on the position to be taken on behalf of the European Union regarding the Sector Understanding on Export Credits for Civil Aircraft

EXPLANATORY MEMORANDUM

1.Subject matter of the proposal

This proposal concerns the decision establishing the position to be taken on the Union's behalf regarding the Sector Understanding on Export Credits for Civil Aircraft (‘Aircraft Sector Understanding’ or ‘ASU’) in connection with the envisaged Common Line in accordance with Part 4, Section 3 of the ASU.

2.Context of the proposal

2.1.The Sector Understanding on Export Credits for Civil Aircraft

The Aircraft Sector Understanding aims to provide a framework for the predictable, consistent and transparent use of officially supported export credits for the sale or lease of aircraft and related goods and services specified in Article 4a) of the ASU. The Sector Understanding became effective on 1 February 2011.

The Aircraft Sector Understanding forms Annex III of the Arrangement on Officially Supported Export Credits (‘Arrangement’) which is administratively embedded in the OECD, and receives support from the OECD Credit Secretariat. Nevertheless, neither the Arrangement nor the Aircraft Sector Understanding are OECD Acts.

The European Union is a party to the Arrangement and the Aircraft Sector Understanding and both have been transposed into the acquis communautaire by virtue of the Regulation (EU) No 1233/2011 of the European Parliament and of the Council of 16 November 2011. Hence the Arrangement and the Aircraft Sector Understanding are legally binding as a matter of Union law.

2.2.The ASU Participants

There are currently ten Participants to the Aircraft Sector Understanding (‘ASU Participants’): Australia, Brazil, Canada, the European Union, Japan, Korea, New Zealand, Norway, Switzerland and the United States. The ASU Participants take decisions on the modifications to the ASU and can accept Common Lines in accordance with Part 4, Section 3 of the ASU. Decisions are taken by consensus, so that, if any Participant objects, the modification of the ASU or the Common Line cannot be adopted.

The European Commission represents the Union in the meetings of the ASU Participants, as well as in the written procedures for decision-making by the Participants.

A Common Line is an instrument under the ASU, which allows the Participants, on an exceptional basis, to divert from the ASU provisions with regard to a specific transaction or temporarily for a non-specific number of transactions. The Common Lines may be accepted in written procedure by remaining silent, as a Participant remaining silent shall be deemed to have accepted the Common Line proposal. The same applies for a Participant indication to have no position. The responses to a Common Line proposal shall be made in principle within 20 calendar days (Article 29 of the ASU). The OECD Export Credit Secretariat shall inform the Participants whether the Common Line was accepted and the agreed Common Line will take effect three calendar days after this announcement (Article 32 of the ASU).

2.3.The envisaged act of the ASU Participants

The envisaged measure would be a proposal for a Common Line which would be submitted to the ASU Participants in accordance with Part 4, Section 3 of the ASU. The proposed Common Line would be an urgent and exceptional measure to react to the economic downturn resulting from the Covid-19 health crisis and reduce the severe impact of the crisis on the European civil aviation industry (see in more detail in section 3 below). The proposed Common Line, if agreed, would temporarily amend the ASU provision governing the repayment of principle (Article 13 of the ASU) which would consequently have legal effects in the EU as a matter of Union law (see in 2.1 above).

Considering the emergency nature of the measure, the proposal should be submitted as soon as possible, and, if agreed, the envisaged Common Line will have to become applicable for all Participants also as soon as possible. As result of the specific 20-day silence procedure stipulated in the ASU (see in 2.2 above), the Union proposal for the Common Line can be automatically agreed by the Participants as the final version of the Common Line, provided that no objection is raised, and should enter into effect three days after the end of the procedure.

In light of the above, it is appropriate to establish the Union’s proposal as the position to be taken on the Union's behalf in a body set up by an agreement, because the decision will be binding on the Union and it will affect Union law, by virtue of Article 1 of Regulation (EU) No 1233/2011, which states that "The guidelines contained in the Arrangement on Officially Supported Export Credits (‘the Arrangement’) shall apply in the Union. The text of the Arrangement is annexed to this Regulation."

The Common Line procedure in the ASU Participants is expected to be initiated in January 2021 and finalised in February 2021.

3.Position to be taken on the Union's behalf

The envisaged Common Line would permit the ASU Participants to temporarily support their manufacturers of civil aircraft, whose business is threatened by short-term liquidity problems of the operators and buyers of new aircraft and engines in the wake of the Covid-19 fallout. Currently, most if not all airlines are facing substantial reductions in income and in the post-Covid recovery, these companies will still have fragile liquidity positions as they will have to deal with the financial aftermath of the crisis and with reduced demand.