Proposal for a Council Decision on the position to be adopted by the European Community within the ACP-EC Council of Ministers regarding a decision to revise Annex II to the Cotonou ACP-EC Partnership Agreement
Date: 2009-02-19
Institutions: European Commission
Subjects: ACP countries, European Investment Bank, association agreement (EU), financing, investment, loan

EN 

EN 

   EN 

 
 
COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 19.2.2009 
COM(2009) 72 final 

Proposal for a 

COUNCIL DECISION 

On the position to be adopted by the European Community within the ACP-EC Council 
of Ministers regarding a decision to revise Annex II to the Cotonou ACP-EC 
Partnership Agreement  

(presented by the Commission) 

EN 

   EN 

 
 
 
  
 
1. 

2. 

3. 

4. 

5. 

EXPLANATORY MEMORANDUM 

The proposed modification of Annex II to the ACP-EC Partnership Agreement aims 
at facilitating European Investment Bank (EIB) own resources (OR) lending to ACP 
to  Heavily  Indebted  Poor  Countries  (HIPC)  and  other 
countries  subject 
internationally-agreed debt sustainability frameworks. 

Policy  coherence  between  EIB  own  resources  lending  and  HIPC  initiative  implies 
greater flexibility with respect to interest rate subsidies, currently limited to 3% for 
own resources lending. Many own-resources-financed public sector operations would 
require  interest  rate  subsidies  higher  than  3%  to  satisfy  internationally-agreed  or 
similar HIPC conditions on debt sustainability. 

Such provision already exists for the resources managed by the EIB in the context of 
the  Investment  Facility  (Article  2  of  the  Annex  II).  The  EIB  would  like  the 
provisions on own resources (Article 4 of Annex II) to be aligned with those on the 
Investment Facility. 

According to Article 100 of the ACP-EC Partnership Agreement, Annexes attached 
to  the  Agreement  may  be  revised,  reviewed  and  /  or  amended  by  the  Council  of 
Ministers on the basis of a recommendation from the ACP-EC Development Finance 
Cooperation Committee. 

The  Commission  therefore  proposes  that  the  Council  adopts  the  attached  Decision, 
which  concerns  the  position  to  be  taken  on  behalf  of  the  European  Community 
within the Joint ACP-EC Council of Ministers. 

EN 

2 

   EN 

 
Proposal for a 

COUNCIL DECISION 

On the position to be adopted by the European Community within the ACP-EC Council 
of Ministers regarding a decision to revise Annex II to the Cotonou ACP-EC 
Partnership Agreement  

THE COUNCIL OF THE EUROPEAN UNION, 

Having regard to the Treaty establishing the European Community, and in particular Article 
300(2), 2nd subparagraph, thereof, 

Having regard to the proposal from the Commission, 

Whereas: 

(1) 

(2) 

(3) 

(4) 

In  order  to  facilitate  its  own  resources  lending  to  ACP  countries  subject  to  Heavily 
Indebted  Poor  Countries  (HIPC)  and  other  internationally-agreed  debt  sustainability 
frameworks, the European Investment Bank (EIB) proposes to modify Annex II to the 
ACP-EC Partnership Agreement. 

Policy coherence between EIB own resources lending and the HIPC initiative requires 
a greater flexibility, to satisfy the internationally-agreed or similar HIPC conditions on 
debt sustainability and particularly in respect to interest rate subsidies.  

Such provision already exists for the resources managed by the EIB in the context of 
the  Investment  Facility,  in  accordance  with  Article  2  of  Annex  II  to  the  ACP-EC 
Partnership Agreement. 

It  is  therefore  appropriate  to  align  the  provisions  concerning  EIB  own  resources,  set 
out in Article 4 of Annex II to the ACP-EC Partnership Agreement, with those on the 
Investment Facility. 

HAS DECIDED AS FOLLOWS:  

Sole Article 

The  European  Community  position  within  the  ACP-EC  Council  of  Ministers  regarding  the 
modification of Annex II to the Cotonou Agreement is to support the attached draft ACP-EC 
Council of Ministers Decision amending Annex II to the Agreement.  

EN 

3 

   EN 

 
Done at Brussels,  

For the Council 
The President 

EN 

4 

   EN 

 
 
 
 
 
ANNEX  

Draft 

DECISION OF THE ACP-EC COUNCIL OF MINISTERS  

to adopt amendments to Annex II to the Partnership Agreement 

THE ACP-EC COUNCIL OF MINISTERS, 

Having regard to the Partnership Agreement between the members of the African, Caribbean 
and Pacific Group of States (hereinafter called "the ACP") of the one part, and the European 
Community and its Member States, of the other part, signed in Cotonou (Benin) on 23 June 
2000  and  revised  in  Luxembourg  on  25  June  2005  (hereinafter  called  "the  ACP-EC 
Partnership Agreement")1, and in particular Articles 15 (3) and 100 thereof, 

Having  regard  to  the  recommendation  of  the  ACP-EC  Development  Finance  Cooperation 
Committee 

Whereas: 

(1) 

(2) 

(3) 

(4) 

(5) 

(6) 

In  order  to  facilitate  its  own  resources  lending  to  the  poorer  ACP  countries  in  the 
framework  of  Heavily  Indebted  Poor  Countries  (HIPC)  and  other  internationally-
agreed debt sustainability initiatives, the European Investment Bank (EIB) proposes to 
modify Annex II to the ACP-EC Partnership Agreement. 

Policy coherence between EIB own resources lending and the HIPC initiative requires 
a  greater  flexibility,  to  satisfy  internationally-agreed  or  similar  HIPC  conditions  on 
debt sustainability and particularly in respect to interest rate subsidies. 

Such provision already exists for resources managed by the EIB in the context of the 
Investment  Facility,  in  accordance  with  Article  2  of  Annex  II  to  the  ACP-EC 
Partnership Agreement. 

The  objective  of  the  new  paragraphs  in  Article  1  of  Annex  II  to  the  ACP-EC 
Partnership Agreement is to apply uniform conditions to both EIB own resources and 
the Investment Facilities. 

The  objective  of  the  new  text  for  Articles  1,  2  and  4  of  Annex  II  to  the  ACP-EC 
Partnership  Agreement  is  to  align  EIB  own  resources  and  the  Investment  Facility 
provisions in the HIPC framework.  

It is therefore appropriate to amend Annex II to the ACP-EC Partnership Agreement 
accordingly; 

1 

OJ L 287, 28.10.2005, p.4. 

EN 

5 

   EN 

 
                                                 
HAS DECIDED AS FOLLOWS:  

Article 1 

Annex II to the ACP-EC Partnership Agreement is hereby amended as follows: 

in Article 1, the first paragraph is numbered (1) and the following paragraphs (2), (3) 

(1) 
and (4) are inserted as follows: 

Funds  for  interest  rate  subsidies,  as  provided  for  under  this  Annex,  will  be  made 

"2. 
available from the interest subsidy allocation specified in Annex 1b paragraph 2(c). 

3. 
Interest subsidies may be capitalised or may be used in the form of grants. The amount 
of the interest rate subsidy, calculated in terms of its value at the times of disbursement of the 
loan, shall be charged against the interest subsidy allocation specified in Annex 1b paragraph 
2(c),  and  paid  directly  to  the  Bank.  Up  to  10  % of  this  allocation  for  interest  rate  subsidies 
may also be used to support project related technical assistance in ACP countries. 

4. 
These terms and conditions are without prejudice to terms and conditions that may be 
imposed  upon  ACP  countries  subject  to  restrictive  borrowing  conditions  under  the  Heavily 
Indebted  Poor  Countries  (“HIPC”)  or  other  internationally  agreed  debt  sustainability 
frameworks. Accordingly, where such frameworks require a reduction in the interest rate of a 
loan  by  more  than  3%,  as  permitted  under  Articles  2  and  4  of  this  Chapter,  the  Bank  shall 
seek to reduce the average cost of funds through appropriate co-financing with other donors. 
Should this not be deemed possible, the interest rate of the Bank loan may be reduced by such 
amount  as  required  to  comply  with  the  level  arising  from  the  HIPC  initiative  or  any 
internationally-agreed debt sustainability framework." 

(2) 

in Article 2, the text of paragraph (7) is replaced by the following text: 

"7. 
Ordinary  loans  in  countries  not  subject  to  restrictive  borrowing  conditions  under  the 
HIPC  or  other  internationally  agreed  debt  sustainability  frameworks  may  be  extended  on 
concessional terms and conditions in the following cases: 

(a) 

(b) 

for infrastructure projects, that are a prerequisite for private sector development 
in the Least Developed Countries, in post-conflict countries and in post-natural 
disaster countries. In such cases, the interest rate of the loan will be reduced by 
up to 3 %; 

for  projects  which  involve  restructuring  operations  in  the  framework  of 
privatisation or for projects with substantial and clearly demonstrable social or 
environmental benefits. In such cases, loans may be extended with an interest 
rate subsidy, the amount and form of which will be decided with respect to the 
particular characteristics of the project. However, the interest rate subsidy shall 
not be higher than 3 %. 

The final rate of loans falling under (a) or (b) shall, in any case, never be less than 
50% of the reference rate." 

(3) 

in Article 4 the text of paragraph (2) is replaced by the following text: 

Loans from the Bank’s own resources shall be granted under the following terms and 

"2. 
conditions: 

EN 

6 

   EN 

 
(a) 

(b) 

the  reference  rate  of  interest  shall  be  the  rate  applied  by  the  Bank  for  a  loan 
with the same conditions as to currency and the repayment period on the day of 
signature of the contract or on the date of disbursement; 

however,  for  countries  which  are  not  subject  to  restrictive  borrowing 
conditions  under  the  HIPC  or  other  internationally  agreed  debt  sustainability 
frameworks: 

i) 

ii) 

in  principle,  public  sector  projects  shall  be  eligible  for  an  interest  rate 
subsidy of up to 3%; 

private  sector  projects  falling  into  the  categories  specified  in  Article  2 
(7)(b) shall be eligible for interest rates subsidies on the terms specified 
in that provision. 

The  final  interest rate shall, in any such  case,  never  be less  than 50 %  of the 
reference rate. 

(c) 

the repayment period of loans made by the Bank from its own resources shall 
be determined on the basis of the economic and financial characteristics of the 
project. These loans shall normally comprise a grace period fixed by reference 
to the construction period of the project." 

Article 2 

The procedure for adoption of the present Decision within the ACP-EC Council of Ministers 
shall be a written procedure.  

Done at Brussels,  

For the ACP-EC Council of Ministers 
The President 

EN 

7 

   EN