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# 52014DC0123

**ANNUAL REVIEW of Member States' Annual Activity Reports on Export Credits in accordance with point 3 of Annex I to Regulation (EU) No 1233/2011 /\* COM/2014/0123 final \*/**

  

ANNUAL REVIEW

of Member States' Annual Activity Reports
on Export Credits in accordance with point 3 of Annex I to Regulation (EU) No
1233/2011

1.
Introduction:

Regulation (EU)
No 1233/2011 of the European Parliament and of the Council of 16 November 2011
on the application of certain guidelines in the field of officially supported
export credits and repealing Council Decisions 2001/76 EC and 2001/77/EC[1] foresees in Annex I
that Member States shall make available to the Commission an Annual Activity Report
in order to step up transparency at Union level. The Commission shall produce
an annual review for the European Parliament based on this information.

The present
annual review covers the calendar year 2012. As regards the scope of this
exercise, it concerns export credit activities in the sense of Regulation (EU)
No 1233/2011, i.e. "medium and long term" transactions with a
repayment period of 2 years or more. This review does neither cover short term
export credit transactions[2]
nor activities carried out by certain Export Credit Agencies (ECAs) outside the
field of export credits (such as insurance of investments). It also has to be
noted that in the case of some Member States, the function of Export Credit
Agency is performed by an insurance company operating under a public mandate.
In such cases, the managing of the public export credit program is strictly
separated from the private sector activities (the latter are of course not
subject to the present review).

2. Annual
Activity Reports received for the calendar year 2012:

Annual Activity
Reports have been received from the following Member States: Austria, Belgium, Bulgaria, Czech Republic, Denmark, Finland, France, Germany, Hungary, Italy, Luxemburg, Netherlands, Poland, Portugal, Romania, Slovenia, Slovak Republic, Spain, Sweden and the United Kingdom.

Cyprus, Estonia, Greece, Ireland, Latvia, Lithuania and Malta did not have active export credit programs in the sense of Regulation 1233/2011
during the reporting year.

Croatia joined the European Union on 1 July 2013.

Like in the
previous reporting exercise, Member States have used a similar template for
their reporting ("checklist" format). While some Member States have
chosen to link their Annual Activity Report with national level annual reports
published for the same period, others have opted to describe extensively their
activities directly in the reporting template.

3.
Analysis of the Annual Activity Reports:

a) General
and financial information:

The applicable
regulatory framework (Regulation (EU) No 1233/2011) focuses on rules for export
credit transactions and programs, but leaves it entirely to the individual Member State to decide whether to run an export credit program or not, and in the
affirmative case how to organise its respective Export Credit Agency (“ECA”).

In some Member
States, the ECA is a government department or agency. In others, an insurance
company performs this function under a public mandate and under government
supervision. It is not uncommon for Member States offering different categories
of export credit support to have more than one ECA (e.g. one agency providing
official support in the form of guarantee or insurance-style "pure
cover" and a second one to provide interest rate style support).
Compared to the previous reporting year the picture has not fundamentally
changed: In 2012, 20 EU Member States were running export credit programs in
the sense of Regulation (EU) No 1233/2011, these programs being managed by a
total of 27 different agencies and government departments. In the case of the
Italian ECA SACE, the ownership has changed from the Ministry of Economy and
Finance to the Cassa Depositi e Prestiti (CDP). CDP is now also the majority
shareholder of SIMEST, Italy’s other ECA. Both SACE and SIMEST continue their
export credit mandate under the new ownership structure.

As already
mentioned in the last annual review, the most common category of export credit
support offered by European ECAs traditionally used to be "pure
cover" (i.e. the export transaction in question is actually financed by a
credit from a commercial bank, for which the ECA provides a guarantee or
insurance-type cover), although some Member States also have been offering
"official financing support" (e.g. interest rate support schemes). As
a result of the Global Financial Crisis of 2008-09 and the Eurozone crisis, it
has in recent years become more difficult to obtain sufficient liquidity from
commercial banks. This problem has been discussed a lot in the international
export credit community (e.g. at the OECD). Not all EU Member States are
affected in the same way, but many have developed new instruments during the
last years to mitigate such problems. During the reporting year 2012, Spain has – in addition to its traditional pure cover and interest rate support schemes –
started to operate a direct financing program[3].
The United Kingdom has been developing a direct lending scheme during the
reporting period, which became operational in September 2013. Another solution
can be provided by instruments like the “Enhanced Guarantee” (Garantie
Rehaussée) introduced by France (this instrument specifically covers
institutions refinancing a bank providing an export credit against a default of
payment). Belgium has created the “Export Funding Guarantee” (which also allows
the issuing of guarantees to the benefit of third party investors who refinance
export credits).

Detailed
information may be found in Sections II and IV of the reporting template used
for the Annual Activity Reports, as well as in the general annual reports to
which several Member States explicitly refer.

The Annual
Activity Reports provide relevant financial information on the export credit
programs in 2012. It has however to be stressed that according to Regulation
(EU) No 1233/2011, this reporting is done in accordance with the respective
Member State's national legislative framework. This results in some differences
in presentation. That being said, the Commission has no specific observations
on the financial aspects of the Annual Activity Reports[4].

The Annual
Activity Reports of 4 Member States (Czech Republic, Finland, Slovak Republic, and United Kingdom) mention contingent liabilities in reference to Paragraph
1/last phrase of Annex 1 of Regulation (EU) No 1233/2011[5].

b)
Treatment of "environmental risks, which can carry other relevant
risks":

Paragraph 2 of
Annex I of Regulation (EU) No 1233/2011 states: "In the Annual Activity
Report, Member States shall describe how environmental risks, which can carry
other relevant risks, are taken into account in the officially supported export
credit activities of their ECAs."

All Member
States explicitly refer to this provision in
their Annual Activity Reports. All of them declare that they examine
applications for export credit cover also from an environmental perspective.
When referring to Paragraph 2 of Annex I (which explicitly only mentions
environmental risks), some Member States[6]explicitly
refer to social impacts as well, a few also to human rights[7], fundamental labour standards[8], anti-bribery[9] and general impact on
development[10]
. Finland has recently updated its policy concerning project reviews and
provides a detailed explanation under this section of the Annual Activity
Report.

Environmental
evaluation processes typically lead to a decision to either decline or to
actually provide export credit support[11].
Many Member States refer to the procedures contained in the OECD Recommendation
on Common Approaches for Officially Supported Export Credits and Environmental
and Social Due Diligence (the “Common Approaches”)[12].

c)
Compliance of ECAs with Union objectives and obligations:

Paragraph 3 of
Annex I asks the Commission to evaluate in its annual review the
"compliance of ECAs with Union objectives and obligations".

i) Compliance
with obligations under international law and EU competition law:

There have been
no disputes at WTO level involving European export credit programs.

No complaints
concerning potential infringements of EU law involving export credit agencies
were received by the European Commission in 2012.

ii)
Compliance with Union objectives:

The Treaty on
the European Union (TEU) enumerates the general objectives of the Union in its
Article 3 and the principles and objectives of the Union's External Action in
Article 21.

As regards the
EU's common commercial policy, reference to the principles and objectives of
the Union's external action is made in Article 206 and in the first paragraph
of Article 207 of the Treaty on the Functioning of the European Union, which
read:

Article 206:

By establishing a customs union in accordance with Articles 28 to
32, the Union shall contribute, in the common interest, to the harmonious
development of world trade, the progressive abolition of restrictions on
international trade and on foreign direct investment, and the lowering of
customs and other barriers.

Article 207:

The common commercial policy shall be based on uniform
principles, particularly with regard to changes in tariff rates, the conclusion
of tariff and trade agreements relating to trade in goods and services, and the
commercial aspects of intellectual property, foreign direct investment, the
achievement of uniformity in measures of liberalisation, export policy and
measures to protect trade such as those to be taken in the event of dumping or
subsidies. The common commercial policy shall be conducted in the context of
the principles and objectives of the Union’s external action.

Neither of these
Articles specifically mentions export credits. These provisions are general in
nature and the extent to which they can be translated in rules obligations
directly relevant for the activity of government agencies specialised in rather
technical fields like export credits depends on the specific provisions.

In the Commission's
view, these Treaty provisions can however serve as a background against which
the policies applied to export credit transactions may be evaluated.

The information
reflected in the Annual Activity Reports shows that Member States in general
have policies on export credits and environment[13], anti-bribery and
sustainable lending practices concerning low income countries. The 3 relevant
OECD Recommendations[14]
(OECD Recommendation on Bribery and Officially Supported Export Credits, the
Recommendation on Common Approaches for Officially Supported Export Credits and
Environmental and Social Due Diligence, the Principles and Guidelines to
Promote Sustainable Lending Practices in the provision of Official Export
Credits to Low-Income Countries) play an important – but not exclusive – role.
Even Member States which are not OECD Members apply them or intend in principle
to do so. Many Member States state in their reports that for example the
"Common Approaches" are applied beyond the scope defined by the OECD,
or that their respective national legislation or practices are in substance
more ambitious than the, OECD recommendations[15].
In several cases, the ECAs in question have developed relevant instruments
themselves (e.g. a CSR policy or an ethics code)[16].

Human rights
play an important role in the export credit policies of many Member States: The
new focus on human rights expressed in the new version of the “Common
Approaches” adopted by the OECD in 2012 is generally appreciated. Several
Member States report that they actively support the OECD’s work on practical
implementation of this new human rights dimension of the Common Approaches[17] or stress that they
apply human rights considerations irrespective of the scope of the Common
Approaches[18].

Member States'
policies linked to export credit activities do not limit themselves to the four
policy areas already mentioned, but also include transparency (openness and
confidentiality policy), dialogue with civil society, contribution to
sustainable development, corporate social responsibility (either in the form of
a CSR policy for the ECA itself or by promoting efforts of exporters in this
field), and the promotion of respect of the OECD Guidelines for multinational
enterprises and fundamental labour standards as expressed in core ILO
Instruments,

In summary, the
Commission takes note that all Member States have developed policies to
accompany the management of their export credit programs that are in line with
the EU’s objectives. Policy recommendations developed in the OECD - the only
international organisation to have developed specialised rules on export
credits – are in common use, but relevant activities by Member States clearly
go beyond them.

For example, Finland’s Annual Activity Report mentions among its environmental principles “support to
international developments towards a common set of rules for ECAs in
environmental issues in order to provide equal competitive opportunities in
this respect for exporters from different countries”. In the Commission' view,
this position has - beyond the environmental field - a lot of merit for itself:
International competition between exporters should be on the quality and the
price of the relevant products or services, not on the conditions of the export
credit financing package nor on the substance of the policies applied to export
credits.

Generally, it
would also be advisable to use the work of international monitoring
institutions (including the UN) as guidance in further policy developing.

It is difficult
to define a precise benchmark for measuring "compliance" in EU law.
That being said, the Commission sees a clear general willingness on the side of
the Member States to apply policies to their export credit programs, whose
objectives are in line with the general language of Articles 3 and 21 TEU. In
the European Commission's view, this concerns notably the following objectives:
"establishing of an internal market" (Article 3(3) – as
mentioned, all export credit programs have to be compatible with relevant
legislation), and - at an international level – to uphold and promote "free
and fair trade" (Article 3(5), "to consolidate and support
human rights" (Article 21(2)(b), "to encourage the integration
of all countries into the world economy" (Article 21(2)(e) and "to
help develop international measures to preserve and improve the quality of the
environment and sustainable management of global natural resources, in order to
ensure sustainable development" (Article 21(2)(f).

The Commission
has taken note of the Resolution adopted in July 2013 by the European
Parliament on the first reporting exercise under Regulation (EU) No 1233/2011.
It would obviously have been difficult to apply the substance of this
Resolution retroactively to the reporting exercise 2012 (the deadline for
submission of Annual Activity Reports by Member States was end of July 2013).
The Commission has since then brought this Resolution to the attention of
Member States for future reporting exercises.

[1]               OJ L 326, 8.12.2011, p. 45.

[2]               To such transactions, the Communication of the
Commission pursuant to Article 93(1) of the EC Treaty applying Articles 92 and
93 of the Treaty to short-term export-credit insurance, applies.

[3]               “Direct Lending” is an export credit category in
which the financing, is directly provided by the ECA, not by a commercial bank.

[4]               According to Annex I, paragraph 1, the present
reporting process is without prejudice to the prerogatives of the Member
States' institutions exercising the supervision of the national export credit
programs.

[5]               Their statements in reference to the above-mentioned
sentence in the Regulation ("Where contingent liabilities might arise from
officially supported export credit activities, those activities shall be
reported") are as follows: Czech Republic: "Bank Guarantees issued
CZK 2,168 mil. (approx.. EUR 86.2 mil) reported under total off-balance
commitments" Finland: "A. Export Credit Guarantees – State of Finland covers the possible deficit. B. Export Credit Financing – State of Finland covers the deficit and guarantees the funding. C. Interest Equalisation Scheme –
responsibility of the State of Finland". Slovak Republic: "Bank
guarantees issued in EUR million reported under total off-balance commitments
(01.01.2012: EUR 90.39 mil. 31.12.2012: EUR 47.69 mil.", United
Kingdom: (Refers to its Annual Report and Accounts, which contains on
p.140 a full section with information on contingent liabilities for the business
years ending 31 March 2012 and 31 March 2013) and indicates the total
for 31 March 2013 as "£ 17.60 bn – before reinsurance and £12.20 bn –
net of reinsurance".

[6]               e.g. Belgium, Czech Republic, Denmark, France,
Germany, Netherlands, Romania, Slovak Republic, Slovenia and Sweden

[7]               Sweden, Finland.

[8]               Finland, Netherlands.

[9]               e.g. Denmark, Finland, Netherlands and Sweden.

[10]             Belgium, Finland and Germany.

[11]             Support may be connected with certain conditions,
usually aiming at the enforcement of mitigation measures and compliance with
standards. Such conditional support requires that the overall assessment of the
project's impact is considered as "acceptable". Explicit reference to
conditional cover is made in the reports of Belgium, Denmark, Hungary, Italy, Luxemburg, Poland, Portugal, Romania, Slovenia and Spain. The concept is also
reflected in the OECD Recommendation on Common Approaches for Officially
Supported Export Credits and Environmental and Social Due Diligence.

[12]             e.g. Italy, Netherlands, Luxemburg, Poland, Portugal, Slovak Republic, Slovenia, Spain and United Kingdom.

[13]             On environmental policies, see already Section 3b)
above.

[14]             According to the OECD "Recommendations are not legally binding, but practice accords them great moral force
as representing the political will of Member countries and there is an
expectation that Member countries will do their utmost to fully implement a
Recommendation. Thus, Member countries which do not intend to do implement a
Recommendation usually abstain when it is adopted."

[15]             e.g. Austria, Belgium, Bulgaria, Denmark, Finland, France,
Germany. Netherlands, and Sweden.

[16]             e.g. Denmark, Italy, Luxemburg,Slovenia and Sweden.

[17]             e,g Italy.

[18]             For example Austria, Belgium, Denmark, Germany, Italy, Netherlands and Sweden. Sweden even applies beyond the general screening of
transactions a system of further assessments for transactions with inherent
labour and human rights risks/transactions in high risk countries/sectors.

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