Proposal for a COUNCIL REGULATION on assistance for Albania, Bosnia and Herzegovina, Croatia, the Federal Republic of Yugoslavia and the former Yugoslav Republic of Macedonia and amending Regulation (EEC) No 3906/89

(presented by the Commission)

EXPLANATORY MEMORANDUM

INTRODUCTION

This Explanatory Memorandum covers two proposals for Regulations forwarded to the Council for adoption, namely:

- a proposal for a Regulation on assistance for Albania, Bosnia and Herzegovina, Croatia, the former Yugoslav Republic of Macedonia and the Federal Republic of Yugoslavia;

- a proposal for a Regulation on the European Agency for Reconstruction.

Proposal for a Regulation on assistance for Albania, Bosnia and Herzegovina, Croatia, the former Yugoslav Republic of Macedonia and the Federal Republic of Yugoslavia

1. A SINGLE LEGAL FRAMEWORK

In December 1999 the Commission adopted a Communication [1] on future assistance to the Western Balkans announcing the Commission's intention of proposing that the Council should adopt a new legal basis for assistance to the region [2].

[1] COM(1999) 661 final.

[2] Albania, Bosnia and Herzegovina, Croatia, former Yugoslav Republic of Macedonia, Federal Republic of Yugoslavia.

One of the aims of the proposal is to consolidate the regulatory framework for assistance to the region. At present, assistance to some of its countries is provided under the Obnova Regulation, others receive assistance under the Phare Regulation, and some under both.

The fact that there are two separate legal bases for Phare and Obnova, each with their own, different administrative and management procedures, has caused endless operational problems, a fact to which Parliament and the Court of Auditors rightly draw attention. Also, the Phare programme has been redirected to serve the new priorities of enlargement and is therefore no longer suited to providing assistance to the Western Balkans.

This proposal represents a single legal framework for providing assistance to the five countries in question and repeals Regulation (EC) No 1628/96 (Obnova) and the provisions in the Annex to Regulation (EEC) No 3906/89 (Phare) applicable to these countries.

The assistance given by the Community in other fields and under other Regulations will complement and must dovetail with the assistance provided under this Regulation. This applies in particular to the following types of aid, which will not be covered by the new Regulation: humanitarian assistance, some actions in favor of democracy under Regulation (EC) No 976/99 of 29 April 1999 and exceptional macro financial assitance.

2. MAIN POINTS OF THE PROPOSAL

- Main objectives

"The Stabilisation and Association Process, which offers each country in the region a "road to Europe" is the centrepiece of EU policy in the Balkans. The process, which leads to formal contractual relations with the EU through a Stabilisation and Association Agreement, includes economic and financial assistance and cooperation, political dialogue, improved trade including the establishment of a free trade area, approximation of EU legislation and practices, and cooperation in areas such as justice and home affairs" [3].

[3] Report on the Western Balkans presented to the European Council by the Secretary-General/High Representative together with the Commission.

The European Council which met in Lisbon on 23 and 24 March 2000 confirmed that its overall objective remained the fullest possible integration of the countries of the region into the political and economic mainstream of Europe and that the Stabilisation and Association Process was the centrepiece of its policy in the Balkans.

Under the new Regulation, the main objective of any assistance will be to support participation by the receiving countries in the Stabilisation and Association Process and close regional cooperation.

In the course of the Process the countries will have to redirect their political, economic and institutional development to align themselves on European Union values and models of democracy, respect for human and minority rights, the rule of law and the market economy.

This means concentrating the assistance (in the form of investment and institution building) on building up and modernising institutions and administrations so as to strengthen democracy, the rule of law and respect for human and minority rights.

Another objective will be to provide the institutions and administrations concerned with the skills they need to embark on, and develop, economic and social policies based on market-economy oriented reforms.

The assistance may also be used to encourage alignment of the laws of the countries concerned on those of the European Community - an important factor in any rapprochement between these countries and the European Union.

Where there is still a need, reconstruction and assistance to returning refugees will remain priorities but such assistance cannot be dissociated from the economic and institutional development of the recipient countries.

- Programming

As a rule, the aid will be implemented under either national or multi-beneficiary programmes.

National programmes

Wherever possible, the beneficiaries will be involved in programming within a framework of dialogue and partnership.

The partnership will provide an opportunity to discuss reform programmes with the beneficiaries in priority sectors. The assistance is indissolubly linked to the reforms and will be programmed to accompany and support them.

- Multi-beneficiary programmes

In a number of fields, including customs cooperation, trade, justice and home affairs, with particular reference to cross-border criminal activity and crime prevention, programmes could be devised to involve countries of the region together in initiatives on a regional scale.

- Comitology

In accordance with Council Decision 1999/468/EC, the Commission will be assisted by a management committee. This is the same as the current arrangement for the Phare and Obnova programmes.

Under the Obnova programme, the management committee delivers an opinion on financing decisions worth more than EUR 5 million, the threshold set in 1998 when Regulation (EC) No 1628/96 was revised in order to speed up the response time. To speed up implementation still further, the new cut-off will be EUR 10 million.

This figure might be revised at a later date, for instance if the different external aid programmes were to be harmonised.

General operational guidelines for implementation of the regulation will be adopted in accordance with the committee procedure as well.

- Conditionality

As stated in Article 3 of the proposed Regulation, "respect for the principles of democracy and the rule of law and for humane, minority rights and other fundamental freedoms is a ... precondition of eligibility for assistance". In the event of failure to abide by these principles the Council, acting on a proposal from the Commission, may take appropriate steps.

Other - political - conditions, such as those set out in the Council conclusions of 29 April 1997 on certain types of assistance (e.g. commitments to introduce democratic and economic reforms), will also apply.

The level of compliance will be discussed with the authorities concerned and this dialogue will allow the EU to state its expectations, assess the authorities' commitment and encourage them to develop the measures intended to comply with the conditions. The fulfilment of the conditions will be evaluated and this evaluation will influence the assistance provided under the Regulation.

The element of conditionality is intended to act as an incentive in the context of a dialogue with the authorities in support of the objectives of the Stabilisation and Association Process, the aim being to foster integration.

Where a State does not fulfil the conditions referred to in Article 3 of the proposal, or where compliance with the political conditions for assistance (April 1999) falls short of a threshold regarded as the minimum for a State to be eligible, assistance may be granted direct to local or regional authorities or federal or other entities.

Proposal for a Regulation on the European Agency for Reconstruction

This Agency was established by Regulation (EC) No 2454/1999 of 15 November 1999 amending Regulation (EC) No 1628/96, which is the legal basis for implementing the assistance provided under the Obnova Regulation.

The proposal for a Regulation on assistance to Albania, Bosnia and Herzegovina, Croatia, the former Yugoslav Republic of Macedonia and the Federal Republic of Yugoslavia repeals Regulation (EC) No 1628/96.

The provisions on the creation and operation of the European Agency for Reconstruction should therefore be incorporated in a new Regulation, with a few minor amendments to adapt them to the new aid Regulation.

2000/0111 (CNS)

Proposal for a COUNCIL REGULATION on assistance for Albania, Bosnia and Herzegovina, Croatia, the Federal Republic of Yugoslavia and the former Yugoslav Republic of Macedonia and amending Regulation (EEC) No 3906/89

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community, and in particular Article 308 thereof,

Having regard to the proposal from the Commission [4],

[4] OJ C

Having regard to the opinion of the European Parliament [5],

[5] OJ C

Whereas:

(1) The Community provides assistance for Albania, Bosnia and Herzegovina, Croatia, the Federal Republic of Yugoslavia and the former Yugoslav Republic of Macedonia.

(2) Most of this assistance is currently provided under Council Regulation (EC) No 1628/96 of 25 July 1996 relating to aid for Bosnia and Herzegovina, Croatia, the Federal Republic of Yugoslavia and the former Yugoslav Republic of Macedonia [6] (Obnova), as last amended by Regulation (EC) No 2454/1999 [7] and under Council Regulation (EEC) No 3906/89 of 18 December 1989 on economic aid to certain countries of Central and Eastern Europe [8] (Phare), as last amended by Regulation (EC) No 1266/1999 [9]. This means that the assistance is subject to two different sets of procedures, which encumbers management. In the interests of efficiency it is therefore desirable to establish a single legal framework for this assistance. It is therefore appropriate to repeal Regulation (EC) No 1628/96 and to amend Regulation (EEC) No 3906/89. However, in order to ensure the continuity of the activities of the European Agency for Reconstruction, the provisions of Regulation (EC) No 1628/96 which concern the establishment of the Agency should be incorporated in another Regulation which should enter into force on the date of that repeal.

[6] OJ L 204, 14.8.1996, p. 1.

[7] OJ L 299, 20.11.1999, p. 1.

[8] OJ L 375, 23.12.1989, p. 11.

[9] OJ L 161, 26.6.1999, p. 68.

(3) The European Council which met in Lisbon on 23 and 24 March 2000 confirmed that its overall objective remained the fullest possible integration of the countries of the region into the political and economic mainstream of Europe and that the Stabilisation and Association Process was the centrepiece of its policy in the Balkans.

(4) The existing financial assistance should be expanded and redirected to adjust it to the European Union's political objectives for the region and, particularly, to ensure that it contributes to the Stabilisation and Association Process.

(5) Assistance will therefore be focussed mainly on building up an institutional, legislative and economic framework directed to the values and models subscribed to by the European Union.

(6) A precondition of receiving assistance is that the recipients respect democratic principles, human and minority rights and other fundamental freedoms.

(7) The regional dimension of such assistance must be given special attention, particularly with a view to supporting the European Union's role within the Stability Pact and close regional cooperation.

(8) In view of the political situation in some areas and the nature of the various entities that have responsibility for implementing assistance there, it is desirable to provide that the assistance can be supplied in some cases directly to recipients other than the State.

(9) To make the assistance more effective and ensure it is properly implemented, the Commission should adopt general guidelines in accordance with the management procedure laid down in this Regulation.

(10) To promote cooperation within the region, provision should be made for all the candidate countries and the countries covered by the TACIS and MEDA programmes to participate in the tendering procedures and contracts.

(11) Provision should be made for checks and for the protection of the Community's financial interests inter alia by enabling the Commission, the Court of Auditors and OLAF to exercise their respective powers pursuant to Council Regulation (Euratom, EC) No 2185/96 of 11 November 1996 concerning on-the-spot checks and inspections carried out by the Commission in order to protect the European Communities' financial interests against fraud and other irregularities [10] and Council Regulation (EC, Euratom) No 2988/95 of 18 December 1995 on the protection of the European Communities' financial interests [11].

[10] OJ L 292, 15.11.1996, p. 2.

[11] OJ L 312, 23.12.1995, p. 1.

(12) The measures necessary for the implementation of this Regulation are management measures within the meaning of Article 2 of Council Decision No 1999/468/EC of 28 June 1999 laying down the procedures for the exercise of implementing powers conferred on the Commission [12], and should be adopted in accordance with the management procedure provided for in Article 4 of that Decision. In the interests of faster implementation the threshold for consultation of the management committee should be set at EUR 10 million.

[12] OJ L 184, 17.7.1999, p. 23.

(13) The Treaty does not provide, for the adoption of this Regulation, powers other than those under Article 308,

HAS ADOPTED THIS REGULATION:

Article 1

1. The Community shall provide financial assistance, hereinafter referred to as "Community assistance", to Albania, Bosnia and Herzegovina, Croatia, the former Yugoslav Republic of Macedonia and the Federal Republic of Yugoslavia.

2. The following shall be directly eligible for Community assistance: the State, federal, regional and local bodies, public and semi-public bodies, organisations providing support to businesses, cooperatives, mutual societies, associations, foundations and non-governmental organisations.

3. Authorities established by the international community to act as the civil administration in some areas, such as the High Representative in Bosnia and the United Nations Interim Administration Mission in Kosovo, shall be duly consulted on implementation of the Community assistance in their areas. Any programmes or projects they implement shall be eligible for Community assistance under this Regulation.

Article 2

1. The main purpose of the Community assistance is to support participation by the recipient countries in the Stabilisation and Association Process.

2. The Community assistance is for, inter alia:

(a) the reconstruction and stabilisation of the region;

(b) the creation of an institutional and legislative framework to underpin democracy, the rule of law and human and minority rights;

(c) market-economy orientated economic and social development and economic reform;

(d) the development of closer relations among recipient countries, between them and the European Union, and between them and countries which are candidates for accession to the European Union;

(e) fostering trans-national, cross-border and inter-regional cooperation among the recipient countries and between them and the European Union.

3. As a rule, a country strategy shall be formulated, if possible on a multiannual basis.

4. Community assistance shall wherever possible be implemented under national programmes or multi-beneficiary programmes.

5. The Community assistance shall be implemented by financing investment and institution-building projects and programmes in accordance with the programming principles set out in the general guidelines adopted in accordance with the procedure referred to in Article 8(2).

Article 3

1. Respect for the principles of democracy and the rule of law and for human and minority rights and fundamental freedoms is an essential element for the application of this Regulation and a precondition of eligibility for Community assistance. If these principles are not respected, the Council, acting by qualified majority on a proposal from the Commission, may take appropriate measures.

2. Community assistance shall also be subject to the conditions defined by the Council in its conclusions of 29 April 1997 [13], in particular as regards the recipients' undertaking to carry out democratic, economic and institutional reforms.

[13] Bulletin 4-1997, point 2.2.1.

Article 4

1. Community assistance shall be in the form of grants.

2. Community financing may be used to cover expenditure on preparing, implementing, monitoring, checking and evaluating projects and programmes, and on information.

3. Community financing may be used for cofinancing. Cofinancing of investment projects financed by loans from the European Investment Bank or other international financial institutions may take the form of interest rate subsidies.

4. In the event of the occurrence or threat of a serious political and economic crisis in one of the recipient countries and/or entities, the Community may provide exceptional budget assistance targeted on clearly identified items of expenditure.

5. Community financing may not be used for paying taxes, duties or charges or for acquiring immovable property.

Article 5

1. The Commission shall implement the Community assistance in accordance with the Financial Regulation applicable to the general budget of the European Communities.

2. Participation in invitations to tender and contracts shall be open on equal terms to all natural and legal persons from Member States, States which are recipients under this Regulation, candidate countries and countries which are recipients under the TACIS and MEDA programmes.

3. In the case of cofinancing, the Commission may authorise participation in invitations to tender and contracts by nationals of other countries on a case-by-case basis.

Article 6

1. Financing decisions and any agreements or contracts resulting therefrom shall expressly provide that the Commission or bodies authorised by the Commission, the Court of Auditors and the Anti-Fraud Office (OLAF) may carry out checks on the spot, if necessary.

2. In addition, the Commission may carry out on-the-spot checks and inspections in accordance with Regulation (Euratom, EC) No 2185/96. Measures taken by the Commission in accordance with the procedures referred to in Article 8(2) shall provide for adequate protection of the financial interests of the Community as required by Regulation (EC, Euratom) No 2988/95.

Article 7

1. Financing decisions exceeding EUR 10 million shall be adopted in accordance with the procedure referred to in Article 8(2). The Committee shall be informed of all other financing decisions.

2. Decisions amending decisions taken in accordance with the procedure referred to in Article 8(2) shall be adopted by the Commission without consulting the Committee where they do not comprise substantial changes to the nature of the original projects and operations and, as regards the financial element, where they do not exceed 20% of the total amount of the initial commitment, always provided the sum is not greater than EUR 8 million. The Committee shall be notified of all revised decisions.

Article 8

1. The Commission shall be assisted by a management committee composed of the representatives of the Member States and chaired by the representative of the Commission.

2. Where reference is made to this paragraph, the management procedure laid down in Article 4 of Decision 1999/468/EC shall apply, in compliance with Article 7(3) thereof.

3. The period provided for in Article 4(3) of Decision 1999/468/EC shall be one month.

4. The Committee may examine any other question concerning the implementation of this Regulation which is submitted to it by the Chairman, whether or not at the request of the representative of a Member State, and in particular any question relating to the programming or general implementation of measures or to co-financing.

Article 9

Every year the Commission shall submit a progress report to the European Parliament and the Council on implementation of the Community assistance.

Article 10

1. Regulation (EC) No 1628/96 is repealed.

2. In the Annex to Regulation (EC) No 3906/89, the names "Bosnia and Herzegovina", "Albania", "Croatia", "former Yugoslav Republic of Macedonia" and "Yugoslavia" are deleted.

Article 11

This Regulation shall enter into force on the third day following that of its publication in the Official Journal of the European Communities.

This Regulation shall be binding in its entirety and directly applicable in all Member States.

Done at Brussels,

For the Council

The President