EXPLANATORY MEMORANDUM

1.CONTEXT OF THE PROPOSAL

•Reasons for and objectives of the proposal

The Bio-Based Industries Joint Undertaking (‘BBI JU’) is a body entrusted with the implementation of a public-private partnership whose members are, on the one hand, the Union represented by the Commission and, on the other hand, the Bio-based Industries Consortium (‘BIC’) BBI JU has been established by Council Regulation (EU) No 560/2014 (‘the Council Regulation’), for the implementation of the Joint Technology Initiative on Bio-based Industries (‘BBI JU Initiative’), until 31 December 2024. The Statutes of the BBI JU are annexed to the Council Regulation 560/2014 (‘the Statutes’).

According to Article 3 of the Council Regulation, the contribution of the Union to the administrative and operational costs of the BBI JU should be up to EUR 975 million. This contribution would be divided as follows:

-not more than EUR 29.25 million, consisting of financial contributions to the administrative costs of the BBI JU and

-at least EUR 945.75 million, consisting of financial contributions to the operational costs of the BBI JU4 (hereinafter referred to as ‘the EU contribution’).

According to Article 4 of the Council Regulation, the contribution of BIC or of its constituent entities to the administrative and operational costs of the BBI JU Initiative should be at least EUR 2 730 million. This contribution would be divided as follows:

-not more than EUR 29.25 million, consisting of financial contributions to the administrative costs of the BBI JU;

-at least EUR 182.5 million consisting of financial contributions to the operational costs of the BBI JU;

-an unspecified amount consisting of in kind contributions in implementing indirect actions (also referred to as in kind contributions to operational costs, hereinafter referred to as ‘IKOP’); and

-at least EUR 1 755 million consisting of in kind contributions in implementing additional activities (hereinafter referred to as ‘IKAA’).

The current proposal for amendment regards the legal specificities of the financial contribution referred to in Articles 12(3)(b) and 12(4) of the Statutes annexed to the Council Regulation 560/2014.

In accordance with Article 12(3)(b) and Article 12(4) of the Statutes, the financial contribution to the operational costs of at least EUR 182.5 million should be delivered by BIC by 31 December 2024. Furthermore, it stems from Article 12(3)(b) and Article 12(5) of the Statutes, read together, that this financial contribution from BIC should be entered to BBI JU’s budget (at programme level). Indeed, in accordance with Article 12(5) of the Statutes, members' financial contributions to the operational costs constitute resources of the BBI JU to be entered to its budget. And, in accordance with Article 12(3)(b) of the Statutes, a part of the operational costs of the BBI JU is to be covered by the financial contribution by the members other than the Union. The latter provision does not refer to constituent entities of the members other than the Union, which are the ones who participate in implementation of indirect actions funded by the BBI JU and who could provide financial contributions directly to such indirect actions (at project level).

Subsection 3.2.5 of the Legislative Financial Statement accompanying the Proposal for a Council Regulation on the BBI Joint Undertaking of 10 July 2013 entails that the legislator expects EUR 17.5 million as financial contributions from Industry to operational costs to be entered annually into the budget of the BBI Joint Undertaking.

BIC has acknowledged its obligation to deliver a financial contribution of at least EUR 182.5 million by 31 December 2024, but it has found difficulties with the delivery mode. For many of the BIC members, making a financial contribution at programme level is commercially unviable, because it does not offer any guaranteed benefit in exchange (e.g. results of the projects and related intellectual property rights) and it could benefit competitors participating in projects funded by the BBI JU. Thus, BIC has proposed an alternative mode for delivering the financial contribution: the possibility for its members to deliver the financial contribution directly, at project level. This delivery mode would encourage BIC members’ financial participation, because they could have access to the results of the projects that are reserved to project participants only.

The European Commission assessed the proposal made by BIC, checking whether (and to which extent) the interest of the Union is affected by the alleged difficulty for BIC to fulfil its obligation to contribute financially to BBI JU. At first, the European Commission could have simply dismissed the arguments of BIC, justifying that it is not under the competences of the Commission to pursue the interest of the private member of the JU, that compliance with the existent legal framework is compulsory and that in the absence of it, the sanctions provided for in the Council Regulation would be applied. However, this would have had a negative impact on the objective of the BBI JU, which is to carry out activities through collaboration of stakeholders along the entire bio-based value chains, including SMEs, research and technology centres and universities. Consequently, the Commission services decided to adopt a pro-active attitude and proceeded to an indepth assessment of this issue, identifying the best available follow-up action that it could take. This consisted of an analysis of potential legislative and non-legislative measures, which pointed to the conclusion that a formal modification of the legal framework was needed.

In order to ensure that this modification occurs without any impact on the initial objectives of the Council Regulation, the services of the European Commission identified the objectives which lay behind the obligation to deliver a financial contribution: (1) to secure delivery of a minimum private financial contribution to the operational costs of the BBI JU Initiative by means of a commitment taken by its private member; (2) to secure a minimum leverage effect of contributions made by the Union; and, very importantly, (3) to support the take-off of the bio-economy sector by making funding available for Research and Innovation Actions (‘RIA’) in this area. With regard to the first objective, the commitment to participate financially was made particularly by members of BIC belonging to the forestry industry, which due to their business model cannot generate any IKOP and can only participate financially in the BBI JU. With regard to the third objective, EUR 150 million (out of the EUR 182.5 million expected financial contribution from BIC) were earmarked to be invested in RIAs (where the main beneficiaries are academia and SMEs).

Taking into account the rationale behind the obligation to deliver the financial contribution, the services of the European Commission have been working to identify the possible modes in which this financial contribution could be delivered. A comparative analysis of the Council Regulation with the legal frameworks established for other Joint Undertakings proved to be constructive in this regard. The financial contribution by the Members other than the Union was identified only in the regulation establishing the Innovative Medicines Initiative 2 Joint Undertaking (‘IMI2’). Unlike the BBI JU regulation, IMI2 JU Regulation does not include an obligation to contribute financially. It is only a possibility for the Members other than the Union. This financial contribution at IMI2 JU may be delivered both at programme and project level. Furthermore, it is worth noting that in practice delivery at IMI2 programme level is done by trusts and charities which, by their very nature, operate like public funders (e.g. the Bill & Melinda Gates Foundation, Welcome Trust) while the EFPIA constituent and affiliated entities (the equivalent of BIC members in IMI2) deliver financial contributions at project level. Consequently, the conclusions of this comparative analysis are that: (1) the requirement to deliver a financial contribution exclusively at programme level is unique to the BBI JU; (2) BBI JU’s current model is adequate for enhancing collaboration with trusts and charities; and, most relevantly, (3) BBI JU’s framework should be adjusted as it is to collaborate with commercial companies as well.