Opinion No 1/2006 on the proposal for a regulation of the European Parliament and of the Council laying down the rules for the participation of undertakings, research centres and universities in actions under the Seventh Framework Programme and for the dissemination of research results (2007 to 2013)
Date: 2006-04-05
Institutions: European Court of Auditors
Subjects: EU programme, dissemination of information, research and development, research body, research programme, research results, type of business, university

25.8.2006

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I

(Information)

COURT OF AUDITORS

OPINION No 1/2006

on the proposal for a regulation of the European Parliament and of the
Council laying down the rules for the participation of undertakings,
research centres and universities in actions under the Seventh Framework
Programme and for the dissemination of research results (2007 to 2013)

(pursuant to Article 248(4), second subparagraph, EC)

(2006/C 203/01)

CONTENTS

Paragraph

Page

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

GENERAL OBSERVATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Commission’s proposal misses opportunity for a radical change . . . . . . . . . . . . . . . . . . .

Key proposals to achieve further flexibility and simplification for participants . . . . . . . .

1-8

9-13

9-12

13

SPECIFIC OBSERVATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

14-90

Compliance with interinstitutional arrangements on legal drafting . . . . . . . . . . . . . . . . .

14

Commission’s obligation to monitor compliance with State aid rules for research and
development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Applicability of the ‘Rules for Participation’ to activities funded within the framework of
the European Research Council (ERC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Distinction between internal control and external audit . . . . . . . . . . . . . . . . . . . . . . . . . .

Chapter I: Introductory provisions (Article 1 to Article 3) . . . . . . . . . . . . . . . . . . . . . . . .

Chapter II: Participations (Article 4 to Article 38)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Section 1: Minimum conditions (Article 4 to Article 12) . . . . . . . . . . . . . . . . . . . . .

Section 2: Procedures (Article 13 to Article 28) . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Section 3: Community financial contribution (Article 29 to Article 38)

Chapter III: Dissemination and use, and access rights (Article 39 to Article 52)

. . . . . . .

Chapter IV: European Investment Bank (Article 53) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Chapter V: Final provisions (Article 54)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

15-16

17

18-19

20-21

22-81

22-26

27-57

58-81

82-86

87-89

90

CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

91-94

Annex ‘Rules for participation’ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3

4

4

5

5

5

5

6

6

6

7

7

7

12

15

16

16

17

18

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THE EUROPEAN COURT OF AUDITORS,

Having regard to the Treaty establishing the European Commu-
nity, and in particular Article 248(4) and Article 279 thereof,

Having regard to the Treaty establishing the European Atomic
Energy Community, and in particular Article 160C(4) and
Article 183 thereof,

regard

Euratom)
to Council Regulation
Having
No 1605/2002 of 25 June 2002 on the Financial Regulation
applicable to the general budget of the European Communi-
ties (1), and in particular Article 183 thereof,

(EC,

Having regard to Commission Regulation (EC, Euratom)
No 1261/2005 of 20 July 2005 (2) amending Regulation (EC,
Euratom) No 2342/2002 of 23 December 2002 laying down
detailed rules for the implementation of Council Regulation (EC,
Euratom) No 1605/2002 (3),

Having regard to the Community Framework for State Aid for
Research and Development (4) and to Article 8 of the World
Trade Organization (WTO) Agreement on Subsidies and Coun-
tervailing Measures (5),

Having regard to the Commission ‘Proposal for a regulation of the
European Parliament and of the Council laying down the rules for the
participation of undertakings, research centres and universities in actions
under the Seventh Framework Programme and for the dissemination
of research results (2007 to 2013)’ (6), hereinafter ‘Rules for
Participation’,

Having regard to the Commission’s request for an opinion on this
proposal in the citations of the ‘Rules for Participation’,

Having regard to the European Parliament’s request for an opin-
ion on this proposal, which was submitted to the Court of Audi-
tors on 2 March 2006,

Whereas, pursuant to Article 163(1) of the Treaty establishing the
European Community, the Community shall have the objective of
strengthening the scientific and technological bases of Commu-
nity industry and encouraging it to become more competitive at
international level, while promoting all the research activities
deemed necessary by virtue of the Treaty;

(1) OJ L 248, 16.9.2002 (as amended by OJ L 25, 30.1.2003).
(2) OJ L 201, 2.8.2005, p. 3.
(3) OJ L 357, 31.12.2002, p. 1.
(4) OJ C 45, 17.2.1996, p. 5.
(5) OJ L 336, 23.12.1994, p. 156.
(6) COM(2005) 705 final.

Whereas, pursuant to Article 164 of the Treaty establishing the
European Community, the Community shall carry out the follow-
ing activities, complementing the activities carried out in the
Member States:

(a)

implementation of research, technological development and
demonstration programmes, by promoting cooperation with
and between undertakings, research centres and universities;

(b) promotion of cooperation in the field of Community
research, technological development and demonstration with
third countries and international organisations;

(c) dissemination and optimisation of the results of activities in
technological development and

Community research,
demonstration;

(d)

stimulation of the training and mobility of researchers in the
Community;

Whereas, pursuant to Article 167 of the Treaty establishing the
European Community, for the implementation of the multian-
nual framework programme the Council shall determine the rules
for the participation of undertakings, research centres and uni-
versities and lay down the rules governing the dissemination of
research results;

Whereas Article 274 of the Treaty establishing the European
Community makes the Commission responsible for the imple-
mentation of the budget, having regard to the principles of sound
financial management;

Whereas, in the area of the specific programmes referred to in
Article 164(a) and Article 166(3) of the Treaty establishing the
European Community, the budget can be implemented within a
framework of direct and indirect centralised management by the
Commission, in accordance with Articles 53(2) of the Financial
Regulation applicable to the general budget of the European
Communities and Articles 36 and 37 of its Implementing Rules;

Whereas, in its Opinion No 2/2004 (7), the Court outlined the
principles of an integrated internal control framework, on the
basis of which internal controls should be designed to provide
reasonable assurance that revenue and expenditure are raised and
spent in accordance with the legal provisions in force and man-
aged in accordance with the principles of sound financial
management;

Whereas the Court concluded in its Special Report No 1/2004 (8)
that the rules for setting the Community’s financial participation
in the RTD framework programmes should be reviewed from first
principles, with the aim of eliminating unnecessary complexity in
the forthcoming Seventh Framework Programme so as not
to compromise effective and adequate control over expenditure,

(7) OJ C 107, 30.4.2004, p. 1. See also the Commission’s action plan
towards an Integrated Internal Control Framework, COM(2006) 9
final, 17.1.2006 (in particular Action No 1 in Annex 1).

(8) OJ C 99, 23.4.2004, p. 1.

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HAS ADOPTED THE FOLLOWING OPINION:

INTRODUCTION

— the award of a grant to the European Investment Bank (EIB)
to fund a ‘Risk Sharing Finance Facility’, which is to contrib-
ute to the provisioning and capital allocation for the EIB’s
loan and guarantee financing for European RTD actions (see
whereas (23) and Article 53. See also the Decision, Annex III
b).

Main features of the Commission proposal for ‘Rules for
Participation’

3.
Besides this, the Commission proposal focuses on achiev-
ing greater simplification with regard to the systems for financial
management and control, in particular through:

1.

The legal base of the Seventh Framework Programme is:

— a Decision of the European Parliament and of the Council
concerning the Seventh Framework Programme of the Euro-
pean Community for research, technological development
and demonstration activities and of the Council concerning
the Seventh Framework Programme of the European Atomic
Energy Community (Euratom) for nuclear research and train-
ing activities (2007 to 2011) — Building the Europe of
knowledge (9), hereinafter ‘the Decision’,

— a number of Council Decisions concerning the Specific Pro-
grammes (10), i.e. ‘Cooperation’ (collaborative research (11),
joint technology initiatives and technology platforms as well
as coordination between national programmes),
‘Ideas’,
‘People’ and ‘Capacities’, for the actions of the Joint Research
Centre, and for nuclear research and training activities under
the European Atomic Energy Community (Euratom) Treaty,

— a Regulation of the European Parliament and of the Council
laying down the rules for the participation of undertakings,
research centres and universities in actions under the Seventh
Framework Programme and for the dissemination of research
results, hereinafter the ‘Rules for Participation’, and a Regu-
lation of the Council for such actions under the Euratom
Treaty.

2.
The Commission’s proposal for the ‘Rules for Participa-
tion’ essentially retains the framework that was established for
previous RTD framework programmes, with the exception of:

— certain aspects related to the setting up of a European
Research Council (ERC) to allocate Community funding for
investigator-driven ‘frontier’ research actions (see whereas
(4a), Article 1(6) and Article 9. See also the Deci-
sion, Annex III a) 4. Individual projects),

— the use of lump sums, flat rates and scales of unit cost to sim-
plify the reimbursement of eligible costs (see Article 30),

— the establishment of a single cost system together with an

increase in upper funding limits (see Article 33),

— the setting up of a ‘Guarantee fund’ to cover the financial risk

of carrying out indirect RTD actions (see Article 38).

4.
In the Explanatory Memorandum of the ‘Rules for Partici-
pation’, the Commission proposes a number of additional mea-
sures, such as the introduction of remote evaluation, electronic
submission of proposals and the establishment of a unique reg-
istration system and helpdesks at the Commission and the
National Contact Points (NCPs) to ensure a more efficient admin-
istration of the Seventh Framework Programme. However, in the
Commission proposal these measures are not specified. Unless
they are referred to in the legal base, there is no guarantee that
they will be implemented (see amendments proposed by the
Court to Article 15(1b), Article 16(3a) and Article 17a).

The Court’s Opinion

In its opinion, the Court pays particular attention to the
5.
consequences of the measures proposed by the Commission in
terms of achieving sound financial management of the indirect
actions funded under the Seventh Framework Programme (2007
to 2013). It also takes into account previous resolutions of the
European Parliament and the Council, notably in the discharge
procedure concerning the financial year 2003 (12) and the 2006
general budget (13). The Court’s observations in this opinion also

(9) See Commission proposal COM(2005) 119 final.
(10) See Commission proposals COM(2005) 439 final, COM(2005) 440
final, COM(2005) 441 final, COM(2005) 442 final, COM(2005) 443
final, COM(2005) 444 final, COM(2005) 445 final, 21.9.2005.
(11) The Commission proposal organises collaborative research into nine
sub-programmes:
‘Food, agriculture and biotechnology’,
‘Information and communication technologies’, ‘Nanosciences, nano-
technologies, materials and new production technologies’, ‘Energy’,
‘Environment (including climate change)’, ‘Transport (including aero-
nautics)’, ‘Socioeconomic sciences and the humanities’, and ‘Security
and Space’.

‘Health’,

(12) Commission staff working paper, ‘Follow-up on the discharge for
implementing the European Union budget for the financial year
2003: Council recommendations No. 5665/05’ (COM(2005) 448
final, 19.9.2005) and European Parliament recommendations —
Wynn report (COM(2005) 449 final, 19.9.2005).

(13) In its amendment 740, the European Parliament placed 10 % of the
appropriations in budget reference line 02 01 02 11 ‘other manage-
ment expenditure’ in reserve, which are to be released once the Com-
mission has demonstrated satisfactory effort to simplify and make
more effective its procedures in line with the recommendations made
in the Court’s Special Report No 1/2004.

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refer, in some instances, to the Commission proposal for the
‘Decision’ concerning the Seventh Framework Programme, and in
particular its Annex III defining the different funding schemes (see
whereas (1)).

6.
When the proposal regarding the ‘Rules for Participation’
was adopted by the Commission in December 2005, the current
series of modifications of the Financial Regulation and its Imple-
menting Rules, which will take effect in 2007, had still only been
adopted in part by the Council (see whereas (2)). Under these cir-
cumstances, and in view of the observations made in its Opinion
No 10/2005 (14), the Court considers it impossible to determine
whether this sectoral regulation will comply with the general
principles and detailed provisions of a revised Financial
Regulation.

By analogy, the Court’s observations and conclusion set
7.
out in this opinion should also apply to the Commisson proposal
for a ‘Regulation of the Council determining the rules for the par-
ticipation of undertakings, research centres and universities and
laying down the rules for the dissemination of research results for
the implementation of the European Atomic Energy Community
(Euratom) Seventh Framework Programme (2007 to 2011)’ (15).

Detailed suggestions on how to amend the Commission

8.
proposal in view of this opinion are set out in the Annex.

GENERAL OBSERVATIONS

Commission’s proposal misses opportunity for a radical change

The European Union’s RTD framework programmes are
9.
the world’s largest multinational research programmes in terms of
funding and participation. They account for a significant part of
public funding for research projects both within Member States
and Associated Countries. For many public research entities, such
as universities, they are often one of the main sources of third-
party funding.

Several thousand legal entities participate in each RTD
10.
framework programme, using a considerable variety of distinct
types of indirect actions. Most of these are multi-partner actions
carried out by a consortium of several participants. For each indi-
rect action the Commission concludes contracts or grant agree-
ments with each of the participants, with most agreements grant-
ing only a comparatively low financial contribution from the
Community budget. As the Court’s audits have revealed, the con-
sequence of this large variety of actions and the substantial num-
ber of individual grants is a considerable transaction cost per euro
spent (16).

(14) OJ C 13, 18.1.2006. See paragraph 12.
(15) COM(2006) 42 final, 7.2.2006.
(16) See Special Report No 1/2004, paragraphs 74, 78 and 79.

Moreover, participants have indicated to the Court that
11.
they consider Community grants to be excessively cumbersome
to administer, in particular in the absence of appropriate guidance
by the Commission. Preparing proposals and gathering partici-
pants for a consortium is a costly and time-consuming exercise,
in particular in view of the low average success rate. Participants
also complain that the Commission’s procedures for awarding
grants take too long and that the use of Community funds is
insufficiently flexible to take account of the rapid changes in sci-
ence. As a result, the most innovative research projects are often
not submitted to the European RTD framework programmes.

12.
Whilst it is recognised that a certain degree of complex-
ity is inevitable, the Court considers that the Commission pro-
posal misses the opportunity to bring about radical changes to
the administrative and financial rules for the Seventh Framework
Programme. In the Court’s view, the following general principles
should guide the legislator when adopting the legal base for the
Seventh Framework Programme:

— research is driven by the scientific knowledge and expertise
of individual researchers. Like most beneficiaries of public
funds, researchers have a preference for funding with the
least bureaucratic strings attached. They consider that only
such flexible grants allow them to carry out the most prom-
ising research, and, in such cases, they are more likely to
develop the sense of ownership which is required to succeed.
To ensure this essential ‘buy-in’ by the research community,
the Seventh Framework Programme should therefore aim for
a more flexible use of the Community grants by the consor-
tia implementing indirect actions,

— with this in mind, the consortia must also be given the means
to react speedily to external and internal changes during the
lifecycle of a project. This implies that the decision-taking
powers of the co-ordinator will have to be strengthened. The
co-ordinator should carry the scientific and financial respon-
sibility and must be able to decide not only on the scientific
programme, but also on the allocation of financial resources
in accordance with a set of rules previously agreed by all par-
ticipants in a consortium. At the same time, the co-ordinator
must guarantee towards the Commission that the scientific
scope and the legally required European character of the
action are maintained throughout the project duration. In
practice, this should imply that a participant can only be
replaced by entities of an equivalent research capacity and
scientific standing,

— the counterpart of increased flexibility must be enhanced sci-
entific and financial accountability towards the Commission,
both for on-going indirect actions and after their completion.
This should however not imply excessive reporting to the
Commission, but instead should be based on a peer review

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mechanism, possibly through hearings. Based on the results
of such reviews, the Commission should have the possibility
to discontinue non-performing indirect actions so that pub-
lic money is not wasted.

SPECIFIC OBSERVATIONS

In the Court’s view, the ‘Rules for Participation’ should reflect the
assumption that researchers participating in the European RTD
framework programmes can be trusted to put public money to its
best use, provided this remains within the limits established by
the legal base to ensure effective and adequate control by the
Commission. When determining these controls, it should how-
ever be acknowledged that the risk of failure is an inherent fea-
ture of all research activities.

Compliance with interinstitutional arrangements on legal
drafting

The readability of this Regulation could be improved if all
14.
relevant definitions were grouped in Article 2, ‘Definitions’ (17). In
order to avoid confusion and proliferation of differing definitions,
the wording of definitions should only be changed as compared
to previous RTD framework programmes if a change in substance
is really intended.

Key proposals to achieve further flexibility and simplification
for participants

Commission’s obligation to monitor compliance with state aid
rules for research and development

In line with the above, and following-up recommenda-
13.
tions made by the Court on previous occasions, this opinion iden-
tifies a number of areas where the Commission proposal may not
be sufficient to achieve the required flexibility and simplification
for participants in the Seventh Framework Programme. Of these
areas the following are considered most relevant:

— organising a centralised and ex-ante verification of legal enti-

ties (see paragraphs 34 to 36),

— requiring the Commission services to use common databases
and to exchange data electronically (see paragraphs 41 to 42),

— applying a more flexible governance structure for indirect
actions, with the Commission concluding a grant agreement
with the coordinator acting on behalf of the other partici-
pants, or with the Commission awarding, by Commission
decision, a grant without signing a private law contract (see
paragraphs 45 to 55),

— using reviews (or hearings), ideally by peers, as a monitoring

tool for indirect actions (see paragraph 56),

— providing for a single cost reimbursement system which
allows participants to determine the Community financial
contribution in a transparent,
robust and simple-to-
administer way (see paragraphs 63 to 70), and

— encouraging the use and the dissemination of results of indi-
rect actions and the transfer of ownership (see paragraphs 82
to 84).

15.
According to Articles 87 and 88 of the Treaty, the Com-
mission is responsible for keeping under constant review all sys-
tems of aid existing in the Member States, since, as a matter of
principle, State aid is prohibited (see whereas (3)). With regard to
the ceilings laid down in paragraph 5.12 of the ‘Community
Framework for State Aid for Research and Development’, this
specifies: ‘Where Community financing and State aid are combined,
total official support may not exceed 75 % in the case of industrial
research and 50 % in the case of pre-competitive development activities’
(see also paragraphs 72 and 73).

The Specific Programme ‘Capacities’ explicitly provides
16.
for the funding of public and private ‘research infrastructures’
under
the Seventh Framework Programme. Furthermore,
Annex III of the ‘Decision’ states that the financing of such infra-
structures will combine funding from the RTD framework pro-
gramme and other EU (notably the Structural Funds) and national
instruments (18). As evidenced by the Court’s audits, the Commis-
sion’s existing mechanisms to monitor overall levels of State aid
in respect of research and development are inadequate for ensur-
ing compliance with the thresholds defined in the ‘Community
Framework for State Aid for Research and Development’ for
activities co-funded under the Seventh Framework Programme. In
addition, as referred to in a previous Court opinion concerning
Structural Actions (19), the Commission no longer has detailed
information on the implementation of those activities under

(17) In the Commission’s proposal, several definitions are given in other
articles of the ‘Rules for Participation’ (e.g. the definition of dissemi-
nation, access rights or use in Article 1 or of legal entity in Article 4),
some of which are however not fully consistent with their use in the
other parts of the legal base (e.g. the proposed definition of indirect
action in Article 1). In other cases, the terms are used in the legal
base, but the definition is missing (such as for instance the definition
of investigator-driven frontier research projects in Article 9, coordi-
nator in Article 23 and Article 25, receipts in Article 31).

(18) In the case of participation of entities from the candidate countries,
Annex III states that an additional contribution from the pre-
accession financial instruments could be granted under similar con-
ditions.

(19) See Court opinion No 2/2005, paragraphs 10 and 11.

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shared management for which national or regional authorities are
responsible, such as the financing of research projects, support
for innovation and technology transfer or research infrastruc-
tures. As already referred to by the Court in an opinion concern-
ing the Financial Regulation (20), the Commission should pay
close attention to the potential risks arising from the accumula-
tion of different grants from the Community budget for a single
action. Therefore the Court recommends that the Commission
develops appropriate monitoring tools to ensure compliance with
State aid rules in cases of funding of research activities from mul-
tiple sources.

to

Regulation

interests (25),

Furthermore, the Court recommends the insertion of ref-
19.
erences to Council Regulation (EC, Euratom) No 2988/95 of 18
December 1995 on the protection of the European Communities
Euratom)
financial
No 2185/1996 (26) concerning on-the spot checks and inspec-
tions carried out by the Commission, and to Regulation (EC)
No 1073/1999 (27) and Regulation (Euratom) No 1074/1999 (28)
concerning investigations conducted by the European Anti-Fraud
Office (OLAF). It should be noted that these Regulations apply to
the Commission only (see whereas (15), whereas (16) and
Article 19(8a)).

(EC,

Applicability of the ‘Rules for Participation’ to activities funded
within the framework of the European Research Council (ERC)

Chapter I: Introductory provisions (Article 1 to Article 3)

17.
According to the Commission proposal, the European
Research Council (ERC) will act as an advisory body, supple-
mented by an executive agency to provide an administrative
structure, in accordance with Council Regulation No 58/2003 of
19 December 2002 (21). The Court agrees with the Commission
that the ‘Rules for Participation’ should also apply to activities
funded within the framework of the ERC (22) to ensure that the
same principles apply to all types of Community funding for the
different schemes established in Annex III a) of the ‘Decision’. The
Court also considers that the proposed structure will provide suf-
ficient assurance that the ERC’s scientific autonomy will be guar-
its management structure can be agreed
anteed, and that
and implemented sufficiently quickly (23). The Court however rec-
ommends that the applicability of the ‘Rules for participation’
should be made explicit in the legal base (see whereas (4a) and
Article 1).

Distinction between internal control and external audit

18.
The Court’s rights as the external auditor of the European
Union derive directly from Article 248(2) of the Treaty, and the
Court, as the external auditor of the Commission, should not be
considered as an element of internal control. Therefore, the dif-
ferent mechanisms of internal control and external audit should
be clearly separated in the ‘Rules for Participation’ (24)
(see
whereas (16)).

(20) See Court Opinion No 10/2005, paragraphs 46 to 47.
(21) OJ L 11, 16.1.2003, p. 1.
(22) See the ‘Decision’, Annex III a) 4. Individual projects.
(23) When entrusting the ERC’s executive agency with the executive pow-
ers the Commission enjoys under the Treaties, the provisions of
Article 54 of the Financial Regulation are to apply. In particular, the
implementing tasks delegated must be clearly defined and fully super-
vised (see also paragraph 40).

(24) For the different roles of external audit and internal control, see also
the Court’s proposal for an integrated internal control framework as
described in the Court’s Opinion No 2/2004.

Clarification of definition of ‘indirect action’ required

The Implementing Rules of the Financial Regulation
20.
require in ‘whereas’ (38) that the types of direct and indirect
actions which may be financed by the Community are to be
specified. In the Court’s view, however, the definition of ‘indirect
action’ given in Article 1 is not entirely accurate, since not only
funding schemes identified in Annex III a) of the ‘Decision’ are to
be covered by this Regulation. With regard to the those funding
schemes established in Annex III b), the Commission proposes
however that only grants to the EIB are to be covered by this
Regulation.

In the past the Court identified a risk that normal public
21.
procurement procedures might be circumvented by the use of
indirect RTD actions. This, in turn, can also make it difficult
to verify the Commission’s compliance with the ceiling imposed
on the administrative expenditure for each programme (29). The
Court therefore recommends clarification in Article 2 of the defi-
nition of ‘indirect action’, spelling out the different forms that an
indirect action may take in accordance with the Financial Regu-
lation, i.e. grants, scholarships and prizes, honoraria, and sub-
scriptions, but also public procurement (30)
(see Article 1,
Article 2(12), Article 13(1), Article 14 and Article 53). Similarly
Annex III of the ‘Decision’ should be amended accordingly (31)
(see also paragraph 27). Otherwise, the legal base could create

(25) OJ L 312, 23.12.1995, p. 1.
(26) OJ L 292, 15.11.1996, p. 2.
(27) OJ L 136, 31.5.1999, p. 1.
(28) OJ L 136, 31.5.1999, p. 8.
(29) See Special Report No 1/2004, paragraphs 18 and 78.
(30) See Article 160 of the Financial Regulation (Article 229(3) of the

Implementing Rules).

(31) The final sentence in section a) 3. ‘Coordination and support actions’
reads as follows: ‘These actions may also be implemented by means other
than calls for proposals’. This should be replaced by ‘In addition to grants,
and in accordance with the applicable provisions of the Financial Regulation
and its Implementing Rules, these actions may also be implemented by: pub-
lic procurement for goods or services established by contract and selected on
the basis of calls for tender; study, research or training scholarships and
prizes following contests; subscriptions to organisations; or honoraria for
independent experts’.

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an ambigious situation as to which provisions apply to the dif-
ferent forms of indirect actions, in particular in respect of public
procurement.

Chapter II: Participations (Article 4 to Article 38)

Section 1: Minimum conditions (Article 4 to Article 12)

In the Court’s view, this could be dealt with in the grant
26.
agreements signed by the Commission and the legal entity
employing the researcher(s) or in the Commission decision
awarding the grant. These documents could include a clause
specifying that the award of the grant is conditional upon a spe-
cific researcher working at this legal entity, and that, if this spe-
cific researcher moves to another organisation established in a
Member State or Associated country, the grant will also be trans-
ferred, if so requested by the researcher and subject to successful
verification and certification of the new participant’s operational
and financial capacity by the Commission (see paragraphs 34
to 36).

Minimum conditions for participation to be clarified

Section 2: Procedures (Article 13 to Article 28)

22.
In the Court’s view, a large number of participants in
consortia often means unnecessary bureaucracy and an excessive
administrative burden. This is particularly the case for the
co-ordinators of ‘Integrated Projects’ and ‘Networks of Excel-
lence’ (32). It is therefore recommended that the ‘Rules for Partici-
pation’ clarify that the principle of efficient implementation
should be a key consideration, in particular in those cases where
the number and types of participants exceed the minimum legal
requirements (see whereas (9)).

23.
The Commission’s proposal for the minimum legal
requirements for the number of independent legal entities partici-
pating in indirect actions and their place of establishment is,
or could be interpreted as, overly restrictive. The Court recom-
mends that these conditions should be more clearly described (see
Article 5 and Article 7).

24.
Moreover, the Commission should clarify in Article 10
the conditions to be met by sole participants in indirect actions.
In particular, it should be clarified whether this provision applies
to European Economic Interest Groups (EEIG) and international
European interest organisations only, or whether it also covers
other types of legal entities.

Lack of clarity in rules applicable to Community funding by means other
than grants awarded on the basis of calls for proposals

27.
In the Commission’s proposal, Annex III of the ‘Decision’
provides for exceptions to the use of grants in accordance with
Article 160 of the Financial Regulation (Article 229(3) of the
Implementing Rules). These exceptions cover all Community
funding made by means other than grants,
including grants
awarded on the basis of calls for proposals, namely:

— public procurement for goods or services established by con-

tract and selected on the basis of calls for tender,

— study, research or training scholarships and prizes following

contests (33),

— subscriptions to organisations,

Absence of provisions to guarantee the portability of ERC funding

— honoraria for independent experts.

25.
According to the Commission proposal, grant agree-
ments will in principle be signed with legal entities, not individual
researchers. In contrast to other parts of the Seventh Framework
Programme, grants for investigator-driven ‘frontier’ research
within the framework of the ERC are awarded to fund the research
activities of a specific researcher or research team. This poses the
problem of ensuring that a grant for investigator-driven ‘frontier’
research can be transferred if a specific researcher moves to
another research organisation (see Article 9(2)).

28.
These exceptions, which by default are subject to the
rules set out in the Financial Regulation, should be clearly enu-
merated in the ‘Decision’, Annex III a) 3. ‘Coordination and sup-
port actions’ (see Footnote 31) and in Article 14 of the ‘Rules for
Participation’ (see also paragraph 21). Furthermore, the Court rec-
ommends that the Commission identifies which provisions of the
Financial Regulation are applicable for each of the exceptions
referred to in Article 14 and also clarifies the extent to which
other provisions of this Regulation do not apply.

(32) See also the Court’s proposal for a simplified governance structure of
consortia carrying out multi-partner indirect actions (see para-
graphs 45 to 52).

(33) However, a specific provision for scholarships and prizes is missing
in the Commission proposal for Article 14 (see also Article 30(1)).

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Horizontal selection and award criteria not specified in ‘Rules for
Participation’

be adopted by the Commission, as a body, to make them binding
on all Commission services implementing the Seventh Frame-
work Programme and published in the interests of transpar-
ency (35) (see whereas (13)).

In the Court’s view, the selection and award criteria
29.
defined in the Commission proposal for the Specific Programmes
do not serve as a robust basis for carrying out evaluations (see for
instance Article 6(3) of
the Specific Programme ‘Coopera-
tion’ (34)). As a consequence, these criteria and their application
will have to be specified at a later stage in the (annual) work pro-
grammes for each of the Specific Programmes, without a possi-
bility for the European Parliament to contribute to their definition.

30.
In the interest of more coherent and transparent rules,
the Court would prefer that horizontal selection and award crite-
ria for the evaluation of proposals are spelled out in this Regula-
tion. These horizontal criteria could then be complemented in the
Specific Programmes or the work programmes.

31.
Moreover, with regard to the evaluation principles and
selection and award criteria specified in Article 15, the Court rec-
ommends that provision should be made for:

— specific criteria for investigator-driven ‘frontier’ research
funded within the framework of the ERC (see also the Deci-
sion, Annex III a) 4. Individual projects),

— remote evaluations (i.e. decentralised at the place of work of
evaluators) as a means to attract high-calibre evaluators to
participate and to speed up evaluations, as referred to in the
Explanatory Memorandum,

— the exclusion of proposals at any time, including during the
negotiation phase (taking place after the evaluation proce-
dure), if they contravene fundamental ethical principles.

Implementing rules and procedures to be established and adopted by the
Commission

Moreover, in contrast to the Commission proposal, the
33.
Court recommends that such rules should cover the negotiation
phase, which takes place after selection of proposals on the basis
of a comparative assessment by independent experts and prior to
the award of a grant (36) (see Article 16 and Article 17(4a)). The
rules should ensure that the scientific scope is not changed by the
Commission during the negotiation, unless recommended by the
evaluation outcome.

Centralised and ex-ante verification and certification of legal entities
recommended

34.
Similarly, the Court agrees with the proposal that the
Commission should establish more specific rules and procedures
for the verification of the existence, legal status and operational
and financial capacity of participants in the RTD framework pro-
grammes (see whereas (14) and Article 16a). When doing this,
care should be taken that the request for documents and the
related checks to be made are in proportion to the financial risk
involved. Similarly, allowance must be made for the capacity of
certain legal entities (such as public bodies or SMEs) to produce
the requested information. The Court considers that such rules
should be adopted by the Commission as a body to establish a
common framework and to make them binding on all Commis-
sion services (and executive agencies) implementing the Seventh
Framework Programme. However, in order to be fully in line with
the Financial Regulation, provision must be made for the Com-
mission to ascertain their existence and legal status, but also
to verify participants’ operational and financial capacity.

The Court agrees with the proposal that the Commission
32.
should establish more specific rules and procedures governing the
different steps leading to the award of grants and the use of inde-
pendent experts. To avoid unnecessary bureaucracy, these rules
and procedures should adequately take into account the differ-
ences between individual funding mechanisms and types of indi-
rect actions. Moreover, in the Court’s view, such rules must

‘Cooperation’

(34) See Proposal for a Council Decision concerning the Specific Pro-
(COM(2005) 440 final, 21.9.2005,
gramme
Article 6(3): ‘The work programme will specify the criteria on which pro-
posals for indirect actions under the funding schemes shall be evaluated and
projects selected. The criteria will be those of excellence, impact and imple-
mentation and within this framework additional requirements, weightings
and thresholds may be further specified or complemented in the work pro-
gramme.’

Almost all legal entities taking part in the RTD frame-
35.
work programmes participate in several indirect actions, often
administered by different Commission services. As evidenced by
the Court’s audits, this often implies that the same information is
requested over and over again. Therefore, the Court recommends

(35) See also Special Report No 1/2004, paragraphs 88, 92 and 128.
(36) Note that the term ‘selection’ refers to the Commission drawing up,
on the basis of the evaluation results, a list of proposals that have
passed the minimum thresholds of the evaluation (possibly with a
reserve list in the event that some additional funding becomes avail-
able during the negotiation period) and the list of the proposals to be
rejected (ineligible, those which have not attained the minimum
thresholds of the evaluation, those which cannot be funded because
of budget limits).

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that a centralised ex-ante verification system should be set up.
Such a system should allow for verification to be carried out inde-
pendently of the evaluation of proposals (37). In the Court’s view
the following general principles should be applied:

— the verification should be based on appropriate supporting
documents provided by the legal entity, allowing its existence
and legal status as well as its financial and operational capac-
ity to be verified,

— these documents must be up-dated periodically, or whenever
requested by the Commission (38), by the legal entity,

— to avoid double verification, the Commission should certify
a successful verification, such a certificate then being
acknowledged as sufficient by all Commission services (and
the executive agencies) implementing the Seventh Frame-
work Programme for all proposals submitted by the same
legal entity until further notice.

36.
By doing this, the Commission would establish a com-
mon framework contributing to a consistent and coherent
approach to risk assessment by sub-delegated Authorising Offic-
ers, in accordance with Article 118 of the Financial Regulation
(Article 182 of the Implementing Rules). In turn, this should have
the effect of limiting the need for bank guarantees. In addition,
the proposed modification will ensure a coherent approach
within the Commission, avoiding unnecessary bureaucracy for
participants in the RTD framework programme and speeding up
the negotiation of selected proposals. The establishment of a cen-
tral database as part of such a verification system would also be
more effective in protecting the Communities’ financial interest
(see whereas (20) and Article 16a).

Awarding of grants based on Commission decision

The Court considers, however, that grants should be
38.
awarded on the basis of Commission decisions since, according
to the Financial Regulation (40), the use of the Commission deci-
sion procedure is a pre-condition for agreeing on negotiated flat
rates for indirect costs, established according to the usual cost
accounting practices of the participant, over and above the 7 %
established by the Financial Regulation (see paragraphs 69
and 70).

Clarification of the rules governing independent experts

Independent experts are used by the Commission to
39.
evaluate and monitor proposals for indirect actions, on-going
actions, and the design, implementation and results of the frame-
work programmes and their Specific Programmes. Therefore, in
the Court’s view, a reference to ‘monitoring activities’ must be
in
added in Article 17 to be consistent with the proposal
Article 27.

40.
Given the specificity of ERC funding, the Court recom-
mends inserting a special clause in Article 17 concerning the
nomination of experts to evaluate proposals for investigator-
driven ‘frontier’ research. In the Court’s view, this should be the
responsibility of the ERC’s ‘Scientific Council’, or its competent
subcommittees. Such a different approach would not only distin-
guish ERC funding from those parts of the framework pro-
gramme managed directly by the Commission, but it would also
clarify the responsibility of the ‘Scientific Council’ in the selection
of proposals (see also paragraph 17).

Use of common databases and electronic exchange of data to be specified
in the ‘Rules for Participation’

41.
In the Court’s view, the Commission’s IT systems should
permit computerised transaction processing at every stage of the
procedure (41). Despite its longstanding commitment to imple-
menting such a system, the Commission has consistently failed to
do so (42).

37.
Starting in 2002, the Commission has introduced a series
of measures to simplify the procedures leading to the award of a
grant under the RTD framework programmes (39). In particular,
by means of empowerment, the Commission, as a body, delegated
the necessary decision-making powers to specific Members of the
Commission, with further subdelegation to the Directors-General.
For the Seventh Framework Programme, the Commission pro-
poses a further simplification of the award procedure for grants,
according to which a Commission decision would no longer be
required (see Article 16(8)).

(37) Special Report No 1/2004, paragraphs 92 and 122.
(38) Note that as a starting point, the Commission could establish a first
set of supporting documentation using its archive of those docu-
ments requested from all legal entities which have participated under
previous RTD framework programmes.
(39) Special Report No 1/2004, paragraph 66.

42.
Therefore, the Court recommends specifying the obliga-
tion to set up integrated databases and a common computerised
system in the ‘Rules for Participation’ (see Article 17a). In this
context, the Court welcomes the intention of the Commission to
provide for electronic submission and a unique registration facil-
ity (37), as stated in the Explanatory Memorandum, and recom-
mends that this provision should be included in the ‘Rules for Par-
ticipation’ (see Article 16 and Article 17a).

(40) See Article 117 of the Financial Regulation (Article 181 of the Imple-

menting Rules).

(41) These stages include in particular: electronic proposal submission,
identification and selection of experts, proposal evaluation and selec-
tion, negotiation of proposals, the award and management of grants,
the receipt of project deliverables (such as reports and financial state-
ments) and communication with participants.

(42) Special Report No 1/2004, paragraphs 86 and 138; Court’s Annual

Report concerning the financial year 2004, paragraph 6.10.

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Model grant agreements should take account of specificities in funding
arrangements

In view of the extremely diverse nature of the funding
43.
schemes proposed in Annex III of the ‘Decision’, the Court rec-
ommends establishing specific model agreements for the differ-
ent types of RTD activities and indirect actions (see Article 19).

44.
Moreover, in line with Article 17(4), which provides for
adoption by the Commission of the model appointment letters
for independent experts, the Court considers that the ‘Rules for
Participation’ must provide for a formal adoption of the specific
model grant agreements by the Commission to ensure consis-
tency throughout the Commission services (43).

The current Commission proposal has as a major draw-
48.
back in that the information contained in the grant agreement is
specific to individual participants, thereby unnecessarily compli-
cating the management of grants and multiplying the need for
amendments in case of changes in participation. Furthermore,
according to the Commission proposal, all participants are party
to the grant agreement concluded with the Commission, thereby
giving each participant a ‘de facto’ veto right.

49.
Therefore the Court recommends modifying Article 19
so that only elements essential for the indirect action as a whole
are covered by the grant agreement, such as:

— duration,

— scientific and technical obligations,

Overly complicated governance structure for indirect actions

— the budget of total estimated costs,

45.
Since the beginning of the European RTD framework
programmes, the Community has used private law contracts (or
grant agreements) to establish a legal relationship between par-
ticipants in an indirect action and the Commission. Initially, the
intention behind this approach was to strengthen the coordina-
tion between legal entities from different countries and to further
multi-national cooperation. This has led, however, to a situation
where participants consider themselves to be contractors for the
Commission or where the Commission is seen as an active part-
ner in the consortium. This has also created a ‘de facto’ veto right
for each participant in an indirect action, which in practice often
results in the loss of the flexibility required for sucessful research.

In the Court’s view, it should not be the Commission’s
46.
indirect
role to be directly involved in managing individual
actions. Such an interpretation of the Commission’s role signifi-
cantly contributes to the burdensome ‘red tape’ deplored by many
stakeholders in the RTD framework programmes. It should be the
responsibility of each consortium to define its internal decision-
making structure according to its specific needs and of the indi-
vidual participants to agree with each other on all relevant issues
concerning the management of the indirect action.

47.
The Court therefore suggests a simplified governance
structure for consortia carrying out indirect actions, in line with
previous proposals (44). In the Court’s view, the specific rights and
obligations of each individual participant towards any other par-
ticipant in the consortium should be defined in the consortium
agreement or, where necessary, any other written agreement. Fur-
thermore, with regard to the grant award, the Court considers
that the Commission should conclude a grant agreement with the
coordinator, acting on behalf of the other participants (see
Article 23).

(43) Special Report No 1/2004, paragraph 111.
(44) Special Report No 1/2004, paragraph 115.

— the maximum Community contribution.

All other aspects, including the financial aspects specific to indi-
vidual participants, should be defined in the consortium agree-
ment. As a consequence, the consortium agreement would have
to be concluded after the negotiation of a selected proposal, but
prior to the signature of the grant agreement or the award of a
grant by Commission decision (see Article 23 and Article 24(2)).

According to the Commission proposal, it is unclear
50.
how, legally speaking, the participants accede to the grant agree-
ment. In particular, it is not clear how the grant agreement can
enter into force unless all participants have empowered (i.e. man-
dated) the coordinator prior to the signature of the grant agree-
ment. In the alternative structure proposed by the Court, this
agreement between the coordinator and the participants (empow-
ering the coordinator to act as a legal representative for the other
participants and to conclude a legally binding grant agreement on
their behalf) would be laid down in the consortium agreement.

Rights and obligations between the participants, in accordance with the
grant agreement, to be established in the consortium agreement

51.
In line with the above, it should be clarified in the ‘Rules
for Participation’ that the grant agreement is not the sole source
of rights and obligations in respect of participations, but that the
consortium agreement may add rights and obligations concern-
ing relations between the participants themselves (see Article 24).
In particular, and in accordance with the model grant agreement,
consortium agreements should establish:

— provisions regarding legal representation, internal organisa-
tion of the consortium, confidentiality arrangements and the
settlement of internal disputes, including the withdrawal,
removal or exchange of participants,

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— all detailed financial aspects specific to individual participants
including the distribution of the budget of estimated costs,
the distribution of the maximum Community financial con-
tribution, the forms of grants used and provisions regarding
the reporting and calculating of costs for each of the
participants,

therefore recommends deletion of
procedure. The Court
Article 26(3). However, in the Court’s view, the obligation to
select legal entities which join an on-going action in a fair, trans-
parent and competitive manner should be stated in the model
grant agreements (see Article 19(1a)).

— additional rules on ownership of foreground generated by
the indirect action, transfer of such ownership, access rights
and dissemination and use, including intellectual property
rights arrangements.

52.
The Court recommends that the Commission should
establish specific model consortium agreements, thereby provid-
ing a common standard. However, consortia should be free to
adapt this model to their needs. In contrast to model grant agree-
ments, a formal adoption of the model consortium agreements by
the Commission is therefore not considered necessary (see
Article 24(3)). However, the Commission should provide infor-
mation, support and training, possibly during the negotiation
phase, on how to set up such consortium agreements.

Coordinators
should have
administrative and management activities

the possibility

to subcontract

their

53.
Given the complexity of administrative arrangements
under the RTD framework programmes, some legal entities
(including those who are the main participants from a scientific
point of view) do not wish to take over the role of coordinator.
This is in particular true for public universities and SMEs which
often lack the necessary administrative support structures. In the
Court’s view, the coordinator should therefore have the possibil-
ity to subcontract administrative and management tasks to exter-
nal service providers, subject to the other participants agreeing to
such an externalisation in the consortium agreement
(see
Article 25(3)) (45).

Changes in the composition of a consortium to be made in a fair,
transparent and competitive manner

54.
In the Court’s view, while it is recognised that legal enti-
ties which join an on-going action should be selected in a fair,
transparent and competitive manner, the requirement to publish
‘competitive calls’ (46) will be both overly costly and time-
consuming to organise. In practice it would be unmanageable for
most consortia to change their composition by applying such a

(45) These subcontracted services could then be reimbursed by the Com-
mission according to the rates defined for ‘management and training’
activities, as provided for in Article 33(4).

(46) The term ‘competitive call’ has already been used in the Sixth Frame-
work Programme, but was not legally defined. Since then the Com-
mission has provided informal guidelines on how to carry out such a
‘competitive call’ (generally speaking a procedure similar to a ‘call for
proposal’). No information has been provided by the Commission on
the number of cases in which such a procedure has actually been car-
ried out so far.

55.
Only in those cases where the scientific scope and the
legally required European character of the action is put at risk by
a change in the composition of the consortium, should the Com-
mission have the right to object to such a change. In all other
cases this should remain the responsibility of the legal entities
participating in the indirect action (see Article 26(4)).

The use of reviews as a monitoring tool for indirect actions to be explicitly
provided for in the ‘Rules for Participation’

The Court recommends clarifying the Commission’s legal
56.
obligation to monitor indirect actions and programme imple-
mentation, also regarding previous RTD framework programmes
(see also Article 7 of the Decision) (47). In the Court’s view, the
Commission’s monitoring activity should explicitly provide for
reviews (or hearings) as an alternative monitoring approach (see
Articles 19(4) and 27(2)). Moreover, such reviews could be used
when the possible termination of an action or of the participa-
tion of a specific legal entity has to be assessed (see Article 18(5)).
As for the nomination of experts to evaluate proposals (see para-
graph 40),
the monitoring of
investigator-driven ‘frontier’ research funded within the frame-
work of the ERC should be the responsibility of its ‘Scientific
Council’, or its competent subcommittees (see Article 27(6)).

the Court considers

that

Results of programme monitoring activities to be presented to a
programme committee composed of representatives of Member States

57.
As evidenced by the Court’s audits, Programme Commit-
tees play an important role in monitoring the RTD framework
programmes. Therefore the Court considers that the ‘Rules for
Participation’ should state that the results of the Commission’s
programme monitoring activities, including those regarding pre-
vious RTD framework programmes, are to be presented to a pro-
gramme committee composed of representatives of Member
States, in accordance with Article 202 of the Treaty establishing
the European Community (see whereas (17) and Article 27).

(47) Special Report No 1/2004, paragraph 62.

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Section 3: Community financial contribution (Article 29 to
Article 38)

In addition, the Commission proposal in Article 30(2) on
61.
how to calculate the Community financial contribution is incon-
sistent and should be clarified, using exact terminology (i.e. the
maximum Community financial contribution which is to be set
on the basis of the budget of estimated costs) (49).

Court welcomes proposals to simplify financing systems

Compliance with the ‘no profit’ principle must be ensured

58.
The Court welcomes proposals to simplify financing sys-
tems (48). The Commission, however, should clarify in the ‘Rules
for Participation’ for which types of actions, forms of grants, spe-
cific activities and types of costs (i.e. direct or indirect), flat rate
financing, including scale of unit costs, or lump sum financing
will be applied. In the Court’s view, the legal base must be explicit
in this respect, thereby providing legal certainty for participants
with regard to the financial rules from the beginning of the Sev-
enth Framework Programme (see Article 30).

62.
Based on the Commission proposal for a revised Finan-
cial Regulation, it will be possible to consider the ‘indirect action’
as a whole as the recipient of a grant, thereby allowing in prin-
ciple for profits to be made by individual participants in multi-
partner actions (50). Therefore, in Article 31 of the ‘Rules for Par-
ticipation’, the applicability of the ‘no profit’ principle to each
participant in an indirect action should be clarified.

Lump sums for whole actions to be used only where appropriate

Rules governing the reimbursement of cost to be based on participant’s
accounting principles and cost accounting practices

59.
Given the scale of most indirect actions, the Court con-
siders that lump sums are appropriate for clearly defined work
packages within each project, possibly linked to the achievement
of specific milestones. Such lump sums should also be established
on the basis of a thorough negotiation procedure. A practical
problem with the use of lump sums arises at the time of payment,
when the Commission will have to assess the extent to which
these work packages have been completed as agreed. In particu-
lar, difficulties in the implementation of such a scheme would
arise in those situations where work packages were delayed, only
partly completed, or replaced by other activities. With regard to
lump sums for whole actions, including those proposed for ‘Net-
works of Excellence’ in Article 35, the Court recommends a more
cautious approach (see also paragraphs 78 to 79).

60.
In the absence of a more detailed proposal from the
Commission, the Court suggests that the use of lump sums for
whole actions should be limited to the ‘coordination and support
actions’ and ‘actions for training and career development of
researchers’ established in Annex III a) of the ‘Decision’ (see
Article 30(1) of the Rules for Participation). The Court encour-
ages the Commission to continue its reflections on more exten-
sive use of lump sums for whole actions. This could be incorpo-
rated in the legal base following an interim evaluation of the
‘Rules for Participation’ (see Article 54).

(48) Court’s Annual Report concerning the financial year 2004, para-
graph 6.47; Special Report No 1/2004, paragraphs 36 to 39 and 139.

63.
The Court recommends that Article 31(3)(c) should refer
to the accounting principles of the country where the legal entity
is established and the participant’s usual ‘cost accounting prac-
tices’. Moreover, in the Court’s view, the reference ‘for the sole
purpose of achieving the objectives of the indirect action and its
expected results’ is sufficient to make sure that only costs neces-
sary for carrying out the action are reimbursed.

64.
In the Court’s view, only recoverable indirect taxes should
be considered as non-eligible costs. In practice, certain types of
participating legal entities (such as non-governmental organisa-
tions, foundations, associations) and natural persons do not have
the possibility to recover indirect taxes such as value added taxes
(VAT) (51). These therefore constitute a cost for the participant
and in such cases non-recoverable indirect taxes should be reim-
bursable (see Article 31(3e)).

(49) It should be noted that this calculation has to be made taking into
account the different activities carried out by individual participants
(e.g. management and training activities, which have different
co-financing rates), the application of either lump sums or flat rates
depending on the specific activities, the specific cost structures of the
legal entities participating, and the different upper funding limits laid
down in Article 33. Of course, this underlying principle also applies
to the reimbursement of eligible costs as provided for in Article 31.

(50) Court Opinion No 10/2005, paragraph 44.
(51) The Commission proposal to make only ‘identifiable’ indirect taxes
ineligible may induce participants to conceal VAT in their cost report-
ing.

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The principles of ‘Sound financial management’ in the
65.
Financial Regulation are, however, not necessarily part of a par-
ticipant’s accounting principles and cost accounting practices.
Therefore the Court recommends that the last half-sentence of
Article 31(3)(c) should be deleted.

recommends a simplified calculation method, using unit
scales, provided that these are established in accordance with
the participant’s usual cost accounting practices and that they
do not deviate significantly from actual costs or, alternatively,
if such unit scales were established by the Commission,

Alternative proposal on how to determine the Community financial
contribution in a transparent, robust and simple-to-administer way

66.
On several occasions, the Court has proposed a simpli-
fied system for the reimbursement of eligible costs under the RTD
framework programmes (52). In the Court’s view, the system
to calculate and report costs and determine the Community
financial contribution should be based on a single cost system
(see paragraph 94), should be applicable to all funding schemes
and should be sufficiently flexible to be used by all types of legal
entities participating in indirect actions. Moreover, for a system to
be transparent, robust and simple-to-administer, the participant’s
usual (cost) accounting practices should be applied as far as pos-
sible when reporting the costs incurred.

— the Court recommends introducing a third category, ‘Other
specific costs’, for all other direct costs. This category could
be used for exceptional items, such as durable equipment,
expensive consumables, subcontracting, but also user fees to
be charged, if a budget of estimated eligible costs for such
items has been established in the grant agreement. In this
sense, the eligibility, necessity and reasonableness of the costs
estimated in this category will be assessed during the evalu-
ation and negotiation of proposals and agreed with the Com-
mission in the grant agreement. As a result, the participants
have the legal security of being reimbursed when incurring
these costs as long as the budget of estimated costs is not
exceeded. Alternatively, lump sums could also be used for
the funding of items covered by this cost category.

Three categories of direct costs

Indirect costs based on negotiated flat rates

67.
Such a simplified system should provide for three catego-
ries of direct costs (personnel cost, travel and subsistence cost and
other specific costs), easily identifiable in and retrievable from the
(cost) accounting system of any participant:

— ‘personnel cost’ is the main category of direct costs incurred
when carrying out indirect actions. This cost category is
to cover the remuneration and related charges for personnel
directly hired by the legal entity participating, within the lim-
its and under the terms laid down in the employment con-
tracts. For a system which is based on the reimbursement of
costs actually incurred, it is essential that the working time
of personnel contributing to an indirect action must be sub-
stantiated, so that the respective personnel costs can be cor-
rectly allocated. With regard to the recording of working
time, the Commission should define minimum requirements
applicable to all participants. In line with the Commission
proposal, the Court also recommends that allowance should
be made for a simplified calculation method, e.g. use of bud-
geted costs, average costs or unit scales, category-specific
rates — provided that these are established in accordance
with the participant’s usual cost accounting practices and
that they do not deviate significantly from actual costs,

— ‘travel and subsistence costs’ are proposed as a second cat-
egory, in particular because such costs may constitute a large
part of total costs for some specific actions. Again the Court

68.
The Commission proposal is unclear as to what flat rate
will be applied for the coverage of indirect eligible costs (i.e.
whether this flat rate corresponds to the 20 % rate on the Full
Cost Flat Rate (FCF) model under the Sixth Framework Pro-
gramme or the 7 % rate established by the Financial Regulation as
a default regime). It is also unclear about the circumstances under
which participants may opt for such a flat-rate system.

69.
In contrast to the Commission proposal, the Court con-
siders that participants should be able to charge flat rates estab-
lished in accordance with their usual cost accounting practices
(see paragraph 38). The ‘reasonableness’ of such rates would have
to be demonstrated during the negotiation of a proposal, based
on the participants accounting information, and certified by the
external auditor when providing the audit certificate (see
Article 34a).

70.
In the Court’s view, the use of such negotiated flat rates
would drastically simplify the reporting of costs to the Commis-
sion. Only by allowing participants to use their own cost account-
ing system to calculate and report actual costs incurred will they
be able to participate in full compliance with both their internal
rules and the ‘Rules for Participation’. In practice, this would
imply that participants may charge rates for indirect costs which
are significantly above the 20 % of direct costs under previous
RTD framework programmes (53).

(52) Court’s Annual report concerning the financial year 2001, para-
graph 4.47; Special Report No 1/2004, paragraphs 36 to 40 and 115
and Opinion No 3/2005, paragraph 13.

(53) Special Report No 1/2004, paragraphs 30 to 33.

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Increase in upper funding limits only justified by establishment of single
cost system

In contrast to previous RTD framework programmes, the
71.
Commission proposes in Article 33 to increase upper funding
levels (i.e. reimbursement rates) from 50 % to 75 % for public
bodies, secondary and higher education establishments, research
organisations and SMEs and, at the same time, to establish a single
cost reimbursement system for the Seventh Framework Pro-
gramme. In practice, this means that the Additional Cost (AC) sys-
tem, mainly used by public bodies and higher education estab-
lishments, and the Full Cost (FC) system will be discontinued. The
Court has criticised the AC system in the past because it does not
allow verification of the participants’ share of cofinancing and, in
its practical implementation, often discriminated against those
legal entities using the FC system (54).

The Court therefore fully supports the Commission pro-

72.
posal as:

— the upper funding levels remain within the ceilings imposed

by the state aid rules (see paragraph 15),

— the overall impact on participants’ funding should be neutral
or even beneficial for those legal entities who complied with
in previous RTD framework
the AC system rules
programmes.

The effects on participants’ funding of the removal of the tradi-
tional AC system will be compensated by increasing upper fund-
ing levels. In this way, the Commission proposal prevents a situ-
ation where the Seventh Framework Programme would simply
provide higher funding compared to previous RTD framework
programmes for essentially the same research effort.

With regard to the Commission proposal of a financing
73.
rate of up to 100 % of eligible costs for certain activities within
an indirect action, the Court considers that such a rate can be jus-
tified for management and training activities only, and that the
‘Rules for Participation’ should clearly state that such a rate can
under no circumstances be generalised (see Article 33(4)).

Provisions regarding cost reporting and audit certificates not sufficiently
explicit

74.
In the Court’s view, all costs should be reported for each
period, thereby guaranteeing that the Commission has a means of
verifying the effective co-financing of the indirect action (see
Article 34).

(54) Special Report No 1/2004, paragraphs 23 to 26.

The Court considers that the ‘Rules for Participation’
75.
should specify the scope and content of audit certificates (see
Article 34a) (55). In accordance with the Financial Regulation (56)
and the ‘Rules for Participation’, audit certificates must provide
assurance that:

— the costs claimed by the participant are eligible,

— the costs, interest on pre-financing, and receipts have been
correctly determined and are substantiated by adequate sup-
porting documents.

Audit certificates are to be provided by an external audi-
76.
tor or, in the case of public bodies, a competent public officer.
The external auditor must comply with the requirements estab-
lished in line with the 8th Council Directive 84/253/EEC of 10
April 1984 (57). The competences of the public officer shall be
determined by the national legislation and the relevant authori-
ties. The external auditor or, in the case of public bodies, the com-
petent public officer providing the audit certificate, must be inde-
pendent of the participant who is responsible for selecting the
auditor.

77.
Audit certificates are an essential element of the Commis-
sion’s internal controls. In the Court’s view, this requires that the
Commission has access to the documentation and working papers
of the external auditors. Such an obligation to provide access
should be inserted in the model grant agreements and the terms
of engagement for the external auditor.

No specific financing rules should apply to ‘Networks of Excellence’

78.
In the Court’s view, there should be no specific rules
applying to ‘Networks of Excellence’ and, therefore, Article 35
should be deleted (see also paragraph 59). It is also unclear how
the Commission has fixed a lump sum of 23 500 euro per year
per researcher. There is no indication that the setting of such a
rate has been carried out by means of an evidence-based assess-
ment of the underlying cost structure of on-going ‘Networks of
Excellence’ under the Sixth Framework Programme. In addition,
setting artificially fixed amounts discriminates against those legal
entities that are established in Member States or Associated Coun-
tries with a higher nominal wage level.

(55) Opinion No 2/2004; paragraph V.: Internal control systems should have,
at their basis, a chain of control procedures, with each level having specific
defined objectives which take into account the work of the others. Claims of
expenditure or costs over a certain threshold should be accompanied by an
independent audit certificate and report, based on common standards of
approach and content.

(56) See Article 117 of the Financial Regulation (Article 180(2) of the

Implementing Rules).
(57) OJ L 126, 12.5.1984, p. 20.

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Moreover, the proposed financing mechanism is incon-
79.
sistent with the objective of supporting the integration of the enti-
ties participating in the network, as stated in the ‘Decision’,
Annex III a) 2. ‘Networks of Excellence’ . As currently proposed
in the ‘Rules for Participation’, the mechanism implicitly provides
for the co-financing of research activities and not of activities con-
tributing to the integration of activities carried out within the
framework of a longer term cooperation.

‘Guarantee fund’ will not solve the difficulties experienced by beneficiaries

80.
In the Court’s experience, the main administrative prob-
lems for participants in their dealings with the Commission are
non-standardised requirements by Commission services when
verifying the legal and financial viability of participants and exces-
sive, and often repetitive, requests for information (see para-
graphs 34 to 36).

— third,

the Commission proposal strongly discriminates
between different types of legal entities, thereby discourag-
ing the participation of non-public entities in the RTD frame-
work programmes (60). It also reduces the amount of fund-
ing available for research,

— fourth, the number of actual cases where legal entities
defaulted on their obligations towards the Communities
under previous framework programmes is extremely low,

— fifth, the ‘guarantee fund’ would cover a third party financial
risk to the Community budget by diverting funds from
science,

— finally, the Commission proposal does not explain what hap-
pens to funds not needed to cover losses caused by default-
ing participants. In the Court’s view, and according to the
budgetary principles of annuality and universality underly-
ing the Financial Regulation, excess funds which could not be
assigned as revenue to the framework programme would
also effectively be unavailable for research (61).

The establishment of a ‘guarantee fund’, however, will
81.
not solve those difficulties for participants, and, in addition, is
unlikely to be cost-effective (see whereas (20) and Article 38) (58):

Therefore, the Court recommends the deletion of ‘whereas’ (20)
and Article 38.

— first, the obligations under Article 118 of the Financial Regu-
lation (Article 182 of the Implementing Rules) regarding
bank guarantees cannot be waived by setting up such a
mechanism (59). These arise primarily because of the pre-
financing granted by the Community (in general 80 % of
annual instalments),

Chapter
(Article 39 to Article 52)

III: Dissemination and use, and access rights

Establishing access rights to foreground for affiliated entities

— second, the guarantee fund being an ‘insurance’-type mecha-
nism, financially stable participants would be covering the
risk resulting from potentially defaulting participants, mostly
SME’s. These risks will be spread over all actions funded by
the RTD framework programme, even beyond the actions in
which those paying into the fund would participate,

(58) Opinion No 2/2004, paragraph VIII: ‘Internal control systems require an
appropriate balance between the cost of controlling a particular budgetary
area and the benefits the checks bring in terms of limiting the risk of loss
and irregularity to an acceptable level.’

(59) The amendments proposed by the Court to increase the autonomy
of the consortia (see Articles 18, 19, and 23 to 26) and the Commis-
sion’s verification of the existence, legal status and operational and
financial capacity of participants (see Article 16a) should reduce the
potential risk to the Community budget to such an extent that in a
majority of cases the authorising officer would not have to invoke a
third-party joint and several guarantee or the irrevocable and uncon-
ditional joint guarantee (which, according to Article 182(3) of the
Implementing Rules of the Financial Regulation, is mandatory if pre-
financing is above 80 % of total grant).

82.
In the case of industry participants, the relevant back-
ground for an indirect action is often not owned by the legal enti-
ties participating but by another entity within an industrial group.
In the Court’s view, and in line with the obligation to use the fore-
ground stated in Article 46(1), access rights to foreground should
also be given to affiliated entities of participants in an indirect
action subject to certain conditions (see Article 42 and Articles 49
to 50). In particular, the affiliated company must:

— be established in a Member State or an Associated Country,

(60) Note that the Commission proposes in Article 38(2) that the follow-
ing do not have to contribute to the ‘Guarantee fund’: public bodies,
legal entities whose participation in the indirect action is guaranteed
by a Member State or an Associated Country, higher and secondary
education establishments, participants in actions to support training
and career development of researchers, frontier research actions, and
actions for the benefit of specific groups with the exception of actions
for the benefit of SME’s.

(61) See also Opinion No 10/2005, paragraphs 20 and 22.

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— grant reciprocal access rights in respect of any background

which it holds and which is needed to use the foreground,

specific background could imply that indirect actions cannot be
performed as originally proposed or that the resulting foreground
cannot be disseminated.

— comply with the obligations concerning confidentiality in

accordance with Article 3.

The Court’s proposal for reciprocal access rights for affiliated enti-
ties would remove this specific disincentive and therefore could
enhance
industrial participation in the RTD framework
programmes.

Promoting the use of jointly-owned foreground

83.
In the Court’s view, the provision that co-owners are able
to use the jointly-owned foreground is constructive because it dis-
courages situations where the jointly-owned knowledge may not
be exploited at all due to the reluctance of certain consortia mem-
bers to give authorisation for protection of the knowledge. How-
ever, the Commission proposal could increase the risk that, if no
prior arrangement is concluded, participants would structure
their work as much as possible to avoid joint ownership, which
in turn means that participants may be less inclined to cooperate.
In the Court’s view it should be left to the consortium to agree on
how to deal with such a joint ownership, in accordance with this
Regulation, the grant agreement and the consortium agreement.
Therefore, the Court recommends adding the obligation to con-
clude a joint ownership agreement in Article 40(1) and deleting
Article 40(2)(b), thereby creating an incentive for participants to
enter into a joint ownership agreement.

Notification of the Commission of a transfer of ownership should be
required only in specific circumstances

84.
In the Court’s view, there is no general necessity for the
Commission to be informed of a transfer of ownership. However,
where a transfer is inconsistent with developing the competitive-
ness of the European economy or with ethical principles, prior
notification should be given to the Commission. The Court rec-
ommends that the Commission should establish rules providing
guidance concerning such cases. In all other cases, arrangements
concerning the transfer of ownership should be dealt with by the
participants (see Article 42 and Article 43).

No limitation or exclusion of access rights after the grant award

85.
In the Court’s view, it would be inconsistent and unnec-
essary to allow background (i.e. all intellectual property rights
needed for the implementation of the indirect action or the use
of the results) which is subject to access rights to be further lim-
ited or excluded (see Article 48). Such a limitation or exclusion of

Moreover, access rights should be granted by definition
86.
to all participants in an indirect action (see Article 49). Only if fur-
ther conditions to such access rights are required is there a need
to have an explicit request and further agreement between the
parties concerned. In the Court’s view, access rights should be
granted to affiliated entities on a reciprocal base as described
above (see paragraph 82).

Chapter IV: European Investment Bank (Article 53)

Clarification needed with regard to the ‘Risk Sharing Finance Facility’

87.
As proposed by the Commission in Annex III b) of the
‘Decision’, the ‘Risk Sharing Finance Facility’ funding scheme con-
sists in the provision of a grant to the European Investment Bank
(EIB). In the Court’s view, however, further clarification is needed
as to the scope of the EIB’s loan and guarantee financing activi-
ties (62) (see whereas (23) and Article 53).

88.
With regard to the ‘Risk Sharing Finance Facility’ fund-
ing scheme, the Court also recommends a clarification of whether
all parts of the ‘Rules for Participation’ apply to grants to the EIB
(including the provisions of Chapter III Dissemination and use,
access rights).

89.
Furthermore, according to the Commission proposal,
Community financial support to the EIB will be provided on the
basis of the provisions of the Financial Regulation only. However,
further clarification is needed as to how and according to which
rules the EIB will allocate its loan and guarantee financing. In the
Court’s view, these should be provided and administered by the
EIB in accordance with its own rules, taking into account the gen-
eral orientation and principles established by the Commission in
the grant agreement (see Article 53(2) and (3)).

Chapter V: Final provisions (Article 54)

90.
Given the seven year programming period for the Sev-
enth Framework Programme, the ‘Rules for Participation’ should
provide for a review and a possible revision after a certain period.
The proposed interim evaluation should assess in particular
whether the intended simplification of administrative and finan-
cial aspects has been achieved and, if necessary, propose what
additional measures should be taken (see Article 54).

(62) In particular, it should also be clarified whether, based on the word-
ing in Annex III of the ‘Decision’, this extends to actions outside the
scope of the Seventh Framework Programme, such as EUREKA
projects, or whether actions other than those referred to in Annex III
(i.e. joint technology initiatives, large projects — including Eureka
projects, and new research infrastructures) could be the beneficiaries
of the EIB’s loan and guarantee financing activities.

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CONCLUSION

91.
The Court considers that in many areas the Commission
proposal constitutes an important step towards the simplification
and flexibility necessary for an economic, effective and efficient
implementation of the Seventh Framework Programme.

92.
However, for the reasons set out above, the principles
and criteria that should have guided these changes have not
always been followed and, as a consequence, the Commission has
missed the opportunity to achieve the required simplification. In
particular, in the Court’s view, some of the Commission propos-
als are not justified and risk complicating the management of the
Seventh Framework Programme unnecessarily.

93.
In other areas, where further simplification and more
flexibility is needed, the Court recommends additional changes,
such as:

— organising a centralised and ex-ante verification and certifi-
cation of the legal entities participating (see paragraphs 34
to 36),

— requiring the Commission services to use common databases
and to exchange data electronically (see paragraphs 41 to 42),

— applying a more flexible governance structure for indirect

actions (see paragraphs 45 to 55),

— using reviews (or hearings), ideally by peers, as a monitoring

tool for indirect actions (see paragraph 56),

— providing for a single cost reimbursement system which
allows participants to determine the Community financial
contribution in a transparent,
robust and simple-to-
administer way (see paragraphs 63 to 70),

— encouraging the use and the dissemination of results of indi-
rect actions and the transfer of ownership (see paragraphs 82
to 84).

The Commission’s proposal for the ‘Rules for Participa-
94.
tion’ provides some elements of such a simplified system, in par-
ticular by introducing a single cost system, but falls short of cre-
ating a transparent, robust and simple-to-administer system
to calculate and report costs and determine the Community
financial contribution. The proposed cost reimbursement system
will result in a system which is overly complicated and inherently
difficult to verify for the Commission. Moreover, there is insuffi-
cient correlation between the proposed structure for the reim-
bursement of costs and the (cost) accounting information at the
level of participants. As a result, and unless significant changes are
adopted by the legislator, the dissatisfaction of participants will
persist and the rate and frequency of over-declaration of costs by
participants will continue to be material under the Seventh Frame-
work Programme.

This opinion was adopted by the Court of Auditors in Luxembourg at its meeting of 5 April
2006.

For the Court of Auditors
Hubert WEBER
President

ANNEX:

‘RULES FOR PARTICIPATION’

COM(2005)705 final — REGULATION

Proposal for a
REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL
laying down the rules for the participation of undertakings, research centres and universities in actions
under the Seventh Framework Programme and for the dissemination of research results (2007 to 2013)
(Text with EEA relevance)

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community, and in particular Article 167 and
the second paragraph of Article 172 thereof,

Having regard to the proposal from the Commission (1),

Having regard to the opinion of the European Economic and Social Committee (1),

Having regard to the opinion of the Court of Auditors (1),

Acting in accordance with the procedure referred to in Article 251 of the Treaty (2),

WHEREAS:

(1) The Seventh Framework Programme was adopted by Decision No (…/…/EC) of the European
Parliament and of the Council of (…) concerning the seventh framework programme of the
European Community for research, technological development and demonstration activities
(2007 to 2013) (1).

It is the responsibility of the Commission to ensure the implementation of the framework pro-
gramme and its specific programmes, including the related financial aspects.

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Modifications proposed by
THE COURT OF AUDITORS
in its Opinion No 1/2006

(see para-
graph of
Opinion
No 1/2006)

5.

6.

(2) The Seventh Framework Programme is implemented in accordance with Regulation (EC, Eura-
tom) No 1605/2002 on the Financial Regulation applicable to the general budget of the Euro-
pean Communities (3), hereinafter ‘the Financial Regulation’, and Regulation (EC, Euratom)
No 2342/2002 laying down detailed rules for the implementation of the Financial Regula-
tion (4), hereinafter ‘the Implementing Rules’.

(2) The Seventh Framework Programme is to be is implemented in accordance with Regulation
(EC, Euratom) No 1605/2002 on the Financial Regulation applicable to the general budget of
the European Communities (3), hereinafter ‘the Financial Regulation’, and Regulation (EC,
Euratom) No 2342/2002 laying down detailed rules for the implementation of the Financial
Regulation (4), hereinafter ‘the Implementing Rules’.

(3) The Seventh Framework Programme is also implemented in accordance with the State aid rules,

(3) The Seventh Framework Programme is also to be implemented in accordance with the State

15, 16.

in particular the rules on State aid for research and development (5).

aid rules, in particular the rules on State aid for research and development (5).

(1) OJ C (…), (…), p. (…).
(2) Opinion of the European Parliament of April 2005, and Council Decision of (…).
(3) OJ L 248, 16.9.2002, p. 1.
(4) OJ L 357, 31.12.2002, p. 1, as amended by Commission Regulation (EC, Euratom) No 1261/2005 (OJ L 201, 2.8.2005, p. 3).
(5) Currently Community Framework for State Aid for Research and Development, (OJ C 45, 17.2.1996, p. 5). See also World Trade Organization (WTO) Agreement on subsidies and countervailing measures, Article 8 (see OJ L 336, 23.12.1994)

.

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(4) The rules for the participation of undertakings, research centres and universities should pro-
vide a coherent and transparent framework to ensure efficient implementation and ease of
access for all participants in the Seventh Framework Programme.

(5) The Seventh Framework Programme should promote participation from the outermost regions
of the Community, as well as from a wide range of undertakings, research centres and univer-
sities.

(6) The definition of micro, small and medium-sized enterprises (SMEs) provided in Commission
Recommendation 2003/361/EC (6) should apply, for reasons of coherence and transparency.

(new whereas (4a)) This Regulation is also to apply to the activities funded in the framework of
the European Research Council (ERC).

2, 17.

(7)

(8)

(9)

It is therefore appropriate to permit not only the participation of legal persons, provided that
they are entitled to exercise rights and assume obligations, but natural persons. The participa-
tion of natural persons will ensure that the creation and development of scientific excellence
and ability are not limited to Community funding of projects involving only legal persons,
ensuring also the participation of SMEs that are not legal persons.

(7)

It is therefore appropriate to permit not only the participation of legal persons, provided that
they are entitled to exercise rights and assume obligations, but also of natural persons, pro-
vided that they are entitled to exercise rights and assume obligations. The participation of
natural persons will ensure that the creation and development of scientific excellence and abil-
ity are not limited to Community funding of projects involving only legal persons, ensuring
also the participation of SMEs that are not legal persons.

It is necessary to establish the minimum conditions for participation, both as a general rule and
with regard to the specificities of indirect actions under the Seventh Framework Programme.
In particular, rules should be laid down regarding the number of participants and their place of
establishment.

It is appropriate that any legal entity should be free to participate once the minimum condi-
tions have been satisfied. Participation over and above the minimum should ensure the effi-
cient performance of the indirect action concerned.

(9)

It is appropriate that any legal entity should be free to participate once the minimum condi-
tions have been satisfied. Participation over and above the minimum legal requirements
should not impair ensure the efficient implementation performance of the indirect action con-
cerned.

22, 23, 24.

(10) International organisations dedicated to developing cooperation in the field of research in
Europe and largely made up of Member States or Associated countries should be encouraged
to participate in the Seventh Framework Programme.

(11) In line with the objectives of international cooperation as described by Articles 164 and 170
of the Treaty, the participation of legal entities established in third countries should also be
envisaged, as should the participation of international organisations. However, it is appropri-
ate to require that such participation be justified in terms of the enhanced contribution thereby
made to the objectives sought under the Seventh Framework Programme.

(12) In line with the objectives mentioned above, it is necessary to establish the terms and condi-

tions for providing Community funding to participants in indirect actions.

(12) In line with the objectives mentioned above, it is necessary to establish the terms and con-
ditions for providing Community funding, as set out in part (a) of Annex III to Decision
(…/…) establishing the Seventh Framework Programme, to participants in indirect actions.

(new whereas (11a)) The Commission should implement the Seventh Framework Programme in
accordance with the principles of an integrated internal control framework.

(6) OJ L 124, 20.5.2003, p. 36.

.

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(13) It is necessary for the Commission to establish further rules and procedures, in addition to
those provided for in the Financial Regulation and its Implementing Rules, to govern the sub-
mission, evaluation, selection and award of proposals. In particular the rules governing the use
of independent experts should be established.

(13) It is necessary for tThe Commission is to establish and to adopt further rules and procedures,
in addition to those provided for in the Financial Regulation and its Implementing Rules and
this Regulation, to govern the submission, evaluation, selection and negotiation award of pro-
posals and the award of grants. In particular these rules should include provisions governing
the use of independent experts should be established.

32, 33.

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(14) It is appropriate for the Commission to establish further rules and procedures, in addition to
those provided for in the Financial Regulation and its Implementing Rules, to govern the
assessment of the legal and financial viability of participants in indirect actions under the Sev-
enth Framework Programme.

(14) It is appropriate for tThe Commission should establish and adopt further rules and proce-
dures, in addition to those provided for in the Financial Regulation and its Implementing
Rules, to govern the verification of the existence, legal status and operational and financial
capacity assessment of the legal and financial viability of participants in indirect actions under
the Seventh Framework Programme.

34, 35, 36.

E
N

(15) In this context, the Financial Regulation and the Implementing Rules, govern inter alia the pro-
tection of the Community’s financial interests, the fight against fraud and irregularity, the pro-
cedures for the recovery of sums owed to the Commission, exclusion from contract and grant
procedures and related penalties, and audits, checks, and inspections by the Commission and
the Court of Auditors, pursuant to Article 248(2) of the Treaty.

(15) In this context, the Financial Regulation, its and the Implementing Rules, and Council Regu-
lation (EC, Euratom) No 2988/1995 (7) govern inter alia the protection of the Community’s
financial interests, the fight against fraud and irregularity, the procedures for the recovery of
sums owed to the Commission, exclusion from contract and grant procedures and related
penalties, and audits, checks, and inspections by the Commission and the Court of Auditors,
pursuant to Article 248(2) of the Treaty.

(16) The agreements concluded for each action should provide for supervision and financial con-
trol by the Commission, or any representative authorised by the Commission, as well as audits
by the Court of Auditors and on-the-spot checks carried out by the European Anti-Fraud Office
(OLAF), in accordance with the procedures laid down in Council Regulation No 2185/96.

(16) The agreements concluded for each action are to should provide for supervision and finan-
cial control by the Commission, or any representative authorised by the Commission, as well
as audits by the Court of Auditors and on-the-spot checks carried out by the European Anti-
Fraud Office (OLAF), in accordance with the procedures laid down in Council Regulations
No 2185/96, No 1073/99 and No 1074/99.
Similarly, the agreements are to provide for audits by the Court of Auditors, which, pursuant
to Article 248(2) of the Treaty, may carry out its audits according to its own rules.

19.

18, 19.

(17) The Commission should monitor both the indirect actions carried out under the Seventh
Framework Programme and the Seventh Framework Programme and its Specific Programmes.

(17) The Commission should monitor the implementation of both the indirect actions carried out
under the Seventh Framework Programme, and the Seventh Framework Programme and its
Specific Programmes and the completion of previous framework programmes.
The Commission presents the results of its monitoring activities to a committee composed
of representatives of Member States, and chaired by the Commission.

57.

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(18) The rules governing the dissemination of research results should ensure that, where appropri-
ate, the participants protect the intellectual property generated in actions, and use and dissemi-
nate those results.

(18) The rules governing the dissemination of research results should ensure that, where appro-
priate, the participants and their affiliated entities protect the intellectual property generated
in actions, and use and disseminate those results.

(19) While respecting the rights of the owners of intellectual property, those rules should be
designed to ensure that participants have access to information they bring to the project and
to knowledge arising from research work carried out in the project to the extent necessary
to conduct the research work or to use the resulting knowledge.

(19) While respecting the rights of the owners of intellectual property, those rules should be
designed to ensure that participants and their affiliated entities have access to information
they bring to the project and to knowledge arising from research work carried out in the
project to the extent necessary to conduct the research work or to use the resulting knowl-
edge.

(7) OJ C (…), (…), p. (…).

.

.

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(20) The obligation established in the sixth Framework Programme for certain participants to take
financial responsibility for their partners in the same consortium will be waived. Depending
on the level of risk associated with non-recovery of sums, part of the Community financial con-
tribution may be retained to cover amounts due and not reimbursed by defaulting partners.
The participants that would have been obliged to cover the financial responsibility for other
participants would contribute to risk avoidance, which the Commission shall retain at the time
it makes payments.

(20) The obligation established in the sixth Framework Programme for certain participants to take
financial responsibility for their partners in the same consortium will be waived. Depending
on the level of risk associated with non-recovery of sums, part of the Community financial
contribution may be retained to cover amounts due and not reimbursed by defaulting part-
ners. The participants that would have been obliged to cover the financial responsibility for
other participants would contribute to risk avoidance, which the Commission shall retain at
the time it makes payments.

34, 35,
36, 80, 81.

(21) Community contributions to a joint undertaking or any other structure set up pursuant to
Article 171 of the Treaty, or pursuant to Article 169 of the Treaty do not fall within the scope
of this Regulation.

(21) Community contributions to a joint undertaking or any other structure set up pursuant to
Article 171 of the Treaty, or pursuant to Article 169 of the Treaty do not fall within the scope
of this Regulation.

(22) This Regulation respects the fundamental rights and observes the principles recognised in par-

ticular by the Charter of Fundamental Rights of the European Union.

(22) Any action covered by tThis Regulation should respects the fundamental rights and observes
the principles recognised in particular by the Charter of Fundamental Rights of the European
Union.

(23) The Community may award a grant to the European Investment Bank (EIB) to foster private
sector investment in eligible large European RTD actions by increasing the capacity of the Bank
to manage risk, thus allowing for (i) a larger volume of EIB lending for a certain level of risk,
and (ii) the financing of riskier European RTD actions than would be possible without such
Community support.

(23) The Community may award a grant to the European Investment Bank (EIB) to foster private
sector investment in eligible large European RTD actions identified in part (b) of Annex III to
Decision (…/…) establishing the Seventh Framework Programme by increasing the capacity
of the Bank to manage risk, thus allowing for (i) a larger volume of EIB lending for a certain
level of risk, and (ii) the financing of riskier European RTD actions than would be possible
without such Community support.

2.

(24) The Community may provide financial support, as established in the Financial Regulation, inter

(24) The Community may provide financial support, as established in the Financial Regulation,

alia by means of:

inter alia by means of:

(a)

public procurements, in the form of a price for goods or services established by contract
and selected on the basis of calls for tender;

(a)

public procurements, in the form of a price for goods or services established by contract
and selected on the basis of calls for tender;

(b)

grants;

(b)

grants;

(c)

subscriptions to an organisation in the form of a membership fee;

(c)

subscriptions to an organisation in the form of a membership fee;

(d) honoraria for independent experts identified in Article 17 of this Regulation.

(d) honoraria for independent experts identified in Article 17 of this Regulation.

HAVE ADOPTED THIS REGULATION:

CHAPTER I

Introductory provisions

Article 1

Subject matter

Article 1

Subject matter and scope

This Regulation lays down the rules for the participation of undertakings, research centres and uni-
versities and other legal entities in actions undertaken by one or more participants by means of fund-
ing schemes identified in part (a) of Annex III to Decision (…/…) establishing the Seventh Frame-
work Programme, hereinafter ‘indirect actions’.

(1.) This Regulation lays down the rules for the participation of undertakings, research centres and
universities and other legal entities in actions undertaken by one or more participants by means of
funding schemes identified in part (a) of Annex III to Decision (…/…) establishing the Seventh
Framework Programme, hereinafter ‘indirect actions’, with the exception referred to in paragraph 8
of this Article.

20, 21.

.

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It also lays down rules,
in accordance with those laid down in Regulation (EC/Euratom)
No 1605/2002, hereinafter ‘the Financial Regulation’, and Regulation (EC/Euratom) No 2342/2002,
hereinafter ‘the Implementing Rules’, concerning the Community financial contribution to partici-
pants in indirect actions under the Seventh Framework Programme.

(2.) It also lays down rules, in accordance with those laid down in Regulation (EC/Euratom)
No 1605/2002, hereinafter
and Regulation (EC/Euratom)
No 2342/2002, hereinafter ‘the Implementing Rules’, concerning the Community financial con-
tribution to participants in indirect actions under the Seventh Framework Programme.

Financial Regulation’,

‘the

As regards the results of research carried out under the Seventh Framework Programme, this Regu-
lation lays down rules for the disclosure of foreground by any appropriate means other than that
resulting from the formalities for protecting it, and including the publication of foreground in any
medium, hereinafter ‘dissemination’.

(3.) As regards the results of research carried out under the Seventh Framework Programme, this
Regulation lays down rules for the disclosure of foreground by any appropriate means other than
that resulting from the formalities for protecting it, and including the publication of foreground in
any medium, hereinafter ‘dissemination’.

In addition, it lays down rules for the direct or indirect utilisation of foreground in further research
activities other than those covered by the indirect action concerned, or for developing, creating and
marketing a product or process, or for creating and providing a service, hereinafter ‘use’.

(4.) In addition, it lays down rules for the direct or indirect utilisation of foreground in further
research activities other than those covered by the indirect action concerned, or for developing,
creating and marketing a product or process, or for creating and providing a service, hereinafter
‘use’.

In respect of both foreground and background, this Regulation lays down rules concerning licences
and user rights thereto, hereinafter ‘access rights’.

(5.) In respect of both foreground and background, this Regulation lays down rules concerning
licences and user rights thereto, hereinafter ‘access rights’.

(6.) This Regulation shall apply to actions funded within the framework of the European Research
Council (ERC).

2, 17.

(7.) This Regulation shall apply to grants to the European Investment Bank (EIB) to contribute to
the provisioning and capital allocation for its loan and guarantee financing, for actions identified
in the Annex III to Decision (…/…) establishing the Seventh Framework Programme.

(8. moved from whereas (21)) Community contributions to a joint undertaking or any other struc-
ture set up pursuant to Article 171 of the Treaty, or pursuant to Article 169 of the Treaty, iden-
tified in part (b) of Annex III to Decision (…/…) establishing the Seventh Framework Programme
shall donot fall within the scope of this Regulation.

14.

Article 2

Definitions

For the purposes of this Regulation, the following definitions shall apply in addition to those set out
in the Financial Regulation and the Implementing Rules:

(1)

(2)

‘foreground’ means the results, including information, whether or not they can be protected,
which are generated by actions. Such results include rights related to copyright; design rights;
patent rights; plant variety rights; or similar forms of protection;

‘background’ means information which is held by participants prior to their accession to the
grant agreement, as well as copyrights or other intellectual property rights pertaining to such
information, the application for which has been filed before their accession to the grant agree-
ment, and which is needed for carrying out the indirect action or for using the results of the
indirect action;

(2)

‘background’ means information which is held by participants prior to the conclusion of their
accession to the grant agreement, as well as copyrights or other intellectual property rights
or applications thereof pertaining to such information, the application for which has been
filed before their accession to the grant agreement, and which that is needed for carrying out
the indirect action or for using the foreground results of the indirect action;

(3)

‘research organisation’ means a non-profit making organisation which carries out scientific or
technical research as its main objective;

(3)

‘research organisation’ means a legal entity registered as a non-profit making organisation
which carries out scientific or technical research as its main objective;

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(4)

‘third country’ means a State that is not a Member State;

(5)

(6)

(7)

‘Associated country’ means a third country which is party to an international agreement with
the Community, under the terms or on the basis of which it makes a financial contribution to
all or part of the Seventh Framework Programme;

‘international organisation’ means an intergovernmental organisation, other than the European
Community, which has legal personality under international public law, as well as any specia-
lised agency set up by such an international organisation;

‘international European interest organisation’ means an international organisation, the major-
ity of whose members are Member States or Associated countries, and whose principal objec-
tive is to promote scientific and technological cooperation in Europe;

(7)

‘international European interest organisation’ means an international organisation, the major-
ity of whose members are Member States or Associated Countries, or public research organi-
sations or national funding agencies of those states and countries, and whose principal objec-
tive is to promote scientific and technological cooperation in Europe;

(8)

‘international cooperation partner country’ means a third country which the Commission clas-
sifies as a low-income, lower-middle-income or upper-middle-income country and which is
identified as such in the work programmes;

(9)

‘public body’ means any legal entity established as such by national public law, and interna-
tional organisations;

(10) ‘SMEs’ mean micro, small and medium-sized enterprises within the meaning of Recommen-

dation 2003/361/EC in the version of 6 May 2003;

(11) ‘work programme’ means a plan adopted by the Commission for the implementation of a spe-

cific programme as identified in Article 3 of Decision (…/…);

(12) ‘funding schemes’ mean the mechanisms for the Community funding of indirect actions as

(12) ‘funding schemes’ mean the mechanisms for the Community funding of indirect actions as

20, 21.

established in part (a) of Annex III to Decision (…/…);

established in part (a) of in Annex III to Decision (…/…);

(13) ‘RTD performer’ means a legal entity carrying out research and technological development
activities for the benefit of specific groups in research projects for the benefit of those groups.

(13) ‘RTD performer’ means a legal entity carrying out research and technological development
activities for the benefit of specific groups in research projects for the benefit of those groups
as established in part (a), section 6. of Annex III to Decision (…/…).

Article 3

Confidentiality

Subject to the conditions established in the grant agreement, appointment letter or contract, the
Commission and the participants shall keep confidential any data, knowledge and documents com-
municated to them as confidential.

.

.

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CHAPTER II

Participation

SECTION 1

MINIMUM CONDITIONS

Article 4

General principles

1.
Any undertaking, university or research centre or other legal entity, whether established in a
Member State or Associated country, or in a third country, may participate in an indirect action pro-
vided that the minimum conditions laid down in this Chapter have been met, including any condi-
tions specified pursuant to Article 12.

However, in the case of an indirect action as referred to in Articles 5(1), 7, 8 or 9, under which it is
possible for the minimum conditions to be met without the participation of a legal entity estab-
lished in a Member State, the attainment of the objectives laid down in Articles 163 and 164 of the
Treaty must thereby be enhanced.

However, in the case of an indirect action as referred to in Articles 5(1), 7, 8 or 9, under which it
is possible for the minimum conditions to be met without the participation of a legal entity estab-
lished in a Member State, the attainment of the objectives laid down in Articles 163 and 164 of
the Treaty must thereby be enhanced.

A legal entity is any natural person, or any legal person created under the national law of its place
of establishment, or under Community law or international law, which has legal personality and
which may, acting under its own name, exercise rights and be subject to obligations.

(A legal entity is any natural person, or any legal person created under the national law of its place
of establishment, or under Community law or international law, which has legal personality and
which may, acting under its own name, exercise rights and be subject to obligations.)

However, in the case of an indirect action as referred to in Articles 5(1), 7, 8 or 9, under which it
is possible for the minimum conditions to be met without the participation of a legal entity estab-
lished in a Member State, the attainment of the objectives laid down in Articles 163 and 164 of
the Treaty must thereby be enhanced.

In the case of natural persons, references to establishment shall be deemed to refer to habitual

2.
residence.

In the case of natural persons, references to establishment shall be deemed to refer to

(2.
habitual residence. )

3.
The Joint Research Centre of the European Commission, hereinafter ‘the JRC’, may partici-
pate in indirect actions on the same footing and with the same rights and obligations as a legal entity
established in a Member State.

Article 5

Minimum conditions

1.

The minimum conditions for indirect actions shall be the following:

(a)

at least three legal entities must participate, each of which is established in a Member State or
Associated country, and no two of which are established in the same Member State or Asso-
ciated country;

22, 23, 24.

1.
ing:

(a)

The minimum conditions for the participation in indirect actions shall be that the follow-

at least three legal entities must participate, each of which is established in a Member State or
Associated country, and no two of which are established in the same Member State or Asso-
ciated country;

(b)

the countries in which these legal entities are established must include at least three different
Member States or Associated countries;

(b)

all three legal entities must be independent of each other in accordance with Article 6.

(bc) at least all three of the legal entities must be independent of each other in accordance with

Article 6.

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2.
For the purposes of point (a) of paragraph 1, where one of the participants is the JRC, or an
international European interest organisation or an entity created under Community law, it shall be
deemed to be established in a Member State or Associated country other than any Member State or
Associated country in which another participant in the same action is established.

Article 6

Independence

Two legal entities shall be regarded as independent of each other where neither is under the

1.
direct or indirect control of the other or under the same direct or indirect control as the other.

2.

(a)

For the purposes of paragraph 1, control may in particular take either of the following forms:

the direct or indirect holding of more than 50 % of the nominal value of the issued share capi-
tal in the legal entity concerned, or of a majority of the voting rights of the shareholders or
associates of that entity;

(b)

the direct or indirect holding, in fact or in law, of decision-making powers in the legal entity
concerned.

However, the following relationships between legal entities shall not in themselves be deemed

3.
to constitute controlling relationships:

(a)

the same public investment corporation, institutional investor or venture-capital company has
a direct or indirect holding of more than 50 % of the nominal value of the issued share capital
or a majority of voting rights of the shareholders or associates;

(b)

the legal entities concerned are owned or supervised by the same public body.

Article 7

22, 23, 24.

Indirect actions concerning international cooperation partner countries

For collaborative projects addressing the participation of international cooperation partner countries
in parity with Member States or Associated countries, as identified in the work programme, the
minimum conditions shall be the following:

For collaborative projects, as established in part (a), section 1., of Annex III to Decision (…/…),
which involve addressing the participation of international cooperation partner countries in parity
with Member States or Associated countries, as identified in the work programme, the minimum
conditions shall be the following:

(a)

at least four legal entities must participate;

(a)

at least four legal entities must participate;

(b)

(c)

at least two of the legal entities referred to in point (a) must be established in Member States or
Associated countries, but no two may be established in the same Member State or Associated
country;

at least two of the legal entities referred to in point (a) must be established in international
cooperation partner countries, but no two may be established in the same international coop-
eration partner country;

(b)

(c)

the countries in which at least two of the participating legal entities referred to in subpara-
graph (a) are must be established must include at least two in Member States or Associated
countries, but no two may be established in the same Member State or Associated country;

the countries in which at least two of the participating legal entities referred to in subpara-
graph (a) are must be established must include at least two in international cooperation part-
ner countries, but no two may be established in the same international cooperation partner
country;

(d)

all four legal entities referred to in point (a) must be independent of each other in accordance
with Article 6.

(d)

all at least four of the participating legal entities must be independent of each other in accor-
dance with Article 6.

.

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Article 8

Coordination and support actions, and training and career development of researchers

For coordination and support actions, and actions in favour of training and career development of
researchers, the minimum condition shall be the participation of one legal entity.

The first paragraph shall not apply in the case of actions that coordinate research projects.

Article 9

Investigator-driven ‘frontier’ research projects

For indirect actions to support investigator-driven ‘frontier’ research projects funded in the
framework of the European Research Council, the minimum condition shall be the participation of
one legal entity established in a Member State or in an Associated country.

(1.) For indirect actions to support investigator-driven ‘frontier’ research projects funded in the
framework of the European Research Council, as established in part (a), section 4., of Annex III to
Decision (…/…), the minimum condition shall be the participation of one legal entity established
in a Member State or in an Associated country.

(2.) The Commission shall take appropriate measures to ensure the portability of grants for
investigator-driven ‘frontier’ research projects funded within the framework of the European
Research Council between legal entities established within Member States or Associated countries.

Article 10

Sole participants

Where the minimum conditions for an indirect action are satisfied by a number of legal entities,
which together form one legal entity, the latter may be the sole participant in an indirect action,
provided that it is established in a Member State or Associated country.

Where the minimum conditions for an indirect action are satisfied by a number of legal entities,
which together constitute form one legal entity, such as European Economic Interest Groups (EEIG)
or international European interest organisations, the latter legal entity may be the sole participant
in an indirect action, provided that it is established in a Member State or Associated country.

2.

25, 26.

24.

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Article 11

International organisations and legal entities established in third countries

Participation in indirect actions shall be open to international organisations and legal entities
established in third countries after the minimum conditions laid down in this Chapter have been met,
as well as any conditions specified in the specific programmes or relevant work programmes.

Article 12

Additional conditions

In addition to the minimum conditions laid down in this Chapter, specific programmes or work
programmes may lay down conditions regarding the minimum number of participants.

They may also lay down, according to the nature and objectives of the indirect action, additional
conditions to be met as regards type of participant and, where appropriate, place of establishment.

.

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SECTION 2

PROCEDURES

SUBSECTION 1

CALLS FOR PROPOSALS

Article 13

Calls for proposals

The Commission shall issue calls for proposals for indirect actions in accordance with the

1.
requirements laid down in the relevant specific programmes and work programmes.

The Commission shall issue calls for proposals for indirect actions in accordance with the

1.
requirements laid down in the relevant specific programmes and work programmes.

20, 21.

In addition to the publicity specified in the Implementing Rules, the Commission shall publish calls
for proposals in the Internet pages of the Seventh Framework Programme, through specific infor-
mation channels, and at the national contact points set up by the Member States and the Associated
countries.

Where appropriate, the Commission shall specify in the call for proposals that the partici-

2.
pants need not establish a consortium agreement.

Article 14

Exceptions

20, 21, 27,
28.

The Commission shall not issue calls for proposals for the following:

In accordance with the Financial Regulation and its Implementing Rules, tThe Commission shall
not issue calls for proposals for the following:

(a)

coordination and support actions to be carried out by legal entities identified in the specific pro-
grammes or in the work programmes when the specific programme permits the work pro-
grammes to identify beneficiaries, in accordance with the Implementing Rules;

(a)

coordination and support actions to be carried out by legal entities identified in the specific
programmes or in the work programmes where when the specific programme permits the
work programmes to identify beneficiaries, in accordance with the Implementing Rules;

(b)

coordination and support actions consisting of a purchase or service subject to the rules on
public procurement set out in the Financial Regulation;

(b)

coordination and support actions consisting of a purchase of a good or a service established
by contract and selected subject to the rules on public procurement set out in the Financial
Regulation;

(c)

coordination and support actions relating to the appointment of independent experts;

(cd) coordination and support actions relating to the appointment of independent experts;

(d) other actions, where so provided by the Financial Regulation or the Implementing Rules.

(ed) other actions implemented on the basis of decisions by the Council and the European Par-
liament (or by the Council in consultation with the European Parliament) identified in part
(b) of Annex III to Decision (…/…) establishing the Seventh Framework Programme where
so provided by the Financial Regulation or the Implementing Rules.

(c)

coordination and support actions relating to the award of study, research or training schol-
arships and prizes following contests;

.

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SUBSECTION 2

SUBSECTION 2

EVALUATION OF PROPOSALS

EVALUATION, SELECTION, NEGOTIATION OF PROPOSALS AND AWARD OF GRANTS

Article 15

Article 15

30, 31.

Evaluation, selection and award

Evaluation principles and, selection and award criteria

1.
The Commission shall evaluate all the proposals submitted in response to a call for propos-
als on the basis of the principles for evaluation, and the selection and award criteria set out in the
specific programme and the work programme.

1.
The Commission shall evaluate all the proposals for indirect actions submitted in response
to a call for proposals on the basis of the evaluation principles for evaluation, and the selection
and award criteria set out in this Regulation, the specific programme and the work programme.

The work programme may set out specific criteria or further details on the application of the cri-
teria.

(1a.) Specific selection and award criteria may in particular be defined for investigator-driven ‘fron-
tier’ research funded within the framework of the European Research Council.

(1b.) Where established in the work programmes or the calls for proposals, remote evaluations
may be carried out.

2.
A proposal which contravenes fundamental ethical principles or which does not fulfil the
conditions set out in the specific programme, the work programme or in the call for proposals shall
not be selected. Such a proposal may be excluded from the evaluation, selection and award proce-
dures at any time.

2.
A proposal which contravenes fundamental ethical principles or which does not fulfil the
conditions set out in the specific programme, the work programme or in the call for proposals
shall not be eligible for participation and selected. Such a proposal may be excluded from the evalu-
ation procedures at any time.

3.

Proposals shall be selected on the basis of the evaluation results.

3.

Proposals shall be selected on the basis of the evaluation results.

31.

4, 31.

31.

Article 16

Article 16

32, 33.

Submission, evaluation, selection and award procedures

Submission, evaluation, selection, negotiation and award procedures

The Commission shall adopt and publish rules governing the procedure for the submission
1.
of proposals, as well as the related evaluation, selection and award procedures. In particular, it shall
lay down detailed rules for the two-stage procedure for submission, and rules for the two-step evalu-
ation procedure.

The Commission shall adopt and publish rules governing the procedure for the submission
1.
of proposals, as well as the related evaluation, selection, negotiation and award procedures. In par-
ticular, it shall lay down detailed rules for the two-stage procedure for submission, and rules for
the two-step evaluation procedure.

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Where a call for proposals specifies a two-stage submission procedure, only those proposals
2.
that pass the evaluation criteria for the first stage shall be requested to submit a complete proposal
in the second stage.

3.
Where a call for proposals specifies a two-step evaluation procedure, only those proposals
that pass the first step, based on the evaluation of a limited set of criteria, shall go forward for fur-
ther evaluation.

The Commission shall adopt and publish rules to ensure consistent verification of the exist-

4.
ence and legal status of participants in indirect actions as well as their financial capacity.

The Commission shall adopt and publish rules to ensure consistent verification of the exist-

4.
ence and legal status of participants in indirect actions as well as their financial capacity.

(3a.) Unless otherwise specified in the work programme, proposals for indirect actions must be
submitted electronically.

4.

.

.

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(4a.; moved from Article 15(3)) Proposals for indirect actions shall beselectedon the basis of a com-
parative analysis of the evaluation results.

(5.) Participants shall be informed in writing of the evaluation result.
In the case of indirect actions proposed by a consortium, the evaluation result and the informa-
tion concerning the selection of the proposal may be communicated to the co-ordinator only.

(6.) For those proposals selected, the Commission may agree, if necessary, with participants to
modify the scientific, operational and financial aspects of the indirect action, within the limits of
the work programme and the call for proposal, and taking into account the results of the evalua-
tion of the proposal.

(7.) Applying the verification procedure set out in Article 16a, the Commission shall ensure that
participants have the operational and financial capacity needed to carry out the indirect action as
and when needed.

(8.) The Commission shall award grants for those proposals for which negotiations have been suc-
cessfully completed.
All other proposals shall be rejected.

37, 38.

Article 16a

34, 35, 36,
42.

Verification of existence, legal status and operational and financial capacity of
participants in indirect actions

The Commission shall be responsible for verifying the existence, the legal status and the opera-
tional and financial capacity of participants in indirect actions.
The verification shall be based on appropriate supporting documents provided by the participant,
allowing its existence and legal status as well as its financial and operational capacity to be ascer-
tained.
These documents must be up-dated periodically, or whenever requested by the Commission.
To avoid double verification, the Commission shall certify a successful verification, which until fur-
ther notice shall be considered as sufficient for all proposals submitted by the same participant.
For this purpose the Commission shall set up a single verification and certification system and shall
adopt and publish specific rules.

39.

Article 17

Appointment of independent experts

The Commission shall appoint independent experts to assist with evaluations required under

1.
the Seventh Framework Programme, and its specific programmes.

1.
The Commission shall appoint independent experts to assist with evaluations of indirect
actions and monitoring activities as required under the Seventh Framework Programme, and its
specific programmes.

For coordination and support actions, referred to in Article 14, independent experts shall be
appointed only if the Commission deems it appropriate.

For coordination and support actions, referred to in Article 14, independent experts shall be
appointed only if the Commission deems it appropriate.

Independent experts shall be chosen considering the skills and knowledge appropriate to the

2.
tasks assigned to them.

.

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Independent experts shall be identified and selected on the basis of calls for applications from indi-
viduals and calls addressed to national research agencies, research institutions or enterprises with a
view to establishing lists of suitable candidates.

The Commission may, if deemed appropriate, select any individual with the appropriate skills from
outside the lists.

Appropriate measures shall be taken to ensure reasonable gender balance when appointing groups
of independent experts.

3.
When appointing an independent expert, the Commission shall take all necessary steps to
ensure that the expert is not faced with a conflict of interests in relation to the matter on which the
expert is required to provide an opinion.

3.
When appointing an independent expert, tThe Commission shall take appropriate mea-
sures all necessary steps to ensure that the expert is not faced with a conflict of interests in relation
to the matter on which the expert is required to provide an opinion.

(2a.) For the evaluation and the monitoring of investigator-driven ‘frontier’ research, experts shall
be appointed by the Commission on the basis of a proposal by the Scientific Council of the Euro-
pean Research Council.

4.
The Commission shall adopt a model appointment letter, hereinafter ‘the appointment let-
ter’, which shall include a declaration that the independent expert has no conflict of interest at the
time of appointment and that he undertakes to inform the Commission if any conflict of interest
should arise in the course of providing his opinion or carrying out his duties. The Commission shall
conclude an appointment letter between the Community and each independent expert.

40.

44.

The Commission shall publish periodically in any appropriate medium the list of the inde-

5.
pendent experts that have assisted it for each specific programme.

5.
The Commission shall publish periodically in any appropriate medium the list and the func-
tion of the independent experts that have assisted it for each framework programme and its spe-
cific programmes.

(4a.) The Commission shall adopt and publish rules governing the appointment and the use of
independent experts.

32, 33.

Article 17a

4, 41, 42.

Databases and electronic exchange of data

(1.)The Commission shall take appropriate measures to ensure that data relating to all the indirect
actions funded under the Seventh Framework Programme are recorded and processed in integrated
databases and a common computerised system.

(2.) The Commission shall encourage the electronic exchange of data for all aspects regarding the
management of proposals and grants.

SUBSECTION 3

SUBSECTION 3

IMPLEMENTATION AND GRANT AGREEMENTS

IMPLEMENTATION OF INDIRECT ACTIONS AND GRANT AGREEMENTS

Article 18

General

General Provisions regarding the implementation of grant agreements

Article 18

1.
The participants shall implement the indirect action and shall take all necessary and reason-
able measures to that end. Participants in the same indirect action shall implement the work jointly
and severally towards the Community.

2.
The Commission shall draw up, on the basis of the model provided for in Article 19.7 and
taking into account the characteristics of the funding scheme concerned, a grant agreement between
the Community and the participants.

2.
The Commission shall draw up, on the basis of the model provided for in Article 19.7 and
taking into account the characteristics of the funding scheme concerned, a grant agreement
between the Community and the participants.

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3.

Participants shall make no commitments incompatible with the grant agreement.

4.
Where a participant fails to comply with its obligations, the other participants shall comply
with the grant agreement without any complementary Community contribution unless the Com-
mission expressly relieves them of that obligation.

.

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If the implementation of an action becomes impossible or if the participants fail to imple-

5.
ment it, the Commission shall ensure the termination of the action.

5.
If the implementation of an action becomes impossible or if the participants fail to imple-
ment it, the Commission shall ensure the termination of the action in accordance with Article 21.

56.

E
N

Participants shall ensure that the Commission is informed of any event which might affect

6.
the implementation of the indirect action or the interests of the Community.

Article 19

Article 19

43, 44, 45,
46, 47, 48,
49, 50.

General provisions for inclusion in grant agreements

General provisions for inclusion in grant agreements

1.
The grant agreement shall establish the rights and obligations of the participants with regard
to the Community, in accordance with Decision (…/…), this Regulation, the Financial Regulation,
and the Implementing Rules, and in accordance with the general principles of Community law.

It shall also establish, in accordance with the same conditions, the rights and obligations of legal enti-
ties who become participants when the indirect action is ongoing.

It shall also establish, in accordance with the same conditions, the rights and obligations of legal
entities who become participants when the indirect action is ongoing.

Where appropriate, the grant agreement shall provide which part of the Community finan-
2.
cial contribution will be based on the reimbursement of eligible costs, and which part will be based
on flat rates (including scale of unit costs) or lump-sums.

(1a. moved from Article 18(2)) For each indirect action, with the exception of those referred to in
Article 14, tThe Commission shall draw up, on the basis of using the models provided for referred
to in Article 19(7) and taking into account the characteristics of the funding scheme concerned, a
grant agreement between the Community and the coordinator acting on behalf of the participants.

Where appropriate, tThe grant agreement shall specify the duration of the action, the sci-
2.
entific and technical work to be carried out, a budget of total estimated costs and provide which
part of the maximum Community financial contribution to the indirect actionwill be based on the
reimbursement of eligible costs, and which part will be based on flat rates (including scale of unit
costs) or lump-sums.

The grant agreement shall specify which changes in the composition of the consortium are

3.
to require the prior publication of a competitive call.

The grant agreement shall specify which changes in the composition of the consortium are

3.
to require the prior publication of a competitive call.

The grant agreement shall require the submission to the Commission of periodic progress

4.
reports concerning the implementation of the indirect action concerned.

The grant agreement shall require the submission to the Commission of periodic progress
4.
reports concerning the implementation of the indirect action concerned and, where appropriate,
may also provide for reviews to assess the implementation of the indirect action concerned.

56.

Where appropriate, the grant agreement may provide that the Commission is to be notified

5.
in advance of any intended transfer of ownership of foreground to a third party.

Where appropriate, the grant agreement may provide that the Commission is to be notified

5.
in advance of any intended transfer of ownership of foreground to a third party.

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6.
Where the grant agreement requires participants to carry out activities that benefit third par-
ties, the participants shall advertise this widely and identify, evaluate and select third parties trans-
parently, fairly and impartially. If provided for in the work-programme, the grant agreement shall
establish criteria for the selection of such third parties. The Commission reserves the right to object
to the selection of the third parties.

The Commission shall establish a model grant agreement in accordance with this Regula-

7.
tion.

7.
The Commission shall establish and adopt a model grant agreements specific to each of the
funding schemes identified in part (a) of Annex III to Decision (…/…) establishing the Seventh
Framework Programme in accordance with this Regulation.

8.
The model grant agreement shall reflect the principles laid down in the European Charter for
Researchers and the Code of Conduct for the Recruitment of Researchers (8). It shall address, as
appropriate, synergies with education at all levels; readiness and capacity to foster dialogue and
debate on scientific issues and research results with a broad public beyond the research community;
activities to increase the participation and role of women in research; and activities addressing socio-
economic aspects of the research.

8.
The model grant agreements shall reflect the principles laid down in the European Charter
for Researchers and the Code of Conduct for the Recruitment of Researchers (8). It shall address, as
appropriate, synergies with education at all levels; readiness and capacity to foster dialogue and
debate on scientific issues and research results with a broad public beyond the research commu-
nity; activities to increase the participation and role of women in research; and activities address-
ing socio-economic aspects of the research.

(8a. moved from whereas (16)) The model grant agreements concluded for each action shall should
provide for supervision and financial control by the Commission, or any representative authorised
by the Commission, as well as audits by the Court of Auditors and on-the-spot checks carried out
by the European Anti-Fraud Office (OLAF), in accordance with the procedures laid down in Coun-
cil Regulations No 2185/96, No 1073/99 and No 1074/99.

19.

Article 20

Provisions concerning access rights, use and dissemination

1.
The grant agreement shall establish the respective obligations of the participants with regard
to access rights, use and dissemination, in so far as those obligations have not been laid down in
this Regulation.

1.
The grant agreement shall establish the respective rights and obligations of the participants
with regard to access rights, use and dissemination, in so far as those rights and obligations have
not been laid down in this Regulation.

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For those purposes, it shall require the submission to the Commission of a plan for the use and dis-
semination of foreground.

2.
The grant agreement may specify the conditions under which the participants may object to
a technological audit of the use and dissemination of the foreground being carried out by certain
authorised representatives of the Commission.

Article 21

Provisions concerning termination

The grant agreement shall specify the grounds for its termination, in whole or in part, in particular
for non-compliance with this Regulation, non-performance or breach, as well as the consequences
for participants of any non-compliance on the part of another participant.

(8) OJ L 75, 22.3.2005, p. 67.

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Article 22

Specific provisions

In the case of indirect actions to support existing research infrastructures and, where appli-
1.
cable, new research infrastructures, the grant agreement may lay down specific provisions relating
to confidentiality, publicity and access rights and commitments that might affect users of the infra-
structure.

In the case of indirect actions to support training and career development of researchers, the
2.
grant agreement may lay down specific provisions on confidentiality, access rights and commit-
ments relating to the researchers benefiting from the action.

3.
In the case of indirect actions in the field of security and space research, the grant agreement
may lay down specific provisions on confidentiality, classification of information, access rights,
transfer of ownership of foreground and the use thereof.

Where appropriate, the grant agreement for indirect actions addressing security issues, other

4.
than those referred to in paragraph 3, may also include such specific provisions.

(5.; moved from Article 47) In the case of investigator-driven ‘frontier’ research actions, partici-
pants shall actively ensure the grant agreement may lay down specific provisions relating to dis-
semination.of foreground, taking into account the need to safeguard intellectual property rights,
the benefits of swift dissemination, confidentiality, and the legitimate interests of the participants.

Article 23

Article 23

Signature and accession

Signature and accession in the case of multi-partner indirect actions

The grant agreement shall enter into force upon signature by the coordinator and the Commission.

(1.) The grant agreement shall enter into force upon signature by the coordinator, acting on behalf
of the other participants, and the Commission.

It shall apply to each participant that has formally acceded thereto.

It shall apply to each participant that has formally acceded thereto to the consortium agreement.

(2.) ( Changes in the composition of the consortium shall be subject to written approval by the
Commission in accordance with Article 26(4). )

SUBSECTION 4

CONSORTIA

Article 24

Consortium agreements

Save where otherwise provided in the call for proposals, all legal entities wishing to participate in an
indirect action shall draw up an agreement, hereinafter ‘the consortium agreement’, to govern the
following:

(1.) Save where Unless otherwise provided for in the call for proposals, all legal entities wishing to
participate in an indirect action shall conclude draw up an agreement, hereinafter ‘the consortium
agreement’ , to govern the following:

It may establish additional rights and obligations of the participants in an indirect action, in accor-
dance with the provisions established in the grant agreement, to govern the following:

.

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45, 46, 47,
48, 49, 50.

51, 52.

(a)

the internal organisation of the consortium;

(b)

the distribution of the Community financial contribution;

(a)

(b)

the legal representation and the internal organisation of the consortium, confidentiality
arrangements and the settlement of internal disputes, including provisions regarding the with-
drawal, removal or exchange of any of the participants;

the distribution of the budget of estimated costs, the distribution of the Community financial
contribution, the forms of grants used in accordance with Article 30(1) and provisions regard-
ing the reporting and calculating of costs in accordance with Article 30(2);

(c)

additional rules on dissemination and use including intellectual property rights arrangements,
as appropriate;

(c)

additional rules on ownership of foregound generated by the indirect action, transfer of such
ownership, access rights, dissemination and use including intellectual property rights arrange-
ments, as appropriate;

(d)

the settlement of internal disputes.

(d)

the settlement of internal disputes.

(2.) The consortium agreement shall be concluded by all participants wishing to participate in an
indirect action before the signature of the grant agreement by the coordinator.

(3.) In accordance with this Regulation the Commission shall establish model consortium agree-
ments specific to each of the funding schemes identified in part (a) of Annex III to Decision (…/…)
establishing the Seventh Framework Programme.

45, 46, 47,
48, 49, 50.

Article 25

Coordinator

1.
The legal entities wishing to participate in an indirect action shall appoint one of their num-
ber to act as coordinator to carry out the following tasks in accordance with this Regulation, the
Financial Regulation, the Implementing Rules, and the grant agreement:

1.
The legal entities wishing to participate in an indirect action shall appoint among them-
selves a one of their number to act as coordinator to carry out the following tasks in accordance
with this Regulation, the Financial Regulation, the Implementing Rules, and the grant agreement:

(a)

to ensure that the legal entities identified in the grant agreement complete the necessary for-
malities for accession to the grant agreement, as provided for therein;

(a)

(b)

to receive the Community financial contribution and to distribute it ;

(c)

to keep the financial accounts in order, to keep records and to inform the Commission of the
distribution of the Community financial contribution in accordance with Article 36;

(b)

(c)

(d)

to ensure efficient and correct communication between the participants and the Commission.

(d)

to ensure that the legal entities participating in the indirect action comply with their obliga-
tions under the grant agreement and the consortium agreement identified in the grant agree-
ment complete the necessary formalities for accession to the grant agreement, as provided for
therein;

to receive the Community financial contribution and to distribute it according to the provi-
sions specified in the consortium agreement;

to keep the financial accounts in order, to keep records and to inform the Commission of the
distribution of the Community financial contribution in accordance with Article 24(b) and
Article 36;

to ensure efficient and correct reporting of the scientific and technical deliverables and
progress of work communication between the participants and,
in accordance with
Article 19(4), to the Commission.

(e)

to terminate the participation of legal entities should a participant not comply with its obli-
gations under the grant agreement or the consortium agreement.

2.

The coordinator shall be identified in the grant agreement.

2.

The coordinator shall be identified in the grant agreement consortium agreement.

The appointment of a new coordinator shall require the written approval of the Commission.

The appointment of a new coordinator shall require the written approval of the Commission.

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Article 26

Changes in the consortium

(3.) Where provided for in the consortium agreement, the coordinator may subcontract its admin-
istrative and management activities in accordance with Article 33(4).

53.

54, 55.

The participants in an indirect action may propose the addition of a new participant or the

1.
removal of an existing participant.

2.

Any legal entity which joins an ongoing action shall accede to the grant agreement.

1.
The participants in an indirect action may agree to add propose the addition of a new par-
ticipant or to remove the removal of an existing participant in accordance with the respective pro-
visions established in the consortium agreement.

Any legal entity which joins an ongoing action shall accede to the grant agreement and the

2.
consortium agreement.

Where provided for in the grant agreement, the consortium shall publish a competitive call
3.
and advertise it widely using specific information support, particularly Internet sites on the seventh
framework programme, the specialist press and brochures, and the national contact points set up
by the Member States and Associated countries for information and support.

Where provided for in the grant agreement, the consortium shall publish a competitive call
3.
and advertise it widely using specific information support, particularly Internet sites on the sev-
enth framework programme, the specialist press and brochures, and the national contact points
set up by the Member States and Associated countries for information and support.

55.

The consortium shall evaluate offers in the light of the criteria which governed the initial action and
with the assistance of independent experts appointed by the consortium, in accordance with the
principles laid down in Articles 15, and Article 17, respectively.

The consortium shall evaluate offers in the light of the criteria which governed the initial action
and with the assistance of independent experts appointed by the consortium, in accordance with
the principles laid down in Articles 15, and Article 17, respectively.

The consortium shall notify any change of its composition to the Commission, which may

4.
object within 45 days of the notification.

The consortium shall notify any change of its composition to the Commission, which may

4.
object within 45 days of the notification.

Changes in the composition of the consortium associated with proposals for other changes to the
grant agreement which are not directly related to the change in composition shall be subject to writ-
ten approval by the Commission.

( Changes in the composition of the consortium associated with proposals for other changes to
the grant agreement which are not directly related to the change in composition shall be subject to
written approval by the Commission. )

MONITORING OF PROGRAMMES AND INDIRECT ACTIONS AND COMMUNICATION OF
INFORMATION

SUBSECTION 5

Article 27

Monitoring

Article 27

Monitoring and review

39, 56.

The Commission shall monitor the implementation of indirect actions on the basis of the periodic
progress reports submitted pursuant to Article 19(4).

(1.) The Commission shall monitor the implementation of indirect actions on the basis of the
periodic progress reports submitted pursuant to Article 19(4).

In particular, the Commission shall monitor the implementation of the plan for the use and
dissemination of foreground, submitted pursuant to the second subparagraph of Article 20(1).

…

For those purposes, the Commission may be assisted by independent experts appointed in accor-
dance with Article 17.

For those purposes, the Commission may be assisted by independent experts appointed in accor-
dance with Article 17.

(2.) The Commission may also carry out reviews of indirect actions on a periodic basis, or on their
completion.
Such reviews may also be carried out to determine whether the indirect action should be termi-
nated in accordance with Article 18(5).

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The Commission shall monitor the seventh framework programme, its specific programmes and,
where appropriate, previous framework programmes, with the assistance of independent experts
appointed in accordance with Article 17. In addition, it may set up groups of independent experts
appointed in accordance with Article 17, to advise on the implementation of Community research
policy.

(3.) The Commission shall monitor the Sseventh Fframework Pprogramme, its specific pro-
grammes and, where appropriate, previous framework programmes, with the assistance of inde-
pendent experts appointed in accordance with Article 17. In addition, it may seek advice set up
groups of independent experts appointed in accordance with Article 17, to advise on the imple-
mentation of Community research policy.

(4. moved from above) For those purposes, the Commission may be assisted by independent
experts appointed in accordance with Article 17.

(5.) The Commission shall present to a committee composed of representatives of Member States,
and chaired by the Commission, the results of its monitoring activities in accordance with para-
graphs 1 to 3 of this Article.

(6.) The responsibility for monitoring investigator-driven ‘frontier’ research funded within the
framework of the ERC shall be with the ERC’s ‘Scientific Council’, or its competent sub-committees.

57.

56.

Article 28

Information to be made available

Upon request, the Commission shall make available to any Member State or Associated coun-
1.
try any useful information in its possession on foreground arising from work carried out in the con-
text of an indirect action, provided that the following conditions are met:

(a)

the information concerned is relevant to public policy;

(b)

the participants have not provided sound and sufficient reasons for withholding the informa-
tion concerned.

2.
Under no circumstances shall the provision of information pursuant to paragraph 1 be
deemed to transfer to the recipient any rights or obligations of the Commission or of the partici-
pants.

However, the recipient shall treat any such information as confidential unless it becomes public or is
made available publicly by the participants, or unless it was communicated to the Commission with-
out restrictions on its confidentiality.

SECTION 3

COMMUNITY FINANCIAL CONTRIBUTION

SUBSECTION 1

ELIGIBILITY FOR FUNDING AND FORMS OF GRANTS

Article 29

Eligibility for funding

Where any of the following legal entities participates in an indirect action, it may receive a

1.
Community financial contribution:

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(a)

any legal entity established in a Member State or an Associated country, or created under Com-
munity law,

(b)

any international European interest organisation,

(c)

any legal entity established in an international cooperation partner country.

2.
In the case of a participating international organisation, other than an international Euro-
pean interest organisation, or a legal entity established in a third country other than an interna-
tional cooperation partner country, a Community financial contribution may be granted provided
that at least one of the following conditions is satisfied:

(a)

provision is made to that effect in the specific programmes or in the relevant work programme,

(b)

it is essential for carrying out the indirect action,

(c)

such funding is provided for in a bilateral scientific and technological agreement or any other
arrangement between the Community and the country in which the legal entity is established.

Article 30

Forms of grants

The Community financial contribution for grants identified in part a) of Annex III to the Sev-

1.
enth Framework Programme shall be based on the reimbursement of eligible costs.

1.
The Community financial contribution for grants identified in part a) of Annex III to the
Seventh Framework Programme shall consist of be based on the reimbursement, in part or in
whole, of eligible costs.

However, the Community financial contribution may take the form of flat rate financing, including
scale of unit costs, or lump sum financing, or it may combine the reimbursement of eligible costs
with flat rates and lump sums.

However, the Community financial contribution may take the form of flat rate financing, includ-
ing scale of unit costs, or lump sum financing, or it may combine the reimbursement of eligible
costs with flat rates and lump sums.

The Community financial contribution may also take the form of scholarships or prizes.

The Community financial contribution may also take the form of scholarships or prizes.

While the Community financial contribution shall be calculated by reference to the cost of

2.
the indirect action as a whole, it shall be based on the reported costs of each participant.

While tThe maximum Community financial contribution for the indirect action shall be
2.
defined calculated by reference to the cost of the indirect action as a whole, it shall be according to
the activities carried out by and based on the budget of estimated reported costs for of each par-
ticipant.

Lump sums for whole indirect actions may be used only for coordination and support actions and
actions for training and career development of researchers.

Article 31

Reimbursement of eligible costs

3, 58, 59,
60, 61.

60.

61.

1.

Grants shall be co-financed by the participants.

Indirect actions awarded a Ggrants from the Community budget shall be co-financed by the

1.
participants.

The Community financial contribution to reimburse eligible costs shall not give rise to a profit.

The Community financial contribution to reimburse eligible costs shall not give rise to a profit.
Whether or not there is a profit shall be determined at the level of each participant.

62.

Receipts shall be taken into consideration for the payment of the grant at the end of the

2.
implementation of the action.

Receipts shall be taken into consideration for the payment of the grant at the end of the

2.
implementation of the action in accordance with Article 33(5).

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In order to be considered eligible, costs incurred for the implementation of an indirect action

3.
shall meet the following conditions:

In order to be considered eligible, costs incurred by each participant for the implementa-

3.
tion of an indirect action shall meet the following conditions:

(a)

they must be actual;

(b)

(c)

(d)

(e)

they must have been incurred during the duration of the action, with the exception of final
reports when provided for in the grant agreement;

they must have been determined in accordance with the usual accounting and management
principles and practices of the participant and used for the sole purpose of achieving the objec-
tives of the indirect action and its expected results, in a manner consistent with the principles
of economy, efficiency and effectiveness;

they must be recorded in the accounts of the participant and paid and, in the case of any con-
tribution from third parties, they must be recorded in the accounts of the third parties;

they must be exclusive of non-eligible costs, in particular identifiable indirect taxes including
value added tax, duties, interest owed, provisions for possible future losses or charges, exchange
losses, cost related to return on capital, costs declared or incurred, or reimbursed in respect of
another Community project, debt and debt service charges, excessive or reckless expenditure,
and any other cost that does not meet the conditions referred to in points (a) to (d).

(c)

(d)

(e)

they must have been determined and have been used according to the usual accounting and
management principles of the country where the legal entity is established and cost account-
ing practices of the participant and incurred for the sole purpose of achieving the objectives
of the indirect action and its expected results, in a manner consistent with the principles of
economy, efficiency and effectiveness;

they must be recorded in the accounts of the participant and paid and, in the case of any con-
tribution from third parties, they must be recorded in the accounts of the third parties;

they must be exclusive of non-eligible costs, in particular recoverable identifiable indirect
taxes, including value added tax, duties, interest owed, provisions for possible future losses
or charges, exchange losses, costs related to return on capital, costs declared or incurred, or
reimbursed in respect of another Community project, debt and debt service charges, exces-
sive or reckless expenditure, and any other cost that does not meet the conditions referred
to in points (a) to (d).

63, 65.

64.

For the purposes of point (a), average personnel costs may be used if they are consistent with the
management principles and accounting practices of the participant and do not differ significantly
from actual costs.

For the purposes of point (a), average personnel costs may be used if they are consistent with the
management principles and accounting practices of the participant and do not differ significantly
from actual costs.

Article 32

Article 32

66, 67, 68,
69, 70.

Direct eligible costs and indirect eligible costs

Direct eligible costs and indirect eligible costs

1.
Eligible costs shall be composed of costs attributable directly to the action, hereinafter ‘direct
eligible costs’ and, where applicable, of costs which are not attributable directly to the action, but
which have been incurred in direct relationship with the direct eligible costs attributed to the action,
hereinafter ‘indirect eligible costs’.

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(1a.) Direct costs can be composed of personnel, travel and subsistence, and other specific costs.

67.

include remuneration and related charges for personnel directly

(1b.) Personnel costs shall
employed by a participant.
They shall be charged on the basis of the participant’s records of time actually spent by personnel
on the indirect action.
A participant may charge average costs or unit scales for specific categories of staff, provided that
they are established in accordance with its usual cost accounting practices.

.

.

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(1c.) Travel and subsistence costs for personnel participating in the indirect action shall be charged
as actual costs incurred or based on unit scales, provided that they are established in accordance
with the participant’s usual cost accounting practices, or based on unit scales established by the
Commission.

(1d.) Other specific costs, including durable equipment, user fees, consumables, subcontracting,
shall be eligible only if defined in the grant agreement.

.

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For the coverage of indirect eligible costs, a participant may opt for a flat-rate of its total direct

2.
eligible costs, excluding its direct eligible costs for subcontracting.

2.
For the coverage of indirect eligible costs, a participant may charge actual costs or may opt
for a flat- rate for of its total direct eligible personnel costs, excluding its direct eligible costs for
subcontracting, provided that it is established in accordance with its usual cost accounting prac-
tices.

68, 69, 70.

E
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3.
The grant agreement may provide that the reimbursement of indirect eligible costs is to be
limited to a maximum percentage of the direct eligible costs, excluding the direct eligible costs for
subcontracting, in particular in the case of coordination and support actions, and, where appropri-
ate, actions for training and career development of researchers.

3.
The grant agreement may provide that the reimbursement of indirect eligible costs is to be
limited to a maximum percentage of the direct eligible personnel costs, excluding the direct eli-
gible costs for subcontracting, in particular in the case of coordination and support actions, and,
where appropriate, actions for training and career development of researchers.

68.

Article 33

Upper funding limits

For research and technological development activities, the Community financial contribu-

1.
tion may reach a maximum of 50 % of the total eligible costs.

However, in the case of public bodies, secondary and higher education establishments, research
organisations and SMEs, it may reach a maximum of 75 % of the total eligible costs.

For demonstration activities, the Community financial contribution may reach a maximum

2.
of 50 % of the total eligible costs.

For activities supported by frontier research actions, coordination and support actions, and
3.
actions for the training and career development of researchers, the Community financial contribu-
tion may reach a maximum of 100 % of the total eligible costs.

4.
For management and audit certificates, and other activities not covered by paragraphs 1, 2
and 3, the Community financial contribution may reach a maximum of 100 % of the total eligible
costs.

3, 71, 72,
73.

71, 72.

4.
For management activities (including and audit certificates) and training activities in actions
that do not fall under the funding scheme for training and career development of researchers, coor-
dination, networking, and dissemination and other activities not covered by paragraphs 1, 2 and 3,
the Community financial contribution may be up to reach a maximum of 100 % of the total eli-
gible costs.

73.

The other activities referred to in the first subparagraph include, inter alia, training in actions that do
not fall under the funding scheme for training and career development of researchers, coordination,
networking, and dissemination.

The other activities referred to in the first subparagraph include, inter alia, training in actions that
do not fall under the funding scheme for training and career development of researchers, coordi-
nation, networking, and dissemination.

For the purposes of paragraphs 1 to 4, eligible costs minus receipts shall be taken into con-

5.
sideration in order to determine the Community financial contribution.

For the purposes of paragraphs 1 to 4, eligible costs and minus receipts shall be taken into

5.
consideration in order to determine the Community financial contribution.

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Paragraphs 1 to 5 shall apply, as appropriate, in the case of indirect actions where flat rate

6.
financing or lump sum financing is used for the whole indirect action.

Paragraphs 1 to 5 shall apply, as appropriate, in the case of indirect actions where flat rate

6.
financing or lump sum financing is used for the whole indirect action.

Article 34

Article 34

74.

Reporting and audit of eligible costs

Reporting and audit of eligible costs

1.
Periodic reports shall be submitted to the Commission regarding eligible costs, financial inter-
est yielded by pre-financing, and receipts in relation with the indirect action concerned and, where
appropriate, certified by an audit certificate, in accordance with the Financial Regulation and the
Implementing Rules.

1.
All Periodic reports shall be submitted to the Commission regarding eligible costs, financial
interest yielded by pre-financing, and receipts relating to in relation with the indirect action con-
cerned shall be periodically reported to the Commission and, where appropriate, certified by an
audit certificate, in accordance with the Financial Regulation and the Implementing Rules.

The existence of co-financing in relation with the concerned action shall be reported and, where
appropriate, certified at the end of the action.

The existence of co-financing in relation with the concerned action shall be reported and, where
appropriate, certified at the end of the action.

2.
In the case of public bodies, research organisations, and higher and secondary education
establishments, an audit certificate as required under paragraph 1 may be established by a compe-
tent public officer.

2.
In the case of public bodies, research organisations, and higher and secondary education
establishments, an audit certificate as required under paragraph 1 may be established by a com-
petent public officer.

Article 34a

Audit certificates

69, 75, 76,
77.

(1.) Reported costs shall be certified in accordance with the Financial Regulation and the Imple-
menting Rules.

(2.) In accordance with this Regulation and the provisions of the grant agreement, audit certifi-
cates shall provide assurance that:

75.

(a)

the costs claimed by the participant are eligible;

(b)

the costs, interest on pre-financing and receipts have been correctly determined and are sub-
stantiated by adequate supporting documents.

(3.) Audit certificates shall be provided by an external auditor or, in the case of public bodies, a
competent public officer.
The external auditor must comply with the requirements established in accordance with the 8th
Council Directive 84/253/EEC of 10 April 1984. The competence of the public officer shall be
determined by the national legislation and the relevant authorities.
The external auditor or, in the case of public bodies, the competent public officer providing the
audit certificate, must be independent of the participant in charge of the selection of the auditor.

76.

(4.) The Commission shall have access to the supporting documents for these audit certificates.

77.

Article 35

Networks of Excellence

Article 35

Networks of Excellence

59, 78, 79.

1.
Unless otherwise provided for in the work programme, the Community financial contribu-
tion to Networks of Excellence shall be in the form of a lump-sum calculated according to the num-
ber of researchers to be integrated in the Network of Excellence and the duration of the action.

1.
Unless otherwise provided for in the work programme, the Community financial contri-
bution to Networks of Excellence shall be in the form of a lump-sum calculated according to the
number of researchers to be integrated in the Network of Excellence and the duration of the action.

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The unit value for lump sums paid under paragraph 1 shall be EUR 23 500 per year and per

2.
researcher.

The unit value for lump sums paid under paragraph 1 shall be EUR 23 500 per year and

2.
per researcher.

That amount shall be adjusted by the Commission in accordance with the Financial Regulation and
the Implementing Rules.

That amount shall be adjusted by the Commission in accordance with the Financial Regulation and
the Implementing Rules.

3.
The work programme shall establish the maximum number of participants and, where
appropriate, the maximum number of researchers that may be used as the basis for the calculation
of the maximum lump sum pursuant to paragraph 1. However, participants over and above the
maxima for the establishment of the financial contribution may participate as appropriate.

3.
The work programme shall establish the maximum number of participants and, where
appropriate, the maximum number of researchers that may be used as the basis for the calculation
of the maximum lump sum pursuant to paragraph 1. However, participants over and above the
maxima for the establishment of the financial contribution may participate as appropriate.

4.

The payment of lump sums under paragraph 1 shall be effected by means of periodic releases.

The payment of lump sums under paragraph 1 shall be effected by means of periodic

4.
releases.

Those periodic releases shall be made according to the assessment of the progressive implementa-
tion of the Joint Programme of Activities through the measurement of integration of research
resources and capacities based on performance indicators negotiated with the consortium and speci-
fied in the grant agreement.

Those periodic releases shall be made according to the assessment of the progressive implemen-
tation of the Joint Programme of Activities through the measurement of integration of research
resources and capacities based on performance indicators negotiated with the consortium and
specified in the grant agreement.

SUBSECTION 2

PAYMENT, DISTRIBUTION, RECOVERY AND GUARANTEES

Article 36

Payment and distribution

1.

The Community financial contribution shall be paid to the participants via the coordinator.

The coordinator shall keep records making it possible to determine at any time what portion

2.
of the Community funds has been distributed to each participant.

The coordinator shall communicate that information to the Commission upon request.

Article 37

Recovery

The Commission may adopt a recovery decision in accordance with the Financial Regulation.

Article 38

Article 38

3, 80, 81.

Retained amounts for risk avoidance

Retained amounts for risk avoidance

1.
Depending on the level of risk associated with non-recovery of sums due to the Community,
the Commission may retain a small percentage of the Community financial contribution to each par-
ticipant in an indirect action in order to cover any amounts due and not reimbursed by defaulting
participants in indirect actions.

1.
Depending on the level of risk associated with non-recovery of sums due to the Commu-
nity, the Commission may retain a small percentage of the Community financial contribution to
each participant in an indirect action in order to cover any amounts due and not reimbursed by
defaulting participants in indirect actions.

2.

(a)

Paragraph 1 shall not apply to the following:

public bodies, legal entities whose participation in the indirect action is guaranteed by a Mem-
ber State or an Associated country, and higher and secondary education establishments;

2.

(a)

Paragraph 1 shall not apply to the following:

public bodies, legal entities whose participation in the indirect action is guaranteed by a Mem-
ber State or an Associated country, and higher and secondary education establishments;

.

.

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(b) participants in actions to support training and career development of researchers, frontier
research actions, and actions for the benefit of specific groups with the exception actions for
the benefit of SMEs.

(b) participants in actions to support training and career development of researchers, frontier
research actions, and actions for the benefit of specific groups with the exception actions for
the benefit of SMEs.

The types of participant referred to in points (a) and (b) shall each be responsible for their own debts.

The types of participant referred to in points (a) and (b) shall each be responsible for their own
debts.

The amounts retained shall constitute revenue assigned to the Seventh Framework Pro-

3.
gramme within the meaning of Article 18(2) of the Financial Regulation.

The amounts retained shall constitute revenue assigned to the Seventh Framework Pro-

3.
gramme within the meaning of Article 18(2) of the Financial Regulation.

4.
At the end of the framework programme an assessment shall be made of the amounts
required to cover outstanding risks. Any sums in excess of these amounts shall be reimbursed to the
framework programme and constitute earmarked revenue.

4.
At the end of the framework programme an assessment shall be made of the amounts
required to cover outstanding risks. Any sums in excess of these amounts shall be reimbursed to
the framework programme and constitute earmarked revenue.

CHAPTER III

Dissemination and use, and access rights

SECTION 1

FOREGROUND

SUBSECTION 1

OWNERSHIP

Article 39

Ownership of foreground

Foreground shall be the property of the Community in the following cases:

coordination and support actions consisting in a purchase or service subject to the rules on
public procurement set out in the Financial Regulation;

(a)

coordination and support actions consisting in a purchase of goods or services subject to the
rules on public procurement set out in the Financial Regulation and its Implementing Rules;

1.

(a)

(b)

coordination and support actions relating to independent experts.

Foreground arising from work carried out under indirect actions other than those referred
2.
to in paragraph 1 shall be the property of the participants carrying out the work generating that fore-
ground.

3.
If employees or other personnel working for a participant are entitled to claim rights to fore-
ground, the participant shall ensure that it is possible to exercise those rights in a manner compat-
ible with its obligations under the grant agreement.

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Article 40

Joint ownership of foreground

83.

1.
Where several participants have jointly carried out work generating foreground and where
their respective share of the work cannot be ascertained, they shall have joint ownership of such
foreground.

1.
Where several participants have jointly carried out work generating foreground and where
their respective share of the work cannot be ascertained, they shall have joint ownership of such
foreground.

In such cases, the participants concerned shall conclude a joint ownership agreement governing
the allocation and terms of exercising that joint ownership.

2.
Where no joint ownership agreement has been concluded regarding the allocation and terms
of exercising that joint ownership, each of the joint owners shall be entitled to grant non-exclusive
licenses to third parties, without any right to sub-licence subject to the following conditions:

2.
Where no such joint ownership agreement has been concluded by the participants in an
indirect action regarding the allocation and terms of exercising that joint ownership, each of the
joint owners shall be entitled to grant non-exclusive licenses to third parties, without any right to
sub-licence, subject to the following conditions:

(a)

prior notice must be given to the other joint owners;

(a)

giving prior notice must be given to the other joint owners;.

(b)

fair and reasonable compensation must be provided to the other joint owners.

(b)

fair and reasonable compensation must be provided to the other joint owners.

(3.) The Commission shall establish model joint ownership agreements in accordance with this
Regulation.

Article 41

Ownership of foreground by specific groups

1.
In the case of actions for the benefit of specific groups, Article 39(2) and Article 40(1) shall
not apply. In such cases, foreground shall be jointly owned by the participants which are members
of the specific group benefiting from the action, unless otherwise agreed by those participants.

In the case of actions for the benefit of specific groups identified in part (a), section 6. of Annex III
to Decision (…/…) establishing the Seventh Framework Programme, Article 39(2) and Article 40(1)
shall not apply. In such cases, foreground shall be jointly owned by the participants which are
members of the specific group benefiting from the action, unless otherwise agreed by those par-
ticipants.

Where the owners of the foreground are not members of that group, they shall ensure that the group
is provided with all the rights to foreground that are required for the purposes of using and dis-
seminating that foreground in accordance with the technical annex to the grant agreement.

Where the owners of the foreground are not members of that group, they shall ensure that the
group is provided with all the exclusive rights to foreground that are required for the purposes of
using and disseminating that foreground in accordance with the technical annex to the grant agree-
ment.

Article 42

Article 42

82, 84.

Transfer of foreground

Transfer of ownership and access rights regarding foreground

1.
Where a participant transfers ownership of foreground, it shall pass on its obligations to the
assignee, in particular those relating to the granting of access rights, and dissemination and use, in
accordance with the grant agreement.

1.
Where a participant transfers ownership of foreground, it shall pass on its obligations to
the assignee, in particular those relating to the granting of access rights, and dissemination and use
in accordance with this Regulation, the grant agreement and the consortium agreement.

.

.

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(1a.) Foreground shall also be accessible to affiliated entities of the participants carrying out the
work generating that foreground if the affiliated company is:
established in a Member State or an Associated Country;
(a)

(b)

granting reciprocal access rights in respect of any background which it holds and which is
needed to use the foreground;

(c)

complying with the obligations concerning confidentiality in accordance with Article 3.

2.
Subject to its obligations concerning confidentiality, where the participant is required to pass
on access rights, it shall give prior notice to the other participants in the same action, together with
sufficient information concerning the new owner of the foreground to permit them to exercise their
access rights under the grant agreement.

2.
Subject to its obligations concerning confidentiality, wWhere a the participant intends is
required to pass on access rights, it shall give prior notice to the other participants in the same
action, together with sufficient information concerning the new assignee owner of the foreground
to permit the other participants them to exercise their access rights under the grant agreement.

However, the other participants may, by written agreement, waive their right to individual prior
notice in the case of transfers of ownership from one participant to a specifically identified third
party.

However, the other participants may, by written agreement, waive their right to individual prior
notice in the case of transfers of ownership from one participant to a specifically identified third
party.

(2a.) No prior notice to the other participants in the same action needs to be given (one) year after

(a)

(b)

the completion of the indirect action, or

the termination of participation by the owner of the foreground concerned.

Following notification in accordance with the first subparagraph of paragraph 2, the other
3.
participants may object to any transfer of ownership on the ground that it would adversely affect
their access rights.

Following notification in accordance with the first subparagraph of paragraph 2 of this
3.
Article, any the other participants may object to any transfer of ownership on the ground that it
would adversely affect their access rights.

Where the other participants demonstrate that their rights would be adversely affected, the intended
transfer shall not take place until agreement has been reached between the participants concerned.

Where any of the other participants demonstrate that their rights would be adversely affected, the
intended transfer shall not take place until agreement has been reached between the participants
concerned.

4.
Where appropriate, the grant agreement may provide, by way of an additional requirement,
that the Commission is to be notified in advance of any intended transfer of ownership to a third
party.

4.
Where appropriate, the grant agreement, may provide, by way of an additional require-
ment, that tThe Commission is to be notified in advance of any intended transfer of ownership or
access rights regarding foreground to a third party which is not established in a Member State or
an Associated country.

Article 43

84.

Preservation of European competitiveness and ethical principles

The Commission may object to the transfer of ownership of foreground, or to the granting of an
exclusive licence regarding foreground, to a legal entity which is established in a third country not
associated to the Seventh Framework Programme, if it considers that this is not in accordance with
the interests of developing the competitiveness of the European economy or is inconsistent with
ethical principles.

In accordance with Article 42(4) of this Regulation, tThe Commission may object to the transfer
of ownership of foreground, or to the granting of an exclusive licence regarding foreground, to third
parties not a legal entity which is established in a Member State or an Associated country third
country not associated to the Seventh Framework Programme, if it considers that this is not in
accordance with the interests of developing the competitiveness of the European economy or is
inconsistent with ethical principles.

In such cases, the transfer of ownership or grant of exclusive licence shall not take place unless the
Commission is satisfied that appropriate safeguards will be put in place.

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SUBSECTION 2

PROTECTION, PUBLICATION, DISSEMINATION AND USE

Article 44

Protection of foreground

Where foreground is capable of industrial or commercial application, its owner shall provide
1.
for its adequate and effective protection in conformity with relevant legislation, and having due
regard to the legitimate interests, particularly the commercial interests, of the participants in the indi-
rect action concerned.

Where a participant invokes legitimate interest, it must, in any given instance, show that it would
suffer disproportionately great harm.

Where a participant invokes legitimate interest, it must, in any given instance, show that it would
suffer disproportionately great harm.

2.
Where the owner of foreground does not protect foreground that it owns, and does not
transfer it to another participant in accordance with Article 42(1) and (2), no dissemination activi-
ties may take place before the Commission has been informed.

In such cases, the Commission may, with the consent of the participant concerned, assume owner-
ship of that foreground and adopt measures for its adequate and effective protection. The partici-
pant concerned may refuse consent only if it can demonstrate that its legitimate interests would suf-
fer disproportionately great harm.

In such cases, the Commission may, with the consent of the participant concerned, assume own-
ership of that foreground and adopt measures for its adequate and effective protection. The par-
ticipant concerned may refuse consent only if it can demonstrate that its legitimate interests would
suffer disproportionately great harm.

Article 45

Statement relating to Community financial support

All publications, patent applications filed by or on behalf of a participant, or any other dissemination
relating to foreground, shall include a statement that the foreground concerned was generated with
the assistance of financial support from the Community.

The terms of that statement shall be established in the grant agreement.

Article 46

Use and dissemination

1.

The participants shall use the foreground which they own, or ensure that it is used.

82.

Each participant shall ensure that the foreground of which it has ownership is disseminated

2.
as swiftly as possible. If it fails to do so, the Commission may disseminate that foreground.

Each participant shall ensure that the foreground of which it has ownership is disseminated

2.
as swiftly as possible. If it fails to do so, the Commission may disseminate that foreground.

Dissemination activities shall be compatible with intellectual property rights, confidentiality,

3.
and the legitimate interests of the owner of the foreground.

3.
Dissemination activities shall be compatible with intellectual property rights, confidential-
ity obligations, and the legitimate interests of the owner of the foreground as to the protection or
potential protection of foreground.

4.

Prior notice of any dissemination activity shall be given to the other participants concerned.

.

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Following notification, any of those participants may object if it considers that its legitimate inter-
ests in relation to its foreground could suffer disproportionately great harm. In such cases, the dis-
semination activity may not take place unless appropriate steps are taken to safeguard these legiti-
mate interests.

Following notification, any of those participants may object within a period to be agreed between
the participants in their consortium agreement or by any other written agreement if it considers
that its legitimate interests in relation to its foreground or background could suffer disproportion-
ately great harm. In such cases, the dissemination activity may not take place unless appropriate
steps are taken to safeguard these legitimate interests.

Article 47

Article 47

Dissemination in relation to frontier research actions

Dissemination in relation to frontier research actions

In the case of frontier research actions, participants shall actively ensure dissemination of foreground,
taking into account the need to safeguard intellectual property rights, the benefits of swift
dissemination, confidentiality, and the legitimate interests of the participants.

(moved to Article 22(5)) In the case of frontier research actions, participants shall actively ensure
dissemination of foreground, taking into account the need to safeguard intellectual property rights,
the benefits of swift dissemination, confidentiality, and the legitimate interests of the participants.

SECTION 2

ACCESS RIGHTS TO BACKGROUND AND FOREGROUND

Article 48

Background covered

Participants may define the background needed for the purposes of the indirect action in a written
agreement and, where appropriate, may exclude specific background.

Participants may define the background needed for the purposes of the indirect action in the
consortium a written agreement and, where appropriate, may exclude specific background.

Article 49

Principles

1.

All requests for access rights shall be made in writing.

1.

All requests for access rights shall be made in writing.

(1a.) Access rights in accordance with Articles 50, 51 and 52 shall be deemed granted to partici-
pants and to their affiliated entities provided that:
(a)
(b)

these entities grant reciprocal access rights to all participants and their affiliated entities;
such affiliated entities fulfil all obligations towards the Commission and the other partici-
pants under this Regulation, the grant agreement, the consortium agreement and any other
written agreement of the participants.

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85.

82, 86.

Unless otherwise agreed by the owner of the foreground or background, access rights shall

2.
confer no entitlement to grant sub-licences.

Exclusive licences for foreground or background may be granted, subject to written confir-

3.
mation by all the other participants concerned that they waive their access rights thereto.

4.
Without prejudice to paragraph 3, any agreement providing access rights to foreground or
background to participants or third parties shall be such as to ensure that potential access rights for
other participants are maintained.

.

.

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5.
Participants in the same action shall inform each other as soon as possible of any limitation
to the granting of access rights to background, or of any other restriction which might substantially
affect the granting of access rights.

The termination of its participation in an indirect action shall in no way affect the obligation
6.
of that participant to grant access rights to the remaining participants in the same action under the
terms and conditions established by the grant agreement.

Article 50

Access rights for implementation of indirect actions

1.
Access rights to foreground shall be granted to other participants in the same indirect action,
if it is needed to enable those participants to carry out their own work under that indirect action.

1.
Access rights to foreground shall be granted to other participants in the same indirect action
and their affiliated entities, if it is needed to enable those participants to carry out their own work
under that indirect action.

Such access rights shall be granted on a royalty-free basis.

Access rights to background shall be granted to the other participants in the same indirect
2.
action, if it is needed to enable those participants to carry out their own work under that indirect
action provided that the participant concerned is entitled to grant them.

Access rights to background shall be granted to the other participants in the same indirect
2.
action and their affiliated entities if it is needed to enable those participants to carry out their own
work under that indirect action, provided that the participant concerned is entitled to grant them.

Such access rights shall be granted on a royalty-free basis, unless otherwise agreed by all partici-
pants before their accession to the grant agreement.

Such access rights shall be granted on a royalty-free basis, unless otherwise agreed by all partici-
pants in the consortium agreement before their accession to the grant agreement.

However, RTD Performers shall grant access rights to background on a royalty-free basis.

Article 51

Access rights for use

Participants in the same indirect action shall enjoy access rights to foreground, if it is needed

1.
to use their own foreground.

Participants in the same indirect action and their affiliated entities shall enjoy access rights

1.
to foreground, if it is needed to use their own foreground.

Such access rights shall be granted either under fair and reasonable conditions, or royalty-free.

Such access rights shall be granted either under fair and reasonable conditions, or royalty-free,
unless otherwise agreed in the consortium agreement.

Participants in the same indirect action shall enjoy access rights to background, if it is needed

2.
to use their own foreground provided that the participant concerned is entitled to grant them.

Participants in the same indirect action and their affiliated entities shall enjoy access rights
2.
to background, if it is needed to use their own foreground generated by the indirect action and
provided that the participant concerned and its affiliated entities are is entitled to grant them.

Such access rights shall be granted either under fair and reasonable conditions, or royalty-free.

Such access rights shall be granted either under fair and reasonable conditions, or royalty-free sub-
ject to the conditions agreed in the consortium agreement.

A request for access rights under paragraphs 1 or 2 may be made up to one year after either

3.
of the following events:

A request for access rights under paragraphs 1 or 2 of this Article may be made up to (one)

3.
year after either of the following events:

(a)

the end of the indirect action ;

.

.

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82.

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(b)

termination of participation by the owner of the background or foreground concerned.

However, the participants concerned may agree on a different time limit.

4.
Subject to the agreement of all the owners concerned, access rights to foreground shall be
granted to a RTD performer, on fair and reasonable conditions to be agreed, for the purposes of pur-
suing further research activities.

RTD performers shall grant access on a royalty-free basis to background needed to use the

5.
foreground generated in the indirect action.

Article 52

Additional provisions regarding access rights for ‘frontier’ research actions and for
actions for the benefit of specific groups

In the case of frontier research actions, access rights to foreground and background for imple-

1.
mentation or use shall be royalty-free, notwithstanding Articles 50 and 51.

2.
Where the specific group benefiting from the action is represented by a legal entity that par-
ticipates in the action in their place, that legal entity may grant a sub-licence, in respect of any access
right granted to it, to those of its members which are established in a Member State or an Associ-
ated country.

CHAPTER IV

European Investment Bank

Article 53

1.
The Community may award a grant to the European Investment Bank (EIB) to cover the risk
for loans the EIB makes in support of research objectives set out under the seventh Framework Pro-
gramme (Risk-Sharing Finance Facility).

1.
The Community may award a grant to the European Investment Bank (EIB) to contribute
to the provisioning and capital allocation for its loan and guarantee financing cover the risk for
loans the EIB makes in support of actions implemented on the basis of decisions by the Council
and the European Parliament (or by the Council in consultation with the European Parliament)
identified in part (b) of Annex III to Decision (…/…) establishing research objectives set out under
the seventh Framework Programme (Risk-Sharing Finance Facility).

The EIB shall provide these loans in accordance with the principles of fairness, transparency,

2.
impartiality and equal treatment.

Taking into account the general orientation and principles established by the Commission
2.
in the grant agreement, tThe EIB shall provide and administer these loans and guarantees in accor-
dance with its own rules the principles of fairness, transparency, impartiality and equal treatment.

3.
The Commission has the right to object to the use of the Risk-Sharing Finance Facility for
certain loans, on terms to be defined in the grant agreement in accordance with the Work Pro-
grammes.

3.
The Commission has the right to object to the use of the Risk-Sharing Finance Facility for
certain loans actions, on terms to be defined in the grant agreement in accordance with the Work
Programmes.

2, 20, 21,
87, 88, 89.

89.

89.

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CHAPTER V

Final provisions

Article 54

This Regulation shall enter into force on the third day following its publication in the Official Journal
of the European Union. It shall apply from 1 January 2007.

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

Done at Brussels,

For the European Parliament

The President

For the Council

The President

60, 90.

This regulation may be revised, subject to an interim evaluation carried out by the Commission no
later than 2010.

.

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