Proposal for a regulation of the European Parliament and of the Council amending Council Regulation (EC, Euratom) No 1605/2002 on the Financial Regulation applicable to the general budget of the European Communities
Date: 2010-03-03
Institutions: European Commission
Subjects: financial management, financial regulation, general budget (EU), implementation of the budget

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EUROPEAN COMMISSION 

Brussels, 3.3.2010 
COM(2010) 71 final 

2010/0047 (COD) 

Proposal for a 

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 

amending Council Regulation (EC, Euratom) No 1605/2002 on the Financial Regulation 
applicable to the general budget of the European Communities 

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EXPLANATORY MEMORANDUM 

The present Commission proposal aims at amending the Financial Regulation in line with the 
Lisbon Treaty after its entry into force on December 1, 2009. The Lisbon Treaty introduces 
substantial changes concerning budgetary and financial issues which should be translated in 
the  Financial  Regulation  (FR),  which  governs  all the  rules  and  procedures  applicable  to  the 
use of EU funds and which must be respected by all institutions.  

The  Commission  will  present,  as  foreseen  in  Article  184  of  the  Financial  Regulation,  its 
proposal for the triennial review of the Financial Regulation at the end of the first semester 
2010. However, the Commission considers that an ad-hoc, fast-track revision of the FR and 
IR is inevitable before and separately from the triennial review. Such delimitated revision is 
indeed  necessary  in  order  to  ensure  a  stable  legal  framework  for  budget  implementation  in 
line  with  the  new  Treaty.  Other  aspects  relating  to  the  creation  of  the  European  External 
Action  Service  (EEAS)  will  be  covered  by  a  separate  proposal  to  be  tabled  soon  by  the 
Commission. 

Changes stemming from the Lisbon Treaty 

For the first time in decades, the Treaty on the Functioning of the European Union (TFEU) 
foresees  important  changes  concerning  budgetary  and  financial  issues,  which  need  to  be 
detailed in the Financial Regulation. Adequate provisions of the Financial Regulation should 
therefore be introduced or modified in order to take into account the following changes: 

- the introduction of the multiannual financial framework in the Treaty, and its link to annual 
budgetary procedure: in this regard, as a consequence of the introduction of the multiannual 
financial framework in the TFEU, some provisions of the Interinstitutional Agreement (IIA) 
on  budgetary  discipline  and  sound  financial  management  should  be  introduced  in  the 
Financial Regulation. 

- the new annual budgetary procedure and the abolition of the distinction between compulsory 
and non-compulsory expenditure, which have an impact on the provisions relating to transfers 
and the provisional twelfths; 

The present proposal also allows for the streamlining of the Financial Regulation in line with 
the Lisbon Treaty, through both technical adaptations and the deletion of obsolete provisions. 

New provisions introduced in Article 317 TFEU concerning the control and audit obligations 
of  the  Member  States  in  the  implementation  of  the  budget,  together  with  Point  44  of  the 
Interinstitutional Agreement (IIA) on budgetary discipline and sound financial management, 
require an in-depth analysis and will therefore be proposed together with the triennial revision 
of the Financial Regulation. The triennial revision should also be the opportunity to codify or 
recast  the  text  in  order  to  take  into  account,  in  particular,  the  renumbering  of  Treaty 
provisions. 

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2010/0047 (COD) 

Proposal for a 

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 

amending Council Regulation (EC, Euratom) No 1605/2002 on the Financial Regulation 
applicable to the general budget of the European Communities 

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  on  the  functioning  of  the  European  Union,  and  in  particular 
Article 322 thereof, in conjunction with the Treaty establishing the European Atomic Energy 
Community, and in particular Article 106a thereof, 

Having regard to the proposal from the European Commission, 

Having regard to the opinion of the Court of Auditors1, 

Acting in accordance with the ordinary legislative procedure, 

Whereas: 

(1) 

(2) 

(3) 

(4) 

Council  Regulation  (EC,  Euratom)  No  1605/2002  of  25  June  2002  on  the  Financial 
Regulation  applicable  to  the  general  budget  of  the  European  Communities2 
(hereinafter  “the  Financial  Regulation”),  lays  down  the  budgetary  principles  and 
financial  rules  which  should  be  respected  in  all  legislative  acts.  It  is  necessary  to 
amend  certain  provisions  of  the  Financial  Regulation  in  order  to  take  account  of 
amendments introduced by the Treaty of Lisbon. 

Due  to  the  specific  nature  and  tasks  of  the  European  Central  Bank,  notably  its 
independence as regards the management of its finances, it should be excluded from 
the scope of the Financial Regulation. For the reasons of legal certainty, that exclusion 
should apply from the date of the entry into force of the Treaty of Lisbon. 

Police  and  judicial  cooperation  in  criminal  matters  became  an  integral  part  of  other 
Union policies and internal actions. The specific financial provisions applicable to that 
policy are thus no longer justified and should therefore be deleted. 

Under  the  2007-2013  multiannual  financial  framework,  the  Guarantee  Fund  for 
external  actions  is  no  longer  the  subject  of  a  special  regime.  Payments  to  the  Fund 
from the general budget of the European Union are now entered in a dedicated budget 
line.  The  applicable  specific  financial  provisions  are  no  longer  necessary  and  should 
therefore be deleted. 

1 
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OJ C , , p. . 
OJ L 248, 16.9.2002, p. 1. 

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(5) 

(6) 

(7) 

(8) 

(9) 

The rules should be clarified for the situation where the European Parliament decides 
to  reduce  the  amount  of  the  additional  expenditure  in  excess  of  the  provisional 
twelfths adopted by Council in accordance with Article 315 of the Treaty. 

The  2007-2013  multiannual  financial  framework  has  been  established  by  the 
Interinstitutional  Agreement  of  17  May  2006  between  the  European  Parliament,  the 
Council  and 
the  Commission  on  budgetary  discipline  and  sound  financial 
management3. Since the Treaty requires that multiannual financial framework is to be 
laid down in the form of a regulation, it is necessary to incorporate certain provisions 
from  that  Interinstitutional  agreement  into  the  Financial  Regulation.  In  particular,  in 
order  to  ensure  budgetary  discipline,  it  is  necessary  to  establish  a  link  between  the 
multiannual  financial  framework  and  the  annual  budgetary  procedure.  It  is  also 
necessary to include provisions on commitment of the European Parliament and of the 
Council to respect the allocations of commitment appropriations laid down in the basic 
acts for structural operations, rural development and the European Fisheries Fund. 

No  distinction  is  made  between  compulsory  and  non-compulsory  expenditure  any 
longer. Provisions concerning transfers should therefore be adapted accordingly. 

In accordance with Article 316 of the Treaty, it should be foreseen that the European 
Council and the Council share the same section in the Budget.  

The amended annual budgetary procedure under the Treaty should be reflected in the 
Financial Regulation.  

(10) 

In the area of external action, the adoption procedure of preparatory measures should 
be adapted to the provisions of the Treaty. 

(11)  The  Commission  has  to  submit  to  the  European  Parliament  and  to  the  Council  an 
evaluation  report  on  the  Union's  finances  based  on  the  results  achieved.  Adequate 
provisions should therefore be introduced in the Financial Regulation for such report 
in relation to other existing reporting requirements. 

(12)  Regulation (EC, Euratom) No 1605/2002 should therefore be amended accordingly, 

HAVE ADOPTED THIS REGULATION: 

Regulation (EC, Euratom) No 1605/2002 is amended as follows: 

Article 1 

(1) 

In the title of the Regulation, the words “the general budget of the Communities” are 
replaced by “the general budget of the European Union”. 

(2) 

Article 1 is replaced by the following: 

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OJ C 139, 14.6.2006, p. 1. 

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“Article 1 

1. 

2. 

3. 

This Regulation lays down the rules for the establishment and implementation 
of the general budget of the European Union, hereinafter “the budget”, and the 
presentation and auditing of the accounts. 

For the purposes of this Regulation, the Economic and Social Committee, the 
Committee of the Regions, the Ombudsman and the European Data-Protection 
Supervisor shall be considered institutions of the Union. 

For  the  purposes  of  this  Regulation,  the  European  Central  Bank  shall  not  be 
considered an institution of the Union. 

For the purposes of this Regulation, any reference to “the Communities” or to 
“the Union” shall be understood as a reference to “the European Union and the 
European Atomic Energy Community”.” 

(3) 

Article 4 is amended as follows: 

(a) 

in paragraph 2, point (a) is replaced by the following: 

“(a)  the  revenue  and  expenditure  of 

including 
administrative  expenditure  occasioned  for  the  institutions  by  the 
provisions  of  the  Treaty  on  European  Union  relating  to  the  common 
foreign and security policy, and the operating expenditure occasioned by 
implementation of those provisions where this is charged to the budget;” 

the  European  Union, 

(b)  paragraph 3 is deleted. 

(4) 

Article 8 is amended as follows: 

(a) 

in paragraph 2, the abbreviation “GNP” is replaced by “GNI”; 

(b) 

in paragraph 6, the words “the Guarantee Section of the European Agricultural 
Guidance  and  Guarantee  Fund  (EAGGF)”  are  replaced  by  “the  European 
Agricultural Guarantee Fund (EAGF)”. 

(5) 

Article 13 is amended as follows: 

(a) 

paragraph 1 is replaced by the following: 

“1. 

If  the  budget  has  not  been  definitively  adopted  at  the  beginning  of  the 
financial  year,  the  first  paragraph  of  Article  315  of  the  Treaty  on  the 
Functioning  of  the  European  Union  shall  apply  to  commitment  and 
payment of expenditure which it has been possible to book to a specific 
chapter  in  the  budget  as  part  of  implementation  of  the  last  budget  duly 
adopted.” 

(b)  paragraph 3 is replaced by the following: 

“3. 

If  the  continuity  of  action  by  the  Union  and  management  needs  so 
require, the Council, acting by a qualified majority on a proposal of the 

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Commission,  may  authorise  two  or  more  provisional  twelfths  both  for 
commitments and for payments over and above those automatically made 
available  in  accordance  with  paragraphs  1  and  2.  It  shall  forward  the 
decision on authorisation without delay to the European Parliament. 

The  decision  shall  enter  into  force  thirty  days  following  its  adoption 
unless  the  European  Parliament,  acting  by  a  majority  of  its  Members, 
decides to reduce that expenditure within those thirty days. 

If  the  European  Parliament  decides  to  reduce  that  expenditure,  the 
Council shall review the decision on authorisation taking into account the 
amount approved by the European Parliament. 

The  additional  twelfths  shall  be  authorised  in  full  and  shall  not  be 
divisible.” 

(c) 

paragraph 4 is deleted. 

(6) 

Article 16 is replaced by the following: 

“Article 16 

The  multiannual  financial  framework  and  the  budget  shall  be  drawn  up  and 
implemented in euro and the accounts shall be presented in euro. 

However, for the cash-flow purposes referred to in Article 61, the accounting officer 
and, in the case of imprest accounts, the imprest administrators, and, for the needs of 
the  administrative  management  of  the  services  in  charge  of  the  Union's  external 
action, the authorising officer responsible shall be authorised to carry out operations 
in national currencies as laid down in the implementing rules.” 

(7) 

Article 24 is replaced by the following: 

“Article 24 

1. 

2. 

3. 

The  Commission  shall  submit  its  proposal  simultaneously  to  the  two  arms  of 
the budgetary authority. 

The  budgetary  authority  shall  take  decisions  on  transfers  of  appropriations  as 
provided for in paragraphs 3 to 6, save as otherwise provided in Title I of Part 
Two. 

Save  in  urgent  circumstances,  the  Council,  by  a  qualified  majority,  and  the 
European  Parliament,  shall  deliberate  upon  the  Commission  proposal  within 
six  weeks  of  the  date  on  which  the  two  institutions  received  the  proposal  for 
each transfer submitted to them. 

4. 

The transfer proposal shall be approved, if within the six-week period: 

- 

both arms approve it; 

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- 

- 

one of the two arms approves it and the other refrains from acting; 

both arms refrain from acting or have not taken a decision contrary to the 
Commission proposal. 

5.  The  six-week  period  referred  to  under  point  4  will  be  reduced  to  three  weeks, 

unless one arm of the budgetary authority requests otherwise, when: 

i) the transfer represents less than 10% of the appropriations of the line from which 

the transfer is made and does not exceed EUR 5 million; 

or 

ii) the transfer concerns only payment appropriations and the overall amount of the 

transfer does not exceed EUR 100 million. 

6. 

If  one  of  the  two  arms  of  the  budgetary  authority  has  amended  the  transfer 
while  the  other  approved  it  or  refrains  from  acting,  or  if  both  arms  have 
amended  the  transfer,  the  smaller  amount  approved  either  by  the  European 
Parliament  or  the  Council  shall  be  deemed  approved,  unless  the  Commission 
withdraws its proposal.” 

(8) 

Article 26 is amended as follows: 

(a) 

in the second subparagraph of paragraph 2, the first sentence is replaced by the 
following: 

“The procedure provided for in Article 24(3) and (4) shall apply.” 

(9) 

In Article 27(3), the third sentence is replaced by the following: 

“Such information, as referred to in Article 33(2)(d), shall be provided annually and 
at the latest in the documents accompanying the draft budget.” 

(10) 

In Article 30, paragraph 2 is deleted. 

(11)  The first paragraph of Article 31 is replaced by the following: 

“The  European  Parliament,  the  European  Council  and  the  Council,  the  Court  of 
Justice  of  the  European  Union,  the  Court  of  Auditors,  the  Economic  and  Social 
Committee, the Committee of the Regions, the Ombudsman as well as the European 
Data-Protection  Supervisor  shall  draw  up  an  estimate  of  their  revenue  and 
expenditure, which they shall send to the Commission before 1 July each year.” 

(12)  Article 33 is amended as follows: 

(a) 

paragraph 1 is replaced by the following: 

“1.  The  Commission  shall  submit  a  proposal  containing  the  draft  budget  to 
the European Parliament and the Council, at the latest, by 1 September of 
the year preceding that in which the budget is to be implemented. 

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The  draft  budget  shall  contain  a  summary  general  statement  of  the 
expenditure  and  revenue  of  the  Union  and  consolidate  the  estimates 
referred to in Article 31.” 

(b) 

in paragraph 2, the introductory sentence is replaced by the following: 

“The Commission shall attach to the draft budget:”. 

(13)  Article 34 is replaced by the following: 

”Article 34 

Until  the  Conciliation  Committee  referred  to  in  Article  314  of  the  Treaty  on  the 
Functioning  of  the  European  Union  is  convened,  the  Commission  may,  on  its  own 
initiative or if requested by the other institutions, each in respect of its own section, 
present  simultaneously  to  the  European  Parliament  and  the  Council  letters  of 
amendment  to  the  draft  budget  on  the  basis  of  new  information  which  was  not 
available  at  the  time  the  draft  was  established,  including  a  letter  of  amendment 
updating expenditure estimates for agriculture.” 

(14)  The following Article 34a is inserted:  

”Article 34a 

Once the Conciliation Committee has agreed on a joint text, the European Parliament 
and  the  Council  shall  endeavour  to  approve  the  outcome  of  the  Conciliation 
Committee as soon as possible in accordance with Article 314(6) of the Treaty on the 
Functioning of the European Union, in accordance with their respective internal rules 
of procedure.' 

(15)  Article 35 is deleted. 

(16)  Article 37 is replaced by the following: 

"Article 37 

1. 

If  there  are  unavoidable,  exceptional  or  unforeseen  circumstances,  the 
Commission may present draft amending budgets. 

Requests for amending budgets, in the same circumstances as referred to in the 
preceding paragraph, from institutions other than the Commission shall be sent 
to the Commission. 

Before  presenting  a  draft  amending  budget,  the  Commission  and  the  other 
institutions  shall  examine 
the  relevant 
appropriations,  taking  into  account  any  expected  under-implementation  of 
appropriations. 

the  scope  for  reallocation  of 

2. 

The  Commission  shall,  save  in  exceptional  circumstances,  submit  any  draft 
amending  budget  simultaneously  to  the  European  Parliament  and  the  Council 

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by 1 September each year at the latest. It may attach an opinion to the requests 
for amending budgets from the other institutions. 

3. 

The European Parliament and the Council shall discuss them with due account 
for their urgency." 

(17)  Article 38 is deleted. 

(18) 

In Article 39, the first sentence is replaced by the following: 

“The  Commission  and  the  budgetary  authority  may  agree  to  bring  forward  certain 
dates for the transmission of the estimates, and for the adoption and transmission of 
the draft budget.” 

(19) 

In Article 40, the following second paragraph is added: 

“The European Council and the Council shall share the same section of the budget.” 

(20)  Article 46 is amended as follows: 

(a) point 2 of paragraph 1 is replaced by the following: 

"(2)  in  each  section  of  the  budget,  the  revenue  and  expenditure  shall  be  shown  in 

the same structure as in point 1;" 

(b)  point 5 of paragraph 1 is deleted. 

(21) 

In Title III, the following Chapter 3 is added: 

“Chapter 3 
Budgetary discipline 

Article 47a 

The budget shall comply with the multiannual financial framework. 

Article 47b 

Where by implementation of an act of the Union the appropriations available in the 
budget or the allocations available in the multiannual financial framework would be 
exceeded, such act may be implemented in financial terms only after the budget has 
been  amended  and,  if  necessary,  the  financial  framework  has  been  appropriately 
revised. ” 

(22)  Article 49 is amended as follows: 

(a) 

in paragraph 1, the first subparagraph is replaced by the following: 

“A  basic  act  shall  first  be  adopted  before  the  appropriations  entered  in  the 
budget for any action by the Union may be used.” 

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(b)  paragraph 3 is replaced by the following:  

“3. 

In  application  of  Title  V  of  the  Treaty  on  European  Union,  a  basic  act 
may take one of the forms specified in Articles 26(2), 28(1), 29, 31(2), 33 
and 37 of the Treaty on European Union.” 

(c) 

paragraph 4 is deleted; 

(d)  paragraph 6 is amended as follows: 

(i) 

the introductory sentence is replaced by the following: 

“By way of derogation from paragraphs 1, 2 and 3, the following may be 
implemented  without  a  basic  act  provided  the  actions  which  they  are 
intended to finance fall within the powers of the Union:” 

(ii)  points (b) and (c) are replaced by the following: 

“(b)  appropriations for preparatory actions in the field of application of 
the  Treaty  on  the  Functioning  of  the  European  Union  and  the 
Euratom  Treaty,  designed  to  prepare  proposals  with  a  view  to  the 
adoption of future actions. The preparatory actions are to follow a 
coherent  approach  and  may  take  various  forms.  The  relevant 
commitment  appropriations  may  be  entered  in  the  budget  for  not 
more 
legislative 
three  successive  financial  years.  The 
procedure must  be  concluded before  the  end of the third financial 
year. In the course of the legislative procedure, the commitment of 
appropriations  must  correspond  to  the  particular  features  of  the 
preparatory  action  as  regards  the  activities  envisaged,  the  aims 
pursued  and  the  persons  benefited.  Consequently,  the  means 
implemented  cannot  correspond  in  volume  to  those  envisaged  for 
financing the definitive action itself. 

than 

When the draft budget is presented, the Commission shall submit a 
report to the budgetary authority on the actions referred to in point 
(a) and the first paragraph of this point which shall also contain an 
assessment of results and the follow-up envisaged; 

(c) 

appropriations  for  preparatory  measures  in  the  field  of  Title  V  of 
the Treaty on European Union. These measures shall be limited to a 
short  period  of  time  and  shall  be  designed  to  establish  the 
conditions  for  European  Union  action  in  fulfilment  of  the 
objectives of the CFSP and for the adoption of the necessary legal 
instruments; 

For  the  purpose  of  EU  crisis  management  operations,  preparatory 
measures  are  designed  inter  alia  to  assess  the  operational 
requirements, to provide for a rapid initial deployment of resources, 
or to establish the conditions on the ground for the launching of the 
operation; 

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Preparatory measures shall be agreed by the Council, on a proposal 
by  the  High  Representative  of  the  Union  for  Foreign  Affairs  and 
Security Policy. 

In  order  to  ensure  the  rapid  implementation  of  preparatory 
measures, the High Representative of the Union for Foreign Affairs 
and  Security  Policy  shall  inform  the  Commission  as  early  as 
possible on the Council's intention to launch a preparatory measure 
and  in  particular  of  the  estimated  resources  required  for  this 
purpose.  In  conformity  with  the  provisions  of  this  Regulation,  the 
Commission shall take all the necessary measures to ensure a rapid 
disbursement of the funds;”. 

(23) 

Article 146(2) is replaced by the following: 

”2.  With a view to granting the discharge, the European Parliament shall, after the 
Council  has  done  so,  examine  the  accounts,  financial  statements  and  the 
evaluation report referred to in Article 318 of the Treaty on the Functioning of 
the European Union. It shall also examine the annual report made by the Court 
of  Auditors  together  with  the  replies  of  the  institutions  under  audit,  and  any 
relevant special reports by the Court of Auditors in respect of the financial year 
in  question  and  the  Court  of  Auditors'  statement  of  assurance  as  to  the 
reliability  of  the  accounts  and  the  legality  and  regularity  of  the  underlying 
transactions.” 

(24)  The following Article 155a is inserted: 

“Article 155a 

The  European  Parliament  and  the  Council  undertake  to  respect  the  allocations  of 
commitment  appropriations  provided  for  in  the  relevant  basic  acts  for  structural 
operations, rural development and the European Fisheries Fund.” 

(25)  Article 184 is replaced by the following: 

“Article 184 

Every three years, or whenever it proves necessary to do so, this Regulation shall be 
the subject of a review in accordance with the procedure laid down by Article 322 of 
the Treaty on the Functioning of the European Union. ” 

Article 2 

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

However, point 2 of Article 1 shall apply from 1 December 2009. 

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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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