Proposal for a COUNCIL DECISION allowing for separate liability of the Czech Republic and the Slovak Republic with regard to the loan facility granted to Czechoslovakia pursuant to Council Decision 91/106/EEC
Date: 1993-09-01
Institutions: European Commission
Subjects: Community loan, Czechoslovakia, EU aid, financial aid, liability, republic

COMMISSION  OF  THE  EUROPEAN  COMMUNITIES 

C0MC93) 399 final 

Brussels,  1  September  1993 

Proposal  for a 

COUNCIL DECISION 

allowing for separate liability of the Czech Republic and the Slovak 
Republic with regard to the loan facility granted to Czechoslovakia 
pursuant to Council Decision 91/106/EEC 

(presented  by  the Commission) 

EXPLANATORY MEMORANDUM 

In February of 1991, the EC Council decided to grant a loan of ECU 375 
million to the Czech and Slovak Federal Republic  (CSFR). The loan was 
disbursed in two tranches, the first one of ECU 185 million in August 
1991 and the second one of ECU 190 million in February 1992. The aim of 
the  loan  was  to  strengthen  the  balance  of  payments  and  reserves 
situation  in the  former  CSFR, thus  facilitating  the  introduction  of 
currency convertibility. 

In view of the dissolution of the federation on January  1, 1993, the 
Commission, at the end of last year, took  the initiative to propose to 
the authorities of the CSFR and the two successor  republics that the 
loan be continued on the understanding that the two republics would be 
jointly  and severally  responsible  for the  full amount as regards the 
Community as lender. 

In response to the Commission initiative, the authorities of the Czech 
and Slovak Republics proposed a formal division of the EC loan on the 
basis of a 2:1 ratio, in accordance with the law regarding the division 
of  property  of  the  former  CSFR  adopted  on November  13, 1992  by  the 
Federal  Assembly  of  the  CSFR.  This  law  states  that  the  commitments 
arising  from the  loans accepted by the  former CSFR  should be divided 
between  the  two  successor  states  in  the  ratio  corresponding  to  the 
population of the individual republics, that is, a ratio of 2 to 1. 

In  justifying  their  position, the  new  republics  emphasized  the  fact 
that individual responsibility  is one of the most important aspects of 
sovereignty,  and  that  economic  autonomy  was  a  crucial  factor  in the 
separation  of  the  Czech  and  Slovak Republics. They  also  argued  that 
some other  important official creditors had already  accepted  separate 
liability of the successor states. 

The  Commission,  having  considered  the views  expressed  on  this  issue 
within  the  G-24,  and  after  proper  consultation  of  the  Monetary 
Committee, has decided to accede to the request made by the authorities 
of the successor republics and is proposing that the Community agrees 
to  divide  the  1991  EC  loan  according  to  the  2:1  ratio,  with  each 
successor  republic  being  individually  liable  for  only  its  allocated 
part  of  the  loan.  Accordingly,  the  Czech  Republic  and  the  Slovak 
Republic  will  be  responsible  for,  respectively,  two  thirds  and  one 
third of the total payments of principal, interest and fees associated 
with the EC loan. 

During the interim period between the date of the effective dissolution 
of  the  CSFR,  that  is, December  31, 1992  and  the  date  on  which  the 
reallocation  of  the  1991  loan  comes  into  effect  the  Czech  and  the 
Slovak  Republics  will  remain  jointly  responsible  for  all  payments 
falling due, persuant to Declarations made by each to the Community in 
December  1992  on  the  assumption  of  liabilities  under  all  agreements 
between the Community and former CSFR. It must be noted in this respect 
that  since  the partition  of  the  Federation, the  authorities  of both 
republics  are  indeed  discharging  fully  and  timely  their  obligations 
fallen due. Payments of ECU 10,5 million have been made to this end on 
the 18th of March and ECU 9,6 million on the 15th of June. 

It is proposed to the Council to authorise the Commission to agree with 
the Czech  and the Slovak authorities  on the amendment  or novation of 
the original  Loan Agreement  necessary  to make  effective  the  separate 
liability of the Czech and the Slovak Republics, whilst transposing, as 
appropriate, the  original terms  and  conditions  of the  Community  loan 
operation. The separate liability of the two Republics would also have 
to  be  reflected  in  a  new  drafting  of  the  remarks  accompanying  the 
corresponding Budget token entry. 

Proposal for a 
COUNCIL DECISION 

allowing  for  separate  liability  of  the  Czech  Republic  and  the  Slovak 
Republic  with  regard  to  the  loan  facility  granted  to  Czechoslovakia 
pursuant to Council Decision 91/106/EEC1). 

THE COUNCIL OF THE EUROPEAN COMMUNITIES, 

Having  regard  to  the  Treaty  establishing  the  European  Economic 
Community, and in particular Article 235 thereof, 

Having  regard  to  the  proposal  from  the  Commission2)  submitted 
following consultation of the Monetary Committee, 

Having regard to the opinion of the European Parliament3), 

Whereas  pursuant  to  Council  Decision  91/106/EEC  the  Community  has 
granted  to  the  Czech  and  Slovak  Federal  Republic  (CSFR)  a  medium-term 
loan  of  ECU  375  million  in  principal,  with  a  view  to  ensuring  a 
sustainable  balance-of-payments  situation,  strengthening  its  reserves 
and  facilitating  the  introduction  of  currency  convertibility;  whereas 
the  loan  was  fully  disbursed  by  the  Commission  on  two  instalments  of 
respectively  ECU  185  million  in  August  1991  and  ECU  190  million  in 
February 1992; 

Whereas in accordance with the constitutional act on the dissolution of 
the  CSFR  adopted  by  the  Federal  Assembly  of  the  CSFR  on  25  November 
1992, the CSFR ceased to exist as of 31 December  1992 and  its successor 
states are the Czech Republic and the Slovak Republic; 

Whereas the constitutional  act on the division of  property  of the CSFR 
between  the  Czech  Republic  and  the  Slovak  Republic  adopted  by  the 
Federal Assembly on 13 November 1992 stipulates that the loans accepted 
by the CSFR will  be  divided  between  the Czech Republic  and  the  Slovak 
Republic  in  the  ratio  of  two  to  one,  corresponding  to  the  relative 
proportion  of  their  populations;  and  whereas  the  Czech  and  the  Slovak 
authorities  have  requested  the  Community  to  agree  accordingly  on  the 
division  of the  liability  of  the CSFR  arising  from  the Community  loan 
operation  of  ECU  375  million  granted  pursuant  to  Council  Decision 
91/106/EEC; 

Whereas  the  Czech  Republic  and  the  Slovak  Republic  are  jointly 
continuing to discharge fully their debt servicing obligations  stemming 
from  the  Community  loan  operation  of  ECU  375  million  as  these 
obligations  fall  due; and whereas  these  Republics  have  agreed  to  take 
over  respectively  two  thirds  and  one third  of  the  payment  obligations 
of principal, interest and fees relating to this operation; 

1)  OJ N° L56, 2.3.1991, p. 24 
2) 
3) 

Whereas  the  Commission  should  be  authorised  to  take  the  appropriate 
action  to ensure that the  liabilities arising  under the  loan granted 
purusant to Decision 91/106/EEC should be divided between the Czech and 
the Slovak Republics in conformity with the act of the Federal Assembly 
of 13 November 1992; 

Whereas the Treaty does not provide, for the adoption of this Decision, 
powers other than those of Article 235, 

HAS DECIDED AS FOLLOWS : 

Sole Article 

1.  The  Czech  Republic  and  the  Slovak  Republic  may  assume  separate 
liability  for  respectively  two  thirds  and  one  third  of  all  the 
payments  of  principal,  interest  and  fees  associated  with  the 
service  of  the  Community  medium-term  loan  of  ECU  375  million 
granted to the Czech and Slovak Federal Republic (CSFR) pursuant to 
Council Decision 91/106/EEC of 25 February 1991. 

2.  To  this  end,  the  Commission  is  authorised  to  agree  with  the 
authorities  of  the  Czech  and  the  Slovak  Republics,  after 
consultation  of  the  Monetary  Committee,  on  the  necessary 
adjustments  to the original Loan Agreement  between the  Community 
and the CSFR. 

3.  The terms  and  conditions  stipulated  in Decision  91/106/EEC  shall 
apply  mutatis  mutandis  to  the  arrangements  to  be  entered  into 
pursuant  to  paragraph  2  and  the  financial terms  of  the  original 
Loan Agreement will be preserved. 

4.  All  related  costs  that  may  be  incurred  by  the  Community  in 
concluding and carrying out the arrangements provided  for by this 
Decision  shall  be  borne  by  the  Czech  Republic  and  the  Slovak 
Republic as to two thirds and one third respectively. 

Done at Brussels, 

For the Council 

The President 

1.  Budget line concerned 

FINANCIAL RECORD 

Article (BO-214) loan guarantee for aid to Czechoslovakia. 

2.  References (legal base) 

Article 235 of the Treaty 

3.  Classification of the Expenditure 

Obligatory 

4.  Description and Justification for the action 

a.  Description of the action 

Amendment  to the remarks accompanying the existing token entry 
with a view to reflecting the separate liability of the Czech 
and  the Slovak Republics with  regard  to the  servicing  of the 
Community  loan  of  ECU  375  million  granted  to  Czechoslovakia 
pursuant Council decision 91/106/EEC of 25 February 1991. 

b.  Justification for the action 

Czechoslovakia ceased to exist as of 31 December 1992. 

The authorities of the Czech and the Slovak Republics have 
requested  the  Community  to  agree  on  the  division  of  the 
liability  of  the  CSFR  arising  from  the  Community  loan, 
according  to  a  two  to  one  ratio,  consistent  with  their 
separation agreement. 

5.  Effect of the action on intervention credits 

The Czech Republic and the Slovak Republic will be held separately 
liable for respectively two thirds and one third of the payments of 
principal,  interest  and  fees  associated  with  the  service  of  the 
Community loan. 

ISSN 0254-1475 

COM (93) 399 final 

11 01 

Catalogue number : CB-CO-93-431-EN-C 

ISBN 92-77-58731-8 

Office for Official Publications of the European Communities 
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