Proposal for a Council Regulation (EC, Euratom) No …/.. establishing a Guarantee Fund for external actions (Codified version)
Date: 2008-06-17
Institutions: European Commission
Subjects: Community loan, European Investment Bank, codification of EU law, credit guarantee, financial management, fund (EU)

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COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 17.6.2008 
COM(2008) 365 final 

2008/0117 (CNS) 

Proposal for a 

COUNCIL REGULATION (EC, Euratom) No …/.. 

establishing a Guarantee Fund for external actions 

(Codified version) 

(presented by the Commission) 

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EXPLANATORY MEMORANDUM 

In  the  context  of  a  people’s  Europe,  the  Commission  attaches  great  importance  to 
simplifying  and  clarifying  Community  law  so  as  to  make  it  clearer  and  more 
accessible to the ordinary citizen, thus giving him new opportunities and the chance 
to make use of the specific rights it gives him. 

This aim cannot be achieved so long as numerous provisions that have been amended 
several times, often quite substantially, remain scattered, so that they must be sought 
partly  in  the  original  instrument  and  partly  in  later  amending  ones.  Considerable 
research work, comparing many different instruments, is thus needed to identify the 
current rules. 

For  this  reason  a  codification  of  rules  that  have  frequently  been  amended  is  also 
essential if Community law is to be clear and transparent. 

On  1  April  1987  the  Commission  therefore  decided1  to  instruct  its  staff  that  all 
legislative acts should be codified after no more than ten amendments, stressing that 
this  is  a  minimum  requirement  and  that  departments  should  endeavour  to  codify  at 
even  shorter  intervals  the  texts  for  which  they  are  responsible,  to  ensure  that  the 
Community rules are clear and readily understandable. 

The  Conclusions  of 
the  Edinburgh  European  Council 
(December 1992) confirmed this2, stressing the importance of codification as it offers 
certainty as to the law applicable to a given matter at a given time. 

the  Presidency  of 

Codification  must  be  undertaken  in  full  compliance  with  the  normal  Community 
legislative procedure. 

Given  that  no  changes  of  substance  may  be  made  to  the  instruments  affected  by 
codification, the European Parliament, the Council and the Commission have agreed, 
by  an  interinstitutional  agreement  dated  20  December  1994,  that  an  accelerated 
procedure may be used for the fast-track adoption of codification instruments. 

is 

this  proposal 

to  undertake  a  codification  of  Council 
The  purpose  of 
Regulation (EC, Euratom) No 2728/94 of 31 October 1994 establishing a Guarantee 
Fund  for  external  actions3.  The  new  Regulation  will  supersede  the  various  acts 
incorporated in it4; this proposal fully preserves the content of the acts being codified 
and  hence  does  no  more  than  bringing  them  together  with  only  such  formal 
amendments as are required by the codification exercise itself. 

COM(87) 868 PV. 
See Annex 3 to Part A of the Conclusions. 
Carried out pursuant to the Communication from the Commission to the European Parliament and the 
Council - Codification of the acquis communautaire, COM(2001) 645 final. 
Annex I to this proposal. 

1. 

2. 

3. 

4. 

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3 

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5. 

The codification proposal was drawn up on the basis of a preliminary consolidation, 
in  all  official  languages,  of  Regulation  (EC,  Euratom)  No  2728/94  and  the 
instruments  amending  it,  carried  out  by  the  Office  for  Official  Publications  of  the 
European  Communities,  by  means  of  a  data-processing  system.  Where  the  Articles 
have been given new numbers, the correlation between the old and the new numbers 
is shown in a table contained in Annex II to the codified Regulation. 

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(cid:208) 2728/94 
2008/0117 (CNS) 

Proposal for a 

COUNCIL REGULATION (EC, Euratom) No …/.. 

of […] 

establishing a Guarantee Fund for external actions 

THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  establishing  the  European  Community,  and  in  particular 
Article 235 308 thereof, 

Having  regard  to  the  Treaty  establishing  the  European  Atomic  Energy  Community,  and  in 
particular Article 203 thereof, 

Having regard to the proposal from the Commission, 

Having regard to the opinion of the European Parliament1, 

Having regard to the opinion of the European Economic and Social Committee2, 

Whereas: 

(1) 

Council  Regulation  (EC,  Euratom)  No  2728/94  of  31  October  1994  establishing  a 
Guarantee Fund for external actions3 has been substantially amended several times4. In 
the interests of clarity and rationality the said Regulation should be codified. 

(cid:208)  

1 
2 
3 

4 

OJ C […], […], p. […]. 
OJ C […], […], p. […]. 
OJ  L  293,  12.11.1994,  p.  1.  Regulation  as  last  amended  by  Regulation  (EC,  Euratom)  No  89/2007 
(OJ L 22, 31.1.2007, p. 1). 
See Annex I. 

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(2) 

The  general  budget  of  the  European  ⌦ Union ⌫  Communities  is  exposed  to 
⌦ a ⌫ increased financial risk as a result of the guarantees covering loans to third 
countries. 

(cid:208) 2728/94 Recital 1 (adapted) 

(3) 

(4) 

(cid:208) 2728/94 Recital 2 (adapted) 

The European Council on 11 and 12 December 1992 concluded that considerations of 
prudent budgetary management and financial discipline called for the establishment of 
a new financial mechanism, and that accordingly a Guarantee Fund should be set up in 
order to cover the risks related to loans and guarantees covering loans granted to third 
countries  or  for  projects  executed  in  third  countries.  It  is  possible  to  meet  this 
⌦ This ⌫ need ⌦ can be met ⌫ by the establishment of a Guarantee Fund which 
may be drawn on to pay the Community's ⌦ Communities’ ⌫ creditors direct. 

(cid:208) 2728/94 Recital 3 and 89/2007 
Recital 3 (adapted) 

to 

institutions  have  agreed,  pPursuant 

The 
the  Interinstitutional  Agreement 
⌦ between the European Parliament, the Council and the Commission on budgetary 
discipline  and  sound  financial  management,  adopted  on  17  May  2006⌫ 5  of  29 
October 1993, ⌦ the funding of the Guarantee Fund is provided for as an obligatory 
expenditure  from  the  general  budget  of  the  European  Union ⌫  to  enter  into  the 
budget a reserve relating to lending and guarantee operations for the benefit of and in 
third countries. 

(cid:208) 2728/94 Recital 4 (adapted) 

(5)  Mechanisms  currently  exist  for  honouring  guarantees  when  they  are  activated,  in 
particular by drawing provisionally on cash resources, as provided for in Article 12 of 
Council Regulation (EEC, Euratom) No ⌦ 1150/2000 of 22 May 2000 implementing 
Decision  2000/597/EC,  Euratom  on 
the  Communities'  own 
resources6 ⌫ 1552/89 of 29 May 1989 implementing Decision 88/376/EEC, Euratom 
on the system of the Communities' own resources7. 

the  system  of 

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OJ C 139, 14.6.2006, p. 1. 
OJ  L  130,  31.5.2000,  p.  1.  Regulation  as  amended  by  Regulation  (EC,  Euratom)  No  2028/2004 
(OJ L 352, 27.11.2004. p. 1). 
OJ No L 155, 7. 6. 1989, p. 1. Regulation as last amended by Regulation (EC, Euratom) No 2729/94 
(see page 5 of this Official Journal). 

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(6) 

The Guarantee Fund should be constituted by the gradual payment of resources. The 
Fund  will  subsequently  also  receive  interest  on  its  invested  resources  and  amounts 
recovered from defaulting debtors where the Fund has already honoured the guarantee. 

(cid:208) 2728/94 Recital 5 

(7)  ⌦ Experience  of  the  functioning  of  the  Guarantee  Fund  indicates  that  a  ratio  of 
9% ⌫  By  reference  to  the  practice  of  international  financial  institutions,  a  ratio  of 
10 %  between  the  Guarantee  Fund's  resources  and  guaranteed  liabilities  in  principal, 
increased by unpaid interest due, would ⌦ be ⌫ seem adequate. 

(cid:208) 2728/94 Recital 6 (adapted) 

(8) 

Payments  to  the  Guarantee  Fund  equal  to  ⌦ 9% ⌫  14 %  of  the  amount  of  each 
operation  would  seem  ⌦ sufficient ⌫  appropriate  to  attain  the  this  target  amount. 
The arrangements for making such payments ⌦ should ⌫ must be defined. 

(cid:208) 2728/94 Recital 7 (adapted) 

(9) 

Once  the  target  amount  is  attained,  the  provisioning  rate  will  be  reviewed.If  the 
Guarantee  Fund  exceeds  the  target  amount,  the  surplus  will  ⌦ should ⌫  be  paid 
back to the general budget of the European ⌦ Union ⌫ Communities. 

(cid:208) 2728/94 Recital 8 (adapted) 

(cid:208) 2728/94 Recital 9 (adapted) 

(10)  The financial management of the Guarantee Fund should be entrusted to the European 
Investment  Bank  (⌦ hereinafter  referred  to  as  the ⌫  ‘EIB’).  The  financial 
management  of  the  Fund  should  be  subject  to  audit  by  the  Court  of  Auditors  in 
accordance  with  procedures  to  be  agreed  upon  by  the  Court  of  Auditors,  the 
Commission and the European Investment Bank ⌦ EIB ⌫. 

(cid:208) 2273/2004 Recital 3 (adapted) 

(11)  ⌦ The Communities have granted loans and guaranteed loans to accession countries 
or for projects executed in those countries. Those loans and guarantees are covered by 
the Guarantee Fund and will remain outstanding or in force after the date of accession. 
From that date, they will cease to be external actions of the Communities and should 
therefore  be  covered  directly  by  the  general  budget  of  the  European  Union  and  no 
longer by the Guarantee Fund. ⌫ 

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(cid:208) 89/2007 Recital 5 (adapted) 

(12)  The Guarantee Fund covers defaults under loans issued by the ⌦ EIB ⌫ European 
Investment Bank (hereinafter the EIB) for which the ⌦ Communities ⌫Community 
provides  a  guarantee  under  the  EIB's  external  mandate.  In  addition,  in  line  with  the 
EIB's external mandate ⌦ which took ⌫ as taking effect from 1 February 2007, the 
Fund should also cover defaults under loan guarantees issued by the EIB for which the 
⌦ Communities ⌫Community provides a guarantee. 

(13)  The Treaties do not provide any powers other than those pursuant to Article 235 308 
of  the  EC  Treaty  and  Article  203  of  the  Euratom  Treaty  for  the  adoption  of  this 
Regulation, 

(cid:208) 2728/94 Recital 10 

HAS ADOPTED THIS REGULATION: 

(cid:208) 2728/94 

Article 1 

(cid:208) 89/2007 Art. 1 pt. 1 (adapted) 

A Guarantee Fund, hereinafter referred to as the ‘Fund’, shall be established, the resources of 
which shall be used to repay the Community's ⌦ Communities’ ⌫ creditors in the event of 
the 
default 
⌦ Communities ⌫Community  or  of  a  loan  guarantee  issued  by  the  European  Investment 
Bank  ⌦ , 
the 
⌦ Communities ⌫Community provides a guarantee. 

for  which 

beneficiary 

guaranteed 

hereinafter 

‘EIB’, ⌫ 

referred 

granted 

loan 

the 

the 

by 

by 

or 

of 

as 

to 

a 

The lending and guarantee operations referred to in the first paragraph, hereinafter referred to 
as ‘operations’, shall be those carried out for the benefit of a third country or for the purpose 
of financing projects in third countries. 

(cid:208) 2728/94 

All  operations  carried  out  for  the  benefit  of  a  third  country  or  for  the  purpose  of  financing 
projects in a third country shall fall outside the scope of this Regulation with effect from the 
date on which that country accedes to the European Union. 

(cid:208) 2273/2004 Art. 1 pt. 1 

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(cid:208) 2728/94 

Article 2 

The Fund shall be endowed by: 

– 

– 

– 

one  annual  payment  from  the  general  budget  of  the  European  Union  pursuant  to 
Articles 54 and 56, 

(cid:208) 89/2007 Art. 1 pt. 2 

interest on Fund resources invested, 

(cid:208) 2728/94 

amounts recovered from defaulting debtors where the Fund has already honoured the 
guarantee. 

The Fund shall rise to an appropriate level, hereinafter referred to as ‘the target amount’. 

Article 3 

The  target  amount  shall  be  9%  of  the  Community  ⌦ Communities’ ⌫  total  outstanding 
capital liabilities arising from each operation, increased by unpaid interest due. 

(cid:208) 1149/1999 Art. 1 pt. 1 
(adapted) 

On the basis of the year-end ‘n–1’ difference between the target amount and the value of the 
Fund's net assets, calculated at the beginning of the year ‘n’, any surplus shall be paid in one 
transaction  to  a  special  heading  in  the  statement  of  revenue  in  the  general  budget  of  the 
European Union of the year ‘n+1’. 

(cid:208) 89/2007 Art. 1 pt. 3 

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(cid:208) 2273/2004 Art. 1 pt. 2 

Article 3a4 

Following  the  accession  of  a  new  Member  State  to  the  European  Union,  the  target  amount 
shall be reduced by an amount calculated on the basis of the operations referred to in the third 
subparagraph of Article 1. 

In order to calculate the amount of the reduction, the percentage rate referred to in the second 
subparagraph of Article 3 applicable on the date of accession shall be applied to the amount of 
those operations outstanding on that date. 

The surplus shall be paid back to a special heading in the statement of revenue in the general 
budget of the European Union. 

(cid:208) 89/2007 Art. 1 pt. 4 

Article 45 

Based on the year-end ‘n–1’ difference between the target amount and the value of the Fund's 
net assets, calculated at the beginning of the year ‘n’, the required provisioning amount shall 
be  paid  into  the  Fund  in  one  transaction  in  the  year  ‘n+1’  from  the  general  budget  of  the 
European Union. 

(cid:208) 89/2007 Art. 1 pt. 5 

Article 56 

1.  If,  as  a  result  of  one  or  more  defaults,  the  activation  of  guarantees  during  year  ‘n–1’ 
exceeds EUR 100 million, the amount exceeding EUR 100 million shall be paid back into the 
Fund in annual tranches starting in year ‘n+1’ and continuing over the following years until 
full  repayment  (smoothing  mechanism).  The  size  of  the  annual  tranche  is  the  lesser  of  the 
following: 

– 

– 

EUR 100 million, or 

the remaining amount due in accordance with the smoothing mechanism. 

Any amount resulting from the activation of guarantees in years preceding year ‘n–1’, that has 
not  yet  been  repaid  in  full  due  to  the  smoothing  mechanism,  shall  be  paid  back  before  the 
smoothing  mechanism  for  defaults  occurring  in  year  ‘n–1’  or  subsequent  years  can  take 
effect.  Such  remaining  amounts  shall  continue  to  be  deducted  from  the  maximum  annual 
amount to be recovered from the general budget of the European Union under the smoothing 
mechanism until such time as the full amount has been paid back into the Fund. 

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2.  The  calculations  based  on  the  smoothing  mechanism  shall  be  made  separately  from  the 
calculations referred to in the third subparagraph of Article 3 and in Article 45. Nevertheless, 
they  shall  together  result  in  one  annual  transfer.  The  amounts  to  be  paid  from  the  general 
budget of the European Union under the smoothing mechanism shall be treated as net assets 
of the Fund for the calculation pursuant to Articles 3 and 45. 

3.  If,  as  a  result  of  the  activation  of  guarantees  following  one  or  more  major  defaults, 
resources in the Fund fall below 80% of the target amount, the Commission shall inform the 
budgetary authority thereof. 

4.  If,  as  a  result  of  the  activation  of  guarantees  following  one  or  more  major  defaults, 
resources  in  the  Fund  fall  below  70%  of  the  target  amount,  the  Commission  shall  submit  a 
report on exceptional measures that may be required to replenish the Fund. 

(cid:208) 2728/94 (adapted) 

Article 67 

The  Commission  shall  entrust  the  financial  management  of  the  Fund  to  the  EIB  under  a 
⌦ mandate ⌫ brief on the Community's ⌦ Communities’ ⌫ behalf. 

(cid:208) 2728/94 
(cid:206)1 2273/2004 Art. 1 pt. 3 

Article 78 

The Commission shall, by no later than (cid:206)1 31 May  of the following financial year, send 
to  the  European  Parliament,  the  Council  and  the  Court  of  Auditors  an  annual  report  on  the 
situation of the Fund and the management thereof in the previous year. 

The  revenue  and  expenditure  account  and  the  balance  sheet  relating  to  the  Fund  shall  be 
attached to the Communities' revenue and expenditure account and balance sheet. 

Article 89 

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(cid:208) 2728/94 (adapted) 

Article 9 

(cid:208) 1149/1999 Art. 1 pt. 4 
(adapted) 

The Commission shall submit to the European Parliament and the Council a comprehensive 
reports  on  the  functioning  of  the  Fund,  both  at  the  time  of  the  conclusion  of  the  first 
Accession  Agreement  with  the  applicant  States,  and  before  31  December  2006.  The 
Commission shall, if necessary, submit to the Council appropriate proposals for modification 
of the parameters of the Fund. 

(cid:208)  

Article 10 

Regulation (EC, Euratom) No 2728/94 is repealed. 

References to the repealed Regulation shall be construed as references to this Regulation and 
shall be read in accordance with the correlation table in Annex II. 

(cid:208) 2728/94 (adapted) 

Article 1011 

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

Article 4 shall apply to operations decided on and committed as from 1 January 1993. 

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

Done at Brussels, […] 

For the Council 
The President 
[…] 

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(cid:207)  

ANNEX I 

Repealed Regulation with list of its successive amendments 

Council Regulation (EC, Euratom) No 2728/94 

(OJ L 293, 12.11.1994, p. 1) 

Council Regulation (EC, Euratom) No 1149/1999 

(OJ L 139, 2.6.1999, p. 1) 

Council Regulation (EC, Euratom) No 2273/2004 

(OJ L 396, 31.12.2004, p. 28) 

Council Regulation (EC, Euratom) No 89/2007 

(OJ L 22, 31.1.2007, p. 1) 

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ANNEX II 

CORRELATION TABLE 

Regulation (EC, Euratom) No 2728/94 

This Regulation 

Articles 1, 2 and 3 

Articles 1, 2 and 3 

Article 3a 

Article 4 

Article 5 

Article 6 

Article 7 

Article 8 

Article 9 

- 

Article 10, first paragraph 

Article 4 

Article 5 

Article 6 

Article 7 

Article 8 

Article 9 

- 

Article 10 

Article 11 

Article 10, second paragraph 

- 

– 

– 

Annex I 

Annex II 

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