Recommendation for a COUNCIL DECISION amending the Council Decision of 23 November 1998 concerning exchange rate matters relating to the CFA franc and the Comorian franc (98/683/EC)
Date: 2020-10-20
Institutions: Directorate-General for Economic and Financial Affairs, European Commission
Subjects: Comoros, France, WAEMU countries, West African Economic and Monetary Union, cooperation agreement, exchange rate, monetary policy, national currency

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   EUROPEAN COMMISSION  Brussels, 20.10.2020  COM(2020) 658 final  Recommendation for a COUNCIL DECISION amending the Council Decision of 23 November 1998 concerning exchange rate matters relating to the CFA franc and the Comorian franc (98/683/EC)  
 
EXPLANATORY MEMORANDUM 

1. 

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CONTEXT OF THE PROPOSAL 

Reasons for and objectives of the proposal 

In 2019, France and the States of the West African Economic and Monetary Union (UEMOA) 
engaged  in  a  discussion  on  the  reform  of  their  cooperation  in  exchange  rate  matters. 
Currently, their cooperation is based on a cooperation agreement of 4 December 1973  and a 
related guarantee agreement signed in 1973 and modified in 2005 and 2014. The purpose of 
this  reform  is  to  help  modernise  the  UEMOA  and  to  facilitate  its  progressive  extension  to 
other States of the Economic Community of West African States (CEDEAO).  

The  discussions  between  France  and  the  States  of  the  UEMOA  regarding  their  existing 
cooperation  have  led  to  a  common  proposal  for  reforming  the  functioning  of  the  UEMOA. 
The  reform  is  premised  on  four  axes.  Firstly,  a  change  to  the  name  of  the  CFA  franc  in 
“ECO” somewhere in 2020. The second objective is to abolish the obligation for States of the 
UEMOA  to  centralise  foreign  reserves  in  an  account  of  the  French  treasury;  Thirdly,  it 
concerns  the  withdrawal  by  France  from  decision-making  bodies  of  UEMOA  authorities. 
Fourthly, a parallel creation of a dialogue between the respective authorities and introduction 
of risk surveillance mechanisms takes place.  

To  make  this  reform  concrete,  France  signed  on  22  December  2019  a  new  cooperation 
agreement with its partners of the UEMOA, which is to replace the existing agreement of 4 
December  1973  once  it  enters  into  force.  This  new  agreement  will  be  accompanied  by  a 
guarantee  agreement  to  be  concluded  with  the  Central  Bank  of  West  African  States 
(BCEAO). It is noted that the reform leaves the essential features of the existing cooperation 
in  exchange  rate  matters  between  France  and  the  States  of  the  UEMOA  unaffected.  In 
particular, it concerns the maintenance of a convertibility between the euro and the CFA franc 
at a fixed parity supported by an unlimited and unconditional budget guarantee from France.  

The existing and future cooperation agreement between France and the States of the UEMOA 
cannot  be  seen  in  isolation  of  Union  law.  Since the  introduction  of  the  euro,  the  Union  has 
exclusive  competence  for  monetary  policy  and  exchange  rate  matters  for  Member  States 
whose  currency  is  the  euro.  France  is  a  Member  State  whose  currency  is  the  euro  since  1 
January 1999. Pursuant to Article 2 TFEU, when the Treaties confer on the Union exclusive 
competence  in  a  specific  area,  only  the  Union  may  legislate  and  adopt  legally  binding  acts. 
The  Member  States  are  only  able  to  do  so  themselves  if  so  empowered  by  the  Union.  In 
accordance  with  Article  109(3)  of  the  Treaty  on  the  establishment  of  the  European 
Community the Council authorised France in its Decision of 23 November 1998 (98/683/EC) 
to  continue  its  present  agreements  concerning  exchange  rate  matters  with  the  UEMOA,  the 
CEMAC and the Comores after the substitution of the euro for the French franc. While France 
was  authorised  to  continue  its  existing  agreements,  it  was  not  empowered  to  replace  such 
agreements  with  new  ones.  This  is  even  the  case  if  the  main  object  and  legal  regime 
governing  the  exchange  rate  cooperation  between  France  and  its  partners  of  the  UEMOA, 
CEMAC  and  the  Comores  would  be  similar,  i.e.  ensuring  a  convertibility  between  the 
currencies of those entities and the euro supported by a budget guarantee of the French State.  

With a view to ensure compatibility with an exclusive competence under Union law and offer 
legal certainty, it is necessary to amend the Council’s Decision of 23 November 1998. This 
will authorize France to conclude a new cooperation agreement, which replaces the existing 
agreement of 4 December 1973. It will also ensure that the French Republic can conclude new 

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agreements  with  other  African  partners  replacing  existing  agreements.  In  addition,  several 
other  provisions  of  that  Council  Decision  governing  the  information  and  approval  regime 
should be updated to extend their application to any new agreements with the UEMOA or any 
other partners replacing the existing ones.  

• 

Consistency with other Union policies 

These  agreements  are  unlikely  to  have  any  material  effect  on  the  conduct  of  the  single 
monetary  and  exchange  rate  policy  of  the  euro  area.  The  guarantee  of  convertibility  for  the 
CFA  franc  and  the  Comorian  franc  is  based  on  a  budgetary  commitment  of  the  French 
Republic. While this  entails a fiscal  risk for France in  case the  UEMOA would activate the 
guarantee, it is considered as unlikely to have a material effect on France’s fiscal position.  

2. 

• 

LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY 

Legal basis 

The legal basis for the adoption of this recommendation is Article 219(3) TFEU (ex-Article 
109(3) of the Treaty establishing the European Community). The latter was used to adopt the 
Council’s  Decision  of  23  November  1998  concerning  exchange  rate  matters  relating  to  the 
CFA  franc  and  the  Comorian  franc  (98/683/EC).  Article  219(3)  TFEU  provides  for  the 
Council  on  a  recommendation  from  the  Commission,  and  after  consultation  of  the  ECB,  to 
determine  the  arrangements  for  the  negotiation  and  for  the  conclusion  of  agreements 
concerning foreign exchange rate matters with one or more third countries.  

• 

Subsidiarity (for non-exclusive competence)  

The  principle  of  subsidiarity  is  not  applicable  since  this  matter  pertains  to  the  Union’s 
exclusive competence for monetary and foreign exchange matters.  

• 

Proportionality 

The objective of the proposed recommendation for a Council Decision is to empower France 
to  conclude  a  new  cooperation  agreement,  which  replaces  the  existing  agreement  of  4 
December  1973  with  the  UEMOA.  It  also  seeks  to  ensure  that  the  French  Republic  can 
conclude  new  agreements  with  other  African  partners  replacing  existing  agreements.  In 
addition,  several  other  provisions  of  that  Council  Decision  governing  the  information  and 
approval  regime  are  updated  to  extend  their  application  to  any  new  agreements  with  the 
UEMOA or any other partners replacing the existing ones. To this end, the recommendation 
provides  for  targeted  amendments  ensuring  such  empowerment  for  France,  which  go  not 
beyond what is necessary to achieve the aforementioned objective.  

• 

Choice of the instrument 

Where  agreements  concerning  monetary  or  foreign  exchange  regime  matters  need  to  be 
negotiated,  Article  219(3)  TFEU  prescribes  the  use  of  a  recommendation  from  the 
Commission to the Council to determine the appropriate arrangements for the negotiation and 
conclusion of such agreements.  

• 

Detailed explanation of the specific provisions of the proposal 

The Commission’s recommendation to the Council contains two articles.  

The  first  article  provides  for  the  amendments  to  the  title  and  to  Articles  3,  4  and  5  of  the 
Council’s Decision of 23 November 1998.  

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The amendment to the title and Article 3 of that Decision reflect the potential evolution in the 
future of re-naming the CFA franc and Comorian franc. Hence, the references to CFA franc 
are  replaced  by  the  general  term  currency  of  the  respective  monetary  unions.  The  same  is 
done for the Comorian franc with a general reference to the currency of the Comores.  

The amendments to Articles 4 and 5 of that Decision authorise France to replace its existing 
agreements  with  the  UEMOA,  CEMAC  and  the  Comores  with  new  agreements  in  foreign 
exchange  rate  matters  and  subjects  any  new  agreements  to  the  same  rules  regarding 
involvement of the competent Union bodies as the existing ones in order to ensure continuity 
of the applicable information and approval regime set by the Council in 1998.  

The second article ensures that the decision addressed to France will be applicable as from the 
day that the Council’s Decision is notified to the French Republic. 

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Recommendation for a 

COUNCIL DECISION 

amending the Council Decision of 23 November 1998 concerning exchange rate matters 
relating to the CFA franc and the Comorian franc (98/683/EC) 

THE COUNCIL OF THE EUROPEAN UNION, 

Having regard to the Treaty on the Functioning of the European Union, in particular Article 
219(3) thereof, 

Having regard to the recommendation from the European Commission,  
Having regard to the opinion of the European Central Bank(1),  

Whereas:  

(1) 

(2) 

(3) 

The  Union  has  exclusive  competence  for  monetary  and  exchange  rate  matters  in  the 
Member States whose currency is the euro. Where the Treaties confer on the Union an 
exclusive  competence  in  a  specific  area,  only  the  Union  may  legislate  and  adopt 
legally  binding  acts,  the  Member  States  being  able  to  do  so  themselves  only  if  so 
empowered by the Union.  

Pursuant to  Article 219(3) of the Treaty, the Council is  to  determine the appropriate 
arrangements  for  the  negotiation  and  conclusion  of  agreements  concerning  monetary 
or foreign exchange regime matters. 

(Union  économique  et  monétaire  ouest-africaine), 

Before the introduction of the euro, France had concluded several agreements with the 
UEMOA 
the  CEMAC 
(Communauté  économique  et  monétaire  de  l’Afrique  Centrale)  and  the  Comores, 
which were intended to guarantee the convertibility of the CFA and Comorian francs 
into  the  French  franc  at  a  fixed  parity(2).  Upon  the  substitution  of  the  euro  for  the 
French  franc  on  1  January  1999,  the  Council  authorised  France  to  continue  such 
existing agreements (“present agreements”) concerning exchange rate matters with the 
UEMOA, the CEMAC and the Comores pursuant to the framework laid down in the 
Decision  of  the  Council  of  23  November  1998  (98/683/EC)  (“the  Council 
Decision”)(3). 

[…], OJ, C XX/XX, D.M.Y.  
Convention de coopération monétaire du 23 novembre 1972 entre les États membres de la Banque des  

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États de l'Afrique centrale (BEAC) et la République française, as amended; Convention de compte 
d'opérations du 13 mars 1973 entre le ministre de l'Économie et des Finances de la République Française  
et le Président du Conseil de l'administration de la Banque des États de l'Afrique Centrale, as amended; 
Accord de coopération du 4 décembre 1973 entre la République française et les Républiques membres de  
l'union monétaire ouest-africaine, as amended; Convention de compte d'opérations du 4 décembre 1973  
entre le ministre de l'Économie et des Finances de la République Française et le Président du conseil des  
ministres de l'Union monétaire ouest-africaine, as amended; Accord de coopération monétaire du 23  
novembre 1979 entre la République française et la République fédérale islamique des Comores, as  
amended; Convention de compte d'opérations du 23 novembre 1979 entre le ministre de l'Économie et des  
Finances de la République Française et le ministre des Finances, de l'Économie et du Plan de la République  
fédérale des Comores, as amended. 
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OJ L 320, 28.11.1998, p. 58–59.  

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(4) 

(5) 

(6) 

(7) 

Pursuant  to  Articles  4  and  5  of  Decision  98/683/EC,  France  may  negotiate  and 
conclude  modifications  to  the  existing  agreements,  which  either  maintain  or  change 
the nature or scope of the existing agreements.  

France  and  the  States  of  the  UEMOA  are  in  the  process  of  replacing  their  existing 
agreement of 4 December 1973 by a new cooperation agreement concerning exchange 
rate matters. That agreement was signed on 21 December 2019. It is accompanied by a 
new guarantee agreement  to be concluded with the Central Bank of the States of the 
UEMOA. On 22 May 2020 the French Government put forward a bill to the National 
Assembly to ratify the new cooperation agreement.  

The  replacement  of  existing  agreements  concerning  exchange  rate  matters  between 
France,  the  UEMOA,  CEMAC  and  Comores,  as  France  and  the  UEMOA  currently 
intend to achieve, is not covered by Articles 4 and 5 of Decision 98/683/EC. This is 
the  case  even  if  the  nature  and  scope  of  such  new  cooperation  agreements  remains 
unchanged,  namely  to  ensure  a  convertiblity  between  the  euro  and  the  currencies  of 
the  UEMOA,  CEMAC  and  the  Comores  at  a  fixed  parity  supported  by  a  budgetary 
commitment from France.  

France  should  be  empowered  to  replace  the  agreements  in  force  with  UEMOA, 
CEMAC  and  the  Comores.  In  line  with  Council  Decision  98/683/EC,  the  different 
existing  procedures  should  continue  to  apply  depending  on  whether  the  replacement 
affects or does not affect the nature or scope of these agreements. In both cases, it will 
be  necessary  to  involve  the  competent  Union  bodies  in  accordance  with  the  existing 
information  sharing  and  approval  regime,  as  the  case  may  be,  before  replacing  the 
agreements with subsequent agreements. 

(8) 

Decision 98/683/EC should therefore be amended accordingly,  

HAS ADOPTED THIS DECISION:  

Decision 98/683/EC is amended as follows: 

Article 1 

(1) 

The  title  is  replaced  by  ‘Council  Decision  of  23  November  1998  concerning 
exchange rate matters relating to the currencies of the UEMOA, the CEMAC and the 
Comores (98/683/EC)’; 

(2) 

Article 3, 4 and 5 are replaced by the following:  

‘Article 3 

The competent French authorities shall keep the Commission, the European Central 
Bank and the Economic and Financial Committee informed on a regular basis about 
the  implementation  of  the  agreements.  The  French  authorities  shall  inform  the 
Economic and Financial Committee prior to changes of the parity between the euro 
and the currencies of the UEMOA, the CEMAC or the Comores. 

 France  may  negotiate  and  conclude  modifications  to  the  present  agreements,  or 
replace  them,  to  the  extent  that  the  nature  or  scope  of  the  agreements  are  not 

Article 4 

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changed. It shall inform in advance the Commission, the European Central Bank and 
the Economic and Financial Committee of such changes. 

Article 5  

Any  plans  to  change  the  nature  or  scope  of  these  agreements,  either  through 
amendment  or  replacement,  shall  be  submitted  by  France  to  the  Commission,  the 
European  Central  Bank  and  the  Economic  and  Financial  Committee.  Such  plans 
require  the  approval  of  the  Council  on  the  basis  of  a  recommendation  from  the 
Commission and after consultation of the European Central Bank.’ 

This Decision is addressed to the French Republic.  

Done at Brussels, 

Article 2 

For the Council 
The President 

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