Council Regulation (EC) No 389/2006 of  27 February 2006  establishing an instrument of financial support for encouraging the economic development of the Turkish Cypriot community and amending Council Regulation (EC) No 2667/2000 on the European Agency for Reconstruction
Date: 2006-02-27
Institutions: Council of the European Union
Subjects: Cyprus, European Agency for Reconstruction, development aid, economic development, financial aid

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COUNCIL REGULATION (EC) No 389/2006

of 27 February 2006

establishing an instrument of financial support for encouraging the economic development of the
Turkish Cypriot community and amending Council Regulation (EC) No 2667/2000 on the European
Agency for Reconstruction

THE COUNCIL OF THE EUROPEAN UNION,

(5)

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

establishing the European

Measures to be financed under this Regulation are of an
exceptional and transitional nature and are intended, in
particular, to prepare and facilitate, as appropriate, the
full application of the acquis communautaire in the areas
following a solution to the Cyprus problem.

Having regard to the proposal from the Commission,

(6) With a view to allocating the financial support in the
most efficient and rapid way, it is desirable to provide
that assistance can be supplied directly to the benefi-
ciaries.

Having regard to the Opinion of the European Parliament,

Whereas:

(1)

(2)

(3)

repeatedly underlined its
The European Council has
strong preference for accession by a reunited Cyprus.
As yet, a comprehensive settlement has not been reached.

The Council of 26 April 2004, considering that
the
Turkish Cypriot community had expressed their clear
desire for a future within the European Union, recom-
mended that the funds earmarked for the northern part
of Cyprus in the event of a settlement should be used to
put an end to the isolation of that community and to
facilitate the reunification of Cyprus by encouraging the
economic
Cypriot
of
community, with particular emphasis on the economic
integration of
the island and on improving contact
between the two communities and with the EU.

development

Turkish

the

Following the accession of Cyprus, the application of the
acquis is suspended pursuant to Article 1(1) of Protocol
No 10 of the Act of Accession 2003 in the areas of the
Republic of Cyprus in which the Government of the
Republic of Cyprus does not exercise effective control
(hereinafter referred to as ‘the areas’).

(7)

(8)

(9)

of

sound

financial management,

In order to supply assistance in accordance with the
principles
the
Commission should be in a position to delegate to the
European Agency for Reconstruction implementation of
this Regulation. Therefore, Council
assistance under
Regulation (EC) No 2667/2000 on the European
Agency for Reconstruction (1) needs
to be amended
accordingly.

The development and restructuring of infrastructure,
in
particular in the areas of energy and transport, the envir-
onment, telecommunications and water supply should
take account of island-wide planning, where appropriate.

In the implementation of actions financed under this
Regulation,
the rights of natural and legal persons,
including the rights to possessions and property, should
be respected.

(10) Nothing in this Regulation is intended to imply recog-
nition of any public authority in the areas other than the
Government of the Republic of Cyprus.

(11)

In accordance with Article 2 of Council Decision
1999/468/EC of 28 June 1999 laying down the
procedures for
implementing powers
conferred on the Commission (2), measures for the imple-
mentation of this Regulation should be adopted by use of
the management procedure provided for in Article 4 of
that Decision.

the exercise of

(4)

Pursuant to Article 3(1) of Protocol No 10, nothing in
the Protocol precludes measures with a
view to
promoting the economic development of the areas.

(1) OJ L 306, 7.12.2000, p. 7. Regulation as last amended by Regu-

lation (EC) No 2068/2004 OJ L 358, 3.12.2004, p. 2).

(2) OJ L 184, 17.7.1999, p. 23.

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(12)

Implementing this Regulation contributes, as set out
to the achievement of Community objectives,
above,
than
but
those
the
adoption of this Regulation,

the Treaty provides for no powers, other
for
referred to in Article 308 thereof,

— bringing the Turkish Cypriot community closer

to the
through inter alia information on the European
Union,
Union’s political and legal order, promotion of people to
people contacts and Community scholarships,

HAS ADOPTED THIS REGULATION:

— preparation of legal texts aligned with the acquis commu-
nautaire
these being immediately
applicable upon the entry into force of a comprehensive
settlement of the Cyprus problem,

the purpose of

for

Article 1

Overall Objective and Beneficiaries

— preparation for implementation of the acquis communautaire
in view of the withdrawal of its suspension in accordance
with Article 1 of Protocol No 10 to the Act of Accession.

1.
The Community shall provide assistance to facilitate the
reunification of Cyprus by encouraging the economic devel-
the Turkish Cypriot community with particular
opment of
emphasis on the economic integration of
the island, on
improving contacts between the two communities and with
the EU, and on preparation for the acquis communautaire.

Assistance shall benefit inter alia local bodies, cooperatives
2.
and representatives of civil society, in particular organisations of
support organisations, bodies
the social partners, business
in the areas,
carrying out
local or
foundations,
non-profit organisations, non-governmental organisations, and
natural and legal persons.

interest
traditional communities, associations,

functions in the general

3.
The granting of such assistance shall not imply recog-
nition of any public authority in the areas other than the
Government of the Republic of Cyprus.

Article 2

Objectives

Assistance shall be used to support inter alia:

Article 3

Management of Assistance

The Commission shall be responsible for administering

1.
the assistance.

The Commission shall be assisted by the Committee
in Article 9(1) of Regulation (EEC) No
the Member
representatives of

2.
provided for
3906/89 (1), composed of
States and chaired by a representative of the Commission.

3.
The Committee shall give its opinion on draft financing
decisions, where they are in excess of EUR 5 million. The
Commission may approve, without seeking the opinion of the
Committee, financing decisions on supporting activities falling
this Regulation, and amendments to
under Article 4(3) of
financing decisions
the
programme and not exceeding 15 % of the financial envelope
of such a financing decision.

complying with the objective of

4. Where, in accordance with paragraph 3, the Committee is
not consulted on financing decisions,
the Commission shall
inform it no later than one week after the decision is taken.

— the promotion of

social

and economic development
including restructuring, in particular concerning rural devel-
opment, human resources development and regional devel-
opment,

For the purposes of

5.
the management
procedure laid down in Article 4 of Decision 1999/468/EC
shall apply, in compliance with Article 7(3) thereof.

this Regulation,

— the development and restructuring of

in
particular in the areas of energy and transport, the envir-
onment, telecommunications and water supply,

infrastructure,

— reconciliation, confidence building measures, and support to

civil society,

Article 4

Types of Assistance

Assistance under this Regulation may,

inter alia, finance
1.
procurement contracts, grants, including interest rate subsidies,
special loans, loan guarantees and financial assistance.

(1) Council Regulation (EEC) No 3906/89 of 18 December 1989 on
economic aid to certain countries of Central and Eastern Europe (OJ
L 375, 23.12.1989, p. 11). Regulation as last amended by Regu-
lation (EC) No 2257/2004 (OJ L 389, 30.12.2004, p. 1).

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Assistance may be financed in full by the budget where it
2.
is justified and necessary to achieve the objectives of this Regu-
lation.

Article 6

In Article 2 of Regulation (EC) No 2667/2000 the following
paragraph shall be added:

for

supporting activities

Assistance may also be used to cover in particular the
3.
and
costs
training, activities linked to preparing,
comparative studies,
appraising, managing,
implementing, monitoring, controlling
and evaluation of assistance, activities linked to information
and visibility purposes as well as costs for supporting staff,
renting of premises and supply of equipment.

such as preliminary

of

for

assistance

encouraging

‘5.
The Commission may entrust the Agency with the
the
implementation
economic development of the Turkish Cypriot community
within the framework of Council Regulation (EC) No
389/2006 of 27 February 2006 establishing an instrument
of financial support for encouraging the economic devel-
opment of the Turkish Cypriot community and amending
Regulation (EC) No 2667/2000 on the European Agency for
Reconstruction (*).

Article 5

Implementation of Assistance

___________
(*) OJ L 65, 7.3.2006, p. 5.’

Actions under

1.
this Regulation shall be implemented
according to the rules set down in Title IV of part 2 of
Council Regulation (EC, Euratom) No 1605/2002 of 25 June
2002 on the Financial Regulation applicable to the general
budget of the European Communities (1). All
legal
commitments relating to assistance under this Regulation shall
be concluded no later than three years following the date of the
budgetary commitment.

individual

Article 7

Protection of Rights of Natural and Legal Persons

legal persons

1.
The Commission shall ensure that in the implementation
of actions financed under this Regulation the rights of natural
or
to possessions and
property shall be respected. In this context, the Commission
shall act
the European
Court of Human Rights.

in accordance with the case law of

including the rights

2. Without prejudice to any decision taken in accordance
with Article 2(5) of Regulation (EC) No 2667/2000,
the
Commission may, within the limits established in Article 54
of Regulation (EC, Euratom) No 1605/2002, decide to entrust
tasks of public authority, and in particular implementation
tasks,
to the European Agency for Reconstruction or other
bodies listed in Article 54(2) of that Regulation. The selection
criteria for the bodies listed in Article 54(2)(c) are the following:

In order to allow the Member States to convey to the
2.
violations of
information on possible
Commission any
property rights,
any draft
the Commission shall
financing decision which might affect property rights to the
Committee referred to in Article 3(2) two months before the
financing decision is to be taken.

submit

— internationally recognised standing,

Article 8

— compliance with internationally recognised systems of

management and control, and

— supervision by a public authority of a Member State or by

an international organisation/institution.

3.
Actions under this Regulation may be implemented by
shared management according to the rules set down in Title I
and II of part 2 of Regulation (EC, Euratom) No 1605/2002.

(1) OJ L 248, 16.9.2002, p. 1.

Protection of Community’s financial interests

irregularities

1.
The Commission shall ensure that, when actions financed
under this Regulation are implemented, the financial interests of
the Community are protected against fraud, corruption and any
in accordance with Council Regulation
other
(Euratom, EC) No 2988/95 of 18 December 1995 on the
protection of the European Communities' financial interests (2)
and 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 irregu-
larities (3), and with Regulation (EC) No 1073/1999 of
the
European Parliament and of
the Council of 25 May 1999
concerning investigations conducted by the European Anti-
Fraud Office (OLAF) (4).

(2) OJ L 312, 23.12.1995, p. 1.
(3) OJ L 292, 15.11.1996, p. 2.
(4) OJ L 136, 31.5.1999, p. 1.

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For the Community actions financed under this Regu-
2.
lation, the notion of irregularity referred to in Article 1(2) of
Regulation (Euratom, EC) No 2988/95 shall mean any infrin-
gement of a provision of Community law or any breach of a
contractual obligation resulting from an act or omission by an
economic operator, which has, or would have, by an unjustified
item of expenditure, the effect of prejudicing the general budget
of the Communities or budgets managed by them.

Any agreements with the beneficiaries shall expressly
3.
provide for the Commission and the Court of Auditors to
have the power of audit, on the basis of documents and on
the spot, over all contractors and subcontractors who have
received Community funds. Those
also
expressly authorise the Commission to carry out on-the-spot
checks and inspections in accordance with the procedural
provisions of Regulation (Euratom, EC) No 2185/96.

agreements

shall

All

contracts

implementation of
resulting from the
4.
assistance shall ensure the rights of the Commission and the
Court of Auditors as provided for in paragraph 3, during and
after the implementation of contracts.

to in paragraph 1 in cases where reciprocal access to their
external assistance has been established.

3.
Participation in the award of procurement or grant
contracts financed under this Regulation shall be open to inter-
national organisations.

All supplies and materials purchased under a contract
4.
from the
this Regulation must originate
financed under
Community customs territory, the areas, or a country eligible
under paragraphs (1) and (2).

The Commission may, in duly substantiated cases and on
5.
a case-by-case basis, authorise the participation of natural and
legal persons from other countries or the use of supplies and
materials of different origin.

Article 10

Reporting

Article 9

Participation in tenders and contracts

Participation in the award of procurement or grant

1.
contracts financed under this Regulation shall be open to:

— all natural or

legal persons of Member States of

the

European Union,

— all natural or legal persons who are nationals of, or legally
established on the territory of another Member State of the
European Economic Area,

— all natural or legal persons who are nationals of, or legally
established on the territory of Candidate Countries for
Accession to the European Union.

Participation in the award of procurement or grant
2.
contracts financed under this Regulation shall be open to all
natural or legal persons who are nationals of, or legally estab-
lished on the territory of, any other country than those referred

the Commission shall

send to the European
Each year
Parliament and the Council a report on the implementation
of Community assistance under this instrument. The report
shall contain information on the actions financed during the
year and on the findings of monitoring work, and shall give an
assessment of the results achieved in the implementation of the
assistance.

Article 11

Event of a settlement

In the event of a comprehensive settlement of
the Cyprus
problem, the Council shall, on the basis of a proposal from
the Commission, decide unanimously on the necessary adap-
tations to this Regulation.

Article 12

Entry into force

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

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

Done at Brussels, 27 February 2006.

For the Council
The President

U. PLASSNIK