*****

PROTOCOL

on financial and technical cooperation between the European Economic Community and the Republic of Cyprus

THE COUNCIL OF THE EUROPEAN COMMUNITIES,

of the one part, and

THE GOVERNMENT OF THE REPUBLIC OF CYPRUS,

of the other part,

CONSCIOUS of the need to promote the development of the Cypriot economy, of the one part, and with a view to facilitating the pursuit of the objectives of the Agreement establishing an association between the European Economic Community and the Republic of Cyprus, of the other part,

HAVE DECIDED to conclude this Protocol and to this end have designated as their plenipotentiaries:

THE COUNCIL OF THE EUROPEAN COMMUNITIES:

Nikos DIMADIS,

Ambassador Extraordinary and Plenipotentiary,

Permanent Representative of the Hellenic Republic,

Chairman of the Permanent Representatives Committee;

Pierre DUCHÂTEAU,

Director in the Directorate-General for External Relations of the Commission of the European Communities;

THE GOVERNMENT OF THE REPUBLIC OF CYPRUS:

Nicos AGATHOCLEOUS,

Ambassador Extraordinary and Plenipotentiary,

Permanent Delegate to the European Economic Community,

Head of the Mission of the Republic of Cyprus;

Article 1

Within the framework of the financial and technical cooperation provided for in the Association Agreement concluded between the European Economic Community and the Republic of Cyprus, the Community shall participate, on the terms set out in this Protocol, in the financing of measures intended to contribute to the economic and social development of Cyprus.

Article 2

1. For the purposes specified in Article 1 and for a period expiring on 31 December 1988, an aggregate amount of 44 million ECU may be committed as follows:

(a) 28 000 000 ECU in the form of loans from the European Investment Bank, hereinafter referred to as 'the Bank', made from its own resources;

(b) 16 000 000 ECU from the Community's budgetary resources, composed of:

- 6 000 000 ECU in the form of loans on special terms,

- 10 000 000 ECU in the form of grants.

Provision may be made for contributions to risk capital formation, to be charged against the amount shown in the first indent of point (b); these may take the form inter alia of subordinated loans, conditional loans or acquisitions of holdings.

2. The loans referred to in paragraph 1 (a) - with the exception of those intended for financing the oil sector - shall be combined with interest rate subsidies of 2 % financed by means of the funds shown in the second indent of paragraph 1 (b).

Article 3

1. The total amount fixed in Article 2 shall be used for the financing or part-financing of:

- capital projects in the fields of production and economic infrastructure, aimed in particular at diversifying the economic structure of Cyprus and especially at promoting its industrialization and modernizing its agriculture,

- technical cooperation schemes that are a preliminary or a complement to capital projects drawn up by the Cypriot Government,

- technical cooperation in the field of training. 2. The Community's financial contributions shall be used to cover internal and external costs necessarily incurred in carrying out approved projects or schemes (including costs in respect of studies, consulting engineers and technical assistance). They may not be used to cover current administrative, maintenance or operational expenditure.

Article 4

1. Capital projects shall be eligible for financing either by loans from the Bank, combined with interest rate subsidies on the terms set out in Article 2, or by loans on special terms, or by grants, or by a combination of these three means.

2. Technical and economic cooperation shall normally be financed by grants.

Article 5

1. The amounts to be committed each year shall be distributed as evenly as possible throughout the period of application of this Protocol.

2. Any funds not committed at the end of the period referred to in Article 2 (1) shall be used, until exhausted. In that case, the funds shall be used in accordance with the same arrangements as those laid down in this Protocol.

Article 6

1. Loans granted by the Bank from its own resources shall be made in accordance with the arrangements, conditions and procedures laid down in its Statute. They shall, as regards their duration, be subject to terms established on the basis of the economic and financial characteristics of the projects for which these loans are intended, also taking into account the conditions obtaining on the capital markets on which the Bank procures its resources. The interest rate shall be determined in accordance with the Bank's practice at the time of signature of each loan contract, subject to the interest rate subsidy referred to in Article 2 (2).

2. Loans on special terms shall be granted for 40 years with 10 years' postponement of amortization and at an interest rate of 1 % per annum. The terms and arrangements for contributions to risk capital formation shall be determined on a case-by-case basis.

3. The loans may be granted through the intermediary of the State or appropriate Cypriot bodies, on condition that they on-lend the amounts to the recipients on terms decided, by agreement with the Community, on the basis of the economic and financial characteristics of the projects for which they are intended.

Article 7

Aid contributed by the Community for the execution of certain projects may, with the agreement of Cyprus, take the form of co-financing in which, in particular, credit and development bodies and institutions of Cyprus, of Member States or of third States or international finance organizations would take part.

Article 8

The following shall be eligible for financial and technical cooperation:

(a) in general:

- the State of Cyprus;

(b) with the agreement of the State of Cyprus, for projects or measures approved by it:

- Cypriot official development agencies,

- private agencies working in Cyprus for economic and social development,

- undertakings carrying on their activities in accordance with industrial and business management methods and set up as legal persons within the meaning of Article 12,

- groups of producers who are nationals of Cyprus, and exceptionally, where no such groups exist, the producers themselves,

- scholarship holders and trainees sent by Cyprus under the training schemes referred to in Article 3.

Article 9

1. Upon the entry into force of this Protocol, the Community and Cyprus shall establish by mutual agreement the specific objectives of financial and technical cooperation, by reference to the priorities set by Cyprus's development plan.

These objectives may be reviewed by mutual agreement to take account of changes in Cyprus's economic situation or in the objectives and priorities set by its development plan.

2. Within the framework established pursuant to paragraph 1, financial and technical cooperation shall apply to projects and schemes drawn up by the State of Cyprus or by other beneficiaries approved by that country.

Article 10

1. The State of Cyprus or, with the agreement of its Government, the other possible beneficiaries referred to in Article 8, shall present their requests for financial aid to the Community.

2. The Community shall appraise the requests for financing in collaboration with the competent Cypriot authorities and other beneficiaries, in accordance with the objectives referred to in Article 9 (1), and shall inform them of the decisions taken on such requests.

Article 11

1. The execution, management and maintenance of schemes that are the subject of financing under this Protocol shall be the responsibility of Cyprus or the other beneficiaries referred to in Article 8. The Community shall make sure that this financial aid is expended in accordance with the agreed allocations and to the best economic advantage.

2. Certain rules for administering the financial aid granted by the Community will be the subject of an exchange of letters between the Commission and Cyprus at the conclusion of this Protocol.

Article 12

All natural and legal persons which come within the scope of the Treaty establishing the European Economic Community and all natural and legal persons of Cyprus may participate on equal terms in tendering procedures and other procedures for the award of contracts likely to be financed. Such legal persons formed in accordance with the law of a Member State of the EEC or of Cyprus must have their registered offices, their administrative head offices or their principal establishments in the territories in which the Treaty establishing the EEC is applied or in Cyprus; however, where only their registered offices are in those territories or in Cyprus, the activities of such legal persons must be effectively and continuously linked with the economy of those territories or of Cyprus.

Article 13

To promote participation by Cypriot undertakings in the performance of works contracts, an accelerated procedure for issuing invitations to tender involving shorter time limits for the submission of tenders may be used where the works in question, because of their scale, are mainly of interest to Cypriot undertakings.

This accelerated procedure may be used for invitations to tender the value of which is estimated at less than 2 000 000 ECU.

Article 14

1. Cyprus shall apply to contracts awarded for the execution of projects or schemes financed by the Community fiscal and customs arrangements no less favourable than those applied vis-à-vis the most-favoured international development organization.

2. The fiscal and customs arrangements shall be established by means of an exhange of letters between the Parties.

Article 15

Cyprus shall take the necessary measures to ensure that interest and all other payments due to the Community in respect of loans granted under this Protocol are exempted from any national or local tax or levy.

Article 16

Where a loan is accorded to a beneficiary other than the State of Cyprus, the provisions of a guarantee by the latter or of other adequate guarantees may be required by the Community as a condition of the grant of the loan.

Article 17

Throughout the duration of the loans accorded pursuant to this Protocol, Cyprus shall undertake to make available to debtors enjoying such loans, or to the guarantors thereof, the foreign currency necessary for the payment of interest, commission and other charges and the repayment of principal.

Article 18

The results of financial and technical cooperation may be examined within the Association Council. The latter shall establish, where appropriate, the general guidelines of such cooperation.

Article 19

One year before the expiry of this Protocol, the Contracting Parties shall examine what arrangements could be made for financial and technical cooperation during a possible further period.

Article 20

This Protocol shall be annexed to the Agreement establishing an Association between the European Economic Community and the Republic of Cyprus.

Article 21

1. This Protocol shall be subject to approval in accordance with the Contracting Parties' own procedures; the Contracting Parties shall notify each other that the procedures necessary to this end have been completed.

2. This Protocol shall enter into force on the first day of the second month following the date on which the notifications provided for in paragraph 1 have been given.

Article 22

This Protocol is drawn up in two original copies in the Danish, Dutch, English, French, German, Greek and Italian languages, each of these texts being equally authentic.