Source: EURLEX
Language: en
Format: md

**Council of the**
**European Union**

**Interinstitutional File:**

**2022/0044(NLE)**

**PROPOSAL**

**Brussels, 25 February 2022**
**(OR. en)**

**6634/22**

**RECH 100**
**FEROE 1**

From: Secretary-General of the European Commission, signed by Ms Martine
DEPREZ, Director

date of receipt: 24 February 2022

To: Mr Jeppe TRANHOLM-MIKKELSEN, Secretary-General of the Council
of the European Union

No. Cion doc.: COM(2022) 64 final

Subject: Proposal for a COUNCIL DECISION on the signing, on behalf of the
Union, and on provisional application of the Agreement between the
European Union, of the one part, and the Government of the Faroe
Islands, of the other part, on the participation of the Faroe Islands in
Union programmes

Delegations will find attached document COM(2022) 64 final.

Encl.: COM(2022) 64 final

6634/22 MG/lv

#### COMPET.2. EN

EUROPEAN

COMMISSION

Brussels, 24.2.2022
COM(2022) 64 final

2022/0044 (NLE)

Proposal for a

**COUNCIL DECISION**

**on the signing, on behalf of the Union, and on provisional application of the Agreement**
**between the European Union, of the one part, and the Government of the Faroe Islands,**

**of the other part, on the participation of the Faroe Islands in Union programmes**

### **EN EN**

**EXPLANATORY MEMORANDUM**

**1.** **CONTEXT** **OF** **THE** **PROPOSAL**

Article 16 (1)(d) of the Horizon Europe Regulation [1] concerning the association of third
countries to the programme provides for the possibility of association of third countries and
territories that jointly fulfil all of the criteria spelled out therein. Such third countries or
territories are to participate in the Horizon Europe programme on the basis of an agreement
covering the participation of the third country or territory to any Union programme.

The Faroe Islands became formally associated to the Seventh Framework Programme (FP7)
in 2010, and a range of European projects attest to the active involvement of Faroese
researchers and institutes in areas such as environment, oceanology, climate change,
ecosystems and fisheries management. The Faroese association to Horizon 2020 as of 2014
gave researchers, research institutes and enterprises in the Faroe Islands full access to Union
funding and collaborative activities for research and innovation on an equal footing with
entities from Member States and other third countries that were also associated to Horizon
2020. This participation has become very important for the research community of the Faroe
Islands, and establishes an important new and successful pillar of the Faroese-EU relations.
With the successive agreements on the association to the Union Research and Innovation
Framework Programmes being limited in time for the duration of each subsequent EU
programme, there is currently no international agreement in place regulating the participation
of Faroese entities in Horizon Europe or fostering the scientific, research and innovation
cooperation between the EU and Faroese research communities.

On 14 May 2020, by a Letter of Intent, the Faroe Islands expressed their formal interest to
associate to Horizon Europe. The Faroe Islands fulfil the criteria for association of third
countries or territories to the Horizon Europe Framework Programme, as set forth by the
Horizon Europe Regulation (Article 16(1)(d)). They dispose, notably, of good capacity in
science, technology and innovation; are committed to a rules-based open market economy,
including fair and equitable dealing with intellectual property rights, respect of human rights,
and backed by democratic institutions; and actively promote policies to improve the economic
and social well-being of their citizens.

On 13 July 2021, the Council authorised the Commission to open negotiations, on behalf of
the Union, with the Faroe Islands on an Agreement between the European Union and the
Faroe Islands on the general principles for the participation of the Faroe Islands in Union
programmes and the association of the Faroe Islands to Horizon Europe – the Framework
Programme for Research and Innovation (2021-2027). The Research Working Party and the
EFTA Working Party were appointed by the Council to act in the capacity of the special
committees to assist the Commission during the negotiations.

1 Regulation (EU) 2021/695 of the European Parliament and of the Council of 28 April 2021 establishing

–
Horizon Europe the Framework Programme for Research and Innovation, laying down its rules for
participation and dissemination, and repealing Regulations (EU) No 1290/2013 and (EU) No 1291/2013
(OJ L170, 12.05.2021, p.1.).

### EN 1 EN

The negotiations started on 3 September 2021 and were successfully completed on 8 October
2021 when the text of the draft Agreement was initialled by representatives from each of the
future Parties. The Research Working Party and EFTA Working Party of the Council and the
European Parliament were regularly kept informed during the negotiations.

The Agreement annexed to this proposal for a Council decision is composed of two parts,
notably the ‘umbrella agreement’ on the general principles for the participation of the Faroe
Islands in Union Programmes and a Protocol on the association of the Faroe Islands to

–
Horizon Europe the Framework Programme for Research and Innovation (2021-2027) (‘the
Horizon Europe Protocol’) in line with the negotiating directives which the Commission
obtained from the Council.

The ‘umbrella agreement’ comprehensively regulates the conditions of association of the
Faroe Islands applicable across all EU programmes. It governs the terms and conditions for
participation in EU programmes, modalities for establishing participation in (association to)
any given Union programme and the involvement of Faroe Islands in the governance of the
Union Programmes or activities, reflecting the principle of no decision making powers. It
contains detailed rules for the establishment of the financial contribution of the Faroe Islands
to the Union Programmes, including, where applicable, an automatic correction mechanism.
The ‘umbrella agreement’ contains comprehensive rules for the protection of EU financial
interests, including powers which the Commission, European Court of Auditors, OLAF and
EPPO exercise to that end, as well as rules on enforcement of Commission decisions on
recovery and judgments of the Court of Justice of the European Union on the territory of the
Faroe Islands. It also establishes institutional structures, i.e. a Joint Committee tasked with
_inter alia_ monitoring of the implementation of the Agreement and examining how to improve
and develop the cooperation under the Agreement.

The ‘umbrella agreement’ is meant to create a lasting legal framework for cooperation
between the Union and the Faroe Islands in relation to EU programmes. It is expected to
remain in force for several Multi-annual Financial Frameworks of the EU, similarly to the
Agreement on the European Economic Area, the EU-UK Trade and Cooperation Agreement
or the framework agreements with Enlargement and European Neighbourhood Partnership
countries on the general principles for participation of these countries in EU programmes.
Eventual Protocols on association of the Faroe Islands to each specific Union programme
could be added to this ‘umbrella agreement’ in the future, if such Programmes are open to
Faroese participation under EU basic acts establishing each relevant Programme, if this is the
political wish of both Parties, and following the required internal procedures. The duration of
the Protocols will be limited in time to the implementation of any particular Union

programme.

It is proposed that the Protocols will be adopted via decisions of the Joint Committee, which
this agreement will establish. All essential elements pertaining to cooperation between the EU
and the Faroe Islands in EU programmes are comprehensively regulated in the ‘umbrella
agreement’. Article 3(4) of the Agreement specifically restricts the content of the future
Protocols to: identifying the relevant Union Programme, activity or part thereof; setting the
duration of the association; regulating matters which are programme-specific and not
otherwise regulated in the ‘umbrella agreement”; and – in specific cases where the Union
programme is implemented through a financial instrument or a budgetary guarantee - laying
down the amount of the Faroe Islands’ contribution to such a Union programme.

### EN 2 EN

The first such Protocol on Horizon Europe association exceptionally will not be adopted by
the Joint Committee but was negotiated in parallel to the ‘umbrella agreement’ as its integral
part, and is expected to be concluded and enter into force together with the ‘umbrella
agreement’. This way of proceeding was authorised by the Council in the negotiating
directives. It was necessary to achieve an association of the Faroe Islands to the Horizon
Europe Programme from the start of the Programme and to ensure an uninterrupted
cooperation between the EU and Faroese research communities. To that end, provisional
application coupled with a retroactive application from 1 January 2021 of the entire
Agreement (i.e. ‘the umbrella agreement’ including its Horizon Europe Protocol) is now
being proposed.

Regarding the programme-specific terms and conditions providing for the association of the
Faroe Islands to the Horizon Europe, they provide for association to all parts of the
Programme, except for the specific programme on defence research established by Regulation
(EU) 2021/697 [2] . This will ensure the continuity of the previous full association to Horizon
2020, and its predecessor FP7. This participation has been assessed as beneficial to both
parties, with a particular value-added in thematic areas such as environment, health and food,
as well as ocean research.

The Faroe Islands have been a net contributor to the two predecessor Framework Programmes
by a significant margin. The proposed new agreement sets out fair and balanced conditions
concerning the financial contribution of the Faroe Islands to the Horizon Europe. The
‘umbrella agreement’ provides in its Article 6(6) for the possibility of an application of a coefficient and regulates respectively in Article 7 and Article 8 the adjustment and the

– –
correction mechanisms in relation to Programmes where as is the case of Horizon Europe
these mechanisms are applicable. The Horizon Europe Protocol in its Annex I further regulate
the payment schedule, the level of the applicable co-efficient to the Faroese financial
contribution and the technical details for the functioning of the correction mechanism.

The Horizon Europe Protocol builds on the Horizon 2020 and FP7 experience and, as in the
previous association agreement, includes a reciprocity clause, ensuring that researchers and
legal entities established in the Union have as far as possible access to participate to the
Faroese research and innovation programmes that are equivalent to the Horizon Europe, in
accordance with the conditions laid down in the domestic legislation of the Faroe Islands.
Annex II to the Protocol contains a list of Faroese programmes open to participation of EU
based research entities.

The draft Agreement attached to this proposal for a Council decision is in line with the
negotiating directives issued by the Council.

**2.** **LEGAL** **ELEMENTS OF THE PROPOSAL**

The proposal for a Council decision is based on Article 186 and Article 218(5) of the Treaty
on the Functioning of the European Union.

2 Regulation (EU) 2021/697 of the European Parliament and of the Council of 29 April 2021 establishing
the European Defence Fund and repealing Regulation (EU) 2018/1092 (OJ L 170, 12.5.2021, p.149.).

### EN 3 EN

**3.** **BUDGETARY** **IMPLICATIONS**

The Legislative Financial Statement presented with this Decision sets out the indicative
budgetary implications.

In the light of the above, the Commission proposes that the Council

     - decide on the signature and provisional application of the Agreement on behalf of the Union;

    - authorise the negotiator of the Agreement to sign, on behalf of the Union, the Agreement
between the European Union and the Government of the Faroe Islands on the participation of
the Faroe Islands in Union programmes and submit the notification required under Article
15(2) of the Agreement informing that the Union completed required internal procedures
necessary for the provisional application of the said Agreement.

### EN 4 EN

2022/0044 (NLE)

Proposal for a

**COUNCIL DECISION**

**on the signing, on behalf of the Union, and on provisional application of the Agreement**
**between the European Union, of the one part, and the Government of the Faroe Islands,**

**of the other part, on the participation of the Faroe Islands in Union programmes**

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the Functioning of the European Union, and in particular
Article 186 in conjunction with Article 218(5) thereof,

Having regard to the proposal from the European Commission,

Whereas:

–
(1) The Union programme Horizon Europe the Framework Programme for Research
and Innovation (2021-2027) was established by the Regulation (EU) 2021/695 [3]
(hereinafter referred to as ‘the Horizon Europe Programme’).

(2) Pursuant to Article 16(1)(d) of Regulation (EU) 2021/695, the Horizon Europe
Programme is open to the association of third countries and territories which fulfil
jointly the criteria specified therein.

(3) Pursuant to Article 16(2) of Regulation (EU) 2021/695, the association of such
countries and territories to the Horizon Europe Programme requires an agreement
covering the participation of such a country or territory to any Union programme,
provided that the agreement ensures a fair balance as regards the contributions and
benefits of the third country participating in the Union programmes, lays down the
conditions of participation in the Union programmes, including the calculation of
financial contributions to individual programmes, and their administrative costs, does
not confer on the third country any decision-making power in respect of the Union
programme, guarantees the rights of the Union to ensure sound financial management
and to protect the Union's financial interests.

(4) By letter of 14 May 2020 the Faroes Islands expressed their formal interest to become
associated to the Horizon Europe Programme.

(5) On 13 July 2021 the Council authorised the opening of negotiations on behalf of the
European Union for the conclusion of an Agreement between the European Union, of
the one part, and the Faroe Islands, of the other part, on the general principles for the
participation of the Faroe Islands in Union programmes and the association of the

–
Faroe Islands to Horizon Europe the Framework Programme for Research and
Innovation (2021-2027).

3 Regulation (EU) 2021/695 of the European Parliament and of the Council of 28 April 2021 establishing

–
Horizon Europe the Framework Programme for Research and Innovation, laying down its rules for
participation and dissemination, and repealing Regulations (EU) No 1290/2013 and (EU) No 1291/2013
(OJ L 170, 12.5.2021, p.1.).

### EN 5 EN

(6) The negotiations have been successfully completed and the Agreement was initialled
on 8 October 2021.

(7) The Agreement sets out the terms and conditions of the association of the Faroe
Islands to the Union programmes. Pursuant to Article 3 of the Agreement the
association to the Union programmes is subject to the adoption of Protocols.

(8) In line with the Council authorisation, the Protocol on the association of the Faroe

–
Islands to Horizon Europe the Framework Programme for Research and Innovation
(2021-2027) - was negotiated in parallel to the Agreement and forms an integral part
thereof.

(9) The Agreement should be signed on behalf of the Union, subject to its conclusion at a
later date.

(10) In view of ensuring uninterrupted cooperation between the Union and the Faroe
Islands in the field of research, technological development and innovation and
allowing for the participation of the Faroes Islands in the Horizon Europe Programme
from its start, the Agreement should be applied provisionally, pending the completion
of the procedures necessary for its entry into force,

HAS ADOPTED THIS DECISION:

_Article 1_

The signing on behalf of the Union of the Agreement between the European Union, of the one
part, and the Government of the Faroe Islands, of the other part, on the participation of the
Faroe Islands in Union programmes is hereby authorised subject to the conclusion of the said
Agreement.

The text of the Agreement is attached to this Decision.

_Article 2_

The President of the Council shall designate the person(s) empowered to sign the Agreement.

_Article 3_

Pending the completion of the procedures necessary for its entry into force, the Agreement
shall be applied on a provisional basis in accordance with its Article 15(2) and subject to the
notifications provided for therein.

_Article 4_

This Decision shall enter into force on [the date of its adoption].

Done at Brussels,

_For the Council_

_The President_

### EN 6 EN

**LEGISLATIVE FINANCIAL STATEMENT**

**1.** **NAME** **OF** **THE** **PROPOSAL:**

**Proposal for a Council Decision on the signing, on behalf of the Union, and provisional**
**application of the Agreement between the European Union, of the one part, and the**
**Government of the Faroe Islands, of the other part, on the participation of the Faroe**
**Islands in Union programmes**

**2.** **BUDGET** **LINES:**

— —
Revenue line (Chapter/Article/Item): 6 0 1 0 Horizon Europe Assigned

revenue

Amount budgeted for the year concerned:

_(only in case of assigned revenues):_

The revenues will be assigned to the following expenditure line
(Chapter/Article/Item):

Whole article 01.0101 (01.010101, 01.010102, 01.010103, 01.010111, 01.010112,
01.010113, 01.010171, 01.010172, 01.010173, 01.010174, 01.010176)

Whole chapter 01.02 (01.020101, 01.020102, 01.020103, 01.020210, 01.020211,
01.020212, 01.020220, 01.020230, 01.020231, 01.020240, 01.020241, 01.020242,
01.020243, 01.020250, 01.020251, 01.020252, 01.020253, 01.020254, 01.020260,
01.020261, 01.020270, 01.020301, 01.020302, 01.020303, 01.020401, 01.020402)

Budget line 20.XX Administrative expenditure of the European Commission

**3.** **FINANCIAL** **IMPACT**

 Proposal has no financial implications

 Proposal has no financial impact on expenditure but has a financial impact on

revenue

 Proposal has a financial impact on assigned revenue

### EN 7 EN

The effect is as follows:

_(EUR million to one decimal place)_

|Revenue line|Impact on<br>revenue45|XX months period starting<br>dd/mm/yyyy (if applicable)|Year N|
|---|---|---|---|
|6 0 1 0|_7,8_|84 month starting 01/01/2021|1,1|

|Situation following action|Col2|Col3|Col4|Col5|Col6|Col7|Col8|
|---|---|---|---|---|---|---|---|
|Revenue line|2021|2022|2023|2024|2025|2026|2027|
|6 0 1 0|1,1|1,1|1,2|1,1|1,1|1,1|1,2|

|(Only in case of assigned revenues, under the condition that the budget line is already known):|Col2|Col3|Col4|Col5|Col6|Col7|Col8|
|---|---|---|---|---|---|---|---|
|Situation following action|Situation following action|Situation following action|Situation following action|Situation following action|Situation following action|Situation following action|Situation following action|
|Expenditure<br>line6|2021|2022|2023|2024|2025|2026|2027|
|Article 01.0101 and<br>chapter 01.02|1,1|1,1|1,1|1,0|1,1|1,1|1,1|
|20.XX|0,005|0,011|0,017|0,021|0,026|0,032|0,046|

**4.** **ANTI-FRAUD** **MEASURES**

Article 325 of the Treaty on the functioning of the European Union (TFEU) requires
the Commission to counter fraud and any illegal activities affecting the financial
interests of the Union. Preventing and detecting fraud is therefore a general
obligation for all Commission Services in the framework of their daily activities
involving the use of resources. Fraud involving EU funds has a particularly negative
impact on the reputation of the Commission and the implementation of EU policies

4 The amounts per year need to be an estimation based on the formula or method defined under section 5.
For the starting year, the yearly amount is normally paid without a reduction or prorata.
5 In the case of traditional own resources (customs duties, sugar levies), the amounts indicated must be
net amounts, i.e. gross amounts after deduction of 20 % for collection costs.
6 To be used only if necessary.

### EN 8 EN

The current Commission Anti-Fraud Strategy (COM(2019)196) was adopted on 29
April 2019, to replace the 2011 Strategy. It is a policy document setting out the
Commission’s priorities in the fight against fraud in view of the 2021-2027
multiannual financial framework. The 2019 CAFS’ main objectives are to 1) “further
improve the understanding of fraud patterns, fraudsters’ profiles and systemic
vulnerabilities relating to fraud affecting the EU budget” (data collection and
analysis), and 2) “optimise coordination, cooperation and workflows for the fight
against fraud, in particular among Commission services and executive agencies”
(coordination, cooperation and processes). The strategy is accompanied by a 63-point
action plan, the full implementation of which is, in principle, due for end 2021.

The guiding principles and target standards of the 2019 CAFS are:

          - zero tolerance for fraud;

          - fight against fraud as an integral part of internal control;

          - cost-effectiveness of controls;

          - professional integrity and competence of EU staff;

          - transparency on how EU funds are used;

          - fraud prevention, notably fraud-proofing of spending programmes;

          - effective investigation capacity and timely exchange of information;

          - swift correction (including recovery of defrauded funds and
judicial/administrative sanctions);

          - good cooperation between internal and external players, in particular between
the EU and national authorities responsible, and among the departments of all EU
institutions and bodies concerned;

          - effective internal and external communication on the fight against fraud.

The Articles 9 – 12 of the Agreement contain detailed provisions concerning antifraud measures. These meausures are to be applicable horizontally to ensure
protection of EU financial interests across EU Programmes or activities covered in
the future Protocols potentially to be adopted by the Joint Committee under the
Agreement to associate the Faroe Islands to a number of EU programmes or
activities. They are applicable also to Faroese association to the Horizon Europe
Programme covered by the Protocol on the association of the Faroe Islands to

–
Horizon Europe the Framework Programme for Research and Innovation (20212027) which was negotiated in parallel to the Agreement and forms and integral part
thereof.

–
Notably the above-mentioned provisions (Articles 9 12 of the Agreement) provide
for the necessary details, processes and allows for umhumpered execution of tasks by
the bodies safeguearding the financial interests of the EU (the Commission,
including OLAF, the European Court of Auditors and the EPPO). Througout the
implementation of the Programmes or activities covered by the Protocols to the
Agreement, the principle remains the same: the financial interests of the EU are to be
protected by means of proportionate measures, including measures relating to the
prevention, detection, correction and investigation of irreguralities, including fraud,
to the recovery of funds lost, wrongly paid or icorrectly used and, where appropriate,
to the imposition of the administrative penalties.

### EN 9 EN

In accordance with the Financial Regulation, any person or entity receiving Union
funds is to fully cooperate in the protection of the financial interests of the Union,
grant the necessary rights and access to the Commission, OLAF, the Court of
Auditors and ensure that any third parties involved in the implementation of Union
funds grant equivalent rights. As expressly provided in Article 9(4) of the
Agreement, reviews and audits may be carried out also after the suspension of
application of a Protocol, cessation of application or termination of the Agreement.

The Agreement ensures the possibility for the European Anti-Fraud Office (OLAF)
to carry out administrative investigations, including on-the-spot checks and
inspections on the territory of the Faroe Islands, with a view to establishing whether
there has been fraud, corruption or any other illegal activity affecting the financial
interests of the Union.

The Agreement obliges the authorities of the Faroe Islands to cooperate with the
European Public Prosecutor’s Office to allow it to fulfil its duty to investigate,
prosecute and bring to judgment the perpetrators of, and accomplices to, criminal
offences affecting the financial interests of the European Union as provided for in
Directive (EU) 2017/1371 of the European Parliament and of the Council of 5 July
2017 on the fight against fraud to the Union's financial interests by means of criminal
law.

Furthermore the Agreement provides for effective mechanism to ensure enforcement
on territory of the Faroe Islands of Commission decisions and judgments and orders
of Court of Justice in relation to claims stemming from the Programme.

**5.** **OTHER** **REMARKS**

The method for calculation of the Faroe Islands financial contribution across EU
programmes is defined in Article 6, 7 and 8 of the Agreement. In relation to the
financial contribution of the Faroe Islands to the Horizon Europe Programme, further
technical details for application of the adjustment mechanism and automatic
correction mechanism are laid down in Article 5 of the Protocol on the association of

–
the Faroe Islands to Horizon Europe the Framework Programme for Research and
Innovation (2021-2027), and Annex I thereto. The financial contribution model
applicable under the Horizon Europe Programme is specific amongst all other EU
Programmes, providing for application of an automatic correction mechanism (in line
with Article 16 of the Horizon Europe Regulation).

### EN 10 EN