Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EC) No. 1638/2006 laying down general provisions establishing a European Neighbourhood and Partnership Instrument
Date: 2008-05-21
Institutions: European Commission
Subjects: EU aid, EU financial instrument, European neighbourhood policy, cooperation policy, cross-border cooperation, economic development, social development, technical cooperation

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COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 21.5.2008 
COM(2008) 308 final 

2008/0095 (COD) 

Proposal for a 

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 

amending Regulation (EC) No. 1638/2006 laying down general provisions establishing a 
European Neighbourhood and Partnership Instrument 

(presented by the Commission) 

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EXPLANATORY MEMORANDUM 

The  proposed  regulation  amends  Article  23  of  Regulation  (EC)  No.  1638/2006  of  the 
European Parliament and of the Council of 24 October 2006 laying down general provisions 
establishing  a  European  Neighbourhood  and  Partnership  Instrument.  The  purpose  of  the 
amendment is twofold. 

Firstly  it  seeks  to  clarify  existing  provisions  on  Community  funds  managed  by  financial 
intermediaries  for  loan  financing,  equity  investments,  guarantee  funds  or  investment  funds. 
The current text is ambiguous about the possibility of continuing to re-invest such funds (e.g. 
through a revolving fund mechanism). Re-using resources is common practice in operations 
involving risk capital and loan financing. Funds reflowing from old loans and investments can 
thus  be  re-invested.  In  this  way  they  bring  further  benefit  to  the  target  beneficiaries  and 
enhance  the  impact  of  the  assistance.  Clarity  on  this  issue  is  also  important  and  urgent,  as 
similar  operations  may  take  place  in  the  context  of  the  Neighbourhood  Investment  Facility, 
which is about to become operational. 

Secondly  the  proposed  amendment  allows  EIB  to  re-invest  within  the  Facility  for  Euro 
Mediterranean Investment and Partnership (FEMIP) the funds reflowing from past operations 
(reflows)  financed  under  MEDA  and  the  earlier  financial  protocols  with  Algeria,  Cyprus, 
Egypt,  Greece,  Jordan,  Lebanon,  Malta,  Morocco,  Syria,  Tunisia  and  Turkey  .  The  reflows 
include  the  capital  repayment  and  the  benefits  on  the  investment  (including  interests, 
dividends,  the  profits/losses  on  the  sales  of  participations,  and  the  penalties  applied  by  the 
Bank). The re-investment will take place within the framework of this Regulation.  

In 2006, a review of FEMIP was carried out. This review covered EIB loans and EU budget 
resources managed by the EIB and used for risk capital, technical assistance, interest subsidies 
and 'special loans'. To make the best use of available funds, the Commission proposed in the 
'FEMIP Communication1 to use these reflows for new risk capital operations. This proposal 
was endorsed by the Ecofin Council (November 2006), which underlined that FEMIP should 
be further developed and strengthened. At present, as the earlier Regulations did not explicitly 
provide  for  the  possibility  of  re-investing  the  funds,  the  “reflows”  are  returned  to  the 
Community budget  shortly  after  the  beneficiary  has reimbursed the EIB. With the proposed 
amendment, the EIB can be allowed to re-invest such funds in the context of FEMIP until the 
Commission decides to close the operation.  

In order to stop the repayment of the “reflows” and avoid the amount of funds available for 
future operations under FEMIP dwindling while the proposed amendment is being discussed, 
the  Commission,  immediately  after  the  adoption  of  this  proposal,  will  request  the  EIB  to 
suspend  repayments  to  the  Community  budget  and  to  keep  the  funds  in  an  interest-bearing 
account  until  the  proposed  amendment  is  adopted  by  the  legislative  authority.  If  the 
amendment is adopted, the EIB will be allowed to re-invest the funds. If the amendment were 
not  to  be  adopted  the  funds  kept  in  the  EIB  accounts  (and  the  interest  earned)  would 
immediately return to the Community budget.  

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Communication  to  the  Council:  Assessment  of  the  Facility  for  Euro-Mediterranean  Investment  and 
Partnership (FEMIP) and Future Options (Com (2006) 592 final, dated 17-10-2006) 

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2008/0095 (COD) 

Proposal for a 

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 

amending Regulation (EC) No. 1638/2006 laying down general provisions establishing a 
European Neighbourhood and Partnership Instrument 

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, 

Having regard to the Treaty establishing the European Community, and in particular Articles 
179 and 181a thereof, 

Having regard to the proposal from the Commission, 
Acting in accordance with the procedure laid down in Article 251 of the Treaty2, 

Whereas: 

(1) 

(2) 

(3) 

(4) 

(5) 

(6) 

Regulation (EC) No. 1638/2006 of the European Parliament and of the Council of 24 
October 2006 laying down general provisions establishing a European Neighbourhood 
and Partnership Instrument establishes the framework for the provision of Community 
Assistance to neighbouring countries and to Russia.  

In  order  to  support  investments  in  infrastructure  and  the  development  of  the  private 
sector it is important that Community assistance can be effectively used for measures 
such  as  loan  financing,  equity  investments,  guarantee  funds  or  investment  funds 
managed by the European Investment Bank and other financial intermediaries. 

The effectiveness of such measures will be enhanced if the financial intermediaries are 
allowed  to  re-invest  the  repayments  of  funds  occurring  under  such  measures  in  new 
operations.  

The  Facility  for  Euro-Mediterranean  Investment  and  Partnership  (FEMIP)  has  been 
successful  in  channelling  funding  to  the  Mediterranean  region  through  lending  to 
private  companies  and  infrastructure  investment  aimed  at  enhancing  the  business 
environment. 

In order to further strengthen FEMIP it is necessary that EIB be allowed to re-invest in 
Mediterranean non-member countries the repayment of funds arising from operations 
carried out under the regulations and decisions listed in the Annex.  

For the purpose of this Regulation the interests on loans, the dividends on investments, 
the profits and losses on the sales of participations and the penalties applied should be 
considered as benefit perceived by the European Investment Bank 

(7) 

Regulation (EC) No 1638/2006 should therefore be amended accordingly, 

2 

Opinion of the European Parliament of … and Council Decision of … 

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HAVE ADOPTED THIS REGULATION: 

Regulation (EC) No. 1638/2006 is amended as follows: 

Article 1 

(1) 

2. 

(2) 

3. 

In Article 23, paragraph 2 is replaced by the following: 

The Commission shall adopt implementing provisions for paragraph 1 on a case-by-
case  basis  to  cover  in  particular  risk-sharing,  the  remuneration  of  the  intermediary 
responsible  for  implementation,  the  use  of  funds,  their  re-use  or  recovery,  and  the 
closure of the operation. 

In Article 23, the following paragraph 3 is added:  

The Commission may decide that the repayments on capital and the benefits accrued 
by European Investment Bank under the regulations and decisions referred to in the 
Annex  are  re-invested  by  the  European  Investment  Bank  in  the  Mediterranean 
countries covered by this regulation.  

Article 2 

Entry into force 

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

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

Done at Brussels, […] 

For the European Parliament 
The President 

For the Council 
The President 

[…][…] 

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Regulations and decisions referred to in Recital (5) and Article 1 (2) 

Annex 

First Financial Protocols  

Council  Regulation  (EEC)  No 2210/78  of  26 September  1978  concerning  the  conclusion  of 
the  Cooperation  Agreement  between  the  European  Economic  Community  and  the  People´s 
Democratic Republic of Algeria (OJ L 263, 27.9.1978, p. 1). 

Council  Regulation  (EEC)  No 2211/78  of  26 September  1978  concerning  the  conclusion  of 
the  Cooperation  Agreement  between  the  European  Economic  Community  and  the  Kingdom 
of Morocco (OJ L 264, 27.9.1978, p. 1). 

Council  Regulation  (EEC)  No 2212/78  of  26 September  1978  concerning  the  conclusion  of 
the Cooperation Agreement between the European Economic Community and the Republic of 
Tunisia (OJ L 265, 27.9.1978, p. 1). 

Council  Regulation  (EEC)  No 2213/78  of  26 September  1978  on  the  conclusion  of  the 
Cooperation Agreement between the European Economic Community and the Arab Republic 
of Egypt (OJ L 266, 27.9.1978, p. 1). 

Council  Regulation  (EEC)  No 2214/78  of  26 September  1978  concerning  the  conclusion  of 
the  Cooperation  Agreement  between  the  European  Economic  Community  and  the  Lebanese 
Republic (OJ L 267, 27.9.1978, p. 1). 

Council  Regulation  (EEC)  No 2215/78  of  26 September  1978  concerning  the  conclusion  of 
the Cooperation Agreement between the European Economic Community and the Hashemite 
Kingdom of Jordan (OJ L 268, 27.9.1978, p. 1). 

Council  Regulation  (EEC)  No 2216/78  of  26 September  1978  concerning  the  conclusion  of 
the  Cooperation  Agreement  between  the  European  Economic  Community  and  the  Syrian 
Arab Republic (OJ L 269, 27.9.1978, p. 1). 

Second Financial Protocols 

Council Regulation (EEC) No 3177/82 of 22 November 1982 on the conclusion of a Protocol 
on financial and technical cooperation between the European Economic Community and the 
People´s Democratic Republic of Algeria (OJ L 337, 29.11.1982, p. 1). 

Council Regulation (EEC) No 3178/82 of 22 November 1982 on the conclusion of a Protocol 
on financial and technical cooperation between the European Economic Community and the 
Arab Republic of Egypt (OJ L 337, 29.11.1982, p. 8). 

Council Regulation (EEC) No 3179/82 of 22 November 1982 on the conclusion of a Protocol 
on financial and technical cooperation between the European Economic Community and the 
Hashemite Kingdom of Jordan (OJ L 337, 29.11.1982, p. 15). 

Council Regulation (EEC) No 3180/82 of 22 November 1982 on the conclusion of a Protocol 
on financial and technical cooperation between the European Economic Community and the 
Lebanese Republic (OJ L 337, 29.11.1982, p. 22). 

Council Regulation (EEC) No 3181/82 of 22 November 1982 on the conclusion of a Protocol 
on financial and technical cooperation between the European Economic Community and the 
Kingdom of Morocco (OJ L 337, 29.11.1982, p. 29). 

Council Regulation (EEC) No 3182/82 of 22 November 1982 on the conclusion of a Protocol 
on financial and technical cooperation between the European Economic Community and the 
Syrian Arab Republic (OJ L 337, 29.11.1982, p. 36). 

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Council Regulation (EEC) No 3183/82 of 22 November 1982 on the conclusion of a Protocol 
on financial and technical cooperation between the European Economic Community and the 
Republic of Tunisia (OJ L 337, 29.11.1982, p. 43). 

Third Financial Protocols 

Council  Decision  88/30/EEC  of  21 December  1987  on  the  conclusion  of  a  Protocol  on 
financial  and  technical  cooperation  between  the  European  Economic  Community  and  the 
People´s Democratic Republic of Algeria (OJ L 22, 27.1.1988, p. 1).  

Council  Decision  88/31/EEC  of  21 December  1987  on  the  conclusion  of  a  Protocol  on 
financial  and  technical  cooperation  between  the  European  Economic  Community  and  the 
Arab Republic of Egypt (OJ L 22, 27.1.1988, p. 9).  

Council  Decision  88/32/EEC  of  21 December  1987  on  the  conclusion  of  a  Protocol  on 
financial  and  technical  cooperation  between  the  European  Economic  Community  and  the 
Hashemite Kingdom of Jordan (OJ L 22, 27.1.1988, p. 17).  

Council  Decision  88/33/EEC  of  21 December  1987  on  the  conclusion  of  a  Protocol  on 
financial  and  technical  cooperation  between  the  European  Economic  Community  and  the 
Lebanese Republic (OJ L 22, 27.1.1988, p. 25).  

Council  Decision  88/34/EEC  of  21 December  1987  on  the  conclusion  of  a  Protocol  on 
financial  and  technical  cooperation  between  the  European  Economic  Community  and  the 
Republic of Tunisia (OJ L 22, 27.1.1988, p. 33).  

Council  Decision  88/453/EEC  of  30 June  1988  concerning  the  conclusion  of  a  Protocol  on 
financial  and  technical  cooperation  between  the  European  Economic  Community  and  the 
Kingdom of Morocco (OJ L 224, 13.8.1988, p. 32).  

Council  Decision  92/549/EEC  of  16 November  1992  on  the  conclusion  of  the  Protocol  on 
financial  and  technical  cooperation  between  the  European  Economic  Community  and  the 
Syrian Arab Republic (OJ L 352, 2.12.1992, p. 21).  

Fourth Financial Protocols 

Council  Decision  92/44/EEC  of  19 December  1991  on  the  conclusion  of  a  Protocol  on 
financial  and  technical  cooperation  between  the  European  Economic  Community  and  the 
Republic of Tunisia (OJ L 18, 25.1.1992, p. 34).  

Council Decision 92/206/EEC of 16 March 1992 on the conclusion of a Protocol on financial 
and  technical  cooperation  between  the  European  Economic  Community  and  the  People´s 
Democratic Republic of Algeria (OJ L 94, 8.4.1992, p. 13).  

Council Decision 92/207/EEC of 16 March 1992 on the conclusion of a Protocol on financial 
and  technical  cooperation  between  the  European  Economic  Community  and  the  Arab 
Republic of Egypt (OJ L 94, 8.4.1992, p. 21).  

Council Decision 92/208/EEC of 16 March 1992 on the conclusion of a Protocol on financial 
and  technical  cooperation  between  the  European  Economic  Community  and  the  Hashemite 
Kingdom of Jordan (OJ L 94, 8.4.1992, p. 29).  

Council Decision 92/209/EEC of 16 March 1992 on the conclusion of a Protocol on financial 
and  technical  cooperation  between  the  European  Economic  Community  and  the  Lebanese 
Republic (OJ L 94, 8.4.1992, p. 37).  

Council Decision 92/548/EEC of 16 November 1992 concerning the conclusion of a Protocol 
on financial and technical cooperation between the European Economic Community and the 
Kingdom of Morocco (OJ L 352, 2.12.1992, p. 13).  

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Council Decision 94/67/EC of 24 January 1994 on the conclusion of a Protocol on financial 
and technical cooperation between the European Economic Community and the Syrian Arab 
Republic (OJ L 32, 5.2.1994, p. 44).  

Cyprus, Greece, Malta and Turkey 

Council  Regulation (EEC)  No 2760/78  of  23 November 1978  on  the  conclusion  of  the 
Financial Protocol between the European Economic Community and the Republic of Cyprus 
(OJ L 332, 29.11.1978, p. 1).  

Council Regulation (EEC) No 787/84 of 26 March 1984 on the conclusion of the Protocol on 
financial  and  technical  cooperation  between  the  European  Economic  Community  and  the 
Republic of Cyprus (OJ L 85, 28.3.1984, p. 37). 

Council  Decision 90/153/EEC  of  26 February 1990  on  the  conclusion  of  the  Protocol  on 
financial  and  technical  cooperation  between  the  European  Economic  Community  and  the 
Republic of Cyprus (OJ L 82, 29.3.1990, p. 32).  

Council Decision 95/485/EC of 30 October 1995 on the conclusion of a Protocol on financial 
and  technical  cooperation  between  the  European  Community  and  the  Republic  of  Cyprus 
(OJ L 278, 21.11.1995, p. 22).  

Council Decision 1999/258/EC of 30 March 1999 concerning the conclusion of a Protocol on 
the  extension  of  the  period  during  which  the  funds  laid  down  in  the  fourth  Protocol  on 
financial  and  technical  cooperation  between  the  European  Community  and  the  Republic  of 
Cyprus may be committed (OJ L 100, 15.4.1999, p. 25).  

Council  Decision  78/666/EEC  of  25  July  1978  concerning  the  conclusion  of  the  Financial 
Protocol  between  the  European  Economic  Community  and  Greece  (OJ  L  225,  16.08.1978, 
p.25). 

Council Regulation (EEC) No 939/76 of 23 April 1976 concluding the Financial Protocol and 
the  Protocol  laying  down  certain  provisions  relating  to  the  Agreement  establishing  an 
Association between the EEC and Malta (OJ L 111, 28.4.1976, p. 1). 

Council  Regulation  (EEC)  No 2458/86  of  7 July  1986  on  the  conclusion  of  a  Protocol  on 
financial  and  technical  cooperation  between  the  European  Economic  Community  and  the 
Republic of Malta (OJ L 216, 5.8.1986, p. 1). 

Council  Decision  89/378/EEC  of  12 June  1989  concerning  the  conclusion  of  a  Protocol  on 
financial  and  technical  cooperation  between  the  European  Economic  Community  and  Malta 
(OJ L 180, 27.6.1989, p. 46). 

Council Decision 95/484/EC of 30 October 1995 on the conclusion of a Protocol on financial 
and  technical  cooperation  between  the  European  Community  and  the  Republic  of  Malta 
(OJ L 278, 21.11.1995, p. 14).  

Council Decision 1999/259/EC of 30 March 1999 concerning the conclusion of a Protocol on 
the  extension  of  the  period  during  which  the  funds  laid  down  in  the  fourth  Protocol  on 
financial  and  technical  cooperation  between  the  European  Community  and  the  Republic  of 
Malta may be committed (OJ L 100, 15.4.1999, p. 31).  

Council  Decision  79/281/EEC  of  5  March  1979  concerning  the  conclusion  of  a  Financial 
Protocol between the European Community and Turkey (OJ L 067, 17.03.1979, p. 14). 

Horizontal Regulations 

Council Regulation (EEC) No. 3973/86 of 22 December 1986 concerning the application of 
the Protocols on financial and technical cooperation concluded between the Community and 

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Algeria,  Morocco,  Tunisia,  Egypt,  Lebanon,  Jordan,  Syria,  Malta  and  Cyprus,  (OJ  L  370, 
30.12.1986, p. 5). 

Council  Regulation  (EEC)  No 1762/92  of  29 June  1992  on  the  implementation  of  the 
Protocols  on  financial  and  technical  cooperation  concluded  by  the  Community  with 
Mediterranean non-member countries (OJ L 181, 1.7.1992, p. 1). 

Council Regulation (EEC) No 1763/92 of 29 June 1992 concerning financial co-operation in 
respect of all Mediterranean non-member Countries (OJ L 181, 1.07.1992, p. 22). 

Council Regulation (EC) No 1488/96 of 23 July 1996 on financial and technical measures to 
accompany  (MEDA)  the  reform  of  economic  and  social  structures  in  the  framework  of  the 
Euro-Mediterranean  partnership  (OJ  L  189,  30.7.1996,  p.1).  Regulation  as  last  amended  by 
Regulation (EC) No. 2112/2005. 

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LEGISLATIVE FINANCIAL STATEMENT FOR PROPOSALS HAVING A 
BUDGETARY IMPACT EXCLUSIVELY LIMITED TO THE REVENUE SIDE 

1. 

NAME OF THE PROPOSAL:  

Regulation  of  the  European  Parliament  and  the  Council  amending  Regulation  (EC) 
No.  1638/2006 
laying  down  general  provisions  establishing  a  European 
Neighbourhood and Partnership Instrument 

2. 

BUDGET LINES: 

Chapter:  8.1  Loans  granted  by  the  Commission,  Article:  8.1.0  Capital  repayments 
and interest in respect of special loans and risk capital granted in the framework of 
financial cooperation with Mediterranean non-member Countries  

Amount budgeted for the year concerned (2008): € 26,070,788 

3. 

FINANCIAL IMPACT  

(cid:133) 

X 

Proposal has no financial implications 

Proposal has no financial impact on expenditure but has a financial impact on 
revenue – the effect is as follows: 

(€ million to one decimal place)  

(€ million to one decimal place)  

Budget line 

Title 8 

Chapter: 81 

Article 810 

Borrowing and lending 
Operations 

Loans granted by the 
Commission 

Capital repayments and interest in 
respect  of  special  loans  and  risk 
capital  granted  in  the  framework 
financial  cooperation  with 
of 
Mediterranean 
non-member 
countries 

Situation following action 

[n+1] 

[n+2] 

[ulter. -] 

Article 8.1.0 

p.m. 

p.m. 

p.m. 

€ 35 (estimated) 

* The figures included in the above table should be considered as rough estimates. For 2008 whatever has been 
reimbursed  before  the  approval  of  this  proposal  will  not  be  re-invested  under  FEMIP.  It  should  be  noted  that 

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accurate  estimates  are  extremely  difficult  because  part  of  the  reflows  which  are  generated  by  risk  capital 
operations are highly volatile due to the risky nature of the instrument.  

The  proposed  addition  of  paragraph  3  to  Art  23  gives  the  possibility  to  the  Commission  to 
take a decision allowing EIB to re-invest the funds received as re-imbursement of operations 
carried  out  under  MEDA  and  the  earlier  financial  protocols  for  co-operation  with 
Mediterranean  countries.  As  a  result  the  re-imbursement  of  such  funds  to  the  community 
budget  will  be  deferred  to  a  later  date  and  the  funds  will  continue  being  used  to  support 
infrastructure investment and private sector development in the Mediterranean region.  

4. 

ANTI-FRAUD MEASURES 

The  protection  of  the  Community’s  financial  interests  and  the  fight  against  fraud  and 
irregularities form an integral part of the ENPI Regulation. 

For  the  measures  covered  by  this  amendment,  the  administrative  monitoring  of  the  use  of 
ENPI funds will be the responsibility of DG AIDCO. Where an agreement in that sense does 
not already exist, it will be concluded with the financial intermediaries in charge of managing 
community  funds  covering  all  the  aspects  indicated  in  the  new  Article  23  (2)  of  the  ENPI 
Regulation. 

Such  agreement  will  expressly  provide  for  monitoring  of  spending  authorised  under  the 
measures as well as financial control by the Commission, including the European Anti-Fraud 
Office  (OLAF),  and  audits  by  the  Court  of  Auditors,  if  necessary  on  the  spot.  Financial 
intermediaries will be requested to authorise the Commission (OLAF) to carry out on-the-spot 
checks and inspections in accordance with Council Regulation (Euratom, EC) No 2185/96 of 
11  November  1996  concerning  on-the-spot  checks  and  inspections  carried  out  by  the 
Commission in order to protect the European Communities’ financial interests against fraud 
and other irregularities. 

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