WRITTEN QUESTION E-1116/00

by Theresa Villiers (PPE-DE) to the Commission

(11 April 2000)

Subject: European Bank of Reconstruction and Development and Russian companies

1. Is the Commission satisfied that the EBRD is staying within the confines of its own Agreement and Guidelines in its lending policy to Russian companies?

2. What checks are carried out to ensure that the EBRD stays within the confines of its own Agreement and Guidelines in its lending policy to Russian companies?

3. Does the Commission have any plans to review the operation of the EBRD's Agreement and Guidelines for lending to Russian companies?

4. Has any evidence been drawn to its attention which shows that the EBRD's Agreement and Guidelines have been breached in its lending to Russian companies?

5. What actions would it take if evidence were produced that the EBRD has breached its Agreement and Guidelines in its lending to Russian companies?

Answer given by Mr Solbes Mira on behalf of the Commission

(9 June 2000)

1. In its lending activities to individual countries or operations, or entities operating there, the European Bank of reconstruction and development (EBRD) acts within the framework of the agreement establishing the EBRD. Articles 1 and 2 of the agreement set out the purpose and functions of the EBRD and policies established by the board of directors. Article 11.2 requires the board to confirm that such purposes and functions are fully served in the EBRD activities in each country of operations.

This confirmation is established through the adoption of country strategies. Such country strategies are adopted or updated on an annual basis, under the provisions of Article 11.2 of the agreement establishing the EBRD. It reviews the EBRD operations and establishes operational priorities in the relevant countries. These strategies are approved by the board of directors.

The EBRD is preparing the 2000 country strategy for the Russian Federation which is expected to be submitted shortly to the board.

The EBRD is required to develop all its operational activities in Russia within the framework of the above mentioned documents which are all consistent with the agreement establishing the EBRD. The Commission, in its capacity as the representative of the Community in the EBRD board of directors, has, in close co-ordination with Member States and the European Investment Bank (EIB) representatives, approved the EBRD previous country strategies for Russia and has every reason to believe that the EBRD has so far operated consistently in Russia. The Commission also refers in this respect to its response to Written Question E-1665/99 by Mr Manisco(1).

2. Chapter VI of the agreement establishing the EBRD prescribes the corporate governance structure of the EBRD. In particular, Article 27(ii) provides that the board of directors shall establish policies and take decisions concerning loans, guarantees, investments in equity capital, borrowing by the Bank, the furnishing of technical assistance, and other operations of the Bank. Clearly, such policies and decisions include those affecting Russia. As a result, the board of directors maintains not only oversight of these activities but direct control. Directors nominated by the Commission (on behalf of the Community), by the EIB and by Member States sit on the board of directors of the EBRD.

In addition, to this corporate governance structure, Article 35(1) of the agreement establishing the EBRD requires it to publish an annual report containing an audited statement of its accounts and shall circulate to members at intervals of three months or less a summary statement of its financial position and profit and loss statement showing the results of its operations. Article 35(3) requires that copies of all reports, statements and publications made under this article be distributed to members. The 1999 annual report of the EBRD was considered by the board of governors at its meeting in Riga in May 2000.

By approving the country strategy for the Russian Federation, the board of directors has, over time, confirmed that operations in that country are consistent with the EBRD purpose and functions.

3. As indicated in response to question 1, the EBRD is currently preparing the 2000 country strategy for the Russian Federation. This exercise has included a special meeting of the EBRD executive committee on 16 February 2000 and a board workshop on 5 April 2000 at which a paper summarising the key issues for inclusion in the draft country strategy paper was discussed. Final approval by the board of directors of the new Russia strategy is expected by end July 2000.

4. In the reviews and assessments described in answer to Question 3, neither the board of governors, the board of directors nor the President has concluded that any provision of the agreement establishing the EBRD or any of the EBRD policies in its lending to Russian companies has been breached.

5. If evidence were brought to the Commission's attention that EBRD management had breached the EBRD agreed operating principles and policies in its lending to Russian companies, the matter would first be concerted internally and with the other directors before being put forward to the appropriate fora (notably the EBRD board of directors and, if necessary, its board of governors) for decisions on the appropriate sanctions.

(1) OJ C 170 E, 20.6.2000, p. 68.