUR million (to three decimal places)

|| || || 2014 || 2015 || 2016 || 2017 || 2018 || 2019 || 2020 || TOTAL

TOTAL appropriations under HEADINGS 1 to 5 of the multiannual financial framework || Commitments || 0.099 || 0.099 || 0.099 || 0.099 || 0.099 || 0.099 || 0.099 || 0.693

Payments || 0.099 || 0.099 || 0.099 || 0.099 || 0.099 || 0.099 || 0.099 || 0.693

3.2.2.     Estimated impact on
operational appropriations

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

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

Commitment appropriations in EUR million (to three
decimal places)

Indicate objectives and outputs ò || || || Year N || Year N+1 || Year N+2 || Year N+3 || Enter as many years as necessary to show the duration of the impact (see point 1.6) || TOTAL

OUTPUTS

Type[9] || Average cost || No || Cost || No || Cost || No || Cost || No || Cost || No || Cost || No || Cost || No || Cost || No total || Total cost

SPECIFIC OBJECTIVE No 1[10] ... || || || || || || || || || || || || || || || ||

- Output || || || || || || || || || || || || || || || || || ||

- Output || || || || || || || || || || || || || || || || || ||

- Output || || || || || || || || || || || || || || || || || ||

Subtotal for specific objective No 1 || || || || || || || || || || || || || || || ||

SPECIFIC OBJECTIVE NO 2 ... || || || || || || || || || || || || || || || ||

- Output || || || || || || || || || || || || || || || || || ||

Subtotal for specific objective No 2 || || || || || || || || || || || || || || || ||

TOTAL COST || || || || || || || || || || || || || || || ||

3.2.3.     Estimated impact on
appropriations of an administrative nature

3.2.3.1.  Summary

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

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

EUR million (to
three decimal places)

|| 2014 || 2015 || 2016 || 2017 || 2018 || 2019 || 2020 || TOTAL

HEADING 5 of the multiannual financial framework || 0.012 || 0.012 || 0.012 || 0.012 || 0.012 || 0.012 || 0.012 || 0.084

Human resources || || || || || || || ||

Other administrative expenditure || || || || || || || ||

Subtotal HEADING 5 of the multiannual financial framework || 0.012 || 0.012 || 0.012 || 0.012 || 0.012 || 0.012 || 0.012 || 0.084

Outside HEADING 5[11] of the multiannual financial framework || 2014 || 2015 || 2016 || 2017 || 2018 || 2019 || 2020 ||

Human resources || 0.082 || 0.082 || 0.082 || 0.082 || 0.082 || 0.082 || 0.082 || 0.574

Other expenditure of an administrative nature || 0.005 || 0.005 || 0.005 || 0.005 || 0.005 || 0.005 || 0.005 || 0.035

Subtotal outside HEADING 5 of the multiannual financial framework || 0.087 || 0.087 || 0.087 || 0.087 || 0.087 || 0.087 || 0.087 || 0.609

TOTAL || 0.099 || 0.099 || 0.099 || 0.099 || 0.099 || 0.099 || 0.099 || 0.693

The human resources
appropriations required 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.

3.2.3.2.  Estimated
requirements of human resources

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

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

Estimate to be expressed in full time
equivalent units

|| 2014 || 2015 || 2016 || 2017 || 2018 || 2019 || 2020

Ÿ Establishment plan posts (officials and temporary staff) || ||

XX 01 01 01 (Headquarters and Commission’s Representation Offices) || || || || || || ||

XX 01 01 02 (Delegations) || || || || || || ||

08 01 05 01 (Indirect research) || 0.75 || 0.75 || 0.75 || 0.75 || 0.75 || 0.75 || 0.75

10 01 05 01 (Direct research) || || || || || || ||

Ÿ External staff (in Full Time Equivalent unit: FTE)[12] ||

XX 01 02 01 (CA, SNE, INT from the "global envelope") || || || || || || ||

XX 01 02 02 (CA, LA, SNE, INT and JED in the delegations) || || || || || || ||

XX 01 04 yy[13] || - at Headquarters || || || || || || ||

- Delegations || || || || || || ||

XX 01 05 02 (CA, SNE, INT - Indirect research) || || || || || || ||

10 01 05 02 (CA, INT, SNE - Direct research) || || || || || || ||

Other budget lines (specify) || || || || || || ||

TOTAL || || || || || || ||

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:

Officials and temporary staff || Preparation of Joint Committee meetings foreseen under Art. 4 of the Agreement and several missions ensuring the good functioning and implementation of the Agreement, as well as regular review and follow-up of the Agreement.

External staff ||

3.2.4.     Compatibility with the
current multiannual financial framework

– 
þ  Proposal/initiative is compatible with the current multiannual
financial framework.

– 
 ̈  Proposal/initiative will entail reprogramming of the relevant
heading in the multiannual financial framework.

– 
 ̈  Proposal/initiative requires application of the flexibility
instrument or revision of the multiannual financial framework[14].

3.2.5.     Third-party contributions

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

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

Appropriations in EUR million (to 3 decimal places)

|| Year N || Year N+1 || Year N+2 || Year N+3 || Enter as many years as necessary to show the duration of the impact (see point 1.6) || Total

Specify the co-financing body || || || || || || || ||

TOTAL appropriations cofinanced || || || || || || || ||

3.3.        Estimated impact on
revenue

– 
 ̈  Proposal/initiative has no financial impact on revenue.

– 
þ  Proposal/initiative has the following financial impact:

– 
 ̈         on own resources

– 
þ         on miscellaneous revenue

EUR million (to three decimal places)

Budget revenue line: || Appropriations available for the current financial year || Impact of the proposal/initiative[15]

Year N 2014 || Year N+1 2015 || Year N+2 2016 || Year N+3 2017 || 2018 || 2019 || 2020

Article 6013 || pm || 1.262 || 1.335 || 1.427 || 1.521 || 1.610 || 1.719 || 1.879

- the amounts for
2014-2020 are in MEURO and are to be considered as indicative figures. The
contribution finally requested will take account of corrections over the
previous year.

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

Specify the method for
calculating the impact on revenue.

Budget lines: 02.045001, 05.095001, 06.035001, 08.025001, 09.045001,
10.025001, 15.035001, 32.045001 and the appropriations accruing from third
country (i.e. non-European Economic area) financial contributions to Horizon
2020.

The Faroe Islands' contribution to Horizon 2020 will be
proportionate to its GDP compared to that of the EU 28. This ratio shall be
calculated on the basis of the latest statistical data from Eurostat, available
at the time of the publication of the draft budget of the European Union for
the same year.

The proportionality factor obtained for 2014 is 0.014%.

For 2014, the estimated contribution to the
Horizon 2020 Framework Programme, based on 2012 GDP (source: Eurostat), at
market prices, is €1.263M.

GDP EUR 28 || 12,967,102.60

GDP Faroe Islands || 1,810.30

Ratio || 0.014%

Estimated Contribution (Mio €)

Year || Budget || Total estimated contribution

2014 || 9,043.6 || 1.263

2015 || 9,560.0 || 1.335

2016 || 10,223.7 || 1.427

2017 || 10,893.8 || 1.521

2018 || 11,532.0 || 1.610

2019 || 12,317.5 || 1.719

2020 || 13,462.6 || 1.879

Total || 77,033.2 || 10.754

[1]               OJ L347, 20.12.2013, p. 104

[2]               ABM: activity-based management – ABB: activity-based
budgeting.

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

[4]               Details of management modes and references to the
Financial Regulation may be found on the BudgWeb site: http://www.cc.cec/budg/man/budgmanag/budgmanag_en.html

[5]               Diff. = Differentiated appropriations / Non-Diff. =
Non-differentiated appropriations.

[6]               EFTA: European Free Trade Association.

[7]               Candidate countries and, where applicable, potential
candidate countries from the Western Balkans.

[8]               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.

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

[10]             As described in point 1.4.2. ‘Specific objective(s)...’

[11]             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.

[12]             CA= Contract Staff; LA = Local Staff; SNE= Seconded
National Expert; INT = agency staff; JED= Junior Experts in Delegations).

[13]             Sub-ceiling for external staff covered by operational
appropriations (former "BA" lines).

[14]             See points 19 and 24 of the Interinstitutional
Agreement (for the period 2007-2013).

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

ANNEX

AGREEMENT
FOR SCIENTIFIC AND TECHNOLOGICAL COOPERATION

BETWEEN

THE
EUROPEAN UNION AND THE FAROE ISLANDS

ASSOCIATING
THE FAROE ISLANDS TO HORIZON 2020 – THE FRAMEWORK PROGRAMME FOR RESEARCH AND
INNOVATION (2014-2020)

THE EUROPEAN UNION,

hereinafter referred to as "the Union",

of the one part,

and

THE GOVERNMENT OF THE FAROES,

hereinafter referred to as "the
Faroes",

of the other part,

hereinafter jointly referred to as the
"Parties",

WHEREAS the Union programme for research and innovation “Horizon
2020 - the Framework Programme (2014-2020)” (hereinafter referred to as
‘Horizon 2020’) was established by Regulation (EU) No 1291/2013 of the European
Parliament and of the Council[1]. The Specific Programme implementing Horizon 2020 was adopted by
Council Decision No 2013/743/EU[2].

WHEREAS Article 7 of Horizon 2020 stipulates that specific terms and
conditions regarding the participation of associated countries in Horizon 2020,
including the financial contribution, based on the gross domestic product of the
associated country shall be determined by an international agreement between
the Union and the associated country.

CONSIDERING the successful participation of the Faroese researchers
in projects funded by the Union and the importance of current scientific and
technological cooperation between the Faroes and the Union and their mutual
interest in strengthening Research and Innovation in the context of the
establishment of the European Research Area.

CONSIDERING the interest of both Parties in encouraging the mutual
access of their research entities to research and development activities in the
Faroes, on the one hand, and to the Union's framework programmes for research
and technological development, on the other.

RECOGNISING the special situation of the Faroe Islands with their
small territorial size and population and close proximity to the EU as a
northern European neighbour.

WHEREAS the
Government of the Faroes concludes this Agreement on behalf of the Kingdom of
Denmark pursuant to the Act on the Conclusion of Agreements under International
Law by the Government of the Faroes.

WHEREAS without prejudice to the
relevant provisions of the Treaty on the Functioning of the European Union
(hereinafter referred to as "TFEU"), this Agreement and any
activities entered into under it will in no way affect the powers vested in the
Member States to undertake bilateral activities with the Faroes in the fields
of science, technology, research and development, and to conclude, where
appropriate, agreements to that end,

HAVE AGREED AS
FOLLOWS:

ARTICLE 1

Scope

1.           The Faroes shall
participate as associated country, under the terms and conditions established
by, or referred to, in this Agreement and its Annexes, to Horizon 2020 as
established by Regulation (EU) No 1291/2013[3]
of the European Parliament and of the Council of 11 December 2013 establishing
Horizon 2020 – the Framework Programme for Research and Innovation (2014-2020),
and by Regulation (EU) No 1290/2013[4]
laying down the rules for the participation and dissemination in Horizon 2020,
and by Council Decision 2013/743/EU[5],
establishing the Specific Programme Implementing Horizon 2020.

1 bis.      The Regulation (EC) No
294/2008 of the European Parliament and of the Council as amended by the
Regulation (EU) No 1292/2013 of the European Parliament and of the Council
shall apply to participation of Faroese legal entities in Knowledge and
Innovation Communities[6].

2.           All acts deriving from the
acts referred to in paragraph 1, including acts setting up the structures
needed for the implementation of Horizon 2020 through research activities under
Articles 185 and 187 of the TFEU shall be applicable in the Faroes.

3.           In addition to the
association referred to in paragraph 1, cooperation may include:

(a)     regular discussions on the orientations
and priorities for research policies and planning in the Faroes and the Union,

(b)     discussions on cooperation prospects
and development,

(c)     timely provision of information
concerning the implementation of programmes and research projects of the Faroes
and of the Union, and concerning the results of work undertaken within the
framework of this Agreement,

(d)     joint meetings,

(e)     visits and exchanges of research
workers, engineers and technicians,

(f)     regular and sustained contacts between
programme managers or project managers of the Faroes and the Union,

(g)     participation of experts in seminars,
symposia and workshops.

ARTICLE 2

Terms and conditions with respect to the
association of the Faroes

to Horizon 2020

1. 
Legal entities of the Faroes may participate in
indirect actions and in the activities of the Joint Research Centre of the European
Commission under the same conditions as those applicable to legal entities of
Member States of the Union, subject to the terms and conditions established by,
or referred to, in Annexes I and II. For the Faroes research entities, the
terms and conditions applicable for the submission and evaluation of proposals
and those for the granting and conclusion of grant agreements and/or contracts
under Union programmes shall be the same as those applicable for grant
agreements and/or contracts concluded under the same programmes with research
entities established in the Union, taking into account the mutual interests of
the Union and the Faroes.

Legal entities
established in the Union and
the Joint Research Centre of the European Commission, may participate in the
Faroes' research programmes and projects in themes equivalent to those of Horizon 2020 under the same conditions as
those applicable to legal entities of the Faroes, subject to the terms and
conditions established by, or referred to, in Annexes I and II. A legal entity
established in another country associated to Horizon
2020 shall enjoy the same rights and obligations under
this Agreement as legal entities that are established in a Member State, provided that the said associated country in which the entity is established has
agreed to award legal entities from the Faroes the same rights and obligations.

2. 
From the date of the application of this
Agreement the Faroes shall pay for every year of the duration of Horizon 2020 a financial contribution to the
annual budget of the Union. The financial contribution of the Faroes shall be
added to the amount earmarked each year in the annual budget of the Union for commitment appropriations to meet the financial obligations arising out of
different forms of measures necessary for the execution, management and
operation of Horizon 2020. The
rules governing the calculation and the payment of the financial contribution
of the Faroes are set out in Annex III.

3. 
Representatives of the Faroes shall participate
as observers in the committees established within Horizon
2020. These committees shall meet without the presence
of representatives of the Faroes at the time of voting. The Faroes will be
informed of the result. Participation as referred to in this paragraph shall
take the same form, including procedures for receipt of information and
documentation, as that applicable to representatives from Member States.

4. 
Representatives of the Faroes shall participate
in the Board of Governors of the Joint Research Centre according
to the Rules of Procedure for the Board of Governors of the Joint Research
Centre.

5. 
Travel costs and subsistence costs incurred by
representatives of the Faroes participating in meetings of the committees and
bodies referred to in this Article, or in meetings related to the
implementation of Horizon 2020 organised by the Union shall be reimbursed by
the Union on the same basis as, and in accordance with the procedures currently
in force for, representatives of the Member States.

ARTICLE 3

Enhancement of cooperation

1.           The Parties will make
every effort, within the framework of their applicable legislation, to
facilitate the free movement and residence of research workers participating in
the activities covered by this Agreement and to facilitate cross-border
movement of goods intended for use in such activities.

2.           The Parties will ensure
that no fiscal charge or levy shall be imposed upon the transferring of funds
between the Union and the Faroes, when said funds are needed for the operation
of activities covered by this Agreement.

ARTICLE 4

EU-Faroes Research and
Innovation Committee

1.           A joint committee called
the "EU-Faroes Research and Innovation Committee" shall be
established, whose functions shall include:

(a)     ensuring, evaluating and reviewing the
implementation of this Agreement,

(b)     examining any measure of a nature to
improve and develop cooperation,

(c)     regularly discussing the future
orientations and priorities of research policies and research planning in the
Faroes and the Union and the prospects for future cooperation,

(d)     making, subject to each Party's
domestic approval processes, technical amendments to this Agreement as may be
required.

2.           The EU-Faroes Research and
Innovation Committee, which shall be composed of representatives of the
Commission and of the Faroes, shall adopt its Rules of Procedure.

3.           The EU-Faroes Research and
Innovation Committee shall meet upon the request of one of the Parties. The Committee will work on an on-going basis through exchange of
documents, e-mails and other means of communication.

ARTICLE 5

Final provisions

1.           Annexes I, II, III and IV
shall form an integral part of this Agreement.

2.           This Agreement is hereby
concluded for the duration of Horizon 2020. It shall enter into force on the
date on which both Parties have notified each other of the completion of their
procedures for that purpose. It shall be provisionally applied as of 1 January
2014.

This Agreement may only
be amended in writing by common consent of the Parties. The entry into force of
the amendments will follow the same procedure as those applicable for the
Agreement itself through diplomatic channels. Either of the Parties may
terminate this Agreement at any time upon six months’ written notice through
diplomatic channels. Projects and activities in progress at the time of
termination and/or expiry of this Agreement shall continue until their
completion under the conditions laid down in this Agreement. The Parties shall
settle by common consent any other consequences of termination.

3.           Should a Party notify the
other that it shall not conclude this Agreement, it is hereby mutually agreed
that:

– 
 the Union shall reimburse to the Faroes its
contribution to the annual budget of the European Union referred to in Article
2(2),

– 
however, funds committed by the Union in
relation to the participation of the Faroese legal entities in indirect
actions, including reimbursements referred to in Article 2(5), shall be deducted
by the Union from that reimbursement,

– 
projects and activities launched under this
provisional application and that are still in progress at the time of the
notification referred to in paragraph 2 shall continue until their completion
under the conditions laid down in this Agreement.

4.           Should the Union decide to
revise Horizon 2020, it shall notify the Faroes of the exact content of these
revisions within one week of their adoption by the Union. In case of such
revision or extension of the research programmes, the Faroes may terminate this
Agreement by giving six months' notice. The Parties shall give notice of any
intention to terminate or to extend this Agreement within three months of the
adoption of the Union's decision.

5.           When the Union adopts a new
multi-annual framework programme for research, technological development and
demonstration activities, a new agreement may be renegotiated or renewed under
mutually agreed conditions, at the request of either of the Parties.

6.           This Agreement shall apply,
on the one hand, to the territories in which the TFEU is applied and under the
conditions laid down in that Treaty and, on the other hand, to the territory of
the Faroes.

7.           This Agreement shall be
drawn up in duplicate in the Bulgarian, Croatian, Czech, Danish, Dutch, English, Estonian, Finnish, French, German,
Greek, Hungarian, Italian, Latvian, Lithuanian, Maltese, Polish, Portuguese,
Romanian, Slovak, Slovene, Spanish, Swedish and Faroese languages, each text
being equally authentic.

ANNEX I

TERMS AND CONDITIONS FOR THE
PARTICIPATION OF LEGAL ENTITIES OF MEMBER STATES OF THE UNION AND OF THE FAROES

For the purpose of this Agreement, a "legal entity" means
any natural person, or any legal person created and recognised as such under
national law, Union law or international law, which has legal personality and
which may, acting in its own name, exercise rights and be subject to
obligations.

I.          Terms and conditions for the participation of legal
entities of the Faroes in indirect actions of Horizon 2020

1.           Participation and funding
of legal entities established in the Faroes in indirect actions of Horizon 2020
shall follow the conditions laid down for associated countries in Regulation
(EU) No 1290/2013 laying down the Rules for Participation and dissemination in
H2020 and the terms and conditions established by, or referred to in this
Agreement and the annexes thereto.

In case the Union makes provisions for the implementation of Articles 185 and 187 of the TFEU, the
Faroes shall be allowed to participate in the legal structures created under
these provisions, in conformity with the decisions and regulations that have
been or will be adopted for the establishment of these legal structures.

Legal entities
established in the Faroes shall be eligible, under the same conditions as legal
entities established in the Member States, for financial instruments
established under Horizon 2020.

2.           Legal entities of the
Faroes shall be taken into consideration, alongside those of the European
Union, for the selection of independent experts for the tasks, and under the
conditions foreseen in Regulation (EU) No 1290/2013 laying down the rules for
participation in H2020.

3.           In conformity with
Regulation (EU, Euratom) No 966/2012 of the European
Parliament and of the Council of 25 October 2012 on the Financial rules applicable to the general budget of
the European Communities (hereinafter referred to as "Financial
Regulation"), and the Commission Delegated
Regulation (EU) 1268/2012 of 29 October 2012 on the rules of application of the
Financial Regulation, a grant
agreement and/or contract concluded by the Union with any legal entity of the
Faroes in order to perform an indirect action shall provide for controls and
audits to be carried out by, or under the authority of, the Commission or the
Court of Auditors of the European Union. In a spirit of cooperation and mutual
interest, the relevant authorities of the Faroes shall provide any reasonable
and feasible assistance as may be necessary or helpful under the circumstances
to perform such controls and audits.

II.        Terms and conditions for the
participation of legal entities of Member States in the Faroese research
programmes and projects

1.           The participation of legal
entities established in the Union, created under the national law of one of the
Member States of the Union or under the Union law, in projects of the Faroese
research and development programmes may require the joint participation of at
least one Faroese legal entity. Proposals for such participation shall be submitted
jointly, where required, with the Faroese legal entity/ies.

2.           Subject to paragraph 1 and
to Annex II, the rights and obligations of legal entities established in the
Union participating in the Faroese research projects within research and
development programmes, the terms and conditions applicable for the submission
and evaluation of proposals and for the granting and conclusion of grant
agreements and/or contracts in such projects shall be subject to the Faroese
laws, regulations and government directives governing the operation of research
and development programmes, as well as national security constraints where
applicable, as applicable to Faroese legal entities and assuring equitable
treatment, taking into account the nature of the cooperation between the Faroes
and the Union in this field.

Funding of legal entities
established in the Union participating in Faroese research projects within
research and development programmes shall be subject to Faroese laws,
regulations and government directives governing the operation of research and
development programmes, as well as national security constraints where
applicable, as applicable to non-Faroese legal entities participating in the
Faroese research projects within research and development programmes. In the
case where funding is not provided to the non-Faroese legal entities, Union
legal entities shall cover their own costs, including their relative share of
the project's general management and administrative costs.

3.           Proposals for research in
all fields are to be submitted to the Faroese Research Council
(Granskingarráðið).

4.           The Faroes shall regularly
inform the Union of current Faroese programmes and participation opportunities
for legal entities established in the Union.

ANNEX
II

PRINCIPLES
ON THE ALLOCATION OF INTELLECTUAL PROPERTY RIGHTS

I.            Application

For the purposes
of this Agreement:

1.           "intellectual
property" shall have the meaning given in Article 2 of the Convention
establishing the World Intellectual Property Organisation, signed in Stockholm on 14 July 1967,

2.           "knowledge"
shall mean the results, including information, whether or not these results can
be protected, as well as copyrights or rights pertaining to such information
following applications for, or the issue of, patents, designs, plant varieties,
supplementary protection certificates or similar forms of protection.

II.          Intellectual property rights of legal entities of the
Parties

1.           Each Party shall ensure
that the intellectual property rights of legal entities of the other Party
participating in activities carried out pursuant to this Agreement, and the
related rights and obligations arising from such a participation, shall be
consistent with the relevant international conventions that are applicable to
the Parties, including the TRIPS Agreement (Agreement on trade-related aspects
of intellectual property rights administered by the World Trade Organisation)
as well as the Berne Convention (Paris Act 1971) and the Paris Convention
(Stockholm Act 1967).

2.           Legal entities established
in the Faroes participating in indirect actions of Horizon
2020 shall have intellectual property rights and
obligations in accordance with Regulation (EU) 1290/2013 of the European
Parliament and of the Council laying down the rules for participation and
dissemination in Horizon 2020 and in the grant agreements and/or contracts
concluded with the Union accordingly, and that shall comply with paragraph 1.

3.           Where
legal entities of the Faroes participate in an indirect action under Horizon 2020, implemented pursuant to
Articles 185 and 187 of the TFEU, the legal entities established in the Faroes
shall have intellectual property rights and obligations in accordance with
Regulation (EU) No 1290/2013 of the European Parliament and of the Council
laying down the rules for participation and dissemination in Horizon 2020 and
provisions of the relevant grant agreements.

4.           Legal
entities established in the European Union Member States participating in
Faroese research programmes or projects shall have the same intellectual
property rights and obligations as those of legal entities established in the
Faroes participating in such research programmes or projects in accordance with
paragraph 1.

III.       Intellectual property rights
of the Parties

1.           Except if otherwise
specifically agreed by the Parties, the following rules shall apply to the
intellectual property rights generated by the Parties in the course of
activities carried out within Article 1(3) of this Agreement:

(a)     the Party generating the intellectual
property shall have the ownership thereof. Where their respective shares of the
work cannot be determined, the Parties shall co-own the intellectual property;

(b)     the Party holding ownership shall
grant the other Party rights of access to and the use of the intellectual
property with a view to the activities referred to in Article 1(3) of this
Agreement. Such access rights shall be granted on a royalty-free basis.

2.           Except if otherwise
specifically agreed by the Parties, the following rules shall apply to scientific
publication from the Parties:

(a)     where a Party publishes scientific and
technical data, information and results, journals, articles, reports, books,
including audiovisual, works and software, arising and relating to activities undertaken
under this Agreement, a worldwide, non-exclusive, irrevocable, royalty-free
licence shall be granted to the other Party to translate, reproduce, adapt,
transmit and publicly distribute such works, unless precluded by existing
intellectual property rights of third parties;

(b)     all copies of data and information,
protected by copyright, that have to be publicly distributed and prepared under
this section, shall indicate the names of the author or authors of the work,
unless an author explicitly declines to be named. They shall also bear a
clearly visible acknowledgement of the cooperative support of the Parties.

3.           Except if otherwise
specifically agreed by the Parties, the following rules shall apply to
undisclosed information of the Parties:

(a)     when communicating to the other Party
information relating to activities carried out pursuant to this Agreement, each
Party shall identify that information which it wishes to remain undisclosed;

(b)     for the specific purposes of
implementing this agreement, the receiving Party may under its own
responsibility, communicate such undisclosed information as classified
information to bodies or persons under its authority and under obligation to
keep the information confidential;

(c)     with the prior written consent of the
Party providing undisclosed information, the receiving Party may disseminate
such undisclosed information more widely than otherwise permitted by
subparagraph (b). The Parties shall cooperate in developing procedures for
requesting and obtaining prior written consent for such wider dissemination,
and each Party shall provide such approval to the extent permitted by its
domestic policies, regulations and laws;

(d)     non-documentary undisclosed or other
confidential or privileged information provided in seminars and other meetings
between representatives of the Parties arranged under this Agreement, or
information arising from the attachment of staff, use of facilities or indirect
actions, shall remain confidential when the recipient of such undisclosed or
other confidential or privileged information was made aware of the confidential
character of the information before it was, in accordance with subparagraph
(a);

(e)     each Party shall endeavour to ensure
that undisclosed information received in accordance with subparagraphs (a) and
(c) is controlled as provided for in this Agreement. If one of the Parties
becomes aware that it will be, or may be reasonably expected to become, unable
to meet the non-dissemination provisions laid down in subparagraphs (a) and
(c), it shall immediately inform the other Party. The Parties shall thereafter
consult to define an appropriate course of action.

ANNEX
III

RULES
GOVERNING THE FINANCIAL CONTRIBUTION OF THE FAROES TO HORIZON 2020

I.            Calculation of the financial
contribution of the Faroes

1.           The financial contribution
of the Faroes to Horizon 2020 shall
be established on a yearly basis in proportion to, and in addition to, the
amount available each year in the general budget of the European Union for
commitment appropriations needed for the implementation, management and
operation of the Horizon 2020
Programme.

2.           The proportionality factor
governing the contribution of the Faroes shall be obtained by establishing the
ratio between the gross domestic product of the Faroes, at market prices, and
the sum of gross domestic products, at market prices, of the Member States of
the Union. These ratios shall be calculated, for the Member States, on the
basis of the latest statistical data from the Commission (Eurostat) available
at the time of publication of the draft budget of the European Union for the
same year and for the Faroes on the basis of the latest statistical data
pertaining to the same year from the National Statistical Authority of the
Faroes (Hagstova Føroya) available at the time of publication of the draft
budget of the Union.

3.           The Commission shall
communicate to the Faroes, as soon as possible, and at the latest on 1
September of the year before each financial year, the following information
together with relevant background material:

– 
the amounts in commitment appropriations, in the
statement of expenditure of the draft budget of the European Union
corresponding to Horizon 2020.

– 
the estimated amount of the contributions
derived from the draft budget of the Union, corresponding to the participation
of the Faroes in Horizon 2020
in accordance with paragraphs 1, 2 and 3.

Once the general budget of the Union has been finally adopted, the
Commission shall communicate to the Faroes, in the statement of expenditure
corresponding to the Faroese participation, the final amounts referred to in
paragraph 1.

In the fourth year after this Agreement becomes applicable, the
Parties shall review the proportionality factor governing the financial
contribution of the Faroes, on the basis of the data concerning participation
of Faroese legal entities in indirect and direct actions under Horizon 2020 in
the years 2014-2016.

II.          Payment of the financial contribution of
the Faroes

1.           The Commission shall
issue, at the latest in January and June of each financial year, a call for
funds to the Faroes corresponding to its contribution under this Agreement.

These calls for funds
shall provide, respectively, for the payment:

of six-twelfths of the
Faroese contribution 30 days after receipt of the calls for funds. However, the
six-twelfths to be paid 30 days after receipt of the call issued in January
shall be calculated on the basis of the amount set out in the statement of
revenue of the draft budget: the regularisation of the amount thus paid shall
occur with the payment of the six-twelfths 30 days after receipt of the call
for funds issued at the latest in June.

For the first year of
implementation of this Agreement, the Commission shall issue a first call for
funds within 30 days of its provisional application. Should this call be issued
after 15 June, it shall provide for the payment of twelve/twelfths of the
Faroese contribution within 30 days, calculated on the basis of the amount set
out in the statement of revenue of the budget.

2.           The contribution of the
Faroes shall be expressed and paid in euro. Payment by the Faroes shall be
credited to the Union programmes as budgetary revenue allocated to the
appropriate budget heading in the statement of revenue of the annual budget of
the Union. The Financial Regulation shall apply to the management of the
appropriations.

3.           The Faroes shall pay its
contribution under this Agreement in accordance with the schedule in paragraph
1. Any delay in the payment of the contribution shall give rise to the payment
of default interest by the Faroes on the outstanding amount from the due date.
The interest rate for amounts receivable not repaid on the due date shall be
the rate applied by the European Central Bank to its principal refinancing
operations, as published in the C series of the Official Journal of the
European Union, in force on the first calendar day of the month in which the
due date falls, increased by one and a half percentage points.

In case the delay in the
payment of the contribution is such that it may significantly jeopardise the
implementation and management of the programme, participation in the programme
of the Faroes for the concerned financial year will be suspended by the
Commission following the absence of payment 20 working days after a formal letter
of reminder sent to the Faroes, without prejudice to the Union's obligations in
accordance with grant agreements and/or contracts already concluded pertaining
to the implementation of selected indirect actions.

4.           At the latest on 31 May of
the year following a financial year, the statement of appropriations for Horizon 2020 for that financial year shall be prepared and transmitted to the
Faroes for information, in accordance with the format of the Commission's
revenue and expenditure account.

5.           The Commission, at the time of the closure of the accounts relating to
each financial year, within the framework of the establishment of the revenue
and expenditure account, shall proceed to the regularisation of the accounts
with respect to the participation of the Faroes. This regularisation shall take
into consideration modifications which have taken place, either by transfer, cancellations, carryovers,
de-commitments, or by supplementary and amending budgets during the financial
year. This regularisation shall occur at the time of the second payment for the
next financial year, and for the last financial year in July 2021. Further regularisation shall
occur every year until July 2023.

annex iv

Financial control of FAROESE participants in
the Programmes covered by this Agreement

I.          Direct
Communication

The Commission shall communicate directly with the participants in
the Programme established in
the Faroes and with their subcontractors. They may submit directly to the
Commission all relevant information and documentation which they are required
to submit on the basis of the instruments referred to in this Agreement and of
the grant agreements and/or contracts concluded to implement them.

II.        Audits

1.           In accordance with
European Parliament and Council Regulation (EU, Euratom) No 966/2012[7] and to Commission Delegated Regulation (EU) No 1268/2012[8] (hereinafter referred to as the 'Rules of Application') and with
the other rules referred to in this Agreement, the grant agreements and/or
contracts concluded with participants in the Programme established in the
Faroes shall provide for scientific, financial, technological or other audits
to be conducted at any time on the premises of the participants and of their
subcontractors by Commission agents or by other persons mandated by the
Commission.

2.           Commission agents, the European Court of Auditors and other persons mandated by the Commission
shall have appropriate access to sites, works and documents (both electronic and paper versions) and to
all the information required in order to carry out such audits on- the-spot subject to the inclusion of this right of access that shall be stated explicitly in the grant
agreements and/or contracts concluded to implement the instruments referred to
in this Agreement with participants from the Faroes.
The non-provision of such rights would be regarded as a failure to substantiate
costs and, consequently, as a potential breach of the grant agreements.

3.           The audits may be
conducted after the Programme or this Agreement expire, on the terms laid down
in the grant agreements and/or contracts in question.

III.         On-The-Spot
Checks

1.           Within the framework of
this Agreement, the Commission (OLAF) shall be authorised to carry out
on-the-spot checks and inspections in the premises of participants and their
subcontractors from the Faroes, in accordance with the terms and conditions
laid down in Council Regulation (Euratom, EC) No 2185/96[9].

2.           On-the-spot checks and
inspections shall be prepared and conducted by the Commission in close collaboration
with the National Audit Office (Landsgrannskoðanin). The latter shall be
notified a reasonable time in advance of the object, purpose and legal basis of
the checks and inspections, so that they can provide assistance. To that end,
the officials of the competent Faroese authorities may participate in the
on-the-spot checks and inspections.

3.           If the Faroese authorities
concerned so wish, the on-the-spot checks and inspections may be carried out
jointly by the Commission and them.

4.           Where the participants in
the Programme resist an on-the-spot check or inspection, the Faroese
authorities, acting in accordance with national rules and regulations, shall
assist the Commission inspectors, to a reasonable extent as needed to allow
them to fulfil their duty in carrying out an on-the-spot check or inspection.

5.           The Commission shall
report as soon as possible to the competent Faroese authority any fact or
suspicion relating to an irregularity which has come to its notice in the
course of the on-the-spot check or inspection. In any case the Commission shall
be required to inform the abovementioned authority of the result of such checks
and inspections.

IV.         Information and Consultation

1.           For the purposes of proper
implementation of this Annex, the competent Faroese and Union authorities shall
regularly exchange information, unless forbidden or unauthorised by national
rules and regulations and, at the request of one of the Parties, shall conduct
consultations.

2.           The competent Faroese
authorities shall inform the Commission within reasonable time of any fact or
suspicion which has come to their notice relating to an irregularity in
connection with the conclusion and implementation of the grant agreements
and/or contracts concluded in application of the instruments referred to in
this Agreement.

V.          Confidentiality

Information communicated or acquired in any form under this Annex
shall be covered by professional secrecy and protected in the same way as
similar information is protected by Faroese law and by the corresponding
provisions applicable to the Union's institutions. Such information may not be
communicated to persons other than those within the Union’s institutions or in the Member States or the Faroes whose functions
legally require them to know it, nor may it be used for purposes other than to
ensure effective protection of the Parties' financial interests.

VI.         Administrative Measures and Penalties

Without prejudice to application of Faroese criminal law,
administrative measures and penalties may be imposed by the Commission in
accordance with Regulations (EU, Euratom) No 966/2012, (EU) No 1268/2012 and
(EC, Euratom) No 2988/95[10].

VII.       Recovery and Enforcement

Decisions taken by the Commission under Horizon 2020 covered by this Agreement which impose a
pecuniary obligation on persons other than States shall be enforceable in the Faroes. If so
requested by the Commission,
the authority designated by the Government of the Faroes shall commence proceedings for the enforcement of the decision on behalf of the
Commission. In this case, the decision of the Commission shall be submitted to the Faroese Court, without other formality than verification of the
authenticity of the decision,
by the authority designated for this purpose by the Government of the
Faroes, which shall inform the Commission thereof. Enforcement shall take place
in accordance with the Faroese law and rules of procedure. The relevant enforcement provisions shall be incorporated in the grant
agreements and/or contracts with participants from the Faroes. The Court of Justice of the European
Union shall have jurisdiction to review the legality of
the decision of the Commission and suspend its enforcement. Moreover, the Faroese Court shall have jurisdiction
over complaints that enforcement is being carried out in an irregular manner.

[1]               Regulation of the
European Parliament and of the Council establishing Horizon 2020 (OJ L347,
20.12.2013, p.104).

[2]               Council Decision
establishing the Specific Programme implementing Horizon 2020 (OJ L347,
20.12.2013, p.965).

[3]               OJ L347, 20.12.2013, p.104.

[4]               OJ L347, 20.12.2013, p.81.

[5]               OJ L347, 20.12.2013, p.965.

[6]                      Regulation
(EU)No 1292/2013 of the European Parliament and of the Council of 11 December
2013 amending Regulation (EC) No 294/2008 establishing the European Institute of
Innovation and Technology (OJ L347, 20.12.2013, p.174).

[7]               Regulation (EU, Euratom)
No 966/2012 of the European Parliament and of the Council of 25 October 2012 on
the financial rules applicable to the general budget of the Union (OJ L298,
26.10.2012).

[8]               Commission Delegated
Regulation (EU) No 1268/2012 of 29 October 2012 on the rules of application of
Regulation (EU, Euratom) No 966/2012 of the European Parliament and of the
Council on the financial rules applicable to the general budget of the Union (OJ L362, 31.12.2012).

[9]               0J L292, 15.11.1996, p. 2.

[10]             Council Regulation (EC, Euratom) No 2988/95 of 18
December 1995 on the protection of the European Communities' financial
interests (OJ L312, 23.12.1995).