CELEX: 51993PC0399
Language: en
Date: 1993-09-01
Title: Proposal for a COUNCIL DECISION allowing for separate liability of the Czech Republic and the Slovak Republic with regard to the loan facility granted to Czechoslovakia pursuant to Council Decision 91/106/EEC

COMMISSION OF THE EUROPEAN COMMUNITIES
                                             C0MC93) 399 final
                                             Brussels, 1  September 1993
                              Proposal for a
                             COUNCIL DECISION
    allowing for separate liability of the Czech Republic and the Slovak
   Republic with regard to the loan facility granted to Czechoslovakia
                  pursuant to Council Decision 91/106/EEC
                       (presented by the Commission)
 ---pagebreak---                          EXPLANATORY MEMORANDUM
In February of 1991, the EC Council decided to grant a loan of ECU 375
million to the Czech and Slovak Federal Republic (CSFR). The loan was
disbursed in two tranches, the first one of ECU 185 million in August
1991 and the second one of ECU 190 million in February 1992. The aim of
the loan was to strengthen the balance of payments and reserves
situation in the former CSFR, thus facilitating the introduction of
currency convertibility.
In view of the dissolution of the federation on January 1, 1993, the
Commission, at the end of last year, took the initiative to propose to
the authorities of the CSFR and the two successor republics that the
loan be continued on the understanding that the two republics would be
jointly and severally responsible for the full amount as regards the
Community as lender.
In response to the Commission initiative, the authorities of the Czech
and Slovak Republics proposed a formal division of the EC loan on the
basis of a 2:1 ratio, in accordance with the law regarding the division
of property of the former CSFR adopted on November 13, 1992 by the
Federal Assembly of the CSFR. This law states that the commitments
 arising from the loans accepted by the former CSFR should be divided
between the two successor states in the ratio corresponding to the
population of the individual republics, that is, a ratio of 2 to 1.
 In justifying their position, the new republics emphasized the fact
 that individual responsibility is one of the most important aspects of
 sovereignty, and that economic autonomy was a crucial factor in the
 separation of the Czech and Slovak Republics. They also argued that
 some other important official creditors had already accepted separate
 liability of the successor states.
 The Commission, having considered the views expressed on this issue
 within the G-24, and after proper consultation of the Monetary
 Committee, has decided to accede to the request made by the authorities
 of the successor republics and is proposing that the Community agrees
 to divide the 1991 EC loan according to the 2:1 ratio, with each
 successor republic being individually liable for only its allocated
 part of the loan. Accordingly, the Czech Republic and the Slovak
 Republic will be responsible for, respectively, two thirds and one
 third of the total payments of principal, interest and fees associated
 with the EC loan.
 During the interim period between the date of the effective dissolution
 of the CSFR, that is, December 31, 1992 and the date on which the
 reallocation of the 1991 loan comes into effect the Czech and the
 Slovak Republics will remain jointly responsible for all payments
 falling due, persuant to Declarations made by each to the Community in
 December 1992 on the assumption of liabilities under all agreements
 between the Community and former CSFR. It must be noted in this respect
 that since the partition of the Federation, the authorities of both
 republics are indeed discharging fully and timely their obligations
 fallen due. Payments of ECU 10,5 million have been made to this end on
 the 18th of March and ECU 9,6 million on the 15th of June.
 ---pagebreak--- It is proposed to the Council to authorise the Commission to agree with
the Czech and the Slovak authorities on the amendment or novation of
the original Loan Agreement necessary to make effective the separate
liability of the Czech and the Slovak Republics, whilst transposing, as
appropriate, the original terms and conditions of the Community loan
operation. The separate liability of the two Republics would also have
to be reflected in a new drafting of the remarks accompanying the
corresponding Budget token entry.
 ---pagebreak---                              Proposal for a
                            COUNCIL DECISION
allowing for separate liability of the Czech Republic and the Slovak
Republic with regard to the loan facility granted to Czechoslovakia
pursuant to Council Decision 91/106/EEC 1 ).
THE COUNCIL OF THE EUROPEAN COMMUNITIES,
Having regard to the Treaty establishing the          European  Economic
Community, and in particular Article 235 thereof,
Having regard to the proposal from the Commission2)            submitted
following consultation of the Monetary Committee,
Having regard to the opinion of the European Parliament 3 ),
Whereas pursuant to Council Decision 91/106/EEC the Community has
granted to the Czech and Slovak Federal Republic (CSFR) a medium-term
 loan of ECU 375 million in principal, with a view to ensuring a
 sustainable balance-of-payments situation, strengthening its reserves
and facilitating the introduction of currency convertibility; whereas
the loan was fully disbursed by the Commission on two instalments of
respectively ECU 185 million in August 1991 and ECU 190 million in
February 1992;
Whereas in accordance with the constitutional act on the dissolution of
the CSFR adopted by the Federal Assembly of the CSFR on 25 November
 1992, the CSFR ceased to exist as of 31 December 1992 and its successor
 states are the Czech Republic and the Slovak Republic;
Whereas the constitutional act on the division of property of the CSFR
 between the Czech Republic and the Slovak Republic adopted by the
 Federal Assembly on 13 November 1992 stipulates that the loans accepted
 by the CSFR will be divided between the Czech Republic and the Slovak
 Republic in the ratio of two to one, corresponding to the relative
 proportion of their populations; and whereas the Czech and the Slovak
 authorities have requested the Community to agree accordingly on the
 division of the liability of the CSFR arising from the Community loan
 operation of ECU 375 million granted pursuant to Council Decision
 91/106/EEC;
 Whereas the Czech Republic and the Slovak Republic are jointly
 continuing to discharge fully their debt servicing obligations stemming
 from the Community loan operation of ECU 375 million as these
 obligations fall due; and whereas these Republics have agreed to take
 over respectively two thirds and one third of the payment obligations
 of principal, interest and fees relating to this operation;
 1)  OJ N° L56, 2.3.1991, p. 24
 2)
 3)
 ---pagebreak--- Whereas the Commission should be authorised to take the appropriate
action to ensure that the liabilities arising under the loan granted
purusant to Decision 91/106/EEC should be divided between the Czech and
the Slovak Republics in conformity with the act of the Federal Assembly
of 13 November 1992;
Whereas the Treaty does not provide, for the adoption of this Decision,
powers other than those of Article 235,
HAS DECIDED AS FOLLOWS :
                              Sole Article
1. The Czech Republic and the Slovak Republic may assume separate
    liability for respectively two thirds and one third of all the
    payments of principal, interest and fees associated with the
    service of the Community medium-term loan of ECU 375 million
    granted to the Czech and Slovak Federal Republic (CSFR) pursuant to
    Council Decision 91/106/EEC of 25 February 1991.
2.  To this end, the Commission is       authorised to agree with the
    authorities of the Czech and         the Slovak Republics, after
    consultation of the Monetary        Committee, on the necessary
    adjustments to the original Loan   Agreement between the Community
    and the CSFR.
3. The terms and conditions stipulated in Decision 91/106/EEC shall
    apply mutatis mutandis to the arrangements to be entered into
    pursuant to paragraph 2 and the financial terms of the original
    Loan Agreement will be preserved.
4. All related costs that may be incurred by the Community in
    concluding and carrying out the arrangements provided for by this
    Decision shall be borne by the Czech Republic and the Slovak
    Republic as to two thirds and one third respectively.
Done at Brussels,                       For the Council
                                        The President
 ---pagebreak---                            FINANCIAL RECORD
1. Budget line concerned
   Article (BO-214) loan guarantee for aid to Czechoslovakia.
2. References (legal base)
   Article 235 of the Treaty
3. Classification of the Expenditure
   Obligatory
4. Description and Justification for the action
   a.   Description of the action
        Amendment to the remarks accompanying the existing token entry
        with a view to reflecting the separate liability of the Czech
        and the Slovak Republics with regard to the servicing of the
        Community loan of ECU 375 million granted to Czechoslovakia
        pursuant Council decision 91/106/EEC of 25 February 1991.
   b.   Justification for the action
            Czechoslovakia ceased to exist as of 31 December 1992.
            The authorities of the Czech and the Slovak Republics have
            requested the Community to agree on the division of the
            liability of the CSFR arising from the Community loan,
            according to a two to one ratio, consistent with their
            separation agreement.
5. Effect of the action on intervention credits
   The Czech Republic and the Slovak Republic will be held separately
    liable for respectively two thirds and one third of the payments of
   principal, interest and fees associated with the service of the
   Community loan.
 ---pagebreak---                                                                      ISSN 0254-1475
                                                              COM (93) 399 final
                                                                           11 01
                                Catalogue number : CB-CO-93-431-EN-C
                                                             ISBN 92-77-58731-8
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