CELEX: 52022PC0064
Language: en
Date: 2022-02-24
Title: 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

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
 ---pagebreak---                                     EXPLANATORY MEMORANDUM
   1.        CONTEXT OF THE PROPOSAL
   Article 16 (1)(d) of the Horizon Europe Regulation1 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
 ---pagebreak---    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
 ---pagebreak---    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) 2021/6972. 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 co-
   efficient 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
 ---pagebreak---    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
 ---pagebreak---                                                                   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
 ---pagebreak---    (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
 ---pagebreak---                            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
 ---pagebreak---              The effect is as follows:
                                                                                   (EUR million to one decimal place)
          Revenue line                      Impact on            XX months period starting            Year N
                                            revenue45            dd/mm/yyyy (if applicable)
          6010                                             7,8 84 month starting 01/01/2021                   1,1
                                                  Situation following action
      Revenue line             2021          2022         2023           2024       2025         2026        2027
   6010                         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):
                                                  Situation following action
      Expenditure              2021          2022         2023           2024       2025         2026        2027
           line6
   Article 01.0101 and          1,1           1,1          1,1            1,0        1,1          1,1         1,1
   chapter 01.02
   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
 ---pagebreak---    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 anti-
   fraud 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 (2021-
   2027) 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
 ---pagebreak---       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
 ---documentbreak---                              EUROPEAN
                             COMMISSION
                                                      Brussels, 24.2.2022
                                                      COM(2022) 64 final
                                                      ANNEX
                                            ANNEX
                                             to the
                                    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
 ---pagebreak---                                                      ANNEX
   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 European Union (hereinafter referred to as ‘the Union’),
   of the one part,
   and
   the Government of the Faroe Islands (hereinafter referred to as ‘the Faroe Islands’),
   of the other part,
   hereinafter referred to as ‘the Parties’,
   NOTING the wish of the Faroe Islands to become associated to a wider range of Union
   programmes and activities;
   CONSIDERING that the Faroe Islands concludes this agreement on behalf of the Kingdom of
   Denmark pursuant to the Act on the Conclusion of Agreements under International Law by
   the Government of the Faroe Islands;
   WISHING to establish a lasting framework for cooperation between the Parties with clear and
   precise terms and conditions for participation of the Faroe Islands in the Union programmes
   and activities as well as a mechanism facilitating the establishment of such participation in
   individual Union programmes or activities;
   NOTING in particular the wish of the Faroe Islands to further strengthen relations within its
   fields of competences with the Union, including but not limited to cooperation in research and
   innovation as well as education, training, youth, culture and sport;
   CONSIDERING the common goals, values and strong links of the Parties in the field of
   research and innovation, established in the past through the Association Agreements to the
   subsequent Framework Programmes for Research and Innovation1, and recognising the
   common desire of the Parties to further develop, strengthen, stimulate and extend their
   relations and cooperation therein;
   WHEREAS the European Union programme Horizon Europe - the Framework Programme
   for Research and Innovation - was established by Regulation (EU) 2021/695 of the European
   Parliament and of the Council2 (hereinafter referred to as ‘Horizon Europe Programme’);
   1
           Agreement between the European Union and the Government of the Faroes on scientific and
           technological cooperation (OJ L 245, 17.9.2010, p.2), Agreement for scientific and technological
           cooperation between the European Union and the Faroe Islands associating the Faroe Islands to Horizon
           2020 — the Framework Programme for Research and Innovation (2014-2020) (OJ L 35, 11.2.2015,
           p.3.).
   2
           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                                                        1                                                      EN
 ---pagebreak---    CONSIDERING the Union’s efforts to lead the response by joining forces with its
   international partners to address global challenges in line with the plan of action for people,
   planet and prosperity in the United Nations’ ‘Transforming our World: the 2030 Agenda for
   Sustainable Development’, and acknowledging that research and innovation are key drivers
   and essential tools for innovation-led sustainable growth, for economic competitiveness and
   attractiveness;
   RECOGNISING the general principles as set out in Regulation (EU) 2021/695;
   ACKNOWLEDGING the objectives of the renewed European Research Area to build a
   common scientific and technological area, create a single market for research and innovation,
   foster and facilitate the cooperation between organisations in the field of research and
   innovation, including universities, and the exchange of best practices and attractive research
   careers, facilitate cross-border and inter-sectoral mobility of researchers, foster free
   movement of scientific knowledge and innovation, promote the respect of academic freedom
   and freedom of scientific research, support science education and communication activities,
   and encourage competitiveness and attractiveness of participating economies, and that
   associated countries to the Horizon Europe Programme are key potential partners in this
   endeavour;
   EMPHASISING the role of the European Partnerships addressing some of Europe’s most
   pressing challenges through concerted research and innovation initiatives contributing
   significantly to those Union’s priorities in the area of research and innovation that require
   critical mass and long-term vision and the importance of associated countries’ involvement in
   those European Partnerships;
   SEEKING to establish mutually advantageous conditions in order to create decent jobs, to
   strengthen and support innovation ecosystems of the Parties by helping enterprises to innovate
   and scale up in the markets of the Parties and facilitating the uptake as well as deployment
   and accessibility of innovation, including capacity building activities;
   RECOGNISING that reciprocal participation in each other's research and innovation
   programmes should provide mutual benefits; while acknowledging that the Parties reserve
   their right to limit or condition participation in their research and innovation programmes
   including in particular for actions related to their strategic assets, interests, autonomy or
   security,
   HAVE AGREED AS FOLLOWS:
                                               Article 1
                                            Subject matter
   This agreement establishes the rules applicable to the participation of the Faroe Islands in any
   Union programme or activity (hereinafter referred to as ‘the Agreement’).
EN                                                 2                                                EN
 ---pagebreak---                                                      Article 2
                                                    Definitions
   For the purposes of this Agreement, the following definitions apply:
   (a) ‘basic act’ means:
   (i) a legal act of one or more Union institutions, other than a recommendation or an opinion,
   establishing a programme, which provides a legal basis for an action and for the
   implementation of the corresponding expenditure entered in the Union budget or of the
   budgetary guarantee or financial assistance backed by the Union budget, including any
   amendment and any relevant acts of a Union institution which supplement or implement that
   act, except those adopting work programmes, or
   (ii) a legal act of one or more Union institutions other than a recommendation or an opinion,
   establishing an activity financed from the Union budget other than programmes, including any
   amendment and any relevant acts of a Union institution which supplement or implement that
   act, except those adopting work programmes;
   (b) ‘funding agreement’ means agreements relating to Union programmes and activities under
   the Protocols to this Agreement, in which the Faroe Islands participate, which implement
   Union funds, such as grant agreements, contribution agreements, financial framework
   partnership agreements, financing agreements and guarantee agreements;
   (c) ‘other rules pertaining to the implementation of the Union programme and activity’ means
   rules laid down in Regulation (EU, Euratom) 2018/1046 of the European Parliament and of
   the Council3 (‘Financial Regulation’) that apply to the general budget of the Union, and in the
   work programme or in the calls or other Union award procedures;
   (d) ‘Union award procedure’ means a procedure for award of Union funding launched by the
   Union or by persons or entities entrusted with the implementation of Union funds;
   (e) ‘the Faroe Islands entity’ means any type of entity, whether a natural person, legal person
   or another type of entity, which may participate in activities of a Union programme or activity
   in accordance with the basic act and who resides or which is established in the Faroe Islands.
                                                     Article 3
                                       Establishment of the participation
   1.       The Faroe Islands shall be allowed to participate in and contribute to the Union
   programmes, activities, or in exceptional cases, the part of Union programmes or activities,
   which are opened to the participation of the Faroe Islands in accordance with the basic acts
   and as covered by the Protocols.
   3
            Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the Council of 18 July 2018 on
            the financial rules applicable to the general budget of the Union, amending Regulations (EU) No
            1296/2013, (EU) No 1301/2013, (EU) No 1303/2013, (EU) No 1304/2013, (EU) No 1309/2013, (EU)
            No 1316/2013, (EU) No 223/2014, (EU) No 283/2014, and Decision No 541/2014/EU and repealing
            Regulation (EU, Euratom) No 966/2012 (OJ EU L 193, 30.7.2018, p.1.).
EN                                                        3                                                     EN
 ---pagebreak---    2.      The specific terms and conditions for participation of the Faroe Islands in the
   Framework Programme for Research and Innovation (2021-2027) are laid down in the
   Protocol on the association of the Faroe Islands to Horizon Europe – the Framework
   Programme for Research and Innovation (2021-2027). Notwithstanding Article 15 (7) of this
   Agreement, that Protocol may be amended by the Joint Committee established under this
   Agreement.
   3.      Notwithstanding Article 15 (7) of this Agreement, the specific terms and conditions
   for participation of the Faroe Islands in any other particular Union programme or activity
   shall be laid down in Protocols to this Agreement to be adopted and amended by the Joint
   Committee established under this Agreement.
   4.        The Protocols shall:
   (a) identify the Union programmes, activities, or in exceptional cases, the part of Union
   programmes or activities, in which the Faroe Islands shall participate;
   (b) lay down the duration of participation, which shall refer to the period of time during which
   the Faroe Islands and Faroe Islands entities may apply for Union funding or may be entrusted
   with implementation of Union funds;
   (c) lay down specific conditions for the participation of the Faroe Islands and Faroe Islands
   entities, including specific modalities for the implementation of the financial conditions as
   identified under Articles 6 and 7 of this Agreement, specific modalities of the correction
   mechanism as identified under Article 8 of this Agreement, and conditions for participation in
   structures created for the purposes of implementing those Union programmes or activities.
   These conditions shall comply with this Agreement and the basic acts and acts of one or more
   Union institutions establishing such structures;
   (d) where applicable, lay down the amount of the Faroe Islands’ contribution to a Union
   programme implemented through a financial instrument or a budgetary guarantee.
                                                  Article 4
                            Compliance with the programme or activity rules
   1.        The Faroe Islands shall participate in the Union programmes, activities or parts
             thereof covered by the Protocols to this Agreement under the terms and conditions
             established in this Agreement, its Protocols, in the basic acts and other rules
             pertaining to the implementation of Union programmes and activities.
   2.        The terms and conditions referred to in paragraph 1 shall include:
   (a)       the eligibility of the Faroe Islands entities and any other eligibility conditions related
             to the Faroe Islands, in particular to the origin, place of activity or nationality;
   (b)       the terms and conditions applicable to the submission, assessment and selection of
             applications and to the implementation of the actions by eligible Faroe Islands
             entities.
   3.        The terms and conditions referred to in point (b) of paragraph 2 shall be equivalent to
             those applicable to eligible Member States entities, including respect for the
EN                                                    4                                                 EN
 ---pagebreak---        European Union restrictive measures4 unless otherwise provided for in the terms and
       conditions referred to in paragraph 1.
                                                Article 5
      Participation of the Faroe Islands in the governance of programmes or activities
   1.  Representatives or experts of the Faroe Islands or experts designated by the Faroe
       Islands shall be allowed to take part as observers unless it concerns points reserved
       only for Member States or in relation to a programme or activity in which the Faroe
       Islands are not participating, in the committees, expert groups meetings or other
       similar meetings where representatives or experts of the Member States, or experts
       designated by Member States take part, and which assist the European Commission
       in the implementation and management of the programmes, the activities or parts
       thereof, in which the Faroe Islands participate in accordance with Article 3 or are
       established by the European Commission in respect of the implementation of the
       Union law in relation to these programmes, activities or parts thereof. The
       representatives or experts of the Faroe Islands, or experts designated by the Faroe
       Islands shall not be present at the time of voting. The Faroe Islands shall be informed
       of the result of the vote.
   2.  Where experts or evaluators are not appointed on the basis of nationality, nationality
       shall not be a reason to exclude Faroe Islands experts and evaluators.
   3.  Subject to the conditions of paragraph 1, participation of the Faroe Islands’
       representatives in the meetings referred to in paragraph 1, or in other meetings
       related to the implementation of programmes or activities, shall be governed by the
       same rules and procedures as those applicable to representatives of the Member
       States, in particular speaking rights, receipt of information and documentation unless
       it concerns points reserved only for Member States or in relation to a programme or
       activity in which the Faroe Islands are not participating, and the reimbursement of
       travel and subsistence costs.
   4.  Protocols to this Agreement may define further modalities for the participation of
       experts, as well as the participation of the Faroe Islands in governing boards and
       structures created for the purposes of implementing Union programmes or activities
       defined in the respective Protocol.
                                                Article 6
                                         Financial conditions
   1.  Participation of the Faroe Islands or Faroe Islands entities in Union programmes,
       activities or parts thereof shall be subject to the Faroe Islands contributing financially
       to the corresponding funding under the Union budget.
   4
      The EU restrictive measures are restrictive measures adopted pursuant to the Treaty on the European
      Union or the Treaty on the Functioning of the European Union.
EN                                                  5                                                     EN
 ---pagebreak---    2. The financial contribution shall take the form of the sum of:
      (a) a participation fee; and
      (b) an operational contribution.
   3. The financial contribution shall take the form of an annual payment made in one or
      more instalments.
   4. Without prejudice to paragraph 8 of this Article and Article 7, the participation fee
      shall be 4% of the annual operational contribution and shall not be subject to
      retrospective adjustments. As of 2028, the level of the participation fee may be
      adjusted by the Joint Committee.
   5. The operational contribution shall cover operational and support expenditures and be
      additional both in commitment and payment appropriations to the amounts entered in
      the Union budget definitively adopted for programmes or activities or exceptionally
      parts thereof increased, where appropriate, by external assigned revenue that does not
      result from financial contributions to Union programmes and activities from other
      donors, covered by each respective Protocol to this Agreement.
   6. The initial operational contribution shall be based on a contribution key defined as
      the ratio of the Gross Domestic Product (GDP) of the Faroe Islands at market prices
      to the GDP of the European Union at market prices. The GDPs at market prices to be
      applied shall be determined by the dedicated Commission services based on the most
      recent statistical data available for budget calculations in the year prior to the year in
      which the annual payment is due. By derogation, for 2021, the initial operational
      contribution shall be based on the GDP of the year 2019 at market prices.
      Adjustments to this contribution key may be laid down in respective Protocols.
   7. The operational contribution shall be based on the application of the contribution key
      to the initial commitment appropriations increased as described in paragraph 5 of this
      Article entered in the Union budget definitively adopted for the applicable year for
      financing the Union programmes or activities or exceptionally parts thereof in which
      the Faroe Islands participate.
   8. The participation fee referred to in paragraph 2 of this Article shall have the
      following value in the years 2021 to 2027:
      –      2021: 0,5%;
      –      2022: 1%;
      –      2023: 1,5%;
      –      2024: 2%;
      –      2025: 2,5%;
      –      2026: 3%;
      –      2027: 4%.
   9. Upon request, the Union shall provide the Faroe Islands with information in relation
      to its financial participation as included in the budgetary, accounting, performance
      and evaluation related information provided to the Union budgetary and discharge
      authorities concerning the Union programmes and activities in which the Faroe
      Islands participate. That information shall be provided having due regard to the
      Union’s and the Faroe Islands’ confidentiality and data protection rules and is
EN                                            6                                                  EN
 ---pagebreak---        without prejudice to the information which the Faroe Islands are entitled to receive
       under Article 10 of this Agreement.
   10. All contributions of the Faroe Islands or payments from the Union, and the
       calculation of amounts due or to be received, shall be made in euros.
   11. Detailed provisions for the implementation of this Article are set out in the respective
       Protocols.
                                          Article 7
           Programme and activities to which an adjustment mechanism applies
   1.  If so provided in a respective Protocol, the operational contribution of a programme,
       activity or part thereof for a year N may be adjusted upwards or downwards
       retrospectively in one or more subsequent years on the basis of the budgetary
       commitments made on the commitment appropriations of that year, their
       implementation through legal commitments and their decommitment.
   2.  The first adjustment shall be made in year N+1 when the initial contribution shall be
       adjusted upwards or downwards by the difference between the initial contribution
       and an adjusted contribution calculated by applying the contribution key of year N,
       adjusted via the application of a co-efficient if the respective Protocol so provides, to
       the sum of:
       (a)   the amount of budgetary commitments made on commitment appropriations
             authorised in year N under the Union adopted budget and on commitment
             appropriations corresponding to decommitments made available again; and
       (b)   any external assigned revenue appropriations that do not result from financial
             contributions to Union programmes and activities from other donors covered in
             each respective Protocol to this Agreement and that were available at the end
             of year N.
   3.  Each subsequent year, until all the budgetary commitments financed under
       commitment appropriations originating from year N have been paid or decommitted
       and at the latest 3 years after the end of the programme or after the end of the
       multiannual financial framework corresponding to year N, whichever is earlier, the
       Union shall calculate an adjustment of the contribution of year N by reducing the
       Faroe Islands’ contribution by the amount obtained by applying the contribution key,
       adjusted if the respective Protocol so provides, of year N to the decommitments
       made each year on commitments of year N financed under the Union budget or from
       decommitments made available again.
   4.  If external assigned revenue appropriations that do not result from financial
       contributions to Union programmes and activities from other donors covered by each
       respective Protocol to this Agreement are cancelled, the contribution of the Faroe
       Islands to the respective Union Programme, activity or part thereof shall be reduced
       by the amount obtained by applying the contribution key, adjusted if the respective
       Protocol so provides, of year N to the amount cancelled.
EN                                            7                                                  EN
 ---pagebreak---                                             Article 8
      Programmes and activities to which an automatic correction mechanism applies
   1.  An automatic correction mechanism shall apply in relation to those Union
       programmes, activities or parts thereof for which the application of an automatic
       correction mechanism is provided for in a respective Protocol. The application of that
       automatic correction mechanism may be limited to parts of the programme or
       activity specified in a respective Protocol, which are implemented through grants for
       which competitive calls are organised. Detailed rules on the identification of the parts
       of the programme or activity to which the automatic correction mechanism does or
       does not apply may be established in the respective Protocol.
   2.  The amount of the automatic correction for a programme or activity or parts thereof
       shall be the difference between the initial amounts of the legal commitments actually
       entered into with the Faroe Islands or Faroe Islands entities financed from
       commitment appropriations of the year in question and the corresponding operational
       contribution paid by the Faroe Islands as adjusted pursuant to Article 7, excluding
       support expenditure, covering the same period.
   3.  Detailed rules on the establishment of the relevant amounts of the legal commitments
       referred to in paragraph 2 of this Article, including in the case of consortia, and on
       the calculation of the automatic correction, may be laid down in the respective
       Protocol.
                                            Article 9
                                       Reviews and audits
   1.  The Union shall have the right to conduct, in accordance with the applicable acts of
       one or more Union institutions or bodies and as provided in relevant agreements
       and/or contracts, technical, scientific, financial, or other types of reviews and audits
       on the premises of any natural person residing in or any legal entity established in the
       Faroe Islands and receiving Union funding, as well as any third party involved in the
       implementation of Union funds residing or established in the Faroe Islands. Such
       review and audits may be carried out by the agents of the institutions and bodies of
       the Union, in particular of the European Commission and the European Court of
       Auditors, or by other persons mandated by the European Commission in accordance
       with Union law.
   2.  The agents of the institutions and bodies of the Union, in particular of the European
       Commission and the European Court of Auditors, and the other persons mandated by
       the European Commission, shall have appropriate access to sites, works and
       documents (in electronic and paper versions) and to all the information required in
       order to carry out such audits, including the right of obtaining a physical/electronic
       copy of, and extracts from, any document or the contents of any data medium held by
       the audited natural or legal person, or by the audited third party.
   3.  The Faroe Islands shall not prevent or raise any particular obstacle to the right of
       entrance in the Faroe Islands and to the access to the premises of the agents and other
       persons referred to in paragraph 2 of this Article on the grounds of the exercise of
       their duties referred to in this Article.
   4.  The reviews and audits may be carried out, also after the suspension of application of
       a Protocol to this Agreement pursuant to its Article 15(4), the cessation of
EN                                               8                                              EN
 ---pagebreak---             provisional application or termination of this Agreement, on the terms laid down in
            the applicable acts of one or more Union institutions or bodies and as provided in
            relevant agreements and/or contracts in relation to any legal commitment
            implementing the Union budget entered into by the Union before the date on which
            the suspension of application of the relevant Protocol, the cessation of provisional
            application or termination of this Agreement takes effect.
                                                Article 10
    Fight against irregularities, fraud and other criminal offences affecting the financial interests
                                              of the Union
   1.       The European Commission and the European Anti-Fraud Office (OLAF) shall be
            authorised to carry out administrative investigations, including on-the-spot checks
            and inspections, on the territory of the Faroe Islands. These investigations shall be
            carried out in accordance with the terms and conditions established by applicable
            acts of one or more Union institutions.
   2.       The competent Faroe Islands authorities shall inform the European Commission or
            OLAF within reasonable time of any fact or suspicion which has come to their notice
            relating to an irregularity, fraud or other illegal activity affecting the financial
            interests of the Union.
   3.       On-the-spot checks and inspections may be carried out on the premises of any natural
            person residing in or legal entity established in the Faroe Islands and receiving Union
            funds, as well as of any third party involved in the implementation of Union funds
            residing or established in the Faroe Islands.
   4.       On-the-spot checks and inspections shall be prepared and conducted by the European
            Commission or OLAF in close collaboration with the competent Faroe Islands
            authority designated by the government of the Faroe Islands. The designated
            authority shall be notified a reasonable time in advance of the object, purpose and
            legal basis of the checks and inspections, so that it can provide assistance. To that
            end, the officials of the competent Faroe Islands authorities may participate in the
            on-the-spot checks and inspections.
   5.       Upon request by the authorities of the Faroe Islands, the on-the-spot checks and
            inspections may be carried out jointly with the European Commission or OLAF.
   6.       Commission agents and OLAF staff shall have access to all the information and
            documentation, including computer data, on the operations concerned, which are
            required for the proper conduct of the on-the-spot checks and inspections. They may,
            in particular, copy relevant documents.
   7.       Where the person, entity or another third party resists an on-the-spot check or
            inspection, the authorities of the Faroe Islands, acting in accordance with national
            rules and regulations, shall assist the European Commission or OLAF, to allow them
            to fulfil their duty in carrying out an on-the-spot check or inspection. That assistance
            shall include taking the appropriate precautionary measures under national law, in
            particular in order to safeguard evidence.
   8.       The European Commission or OLAF shall inform the authorities of the Faroe Islands
            of the result of such checks and inspections. In particular, the European Commission
EN                                                  9                                                 EN
 ---pagebreak---             or OLAF shall report as soon as possible to the competent Faroe Islands authority
            any fact or suspicion relating to an irregularity which has come to their notice in the
            course of the on-the-spot check or inspection.
   9.       Without prejudice to application of the Faroe Islands criminal law, the European
            Commission may impose administrative measures and penalties on legal or natural
            persons of the Faroe Islands participating in the implementation of a programme or
            activity in accordance with Union legislation.
   10.      For the purposes of proper implementation of this Article, the European Commission
            or OLAF and the competent authorities of the Faroe Islands shall regularly exchange
            information and, at the request of one of the parties to this Agreement, consult each
            other.
   11.      In order to facilitate effective cooperation and exchange of information with OLAF,
            the Faroe Islands shall designate a contact point.
   12.      Information exchanged between the European Commission or OLAF and the Faroe
            Islands’ competent authorities shall take place having due regard to the
            confidentiality requirements. Personal data included in the exchange of information
            shall be protected in accordance with applicable rules.
   13.      The authorities of the Faroe Islands shall 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 Union in accordance with the applicable legislation.
                                               Article 11
                                    Amendments to Articles 9 and 10
   The Joint Committee under this Agreement may amend Articles 9 and 10 of this Agreement,
   in particular to take account of changes of acts of one or more Union institutions.
                                               Article 12
                                       Recovery and enforcement
   1.       Decisions adopted by the European Commission imposing a pecuniary obligation on
            legal or natural persons other than States in relation to any claims stemming from
            Union programmes, activities, actions or projects shall be enforceable in the Faroe
            Islands. The order for enforcement shall be appended to the decision, without any
            other formality than a verification of the authenticity of the decision by the national
            authority designated for this purpose by the government of the Faroe Islands. The
            government of the Faroe Islands shall make known its designated national authority
            to the Commission and the Court of Justice of the European Union. In accordance
            with Article 13, the European Commission shall be entitled to notify such
            enforceable decisions directly to persons residing and legal entities established in the
            Faroe Islands. Enforcement shall take place in accordance with the Faroe Islands’
            law and rules of procedure.
   2.       Judgments and orders of the Court of Justice of the European Union delivered in
            application of an arbitration clause contained in a contract or agreement in relation to
            Union programmes, activities, actions or projects shall be enforceable in the Faroe
EN                                                 10                                                 EN
 ---pagebreak---              Islands in the same manner as European Commission decisions referred to in
             paragraph 1 of this Article.
   3.        The Court of Justice of the European Union shall have jurisdiction to review the
             legality of the decision of the Commission referred to in paragraph 1 and to suspend
             its enforcement. However, the Courts of the Faroe Islands shall have jurisdiction
             over complaints that enforcement is being carried out in an irregular manner.
                                                  Article 13
                               Communication and exchange of information
   The Union institutions and bodies involved in the implementation of Union programmes or
   activities, or in control of such programmes or activities, shall be entitled to communicate
   directly, including through electronic exchange systems, with any natural person residing in
   the Faroe Islands or legal entity established in the Faroe Islands receiving Union funding, as
   well as with any third party involved in the implementation of Union funding that resides or is
   established in the Faroe Islands. Such persons, entities and third parties may submit directly to
   the Union institutions and bodies all relevant information and documentation which they are
   required to submit on the basis of the Union legislation applicable to the Union programme or
   activity and on the basis of the contracts or funding agreements concluded to implement that
   programme or activity.
                                                  Article 14
                                            The Joint Committee
   (1)       The Joint Committee is hereby established. The tasks of the Joint Committee shall
             include:
             (a)    assessing, evaluating and reviewing the implementation of this Agreement and
                    its Protocols, in particular:
                   (i) the participation and performance of the Faroe Islands legal entities in Union
                   programmes and activities;
                   (ii) where relevant, the level of (mutual) openness to the legal entities
                   established in each Party to participate in programmes, projects, actions,
                   activities or parts thereof of the other Party;
                   (iii) the implementation of the financial contribution mechanism and where
                   relevant the automatic correction mechanism applicable to Union programmes
                   or activities covered by Protocols to this Agreement;
                   (iv) information exchange and where relevant examining any possible questions
                   on the exploitation of results, including intellectual property rights;
             (b)    discussing upon request of either Party restrictions applied or planned by the
                    Parties on access to their respective research and innovation programmes,
                    including in particular for actions related to their strategic assets, interests,
                    autonomy or security;
             (c)    examining how to improve and develop cooperation;
EN                                                    11                                              EN
 ---pagebreak---        (d)    discussing jointly the future orientations and priorities of policies related to
              programmes or activities covered by the Protocols to this Agreement;
       (e)    exchanging information, inter alia, on new legislation, decisions or national
              programmes that are relevant for the implementation of this Agreement and its
              Protocols;
       (f)    adopting Protocols to this Agreement on specific terms and conditions of
              participation of the Faroe Islands in Union programmes, activities or parts
              thereof, or amending such Protocols as needed;
       (g)    amending Articles 9 and 10 of this Agreement, in particular to take account of
              changes of acts of one or more Union institutions.
   (2) Decisions of the Joint Committee shall be taken by consensus.
   (3) The Joint Committee, which shall be composed of representatives of the Union and
       of the Faroe Islands, shall adopt its Rules of Procedure.
   (4) The Joint Committee may decide to set up any working party/advisory body on an ad
       hoc basis at expert level that can assist in carrying out the implementation of this
       Agreement.
   (5) The Joint Committee shall meet at least once a year, and, whenever special
       circumstances so require, at the request of any of the Parties. The meetings shall be
       organised and hosted alternately by the Union and by the Faroe Islands.
   (6) The Joint Committee shall work on an on-going basis through an exchange of
       relevant information by any means of communication, in particular in relation to the
       participation/performance of the Faroe Islands entities. The Joint Committee may in
       particular conduct its tasks in writing whenever the need arises.
                                          Article 15
                                       Final provisions
   (1) This Agreement shall enter into force on the date on which the Parties have notified
       each other of the completion of their internal procedures necessary for that purpose.
       It shall apply retroactively from 1 January 2021.
   (2) The Parties may apply this Agreement provisionally in accordance with their
       respective internal procedures and legislation. The provisional application shall begin
       on the date on which the Parties have notified each other of the completion of their
       internal procedures necessary for that purpose.
   (3) Should the Faroe Islands notify the Commission, acting on behalf of the Union, that
       they will not complete their internal procedures necessary for the entry into force of
       this Agreement, this Agreement shall cease to apply provisionally on the date of
       receipt of this notification by the Commission, which shall constitute the cessation
       date for the purposes of this Agreement.
       The decisions of the Joint Committee shall cease to apply on the same date.
   (4) The application of a relevant Protocol to this Agreement may be suspended by the
       Union in case of partial or full non-payment of the financial contribution due by the
       Faroe Islands under the respective Union programme or activity.
EN                                            12                                               EN
 ---pagebreak---        In case of non-payment which may significantly jeopardise the implementation and
       management of the relevant Union programme or activity, the European Commission
       shall send a formal letter of reminder. Should no payment be made within 20
       working days after the formal letter of reminder, suspension of the application of the
       relevant Protocol shall be notified by the Union to the Faroe Islands by a formal
       letter of notification which shall take effect 15 days following the receipt of this
       notification by the Faroe Islands.
       In case the application of a Protocol is suspended, the Faroe Islands entities shall not
       be eligible to participate in award procedures that are not yet completed when the
       suspension takes effect. An award procedure shall be considered completed when
       legal commitments have been entered into as a result of that procedure.
       The suspension does not affect the legal commitments entered into with the Faroe
       Islands entities under the relevant Union programme or activity before the
       suspension took effect. The relevant Protocol shall continue to apply to such legal
       commitments.
       The Union shall immediately notify the Faroe Islands once the entire amount of the
       financial contribution due has been received by the Union. The suspension shall be
       lifted with an immediate effect upon this notification.
       As of the date when the suspension is lifted, the Faroe Islands entities shall be again
       eligible in award procedures launched under the relevant Union programme or
       activity after this date and in award procedures launched before this date, for which
       the deadlines for submission of applications has not expired.
   (5) Either Party may terminate this Agreement at any time by a written notification
       informing of the intent to terminate it. This Agreement may only be terminated in its
       entirety.
       The termination shall take effect three calendar months after the date on which the
       written notification reaches its addressee. The date on which the termination takes
       effect shall constitute the termination date for the purposes of this Agreement.
   (6) Should the Agreement cease to apply provisionally in accordance with paragraph 3
       or be terminated in accordance with paragraph 5 the Parties agree that:
       (a) projects, actions, activities or parts thereof in respect of which legal commitments
       have been entered into during the provisional application and/or after the entry into
       force of this Agreement, and before this Agreement ceases to apply or is terminated,
       shall continue until their completions under the conditions laid down in this
       Agreement;
       (b) the annual financial contribution to the relevant programme or activity of the
       year N during which this Agreement ceases to apply provisionally or is terminated
       shall be paid entirely in accordance with Article 6 of the Agreement and any relevant
       rules in the respective Protocols. Where the adjustment mechanism applies, the
       operational contribution to the relevant programme or activity of the year N shall be
       adjusted in accordance with Article 7 of this Agreement. For programmes or
       activities where both the adjustment mechanism and the automatic correction
       mechanism apply, the relevant operational contribution of the year N shall be
       adjusted in accordance with Article 7 of this Agreement and corrected in accordance
EN                                              13                                              EN
 ---pagebreak---             with its Article 8. The participation fee paid for the year N as part of the financial
            contribution to the relevant programme or activity shall not be adjusted or corrected.
            (c) where the adjustment mechanism applies, following the year during which this
            Agreement ceases to apply provisionally or is terminated, the initial operational
            contributions to the relevant programme or activity paid for the years during which
            this Agreement applied shall be adjusted in accordance with Article 7. In relation to
            programmes or activities where both the adjustment mechanism and the automatic
            correction mechanism apply, these operational contributions shall be adjusted in
            accordance with Article 7 and automatically corrected in accordance with Article 8.
   (7)      The Parties shall settle by common consent any other consequences of termination or
            cessation of provisional application of this Agreement.
   (8)      This Agreement may only be amended in writing by common consent of the Parties.
            The entry into force of the amendments will follow the same procedure as that
            applicable for the entry into force of this Agreement as provided in paragraph 1 of
            this Article.
   (9)      Protocols shall constitute an integral part of this Agreement.
   Done at …, this …… day of …. in the year ….
   For the European Union,
   For the Government of the Faroe Islands,
EN                                                 14                                              EN
 ---pagebreak---      Protocol on the association of the Faroe Islands to Horizon Europe – the Framework
                       Programme for Research and Innovation (2021-2027)
                                                   Article 1
                                          Scope of the association
   (1)     The Faroe Islands shall participate as an associated country in and contribute to all
           parts of the Horizon Europe Programme - the Framework Programme for Research
           and Innovation (the Horizon Europe Programme) referred to in Article 4 of
           Regulation (EU) 2021/695 of the European Parliament and of the Council 5, and
           implemented through the specific programme established by Council Decision (EU)
           2021/7646, in their most up to date versions, and through a financial contribution to
           the European Institute of Innovation and Technology.
   (2)     Regulation (EU) 2021/819 of the European Parliament and of the Council7, and
           Decision (EU) 2021/820 of the European Parliament and of the Council 8, in their
           most up to date versions, shall apply to the participation of the Faroe Islands entities
           in Knowledge and Innovation Communities.
                                                   Article 2
             Additional conditions of participation in the Horizon Europe Programme
   (1)     Before deciding on whether the Faroe Islands entities are eligible to participate in an
           action related to EU strategic assets, interests, autonomy or security under Article
           22(5) of Regulation (EU) 2021/695, the Commission may request specific
           information or assurances, such as:
           (a)    information whether reciprocal access has been or will be granted to Union
                  entities to existing and planned programmes, projects, actions, activities or
                  parts thereof of the Faroe Islands equivalent to the Horizon Europe Programme
                  concerned;
           (b)    information whether the Faroe Islands have in place a national investment
                  screening mechanism and assurances that authorities of the Faroe Islands will
                  report on and consult the Commission on any possible cases where in
   5
         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 EU L 170, 12.5.2021, p.1.).
   6
         Council Decision (EU) 2021/764 of 10 May 2021 establishing the Specific Programme implementing
         Horizon Europe – the Framework Programme for Research and Innovation, and repealing Decision
         2013/743/EU (OJ EU L 167I, 12.5.2021, p.1.).
   7
         Regulation (EU) 2021/819 of the European Parliament and of the Council of 20 May 2021 on the
         European Institute of Innovation and Technology (recast), (OJ EU L 189, 28.5.2021, p.61.).
   8
         Decision (EU) 2021/820 of the European Parliament and of the Council of 20 May 2021 on the
         Strategic Innovation Agenda of the European Institute of Innovation and Technology (EIT) 2021-2027:
         Boosting the Innovation Talent and Capacity of Europe and repealing Decision No 1312/2013/EU (OJ
         EU L 189, 28.5.2021, p. 91.).
EN                                                     15                                                     EN
 ---pagebreak---                application of such a mechanism they have become aware of planned foreign
               investment/takeover by an entity established or controlled from outside the
               Faroe Islands of a Faroe Islands entity, which has received Horizon Europe
               funding in actions related to Union strategic assets, interests, autonomy or
               security, provided that the Commission supplies the Faroe Islands with the list
               of the relevant Faroe Islands entities following the signature of grant
               agreements with these entities; and
        (c)    assurances that none of the results, technologies, services and products
               developed under the concerned actions by the Faroe Islands entities shall be
               subject to restrictions on their export to Union Member States during the action
               and for four years after the end of the action. The Faroe Islands will share an
               up-to-date list of subjects of national export restrictions on annual basis, during
               the action and for four years after the end of the action.
   (2)  The Faroe Islands entities may participate in the activities of the Joint Research
        Centre (JRC) under terms and conditions equivalent to those applicable to Union
        entities unless limitations are necessary to ensure consistency with the scope of
        participation stemming from the implementation of paragraph 1 of this Article.
   (3)  Where the Union implements the Horizon Europe Programme through the
        application of Articles 185 and 187 of the Treaty on the Functioning of the European
        Union, the Faroe Islands and the Faroe Islands entities may participate in the legal
        structures created under those provisions, in conformity with the Union legal acts
        that have been or will be adopted for the establishment of those legal structures.
   (4)   The Faroe Islands’ rights of representation and participation in the European
        Research Area Committee and its subgroups shall be those applicable to the relevant
        category of associated countries.
   (5)  Representatives of the Faroe Islands shall have the right to participate as observers in
        the Board of Governors of the JRC, without voting rights. Subject to that condition,
        such participation shall be governed by the same rules and procedures as those
        applicable to representatives of Member States of the Union, including speaking
        rights and procedures for receipt of information and documentation in relation to a
        point that concerns the Faroe Islands.
   (6)  The Faroe Islands may participate in a European Research Infrastructure Consortium
        (ERIC) in accordance with Council Regulation (EC) No 723/20099, in its most up to
        date version, and with the legal act establishing the ERIC.
   (7)  The Parties shall make every effort, within the framework of the existing provisions,
        to facilitate the free movement and residence of persons participating in the activities
        covered by this Protocol and to facilitate cross-border movement of goods and
        services intended for use in such activities.
   (8)  The Faroe Islands shall take all necessary measures, as appropriate, to ensure that
        goods and services, purchased in the Faroe Islands or imported into the Faroe
        Islands, which are partially or entirely financed pursuant to the grant agreements
        and/or contracts concluded for the realisation of the activities in accordance with this
        Protocol, are exempted from customs duties, import duties and other fiscal charges,
        including the VAT, that are applicable in the Faroe Islands.
   9
       Council Regulation (EC) No 723/2009 of 25 June 2009 on the Community legal framework for a
       European Research Infrastructure Consortium (ERIC) (OJ EU L 206, 8.8.2009, p.1.).
EN                                                16                                               EN
 ---pagebreak---                                                 Article 3
                                               Reciprocity
   Legal entities established in the Union may participate in programmes, projects, actions
   activities or parts thereof of the Faroe Islands equivalent to the Horizon Europe Programme,
   in accordance with the applicable laws and regulations of the Faroe Islands.
   The non-exhaustive list of the equivalent programmes, projects, actions, activities or parts
   thereof of the Faroe Islands is provided in Annex II to this Protocol.
   Funding by the Faroe Islands of legal entities established in the Union shall be subject to the
   Faroe Islands’ applicable laws and regulations governing the operation of research and
   innovation programmes, projects, actions, activities or parts thereof. Where funding is not
   provided, legal entities established in the Union may participate with their own means.
                                                Article 4
                                              Open Science
   The Parties shall mutually promote and encourage open science practices in their
   programmes, projects, actions, activities or parts thereof in accordance with the rules of the
   Horizon Europe Programme and the applicable laws and regulations of the Faroe Islands.
                                                Article 5
      Detailed rules on financial contribution, adjustment mechanism and automatic correction
                                               mechanism
   (1)       An adjustment mechanism and automatic correction mechanism shall apply in
             relation to the operational contribution of the Faroe Islands to the Horizon Europe
             Programme.
   (2)       The automatic correction mechanism shall be based on the performance of the Faroe
             Islands and the Faroe Islands entities in the parts of the Horizon Europe Programme,
             which are implemented through competitive grants.
   (3)       Detailed rules for application of the automatic correction mechanism are laid down
             in Annex I to this Protocol.
EN                                                 17                                              EN
 ---pagebreak---                                               Article 6
                                          Final provisions
   (1)     This Protocol shall remain in force for as long as is necessary for all the projects
           and/or actions activities or parts thereof financed from the Horizon Europe
           Programme, all the actions necessary to protect the financial interests of the Union
           and all the financial obligations stemming from the implementation of this Protocol
           between the Parties to be completed.
   (2)     The Annexes to this Protocol shall form an integral part of the Protocol.
   Annex I: Rules governing the financial contribution of the Faroe Islands to the Horizon
   Europe Programme (2021-2027)
   Annex II: List of the equivalent programmes, projects, actions, activities or parts thereof of
   the Faroe Islands
EN                                               18                                               EN
 ---pagebreak---                                               ANNEX I
     Rules governing the financial contribution of the Faroe Islands to the Horizon Europe
                                        Programme (2021-2027)
   I.       Calculation of the financial contribution of the Faroe Islands
   (1)      The financial contribution of the Faroe Islands to the Horizon Europe Programme
            shall be established on a yearly basis in proportion to, and in addition to, the amount
            available each year in the Union budget for commitment appropriations needed for
            the management, execution and operation of the Horizon Europe Programme,
            increased in accordance with Article 6(5) of this Agreement.
   (2)      The participation fee of the Faroe Islands shall be established and phased in
            according to Article 6(4) and (8) of this Agreement.
   (3)      In accordance with Article 6(6) of this Agreement, the initial operational contribution
            to be paid by the Faroe Islands for their participation in the Horizon Europe
            Programme will be calculated for the respective financial years by applying an
            adjustment to the contribution key.
       The adjustment to the contribution key shall be:
                  Contribution Key Adjusted = Contribution Key × 𝐶𝑜𝑒𝑓𝑓𝑖𝑐𝑖𝑒𝑛𝑡
       The coefficient used for the above calculation to adjust the contribution key shall be 0,4.
   (4)      The operational contribution of the Faroe Islands to Horizon Europe shall be adjusted
            in accordance with rules provided in Article 7 of this Agreement.
   II.      Automatic correction of the Faroe Islands’ operational contribution
   (1)      For the calculation of the automatic correction as referred to in Article 8 of this
            Agreement and Article 5 of this Protocol, the following modalities shall apply:
            (a)    ‘competitive grants’ means grants awarded through calls for proposals where
                   the final beneficiaries can be identified at the time of the calculation of the
                   automatic correction. Financial support to third parties as defined in
                   Article 204 of the Financial Regulation is excluded;
            (b)    where a legal commitment is signed with a consortium, the amounts used to
                   establish the initial amounts of the legal commitment shall be the cumulative
                   amounts allocated to beneficiaries that are the Faroe Islands entities in
                   accordance with the indicative budget breakdown of the grant agreement;
EN                                                19                                                EN
 ---pagebreak---           (c)    all amounts of legal commitments corresponding to competitive grants shall be
                 established using the European Commission electronic system eCorda and be
                 extracted on the second Wednesday of February of year N+2;
          (d)    ‘non-intervention costs’ means costs of the Programme other than competitive
                 grants, including support expenditure, programme-specific administration,
                 other actions10;
          (e)    amounts allocated to international organisations as legal entities being the final
                 beneficiary11 shall be considered as non-intervention costs.
   (2)    The mechanism shall be applied as follows:
          (a)    Automatic corrections for year N in relation to the execution of commitment
                 appropriations for year N, increased in accordance with Article 6(5) of this
                 Agreement, shall be applied based on data on year N and year N+1 from e-
                 Corda referred to in point c) of paragraph (1) of point (II) of this Annex in
                 year N+2 after any adjustments in accordance with Article 7 of this Agreement
                 have been applied to the contribution of the Faroe Islands to the Horizon
                 Europe Programme. The amount considered will be the amount of competitive
                 grants for which data is available, at the time of the calculation of the
                 correction.
          (b)    Starting in year N+2 and up until 2029, the amount of the automatic correction
                 shall be calculated for year N by taking the difference between:
                 i. the total amount of the competitive grants apportioned to the Faroe Islands or
                 the Faroe Islands entities as commitments made on budget appropriations of
                 year N; and
                 ii. the amount of the Faroe Islands adjusted operational contribution for year N
                 multiplied by the ratio between:
                         A. the amount of competitive grants made on commitment appropriations
                         of year N, increased in accordance with Article 6(5) of this Agreement;
                         and
                         B. the total of all the authorised budgetary commitment appropriations of
                         year N, including non-intervention costs.
   III.   Payment of the Faroe Islands’ financial contribution, payment of the
          adjustments made on the Faroe Islands’ operational contribution, and payment
          of the automatic correction applicable to the Faroe Islands’ operational
          contribution
   10
        Other actions include notably procurement, prizes, financial instruments, direct actions of the Joint
        Research Centre, Subscriptions (OECD, Eureka, IPEEC, IEA, …), experts (evaluators, monitoring of
        projects) etc.
   11
        International organisations would only be considered as non-intervention costs if they are final
        beneficiaries. This will not apply where an international organisation is a coordinator of a project
        (distributing funds to other coordinators).
EN                                                   20                                                       EN
 ---pagebreak---    (1) The Commission shall communicate to the Faroe Islands, as soon as possible and at
       the latest when issuing the first call for funds of the financial year, the following
       information:
       (a)    the amounts in commitment appropriations in the Union budget definitively
              adopted for the year in question for the budget lines covering participation of
              the Faroe Islands, in Horizon Europe Programme increased, if relevant, in
              accordance with Article 6(5) of this Agreement;
       (b)    the amount of the participation fee referred to in Article 6(8) of this
              Agreement;
       (c)    from year N+1 of implementation of the Horizon Europe Programme, the
              implementation of commitment appropriations corresponding to budgetary
              year N, increased in accordance with Article 6(5) of this Agreement and the
              level of decommitment;
       (d)    for the part of the Horizon Europe Programme where such information is
              necessary to calculate the automatic correction, the level of commitments
              entered into in favour of the Faroe Islands entities broken down according to
              the corresponding year of budgetary appropriations and the related total level
              of commitments.
       On the basis of its Draft Budget, the Commission shall provide an estimate of
       information for the following year under points (a) and (b) as soon as possible, and,
       at the latest, by 1 September of the financial year.
   (2) The Commission shall issue, at the latest in April and in June of each financial year,
       a call for funds to the Faroe Islands corresponding to its contribution under this
       Protocol.
       Each call for funds shall provide for the payment of six-twelfths of the Faroe Islands’
       contribution not later than 30 days after the call for funds is issued.
       For the first year of implementation of this Protocol, the Commission shall issue a
       single call for funds, within 60 days of the signature of the Agreement.
   (3) Each year starting in 2023, the calls for funds shall also reflect the amount of the
       automatic correction applicable to the operational contribution paid for year N-2.
       The call for funds issued at the latest in April may also include adjustments of the
       financial contribution paid by Faroe Islands for the implementation, management and
       operation of the previous Framework Programme(s) for Research and Innovation in
       which the Faroe Islands participated.
EN                                            21                                               EN
 ---pagebreak---        For each of the financial years 2028, 2029 and 2030, the amount resulting from the
       automatic correction applied to the operational contributions paid in 2026 and 2027
       by the Faroe Islands or from the adjustments made in accordance with Article 7(8) of
       this Agreement will be due to or from the Faroe Islands.
   (4) The Faroe Islands shall pay their financial contribution under this Protocol in
       accordance with section III of this Annex. In the absence of payment by the Faroe
       Islands by the due date, the Commission shall send a formal letter of reminder.
       Any delay in the payment of the financial contribution shall give rise to the payment
       of default interest by the Faroe Islands on the outstanding amount from the due date.
       The interest rate for amounts receivable not paid on the due date shall be the rate
       applied by the European Central Bank to its principal refinancing operations, as
       published in the C series of the Official Journal of the European Union, in force on
       the first calendar day of the month in which the due date falls, increased by one and
       half percentage points.
EN                                            22                                             EN
 ---pagebreak---                                                ANNEX II
                  List of the equivalent programmes, projects, actions, activities
                                 or parts thereof of the Faroe Islands
   The following non-exhaustive list shall be regarded as the Faroe Islands’ programmes,
   projects, actions and activities equivalent to the Horizon Europe Programme:
   –         The Faroese Research Foundation;
   –         The Fisheries Research Foundation of the Faroe Islands.
EN                                                  23                                   EN