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DOCUMENTS "COM"
COM(77)10
Vol.1977/0004

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COMMISSION OFTHEEUROPEAN COMMUNITIES
V
COM(77)10final.
Brussels,2June1977*
ÇâSortiduSecréUfUtJ^J
PROPOSAL FORACOUNCILDIRECTIVE
RELATINGTOCOMMONPRINCIPLES TOBBADOPTED
INEXPORTCREDIT :INSURANCE .SYSTEMSFORMEDIUM
ANDLONGTERM-TRANSACTIONS WITHPUBLICAND.
PRIVATEBUYERS
(submittedtotheCouncil "bytheCommission).
COK177)10final

EXPLANATORY I/EMORMHUM
■ ■ ■»ιι■ι■
1.InApril19741"theCommissionsubmittedtotheCouncilaworkingpaperrelating
totheadoptionofcommonprinciplesinexportcreditinsurancepolicies^.
Theobjectofthepaperwastoseektoharmonizecreditinsuranceandexport
creditguaranteesystems "bytheapplication ofuniformprinciples ,asprovided
forinArticle113oftheTreatyestablishing theEuropeanEconomicCommunity.
Theprevioussearchforaharmonization ofgeneralconditionsbytheformulation
ofidenticalpolicytextshadencounteredcertainobstaclesarisingfromthe
differentadministrative orbankingpracticesofMemberStates.
2.TheworkingpaperofApril1974hasformedabasisforthoroughdiscussions
withexpertsfromMemberStatesandwithUNICE(UnionofIndustriesofthe
EuropeanCommunity)andORGAUHS(LiaisonGroupfortheEuropeanEngineeringIndustries).
Further,thePolicyCo-ordination GroupforCreditInsurance,CreditGuarantees
andFinancialCreditshasdiscussedthepaperseveraltimes.
Finally,inJuneandSeptember1976.|the.Commissioncalledinexpertsinorder
todefine -commonprinciplestobe-incorporatedinaformalproposalfora
Directive.
3.Allthatpreparatory workhavingbeenaccomplished ,theCommissionisnowable
topresentaformalproposalrelatingtocommonprinciplestobeadoptedin
exportcreditinsurancesystemsformediumandlong-termtransactions with
publicandprivatebuyers,leavingittotheinsurersandguarantorstodraw
uptheirowntextsbasedonthecommonrulesandinconformitywiththelegal
requirements oftheirindividualcountries.
1Doc.COK(74)393/6of3April1974.

Inordertoensurethatthecommonprinciplesarebroughtintoforceand
thattheyareinconformitywiththoselaiddowninthisproposal,thetexts
to"beadoptedineachMemberStatearetohecommunicatedpreviouslytothe
otherorganizationsprovidinginsuranceorguaranteesandtotheCommission.
4.Asforpremia,inordertoup-datetheinformationonnationalsystemsandto
clarifyhowtheiroperationaffectstheuniformprinciples,theDirective
providesthattherules,scalesandratesofpremiumwhichareappliedin
theexportcreditinsuranceandguaranteescoveredbytheuniformprinciples
setoutinthisDirectivearetohecommunicatedtotheorganisations
providinginsuranceorguarantees,aswellastotheCommission,within
2monthsfollowingtheentryintoforceoftheuniformprinciples.
TheCommissionintendstocontinueitseffortstoarriveataharmonisedsystem
ofexportcreditinsurancepremia,underaregimewhere,throughtime,premiumincome
issufficienttocoverlosses.
&This:proposalfor•&'dir'ectiveis"basedonArticle113oftheTreaty,which
providesthait'•'.«thecommoncommercialpolicyshall"bebasedonuniform
principles,particularly inregardto exportpolicy

PROPOSAL FORACOUNCIL DIRECTIVE RELATING TOCOMMON PRINCIPLES TO
BEADOPTED INEXPORT CREDIT INSURANCE SYSTEMS FORMEDIUM ANDLONG
TEEM TRANSACTIONS WITH PUBLIC ANDPRIVATE BUYERS .
THECOUNCIL OPTHEEUROPEAN COMMUNITIES ,
Having regard totheTreaty establishing theEuropean Economic Community ,
andinparticular Article 113thereof ,
Having regard totheproposal from theCommission ,
Whereas thecommon commercial policy should he "based onuniform principles ,
inparticular asfarasexport policy isconcerned ;
Whereas export credit isofprimary importance ininternational trade
and isanimportant instrument ofcommercial policy ,and it'istherefore
necessary todefine thecommon principles ofcommercial policy inthis
field ; .. . . ;;;"•••
Whereas inthis respect thedifferences "between export credit insurance
systems inforce inMember States maygive rise todistortion incompetition
"between Community undertakings inmarkets inthird countries ;
Whereas harmonisation ofthese various export credit insurance systems
could facilitate co-operation "between undertakings inthevarious Member
States ;
Whereas harmonisation can "beachieved either bycommon policies ,orby
common principles relating totheelements considered essential tothe
operation ofexport credit insurance systems ;

Whereas moreover medium andlong term guaranteed transactions relate to
public andprivate buyers equally ;
Whereas itisimportant fortheCommission toobtain theopinions of
theRepresentatives oftheMember States onanyproblem relating to
theuniform application ofthis Directive ;
HAS ADOPTED THIS DIRECTIVE
Article 1
1. Member States shall adopt such measures bylaw ,regulation
oradministrative action asmaybenecessary toput into force as
from 1.3.1978 thecommon principles setoutintheAnnexes tothis
Directive and ,inorder toensure these common principles are
respected ,themeasures necessary forallcredit insurance organisations ,
guaranteeing fortheaccount ofor .with thesupport oftheState ,or
anyinstitutions deriving through public support ,.'what ever itsform ,a
mandate /to'give aguarantee oracredit whether tied toanexport
insurance -"policy ornot ,todeposit atthelatest onthe30.9.1977 with
alltheabove mentioned other credit insurance organisations ,
institutions and theCommission copies ofallthedocuments to
beused inapplication ofthis Directive .
2. Anyamendment envisaged tothetext ofthese documents should
equally becommunicated totheabove mentioned organisations and
institutions aswell asthe Commission atleast 3months before the
date atwhich itsapplication isenvisaged .

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3«Furthermore ,within 2months following theentry into force oftheuniform
principles inaccordance with theprovisions ofparagraph 1ofthis Article ,
therules ,scales andrates ofpremium which areapplied intheexport credit
insurance andguarantees covered bytheuniform principles shall "becommunica­
tedtotheother organisations andinstitutions mentioned above ,aswell as
totheCommission *Subsequent modifications tothese rules ,scales ortariffs
forpremium shall besubject tonotification prior their intriduction .
4» TheAnnexes refer respectively :
Annex I
Totransactions guaranteed byspecific orcomprehensive orselected
transaction policies ,effected onthebasis ofasupplier credit .
Annex II •
ToPerformance Bonds ..
Annex III
Toguarantees granted tobanks relating tothesame transactions as
those mentioned inAnnex I.
Annex IV
Toguarantees granted tobanks inrespect offinancial credits .
Annex V
Definitions *

Article 2
Each Member State shall seethat thecredit insurance organisations ,
guaranteeing fortheaccount oforwith thesupport oftheState and
theinstitutions receiving through public support ,whatever itsform ,
amandate togive aguarantee orcredits whether ornotrelated toan
export insurance policy ,insure transactions orgrant guarantees which
fall within thefield ofapplication ofthecommon principles ,in
conformity with theparticular conditions andrules adopted bythe
Council .
Article 3
There shall beappointed totheCommission anAdvisory Committee for
Export Credit Insurance ,hereinafter *called 'the Committee' ,which
shall consist ofRepresentatives ofthe :Member States with a
representative ofthe Commission asChairman .
TheCommittee shall establish itsownrules ofprocedures .
Article 4
TheCommittee shall meet when convened byitsChairman ,either onthe
initiative ofthelatter orattherequest oftheRepresentative ofa
Member State .
Article 5
TheCommittee maybeconsulted bytheCommission onanyproblem relating
totheuniform application ofthis Directive .

Article 6
TheCommission shall ,within three years oftheentry into force ofthe
common principles andafter consultation with theCommittee referred to
inArticle 3,present areport onexperience acquired during the
application ofthesaid principles .Itmay ,induecourse ,make
proposals foramendments tothese principles with aview toadapting
them tothespecific needs which theapplication ofthese principles
has not "been able tomeet .
That report may ,however ,hepresented atanytime ifaMember State
sorequests and shall hesubmitted asamatter ofurgency totheCouncil .
Article 7
TheCouncil Directive No70/509/CEEof ■27October 1970 andtheCounoil
Directive No70/5IO/CEEof27October 1970 arehereby abrogated .
Article 8
This Directive isaddressed totheMember States .
Done at ,on
For the Council
The President

ANNEX I
I COMMON PRINCIPLES TOBEAPPLIED TOTHE !INSURANCE OFSUPPLIER CREDIT
1.Thefield ofapplication ofcommon principles shall cover export
transactions tothird countries (sale ofgoods orprovision of
services ),effected onthe "basis ofasupplier credit ,toa
public orprivate "buyer ,guaranteed "byspecific ,comprehensive
orselected transaction policies andentailing either acredit
risk ofaperiod equal toorgreater than 24months ,ora
manufacturing risk ofaperiod equal toorgreater than 12
months ,or "both these risks whose periods when added together
areequal toorgreater than 24months .
II,SCOPE OFTHEGUARANTEE ■
1.Manufacturing Risk
Themanufacturing risk covers loss arising from thesuspension
ofthemanufacture ofthegoods ordered orperformance ofthe
conditions ofthecontract foraminimum period of6months
directly caused "byanevent listed inIIIbelow orinaccordance
with adecision ofthe Insurer athis absolute discretion
because ofthe threat ofsuch anevent .
Italso covers loss arising from thefinal suspension ofthe
manufacture orperformance oftheconditions ofthecontract
atleast 6months after ithas been continued with the
Insurer 'sagreement following such anevent ordecision .
2.Credit Risk
Thecredit risk covers loss arising from theInsured 'sfailure
toreceive within theperiod fixed .in1IIIthesumsduein
accordance with theterms andconditions ofthecontract ,provided
always thatthelossisdirectly caused byanevent listed inIIIbelow .

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III.EVENTS COUSTITUTITTG ACAUSE OFLOSS AITD -.QUALIFYING PERIOD FORCLAIMS
Thefollowing causes ofloss may "becovered ,andmust bestated
inallGuarantees intheappropriate terminology forthelegal
system governing aparticular contract ofinsurance :
A.Thedefault ofthebuyer orhisfailure orrefusal tofulfil
anyoftheterms ofthecontract ;thelosses established 6
months after theduedate ofastunremaining unpaid .
B.Insolvency ofthedebtor ,theloss isimmediately established .
C.Ageneral moratorium decreed bytheGovernment ofthebuyer 's
country orbythat ofathird country throu^i which payment
must beeffected ;theloss isestablished 4months after the
duedate ofasumremaining unpaid .
D.Anyother measure ordecision oftheGovernment ofaforeign
country which prevents ,performance of*.'the •contract ;theloss
isestablished 4months after thedued£te ofasumremaining
unpaid .
E.Political events -,economic difficulties arising outside ....*
orlegislative oradministrative measures taken outside *
which prevent ordelay thetransfer offunds paid over in
respect ofthe .contract ;theloss isestablished 4months after
theduedate ofasumremaining unpaid ,or4months after the
payment offunds ofthedebtor isprivate .
F.Legal provisions adopted inthecountry ofthebuyer declaring
payments made bythebuyer tobevalid discharge ofthedebt ,
notwithstanding that asaresult offluctuations inexchange
rates such payments ,when converted into thecurrency ofthe
contract ,nolonger cover theamount ofthedebt atthedate
oftransfer ;theloss isestablished assoon asitisconfirmed .
Thecountry oftheInsurer

G. Theoccurrence outside ..... ofoneofthefollowing events :
war (including civil war ,hostilities ,rebellion andinsurrection ),
revolution orriot ,cyclone ,flood ,earthquake ,volcanic eruption
ortital wave ;the loss isestablished 4months after theduedate
ofasuraremaining unpaid .
H.Ameasure ofdecision oftheGovernment of...•••••. *which
prohibits orrestricts theexport ofthegoods ,insomuch as
this measure ordecision falls within the context ofinternational
affairs ;theloss isestablished 4months after theduedate of
asumremaining unpaid .
IV.EFFECTIVE DATS AFPEXTENT OFTHE GUARA1TTS3
1.Effective date .•" ..
•Themanufacturing risk shall become effective atthe
later ofthefollowing dates :
(i)'the "date ofentry into effect ofthecontract
(ii)thedate when allconditions precedent toliability
stipulated bytheInsurer have been fulfilled .
When (ii)applies theguarantee canbeapplied retrospectively
toanycosts incurred bytheInsured between (i)and (ii).
The credit risk shall be'come effective when the Insured has
fulfilled allhiscontractual obligations ;however when ,under
theterms ofthecontract ,theInsured hasanentitlement to
payment ataspecified duedate inrespect ofpartial deliveries
ortherendering ofpart oftheservices ,thecredit risk may
become effective atthe date ofsuch entitlement .
Thecountry oftheInsurer

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2.Extent ofthe guarantee
Cover for themanufacturing andcredit risks assetoutinthis
statement ofcommon principles must notbegiven forlosses arising :
(i)asaconsequence ofthecalling ofaperformance bond ;
(ii)from theinability oftheInsured torecover equipment
owned byhimandnotforming part ofthecontract but
used inthebuyer 'scountry for theexecution ofthe
contract ;
(iii)from exchange losses consequent upon afall inthe
exchange rate ofthecurrency inwhich thecontract
isdenominated between the effective date ofthe
guarantee '"aridthedate on""which theexporter ispaid
•bythebuyer oris.paid 'a'-e-laiin '"bytheInsurer .
Itwill notbe .abreach of(i),(ii)and (iii)above ifthe
loss iscovered' byaspecial facility andsubject topayment
ofasupplementary premium ."
• -
(a)Manufacturing Risk
Liability inrespect oftheManufacturing Risk must ,within the
limit ofthetotal contract amount ,berestricted tocosts
incurred bytheInsured inmanufacturing thegoods orperforming
his contractual obligations .
Itceases inrelation toanygoods orservices which become
eligible forcredit risk cover once they become soeligible .
(b)Credit Risk
Liability inrespect oftheCredit Risk must belimited tothe
principal sums andinterest accruing uptotheduedate of
payment owed totheInsured under thecontract .

(c)Additional Costa
Liability maybeextended toadditional costs incurred bythe
Insured with approval oftheInsurer following aloss orthreat
ofloss tominimise that loss .
Inparticular when manufacture ofthegoods orperformance of
the conditions ofthe contract has "been continued inaccordance
with adecision ofthe Insurer inthe circumstances described
inIII and one ofthe causes ofloss asdefined inIIIdoes not
ultimately arise ,liability mayheextended totheadditional
costs incurred asaconsequence ofthedecision oftheInsurer that
manufacture orperformance shall continue .
Additional costs incurred asaconsequence totheprovisional
provisional interuption oftheexecution ofthebusiness may
"becovered ,nomatter thelength "ofinteruption .-
.Percentage guaranteed
Theguaranteed percentage must notexceed 95$*
INIMITIES •
General Principles
Thefollowing general principles ofcover must heobserved :
(a)TheInsured must actatalltimes with duediligence as
regards theconclusion andperformance oftheguaranteed
contract

Cover must notbegiven forlosses arising
-where there isadispute over theperformance ofthe
contract until that dispute has "been resolved tothe
satisfaction oftheInsurer ;
- "byreason ofthefailure oftheInsured or "byanyperson
acting onhisbehalf orbyaco-contractor orsub-contractor
tofulfil any oftheterms andconditions ofthecontract
ortocomply with anylaws orregulations that mayapply in
either thecountry oftheInsured orofthebuyer .
-byreason ofthefailure toobtain anynecessary authorities
for theimport ofthegoods orperformance oftheconditions
ofthe contract inforce atthe date when the Insurer 's
liability commences .
c)Similarly cover must -notbegiven forlosses arising from
errors bytheInsured inthedevelopment ,design or
performance ofthecontract andwhich would have arisen
irrespective ofwhether ornotanevent constituting "a
cause ofloss had occurred .
Calculation ofloss formanufacturing risk
Guaranteed loss must not exceed the difference between :
(i)total allowable costs andexpenses asdefined inIV2a
and2Cj
(ii)thetotal ofthepayments received byandamounts credited
totheInsured -with theexception ofthose relating to
goods andservices forwhich theguarantee ofthecredit
risk hasalready taken effect –(forexample ,suns received
bytheInsured ,thepr 3eds from theresale oralternative
useofgoods notdeliv :-1,theproceeds oftherealisation
ofsecurities ,amounts wnich theInsured hasreceived oris
entitled toreceive bywr.yofset-off ,indemnity payments
ofanykind )andgenerally anyfinancial advantage that
hasaccrued totheInsured asaresult oftheoccurrence „
ofthe loss .

thecosts |payments andamounts credited asdescribed in
l(i)and (ii)above which areeffected inforeign currencies
shall beconverted into thenational currency attherate ruling
onthedate when thecosts areincurred orthepayments and
amounts received .
2.Calculation ofloss for credit risk
Guaranteed loss must not exceed the difference between :-
(a)total sums dueasdefined inIV2bbutnotreceived by
theInsured ;
(b)-thetotal ofthepayments received byandamounts credited
totheInsured -with theexception of .those relating to
goods andservices towhich theguarantee ofthemanuf­
acturing risk still applies -(forexample ,sums received
bytheInsured aspayments onaccount ,theproceeds ofthe
realisation ofsecurities ,amounts which theInsured has
received orisentitled toreceive byway ofcompensation ,
indemnity payments ofanykind );
-anyexpenses saved bytheInsured oranyfinancial
advantage that hasaccrued totheInsured asaresult
ofthe occurrence ofthe loss .
When thecontract provides forpayment inaforeign currency ,
theamounts referred toin(a)and (b)above which aredenominated
insuch acurrency shall beconverted into thecurrency ofthe
country oftheInsured attherate ruling onthedate ofexpiry
ofthequalifying period fortheclaim .
Theconversion rate used must not ,however ,exceed therate ruling
onthe "date when thecontract was -signed orwasconcluded .

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3.Calculation ofloss foradditional cdsts
Additional costs asdefined inIV(2c)maybeindemnified on
presentation ofevidence ofthose costs .
Ifsuch costs areincurred inaforeign currency they shall
"beconverted into thecurrency ofthecountry oftheInsured
attherate ruling onthedate they were incurred .
4.Allocation ofpayments and theproceeds ofthe realisation
ofsecurities
Thegeneral principle for theallocation ofpayments and the
proceeds oftherealisation ofsecurities insofar asit
affects calculation oftheguaranteed portion oftheloss
and the allocation ofrecoveries "between the Insurer and
theInsured shall bethat such payments andproceeds shall
notbeallocated tounguaranteed losses inpreference to
guaranteed losses .
5'.Recoveries
Recoveries shall beunderstood tocomprise all suras recovered
bytheInsured oranyone acting onhisbehalf from thebuyer
oranyother source subsequent tothepayment ofaclaim and
attributed totherelated guaranteed contract .
They shall beshared betveen theInsured andtheInsurer ,after
conversion ifnecessary into thecurrency ofthecountry of
theInsurer attheexchange rate ruling onthedate when they
arereceived bytheInsured inthesame proportion asloss
has been borne .
VI.PREMIUM
1.Theconclusion oftheinsurance contract shall render the
Insured liable toapremium .
2.Allpremia paid shall benon-returnable .However ,iftheInsured
isable toprove that theguarantee oftherisk covered hasnot
become effective inthesense ofJlV ,thecredit insurer nay
repay part ofthepremium .

ANNEX II
COMMON PRINCIPLES TOBEAPPLIED TOTHEENDORSEMENT OPTHE GUARANTEE
(calling ofabond guaranteeing theexecution oftheinsured contract )
Theoommon principles ofthis Annex shall apply when theguarantee ,to
which thecommon principles setoutinAnnex 1apply ,oovers thecalling
ofbonds required bytheterms ofthecontract .
I. SUBJECT OFTHE GUARANTEE .
Theguarantee shall beextended tocover losses duetothecalling
ofthe bond :
(a)intheevent ofthetermination ortheinterruption ofthe
contract before the .completion 'ofthecontractual obligations
oftheInsured ,du-etooneoftheevents covered inthe
insurance policy ,
(b)•intheevent oftheunfair calling ofthebond .
V'•.
II.INTEEOJITIES '-GENERAL PRINCIPLES
1.Themaximum amount payable bythecredit insurer inrespect
ofthecalling ofabond maynotexceed 955®of "theamount
guaranteed .
2.Theloss shall bepaid under theendorsement totheguarantee :
–inthecase ofpara (a)ofArticle Iofthis Annex ,atthe
same date asthedate ofpayment oftheloss under the
guarantee .
-inthecase ofpara (b)ofArticle 1ofthis Annex ,at
theminimum 4months after thedate ofthecalling ofthe
bond .

III .GENERAL CONDITIONS
1.Theendorsement totheguarantee shall render theInsured liable
toapremium .
2.Theprovisions ofAnnex Inot set outinthis Annex IIshall
apply equally totheendorsement .

ANNEX III
I. COMMON PRINCIPLES TOBEAPPLIED TOTHEDIRECT GUARANTEE TOBANKS
Thefield ofapplication ofthecommon principles shall cover thedirect
guarantee tobanks relating toexport transactions tothird countries
(sale ofgoods orprovisions ofservices )effected onthebasis ofa
supplier credit ,inasmuch as
-these transactions areinsured "byacredit insurance policy covering
both political andcommercial risks ;
-these transactions have aminimum credit period of2years ;
-thesumdue totheexporter isevidenced bybills ornotes
issued oraccepted bythebuyer .
II.GENERAL PRINCIPLES '" ".
Thebank financing anexport transaction insured either byaspecific
acomprehensive oraselected transaction policy ,mayobtain adirect
guarantee inrespect ofthesums due frorti theforeign buyer or,
within thelimit oftheamount ofthesaid sums due ,thesums due
from theexporter asaresult ofthefinancing which hasbeen
extended tohim for that transaction .
Thedirect guarantee tothebank maybegranted byacredit
insurance organisation ,acting fortheaccount orwith thesupport
oftheState ,orbyaninstitution deriving through public support ,
whatever itsform ,amandate togive aguarantee orcredit
whether ornotrelated toanexport insurance policy .

III .EXTENT OPTHE GUARANTEE
1.Thedirect guarantee toabank shall cover therisk ofnon-
payment bytheforeign debtor ,within thelimit oftheamount
ofthecredit (principal andinterest )extended bythebank
totheexporter .
2.Theguarantee maybeunconditional except where theloss is
duetothefault ornegligence ofthebank ,thecredit insurer
ortheinstitution which has given theguarantee tothebank
shall undertake not toapply tothebank theexceptions which
would have been applied totheexporter .
3.Theguarantee maycover lOO/oofthevalue ofprincipal and
interest .
4.Thequalifying period forclaims shall beaminimum of3months .
IV.EFFECTIVE DATS OPTHE GUARANTEE
Thedirect guarantee maybecome effective :
-assoon asi;he goods have been despatched ;or
-assoon asthegoods have been despatched and theexporter has
received inexchange ofdocuments ,theaccepted bills related to
thesaid goods ;or
-when theexport contract stipulates that thebuyer has theright to
refuse thedelivered goods ,assoon asthegoods have been formally
accepted bythebuyer and ,without prejudice toanyguarantee
contained inthecontract ,have been accepted asbeing inaccordance
with the specifications ofthecontract .

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V. PRINCIPLES OPITTO®!NTFI CATION
Iftheloss isduetothefault orthenegligence ofthebank no
indemnity shall bepaid tothebank .
When thecontract provides forpayment inaforeign currency ,the
loss ehall becalculated onthebasis ofthelower ofthefollowing
two conversion rates :
-rate ruling attheendofthequalifying period oftheclaim ,
–rate ruling atthedate ofcontract .
Payment ofaclaim tothebank shall notprejudice theright of
thecredit insurer ortheinstitution which has granted thesaid
guarantee torequest theexporter toexercise onitsbehalf the
rights andguarantees which itholds against thebuyer .
VI RECOURSE .
Thegiving ofadirect guarantee toabank shall notaffect the
terms ofguarantee issued totheexporter .
Theinsurer shall have recourse totheexporter ,tothefull extent
towhich theihsurer isnot liable under thetenns oftheguarantee
issued totheexporter .
When only political risks arecovered ,thecredit insurer orthe
institution which hasgiven theguarantee tothebank maydelay
taking recourse uptothedate appearing intheexporter 'spolicy
atwhich thequalifying period forclaims ends .

I
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Intheevent oftheright ofrecourse being exercised theexporter
shall repay theamounts demanded ofhimplus interest calculated
from thedate ofpayment ofclaim tothehank .
VII .PREMIUM
Thegiving ofadirect guarantee tothehank shall render the
exporter liable toapremium tothecredit insurer ortothe
institution which has given theguarantee .

ANNEX IV
I. COMMON -PRINCIPLES TOBEAPPLIED TOTHEFINANCIAL GUARANTEE
1.Thefield ofapplication ofcommon principles shall cover the
guarantee orcredits defined inpara 2below extended tothe
buyer ortheborrower byabank established inthecountry of
thecredit insurer oroftheinstitution which hasgiven the
guarantee .
2.Theloan agreement shall provide exclusively forthedirect
payment bythebank totheexporter ofstuns dueinrespect
oftheexport contract towhich thelatter isparty .
II.EXTENT OFTHE GUARANTEE
1.Thefinancial guarantee shall relate totheindemnification of
thebank toamaximum of100$ ofthelosses itni^it encounter
under the loan' agreement intheevent of ,this -occurence ofthe
risk covered .
2.Therisk covered shall consist ofthenon-recovery bythebank
ofallorpart ofthe stuns duetoitwithin 3months oftheir
due date .
3.Theguarantee maybeunconditional except where theloss is
duetothe -fault ornegligence ofthebank .

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III .EFFECTIVE DATE ANDEXTENT OPTHE GUARANTEE
(l)Effective date
Theguarantee shall become effective asandwhen theconditions
precedent setout intheloan agreement have been fulfilled .
(2)Extent oftheguarantee
Theguarantee shall relate exclusively totheamount ofthe sums
duetothebank (principal andinterest )which thebuyer orborrower
iscommitted torepay tothebank byvirtue oftheloan agreement .
IV.PRINCIPLES OPDTDEMHIFICATIOII
Iftheloss is'due tothefault orthenegligence ofthebank
noindemnity shall bepaid tothebank . •*'
.When thecontract provides forpayment inaforeign currency ,
the loss :shall becalculated onthe basis ofthe lower ofthe
following tWoconversion rates :
-rate ruling attheendofthequalifying period oftheclaim ,
-rate ruling atthedate ofcontract .
V. RECOURSE
Thegiving ofafinancial guarantee shall notaffect theterms
oftheexporter 'sowninsurance .
Thecredit insurer hasaright toexercise recourse totheexporter
intheevent ofnon-recovery bythebank ifall orpart ofits
debt isduetoafailure bytheexporter intheexecution ofthe
contract .
vi.PRUIIUI :
Thegiving ofafinancial guarantee shall render theexporter
liable toapremium tothecredit insurer ortotheinstitution
which hasgiven the guarr.-' bee.

ANNEX V
BEnaJTITTOÎTS
A. Theterm "Public "buyer "shall bedefined asfollows
(a)abuyer who ,inoneform oranother ,represents thepublic
pov/eritself ,(States ,regional orlocal authorities having
asubordinate status such asprovinces orlocal government
units ;public undertakings )andwhocannot ,either judically
oradministratively ,bemade insolvent .
(b)Thefollowing shall beconsidered aspublic buyers ;
–State trading corporations
-public corporations
-andorganisations inthepublic sector financed inwhole
byorfully accountable toanyof(a)above .
B. "Insolvency "shall bedeemed tooccur when -
1.'Thebuyer isdeclared bankrupt ;-.or
.2. •Ifthebuyer isacompany ,an'order forwinding-up hasbeen
0
made onthegrounds that the-company xsinsolvent ;or
3.Anorder foradministration ofthebuyer 'saffairs hasbeen
made byacourt forthebenefit ofhiscreditors ;or
4.Inthecourse ofexecution ofajudgement ,thelevy ofexecution
hasnot satisfied thedebt either infull orinpart ;or
5.Thebuyer hasmade avalid assignment ,composition orother
arrangement forthebenefit ofhiscreditors generally ;or
6.TheInsured shows ,tothesatisfaction oftheInsurer ,that
the -financial state ofthebuyer issuch that even partial
payment is'unlikely andthat toenforce judgment ortorequest
thaf'the buyer bedeclared bankrupt orwound upwould have
noother foreseeable result than oneoutofproportion to
thecosts oftheproceedings ;-or
7.Suchconditions exist asarebyanyother system oflawsubstantiall
equivalent ineffect toanyoftheforegoing conditions .

PROPOSAL FOR ACOUNCIL DIRECTIVE
repealing theCouncil Directives of27October 1970
authorizing derogations from theprovisions ofthe
common credit insurance policies formedium-and
long-term transactions with public andprivate buyers

PROPOSAL FOR ACOUNCIL DIRECTIVE
repealing theCouncil Directives of27October 1970
authorizing derogations from theprovisions ofthe
common credit insurance policies formedium-and
long-term transactions with public andprivate buyers
THE COUNCIL OPTHE EUROPEAN COMMUNITIES ,
Having regard totheTreaty establishing theEuropean Economio Community
andinparticular Article 113thereof ,
Having regard tothe •proposal from theCommission ,v
Whereas therepeal oftheCouncil .Directives' of27October 1970 onthe
adopt ionofcommon credit insurance policies formedium-and long-term
transactions withpublic andprivate buyers' 1"renders inoperative the
unpublished Council Directives ofthesame date authorizing derogations
from theprovisions ofthesaid common policies ;
Whereas theunpublished Directives inquestion should therefore be
abrogated ,
HAS ADOPTED THIS DIRECTIVE :
1Directivos 70/509/EECand70/510/EEC,OJNoL254,23.11.1970 .

Article 1
TheCounoil Directives of27October 1970 authorizing derogations from
theprovisions oftheCouncil Directives of27October 1970 (70/509/SBC
and70/510/EEC)arehereby abrogated .
Article 2
This Directive isaddressed totheMember States .
Done atBrussels ,
Por the Council
The President