PROTOCOL

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

THE COUNCIL OF THE EUROPEAN UNION,

of the one part, and

THE GOVERNMENT OF THE REPUBLIC OF CYPRUS,

of the other part,

ANXIOUS to promote the development of the Cypriot economy and the objectives of the Agreement establishing an Association between the European Economic Community and the Republic of Cyprus, and to facilitate Cyprus's economic transition with a view to its accession to the European Union,

DESIROUS of showing their support for the United Nations' efforts to promote a general settlement of the Cyprus question,

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

THE COUNCIL OF THE EUROPEAN UNION:

Michel BARNIER,

Minister with responsibility for European Affairs, Ministry for Foreign Affairs,

President-in-Office of the Council of the European Union,

Hans VAN DEN BROEK,

Member of the Commission of the European Communities;

THE GOVERNMENT OF THE REPUBLIC OF CYPRUS:

Alecos P. MICHAELIDES,

Minister for Foreign Affairs;

WHO, having exchanged their full powers, found in good and due form,

HAVE AGREED AS FOLLOWS:

Article 1

Within the framework of the financial and technical cooperation provided for in the Agreement establishing an Association 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 projects and schemes to contribute to the economic and social development of Cyprus, facilitate its economic transition with a view to accession to the European Union, and support efforts to promote a general settlement of the Cyprus question.

Article 2

1. For the purposes specified in Article 1, and for a period expiring on 31 December 1998, an aggregate amount of ECU 74 million may be committed as follows:

(a) ECU 50 million in the form of loans from the European Investment Bank, hereinafter referred to as 'the Bank', made from its own resources;

(b) ECU 22 million from the Community's budgetary resources, in the form of grants;

(c) ECU 2 million from the Community's budgetary resources, in the form of contributions to risk capital formation.

2. The risk capital referred to in paragraph 1 (c) shall contribute to the cooperation objectives and operations defined in Article 3, in particular those indicated in the first indent of paragraph 2 of that Article.

It shall be used primarily to make equity capital or the like available to Cypriot industrial and commercial undertakings, in particular those with which natural or legal persons who are nationals of a Community Member State are associated.

It shall be granted and administrated by the Bank and may take the form of:

(a) subordinated loans, where repayment and payment of any interest will not be made until other bank claims have been settled;

(b) conditional loans, where repayment or duration will depend on the fulfilment of conditions specified at the time the loan is granted;

(c) acquisition of temporary minority holdings on behalf of the Community in the capital of undertakings established in Cyprus;

(d) finance for the acquisition of holdings, in the form of conditional loans granted to Cyprus or, with the Cypriot Government's agreement, to Cypriot undertakings, either directly or through the intermediary of Cypriot financial institutions.

Article 3

1. The total amount fixed in Article 2 shall be used primarily for the financing or part-financing of cooperation projects or operations intended to help gear the Cypriot economy to integration into the European Community. To this end, part of the grants shall be for technical assistance to help Cyprus adopt the acquis communautaire.

Another portion of the grants shall be for projects to promote the development of the whole island.

A total of ECU 12 million in grants will be made available for potential initiatives agreed jointly in Cyprus to promote a general settlement of the Cyprus question.

Loans from the Bank's own resources shall go to finance the investment, particularly in infrastructure, needed to enable Cyprus to adapt its economy.

Financing may also be provided for investments which complement the said cooperation projects.

2. Priority shall be given to those of the eligible projects and operations having the following aims:

- in the industrial, agricultural and service sectors, restructuring and modernization of the Cypriot economy, direct contacts, exchange of information, promotion of investment and private-capital flows, cooperation in and support for vocational training and development of human resources and support for small and medium-sized enterprises, including craft businesses, in order to promote employment,

- in the field of science and technology, the creation or strengthening of links between training and research establishments in Cyprus and the European Community, and the participation of businesses or research centres, in accordance with the conditions and arrangements laid down by Council Decisions 94/761/Euratom, 94/762/EC and 94/763/EC (1) concerning the rules for the participation of undertakings, research centres and universities in the specific programmes of research and technological development and demonstration of the European Community,

- in the trade sector, diversification and promotion of exports, support for policies and reforms to help the economy become more fully integrated with that of the European Community, and the organization of contacts between businesses in Cyprus and the European Community,

- in the environmental sector, developing and strengthening cooperation in protection and management of natural resources and support for the harmonization of policies,

- promoting participation by Cyprus in Community framework programmes, specific programmes, projects or other actions, according to specific arrangements to be negotiated and concluded in accordance with the procedures adopted by each party,

- promoting and coordinating, where this is of mutual interest, joint efforts and activities in the field of cooperation with third countries of the region,

- in the priority areas referred to above, technical assistance and training schemes to help Cyprus adopt the acquis communautaire.

3. The Community's financial contributions shall be used to cover internal and external costs necessarily incurred in carrying out approved projects or operations (including costs in respect of studies, consultants and technical assistance).

They may not be used to cover regular administrative, maintenance or other operational expenditure.

Article 4

1. Capital projects shall be eligible for financing by loans from the Bank, risk capital, or grants or a combination of these means.

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

Article 5

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

2. Should Cyprus accede to the European Union during the period covered by this Protocol, appropriate arrangements will be adopted to ensure a harmonious transition as regards financial aid from the system for associate countries to that for Member States.

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.

2. The terms and arrangements for contributions to risk capital shall be determined on a case-by-case basis.

3. Aid financed from the Community's budget resources, other than that intended for risk capital operations, shall be granted and administered by the Commission.

4. The funds referred to in Article 2 may be granted through the intermediary of the State or appropriate Cypriot bodies, on condition that they allocate 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 and operations 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 Cypriot Government, for projects or operations approved by it:

- official Cypriot 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. With a view to making optimum use of the instruments and means provided for in this Protocol and achieving the objectives laid down in Article 3, the Community and the Government of Cyprus shall, by mutual agreement on the basis of information provided by the latter, draw up an indicative programme committing both parties and determining the specific objectives of financial and technical cooperation, the priority sectors for intervention and the action programmes envisaged by reference to the priorities set out in Cyprus's development plan.

2. The indicative programme may be reviewed by mutual agreement to take account of any changes in Cyprus's economic situation or in the objectives and priorities laid down by its development plan.

3. The Community and Cyprus shall continue their exchanges of views within the appropriate bodies and shall, at least once during the period of implementation of this Protocol and at the latest by the end of the third year following its entry into force, make an assessment of the implementation of the indicative programme.

Article 10

1. Within the framework laid down in accordance with Article 9, the State of Cyprus or, with the agreement of its Government, the other possible beneficiaries referred to in Article 8, shall submit 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, 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 of 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. The projects and action programmes shall be the subject of appropriate evaluation, the outcome of which shall be communicated to both parties, which shall take appropriate measures by mutual agreement.

3. Certain rules for administering the financial aid granted by the Community shall be the subject of an exchange of letters or a Framework Agreement between the Commission and the Government of Cyprus upon conclusion of this Protocol.

Article 12

1. All natural and legal persons falling within the scope of the Treaty establishing the European Community and all natural and legal persons of the Republic of Cyprus may participate on equal terms in tendering procedures and other procedures for the award of contracts likely to be financed. Any such legal person formed in accordance with the law of a Member State of the European Community or of Cyprus must have its registered office, its administrative head office or its principal establishment in the territories in which the Treaty establishing the European Community is applied or in Cyprus; however, where only its registered office is in the said territories or in Cyprus, the activities of such legal person must be effectively and continuously linked with the economy of those territories or of Cyprus.

2. In agreement with Cyprus, natural and legal persons who are nationals of developing countries associated with the Community by comprehensive cooperation or association agreements may exceptionally, on a case-by-case basis, be authorized by the Community to participate in the operations referred to in paragraph 1 which are financed by the Community. The eligibility of such natural or legal persons shall be assessed, mutatis mutandis, on the terms set out in paragraph 1.

Article 13

To promote participation by Cypriot undertakings in the performance of contracts and to ensure the rapid and effective implementation of projects and operations financed from resources administered by the Commission:

1. An accelerated procedure for issuing invitations to tender involving shorter time limits for the submission of tenders may be used by Cyprus in agreement with the Commission for works contracts which, because of their scale, are mainly of interest to Cypriot undertakings.

The organization of this accelerated procedure shall not rule out the possibility of issuing an international invitation to tender where it appears that the nature of the works to be carried out or the usefulness of widening participation justifies recourse to international competition.

2. In urgent cases or where the nature, small scale or particular characteristics of certain works or supplies so warrant, Cyprus may, exceptionally, in agreement with the Commission, authorize the placing of contracts following restricted invitations to tender, the conclusion of contracts by direct agreement and the performance of contracts through public works departments.

The procedures referred to in point 1 and 2 may be used for operations with an estimated cost of less than ECU 3 million.

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 State or the most favoured international development organization.

2. The content of the arrangements referred to in paragraph 1 shall be established by means of an exchange of letters between the Parties.

Article 15

The Government of Cyprus shall take the necessary measures to ensure that interest and all other payments due to the Bank in respect of transactions concluded under this Protocol are exempted from any national or local tax or levy.

Article 16

Where, as provided for under Article 8, a loan is accorded with the agreement of the Cyprus Government to a beneficiary other than the State, the provision of a guarantee by the latter or of other adequate guarantees shall be required by the Bank as a condition of the loan.

Article 17

Throughout the duration of the loans and risk capital operations provided for in Article 2, Cyprus shall undertake to:

(a) place at the disposal of the beneficiaries or of their guarantors the currency necessary for the payment of interest and commission and amortization of loans and risk capital aid granted for the implementation of operations on its territory;

(b) make available to the Bank the foreign currency necessary for the transfer of all sums received by it in national currency which represent the net revenue and proceeds from transactions involving the acquisition by the Community of holdings in the capital of companies or firms.

Article 18

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

Should, before the expiration of this Protocol, the amount fixed in the third subparagraph of Article 3 (1), not have been committed, the parties will jointly agree within the Association Council on the appropriate use of the remaining funds.

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

Article 22

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

En fe de lo cual los plenipotenciarios abajo firmantes suscriben el presente protocolo.

Til bekraeftelse heraf har undertegnede befuldmaegtigede underskrevet denne protokol.

Zu Urkund dessen haben die unterzeichneten Bevollmaechtigten ihre Unterschriften unter dieses Protokoll gesetzt.

AAéò ðssóôùóç ôùí áíùôÝñù, ïé õðïãaaãñáììÝíïé ðëçñaaîïýóéïé Ýèaaóáí ôéò õðïãñáoeÝò ôïõò óôï ðáñueí ðñùôueêïëëï.

In witness whereof, the undersigned Plenipotentiaries have signed this Protocol.

En foi de quoi, les plénipotentiaires soussignés ont apposé leurs signatures au bas du présent protocole.

In fede di che, i plenipotenziari sottoscritti hanno apposto le loro firme in calce al presente protocollo.

Ten blijke waarvan de ondergetekende gevolmachtigden hun handtekening onder dit Protocol hebben gesteld.

Em fé do que, os plenipotenciários abaixo assinados apuseram as suas assinaturas no final do presente protocolo.

Taemaen vakuudeksi alla mainitut taeysivaltaiset edustajat ovat allekirjoittaneet taemaen poeytaekirjan.

Till bekraeftelse haerav har undertecknade befullmaektigade ombud undertecknat detta protokoll.

Hecho en Luxemburgo, el doce de junio de mil novecientos noventa y cinco.

Udfaerdiget i Luxembourg den tolvte juni nitten hundrede og femoghalvfems.

Geschehen zu Luxemburg am zwoelften Juni neunzehnhundertfuenfundneunzig.

¸ãéíaa óôï Ëïõîaaìâïýñãï, óôéò aeþaeaaêá Éïõíssïõ ÷ssëéá aaííéáêueóéá aaíaaíÞíôá ðÝíôaa.

Done at Luxembourg on the twelfth day of June in the year one thousand nine hundred and ninety-five.

Fait à Luxembourg, le douze juin mil neuf cent quatre-vingt-quinze.

Fatto a Lussemburgo, addì dodici giugno millenovecentonovantacinque.

Gedaan te Luxemburg, de twaalfde juni negentienhonderd vijfennegentig.

Feito no Luxemburgo, em doze de Junho de mil novencentos e noventa e cinco.

Tehty Luxemburgissa kahdentenatoista paeivaenae kesaekuuta vuonna tuhatyhdeksaensataayhdeksaenkymmentaeviisi.

Som skedde i Luxemburg den tolfte juni nittonhundranittiofem.

Por la Comunidad Europea

For Det Europaeiske Faellesskab

Fuer die Europaeische Gemeinschaft

Ãéá ôçí AAõñùðáúêÞ Êïéíueôçôá

For the European Community

Pour la Communauté européenne

Per la Comunità europea

Voor de Europese Gemeenschap

Pela Comunidade Europeia

Euroopan yhteisoen puolesta

Foer Europeiska gemenskapen

>REFERENCE TO A FILM>

Por el Gobierno de la República de Chipre

For regeringen for Republikken Cypern

Fuer die Regierung der Republik Zypern

Ãéá ôçí êõâÝñíçóç ôçò ÊõðñéáêÞò AEçìïêñáôssáò

For the Government of the Republic of Cyprus

Pour le gouvernement de la république de Chypre

Per il governo della Repubblica di Cipro

Voor de Regering van de Republiek Cyprus

Pelo Governo da República de Chipre

Kyproksen tasavallan hallituksen puolesta

Foer Republiken Cyperns regering

>REFERENCE TO A FILM>

(1) OJ No L 306, 30. 11. 1994, pp. 1, 5 and 8.