CELEX: 51977PC0010
Language: en
Date: 1977-06-02
Title: PROPOSAL FOR A COUNCIL DIRECTIVE RELATING TO COMMON PRINCIPLES TO BE ADOPTED IN EXPORT CREDIT INSURANCE SYSTEMS FOR MEDIUM AND LONG TERM TRANSACTIONS WITH PUBLIC AND PRIVATE BUYERS (submitted to the Council by the Commission).

ARCHIVES HISTORIQUES
DE LA COMMISSION
COLLECTION RELIEE DES
DOCUMENTS "COM"
COM (77) 10
Vol. 1977/0004
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 ---pagebreak---     COMMISSION OF THE EUROPEAN COMMUNITIES
                  V
                                                       COM(77)10 final.
                                                       Brussels , 2 June 1977 *
                                                     Çâ Sorti du SecréUfUt J^J
                        PROPOSAL FOR A COUNCIL DIRECTIVE
                 RELATING TO COMMON PRINCIPLES TO BB ADOPTED
                 IN EXPORT CREDIT: INSURANCE. SYSTEMS FOR MEDIUM
                 AND LONG TERM- TRANSACTIONS WITH PUBLIC AND .
                                   PRIVATE BUYERS
                    ( submitted to the Council "by the Commission) .
COK177) 10 final
 ---pagebreak--- EXPLANATORY I/EMORMHUM
■          ■  ■ » ι ι ■ ι ■
 1 . In April 1974 1 "the Commission submitted to the Council a working paper relating
     to the adoption of common principles in export credit insurance policies ^.
     The object of the paper was to seek to harmonize credit insurance and export
     credit guarantee systems "by the application of uniform principles , as provided
     for in Article 113 of the Treaty establishing the European Economic Community .
     The previous search for a harmonization of general conditions by the formulation
     of identical policy texts had encountered certain obstacles arising from the
     different administrative or banking practices of Member States .
2 . The working paper       of April 1974 has formed a basis for thorough discussions
     with experts from Member States and with UNICE ( Union of Industries of the
     European Community) and ORGAUHS ( Liaison Group for the European Engineering Industries ).
     Further , the Policy Co-ordination Group for Credit Insurance , Credit Guarantees
     and Financial Credits has discussed the paper several times .
     Finally , in June and September 197 6.| the. Commission called in experts in order
     to define - common principles to be- incorporated in a formal proposal for a
     Directive .
 3 . All that preparatory work having been accomplished , the Commission is now able
     to present a formal proposal relating to common principles to be adopted in
     export credit insurance systems for medium and long-term transactions with
     public and private buyers , leaving it to the insurers and guarantors to draw
     up their own texts based on the common rules and in conformity with the legal
     requirements of their individual countries .
  1Doc . COK(74)393/6 of 3 April 1974 .
 ---pagebreak---     In order to ensure that the common principles are brought into force and
    that they are in conformity with those laid down in this proposal , the texts
   to "be adopted in each Member State are to he communicated previously to the
    other organizations providing insurance or guarantees and to the Commission .
   4. As for premia, in order to up-date the information on national systems and to
   clarify how their operation affects the uniform principles, the Directive
   provides that the rules , scales and rates of premium which are applied in
   the export credit insurance and guarantees covered by the uniform principles
   set out in this Directive are to he communicated to the organisations
  providing insurance or guarantees , as well as to the Commission, within
  2 months following the entry into force of the uniform principles.
  The Commission intends to continue its efforts to arrive at a harmonised system
  of export credit insurance premia, under a regime where , through time , premium income
  is sufficient to cover losses .
& This: proposal for •&' dir'ective is "based on Article 113 of the Treaty , which
  provides thait' •' .«      the common commercial policy shall "be based on uniform
  principles , particularly in regard to               export policy
 ---pagebreak---  PROPOSAL FOR A COUNCIL DIRECTIVE RELATING TO COMMON PRINCIPLES TO
BE ADOPTED IN EXPORT CREDIT INSURANCE SYSTEMS FOR MEDIUM AND LONG
 TEEM TRANSACTIONS WITH PUBLIC AND PRIVATE BUYERS .
 THE COUNCIL OP THE EUROPEAN COMMUNITIES ,
 Having regard to the Treaty establishing the European Economic Community ,
 and in particular Article 113 thereof ,
Having regard to the proposal from the Commission,
Whereas the common commercial policy should he "based on uniform principles ,
 in particular as far as export policy is concerned ;
Whereas export credit is of primary importance in international trade
and is an important instrument of commercial policy, and it' is therefore
necessary to define the common principles of commercial policy in this
 field ;                     .. .      .              ;;; "•••
Whereas in this respect the differences "between export credit insurance
 systems in force in Member States may give rise to distortion in competition
"between Community undertakings in markets in third countries ;
Whereas harmonisation of these various export credit insurance systems
 could facilitate co-operation "between undertakings in the various Member
States ;
Whereas harmonisation can "be achieved either by common policies , or by
 common principles relating to the elements considered essential to the
 operation of export credit insurance systems ;
 ---pagebreak--- Whereas moreover medium and long term guaranteed transactions relate to
public and private buyers equally ;
Whereas it is important for the Commission to obtain the opinions of
the Representatives of the Member States on any problem relating to
the uniform application of this Directive ;
HAS ADOPTED THIS DIRECTIVE
Article 1
1.     Member States shall adopt such measures by law, regulation
or administrative action as may be necessary to put into force as
from 1.3.1978 the common principles set out in the Annexes to this
Directive and , in order to ensure these common principles are
respected , the measures necessary for all credit insurance organisations ,
guaranteeing for the account of or. with the support of the State , or
any institutions deriving through public support , . 'what ever its form , a
mandate/ to 'give a guarantee or a credit whether tied to an export
insurance-" policy or not , to deposit at the latest on the 30.9.1977 with
all the above mentioned other credit insurance organisations ,
institutions and the Commission copies of all the documents to
be used in application of this Directive .
2.     Any amendment envisaged to the text of these documents should
equally be communicated to the above mentioned organisations and
institutions as well as the Commission at least 3 months before the
date at which its application is envisaged .
 ---pagebreak---                                  - 3 -
3 « Furthermore , within 2 months following the entry into force of the uniform
principles in accordance with the provisions of paragraph 1 of this Article ,
the rules , scales and rates of premium which are applied in the export credit
insurance and guarantees covered by the uniform principles shall "be communica­
ted to the other organisations and institutions mentioned above , as well as
to the Commission* Subsequent modifications to these rules , scales or tariffs
for premium shall be subject to notification prior their intriduction.
 4»      The Annexes refer respectively :
 Annex I
 To transactions guaranteed by specific or comprehensive or selected
 transaction policies , effected on the basis of a supplier credit .
 Annex II                      •
 To Performance Bonds . .
 Annex III
 To guarantees granted to banks relating to the same transactions as
 those mentioned in Annex I.
 Annex IV
 To guarantees granted to banks in respect of financial credits .
 Annex V
 Definitions*
 ---pagebreak--- Article 2
Each Member State shall see that the credit insurance organisations ,
 guaranteeing for the account of or with the support of the State and
 the institutions receiving through public support , whatever its form ,
a mandate to give a guarantee or credits whether or not related to an
 export insurance policy, insure transactions or grant guarantees which
 fall within the field of application of the common principles , in
 conformity with the particular conditions and rules adopted by the
 Council .
Article 3
There shall be appointed to the Commission an Advisory Committee for
Export Credit Insurance , hereinafter* called 'the Committee' , which
shall consist of Representatives of the : Member States with a
representative   of the Commission as Chairman .
The Committee shall establish its own rules of procedures .
Article 4
The Committee shall meet when convened by its Chairman, either on the
initiative of the latter or at the request of the Representative of a
Member State .
Article 5
The Committee may be consulted by the Commission on any problem relating
to the uniform application of this Directive .
 ---pagebreak--- Article 6
The Commission shall , within three years of the entry into force of the
common principles and after consultation with the Committee referred to
in Article 3 , present a report on experience acquired during the
application of the said principles . It may, in due course , make
proposals for amendments to these principles with a view to adapting
them to the specific needs which the application of these principles
has not "been able to meet .
That report may , however, he presented at any time if a Member State
so requests and shall he submitted as a matter of urgency to the Council .
Article 7
The Council Directive No 70/509/CEE of■ 27 October 1970 and the Counoil
Directive No 70/5IO/CEE of 27 October 1970 are hereby abrogated.
Article 8
This Directive is addressed to the Member States .
                              Done at              , on
                              For the Council
                               The President
 ---pagebreak---                                                       ANNEX I
I    COMMON PRINCIPLES TO BE APPLIED TO THE! INSURANCE OF SUPPLIER CREDIT
     1.    The field of application of common principles shall cover export
           transactions to third countries ( sale of goods or provision of
           services ), effected on the "basis of a supplier credit , to a
           public or private "buyer, guaranteed "by specific , comprehensive
           or selected transaction policies and entailing either a credit
           risk of a period equal to or greater than 24 months , or a
           manufacturing risk of a period equal to or greater than 12
           months , or "both these risks whose periods when added together
           are equal to or greater than 24 months .
II , SCOPE OF THE GUARANTEE ■
     1 . Manufacturing Risk
         The manufacturing risk covers loss arising from the suspension
         of the manufacture of the goods ordered or performance of the
         conditions of the contract for a minimum period of 6 months
         directly caused "by an event listed in III below or in accordance
         with a decision of the Insurer at his absolute discretion
         because of the threat of such an event .
         It also covers loss arising from the final suspension of the
         manufacture or performance of the conditions of the contract
         at least 6 months after it has been continued with the
         Insurer 's agreement following such an event or decision .
     2 . Credit Risk
         The credit risk covers loss arising from the Insured 's failure
         to receive within the period fixed .in 1 III the sums due in
         accordance with the terms and conditions of the contract , provided
         always that the loss is directly caused by an event listed in III below.
 ---pagebreak---                                   - 2 -
III . EVENTS COUSTITUTITTG A CAUSE OF LOSS AITD-. QUALIFYING PERIOD FOR CLAIMS
       The following causes of loss may "be covered, and must be stated
       in all Guarantees in the appropriate terminology for the legal
       system governing a particular contract of insurance :
     A. The default of the buyer or his failure or refusal to fulfil
        any of the terms of the contract ; the losses established 6
        months after the due date of a stun remaining unpaid .
     B. Insolvency of the debtor, the loss is immediately established .
     C. A general moratorium decreed by the Government of the buyer 's
         country or by that of a third country throu^i which payment
        must be effected ; the loss is established 4 months after the
        due date of a sum remaining unpaid .
  D. Any other measure or decision of the Government of a foreign
      country which prevents , performance of* .'the • contract ; the loss
      is established 4 months after the due d£te of a sum remaining
      unpaid .
  E. Political events-, economic difficulties arising outside ....*
      or legislative or administrative measures taken outside              *
      which prevent or delay the transfer of funds paid over in
      respect of the . contract ; the loss is established 4 months after
      the due date of a sum remaining unpaid , or 4 months after the
      payment of funds of the debtor is private .
  F. Legal provisions adopted in the country of the buyer declaring
      payments made by the buyer to be valid discharge of the debt ,
      notwithstanding that as a result of fluctuations in exchange
      rates such payments , when converted into the currency of the
      contract, no longer cover the amount of the debt at the date
      of transfer ; the loss is established as soon as it is confirmed .
   The country of the Insurer
 ---pagebreak--- G.      The occurrence outside .....     of one of the following events :
        war ( including civil war, hostilities , rebellion and insurrection),
        revolution or riot , cyclone , flood, earthquake , volcanic eruption
        or tital wave ; the loss is established 4 months after the due date
        of a sura remaining unpaid .
H.      A measure of decision of the Government of ...•••••.* which
        prohibits or restricts the export of the goods , insomuch as
        this measure or decision falls within the context of international
        affairs ; the loss is established 4 months after the due date of
        a sum remaining unpaid .
IV .    EFFECTIVE DATS AFP EXTENT OF THE GUARA1TTS3
     1 . Effective date . •"                ..
      •   The manufacturing risk shall become effective at the
          later of the following dates :
           ( i)' the " date of entry into effect of the contract
           ( ii ) the date when all conditions precedent to liability
                  stipulated by the Insurer have been fulfilled .
          When ( ii ) applies the guarantee can be applied retrospectively
          to any costs incurred by the Insured between ( i ) and ( ii ).
          The credit risk shall be'come effective when the Insured has
          fulfilled all his contractual obligations ; however when , under
          the terms of the contract , the Insured has an entitlement to
          payment at a specified due date in respect of partial deliveries
          or the rendering of part of the services , the credit risk may
          become effective at the date of such entitlement .
   The country of the Insurer
 ---pagebreak---                                         - 4 -
2 . Extent of the guarantee
    Cover for the manufacturing and credit risks as set out in this
    statement of common principles must not be given for losses arising:
          ( i ) as a consequence of the calling of a performance bond ;
        ( ii ) from the inability of the Insured to recover equipment
                 owned by him and not forming part of the contract but
                 used in the buyer 's country for the execution of the
                 contract ;
      ( iii ) from exchange losses consequent upon a fall in the
                 exchange rate of the currency in which the contract
                 is denominated between the effective date of the
                  guarantee ' "arid the date on" "which the exporter is paid
               • by the buyer or is . paid 'a'- e-laiin ' "by the Insurer .
    It will not be. a breach of ( i ), ( ii ) and ( iii ) above if the
    loss is covered' by a special facility and subject to payment
    of a supplementary premium ."
                        • -
    ( a) Manufacturing Risk
           Liability in respect of the Manufacturing Risk must , within the
           limit of the total contract amount , be restricted to costs
           incurred by the Insured in manufacturing the goods or performing
           his contractual obligations .
           It ceases in relation to any goods or services which become
           eligible for credit risk cover once they become so eligible .
    ( b ) Credit Risk
           Liability in respect of the Credit Risk must be limited to the
           principal sums and interest accruing up to the due date of
           payment owed to the Insured under the contract .
 ---pagebreak--- ( c) Additional Costa
       Liability may be extended to additional costs incurred by the
       Insured with approval of the Insurer following a loss or threat
       of loss to minimise that loss .
       In particular when manufacture of the goods or performance of
       the conditions of the contract has "been continued in accordance
      with a decision of the Insurer in the circumstances described
       in III and one of the causes of loss as defined in III does not
      ultimately arise , liability may he extended to the additional
       costs incurred as a consequence of the decision of the Insurer that
      manufacture or performance shall continue .
      Additional costs incurred as a consequence to the provisional
      provisional interuption of the execution of the business may
      "be covered , no matter the length "of interuption .-
. Percentage guaranteed
   The guaranteed percentage must not exceed 95$*
   INIMITIES •
   General Principles
   The following general principles of cover must he observed :
   ( a) The Insured must act at all times with due diligence as
         regards the conclusion and performance of the guaranteed
         contract
 ---pagebreak---      Cover must not be given for losses arising
     - where there is a dispute over the performance of the
        contract until that dispute has "been resolved to the
        satisfaction of the Insurer ;
     - "by reason of the failure of the Insured or "by any person
        acting on his behalf or by a co-contractor or sub-contractor
        to fulfil any of the terms and conditions of the contract
        or to comply with any laws or regulations that may apply in
        either the country of the Insured or of the buyer .
     - by reason of the failure to obtain any necessary authorities
        for the import of the goods or performance of the conditions
        of the contract in force at the date when the Insurer 's
        liability commences .
c) Similarly cover must- not be given for losses arising from
     errors by the Insured in the development , design or
     performance of the contract and which would have arisen
     irrespective of whether or not an event constituting " a
     cause of loss had occurred .
   Calculation of loss for manufacturing risk
   Guaranteed loss must not exceed the difference between :
   ( i ) total allowable costs and expenses as defined in IV2a
         and 2 Cj
 ( ii ) the total of the payments received by and amounts credited
         to the Insured - with the exception of those relating to
         goods and services for which the guarantee of the credit
         risk has already taken effect – ( for example , suns received
         by the Insured , the pr 3eds from the resale or alternative
         use of goods not deliv : - 1 , the proceeds of the realisation
         of securities , amounts wnich the Insured has received or is
         entitled to receive by wr.y of set-off, indemnity payments
         of any kind ) and generally any financial advantage that
         has accrued to the Insured as a result of the occurrence „
         of the loss .
 ---pagebreak---     the costs | payments and amounts credited as described in
    l(i) and ( ii ) above which are effected in foreign currencies
    shall be converted into the national currency at the rate ruling
    on the date when the costs are incurred or the payments and
      amounts received .
2 . Calculation of loss for credit risk
    Guaranteed loss must not exceed the difference between :-
    ( a) total sums due as defined in IV 2b but not received by
         the Insured ;
    (b) - the total of the payments received by and amounts credited
           to the Insured - with the exception of .those relating to
           goods and services to which the guarantee of the manuf­
           acturing risk still applies - ( for example , sums received
           by the Insured as payments on account , the proceeds of the
           realisation of securities, amounts which the Insured has
           received or is entitled to receive by way of compensation,
           indemnity payments of any kind );
         - any expenses saved by the Insured or any financial
           advantage that has accrued to the Insured as a result
           of the occurrence of the loss .
When the contract provides for payment in a foreign currency ,
the amounts referred to in ( a) and ( b) above which are denominated
in such a currency shall be converted into the currency of the
country of the Insured at the rate ruling on the date of expiry
of the qualifying period for the claim .
The conversion rate used must not , however, exceed the rate ruling
on the "date when the contract was- signed or was concluded .
 ---pagebreak---                                  - 8 -
    3.      Calculation of loss for additional cdsts
           Additional costs as defined in IV ( 2c ) may be indemnified on
           presentation of evidence of those costs .
           If such costs are incurred in a foreign currency they shall
           "be converted into the currency of the country of the Insured
           at the rate ruling on the date they were incurred .
    4.     Allocation of payments and the proceeds of the realisation
            of securities
           The general principle for the allocation of payments and the
           proceeds of the realisation of securities insofar as it
             affects calculation of the guaranteed portion of the loss
             and the allocation of recoveries "between the Insurer and
             the Insured shall be that such payments and proceeds shall
             not be allocated to unguaranteed losses in preference to
             guaranteed losses .
    5 '.   Recoveries
           Recoveries shall be understood to comprise all suras recovered
           by the Insured or anyone acting on his behalf from the buyer
           or any other source subsequent to the payment of a claim and
           attributed to the related guaranteed contract .
           They shall be shared betveen the Insured and the Insurer , after
           conversion if necessary into the currency of the country of
           the Insurer at the exchange rate ruling on the date when they
             are received by the Insured in the same proportion as loss
             has been borne .
VI .     PREMIUM
   1.     The conclusion of the insurance contract shall render the
          Insured liable to a premium .
   2 . All premia paid shall be non-returnable . However, if the Insured
          is able to prove that the guarantee of the risk covered has not
          become effective in the sense of JlV, the credit insurer nay
          repay part of the premium .
 ---pagebreak---                                                        ANNEX II
COMMON PRINCIPLES TO BE APPLIED TO THE ENDORSEMENT OP THE GUARANTEE
( calling of a bond guaranteeing the execution of the insured contract )
The oommon principles of this Annex shall apply when the guarantee , to
which the common principles set out in Annex 1 apply, oovers the calling
of bonds required by the terms of the contract .
I.    SUBJECT OF THE GUARANTEE .
      The guarantee shall be extended to cover losses due to the calling
      of the bond :
      ( a) in the event of the termination or the interruption of the
            contract before the . completion 'of the contractual obligations
            of the Insured , du-e to one of the events covered in the
            insurance policy,
      (b) • in the event of the unfair calling of the bond .
            V' •.
II .  INTEEOJITIES ' - GENERAL PRINCIPLES
      1 . The maximum amount payable by the credit insurer in respect
           of the calling of a bond may not exceed 955® of "the amount
           guaranteed .
      2 . The loss shall be paid under the endorsement to the guarantee :
           – in the case of para ( a) of Article I of this Annex, at the
              same date as the date of payment of the loss under the
              guarantee .
           - in the case of para (b) of Article 1 of this Annex, at
              the minimum 4 months after the date of the calling of the
              bond .
 ---pagebreak--- III . GENERAL CONDITIONS
      1.  The endorsement to the guarantee shall render the Insured liable
          to a premium .
      2.  The provisions of Annex I not set out in this Annex II shall
          apply equally to the endorsement .
 ---pagebreak---                                                      ANNEX III
I.   COMMON PRINCIPLES TO BE APPLIED TO THE DIRECT GUARANTEE TO BANKS
     The field of application of the common principles shall cover the direct
     guarantee to banks relating to export transactions to third countries
     ( sale of goods or provisions of services ) effected on the basis of a
     supplier credit , inasmuch as
     - these transactions are insured "by a credit insurance policy covering
        both political and commercial risks ;
     - these transactions have a minimum credit period of 2 years ;
     - the sum due to the exporter is evidenced by bills or notes
        issued or accepted by the buyer .
II . GENERAL PRINCIPLES ' "                      " .
     The bank financing an export transaction insured either by a specific
     a comprehensive or a selected transaction policy, may obtain a direct
     guarantee in respect of the sums due frorti the foreign buyer or ,
     within the limit of the amount of the said sums due , the sums due
     from the exporter as a result of the financing which has been
     extended to him for that transaction .
     The direct guarantee to the bank may be granted by a credit
     insurance organisation, acting for the account or with the support
     of the State , or by an institution deriving through public support ,
     whatever its form , a mandate to give a guarantee or credit
     whether or not related to an export insurance policy .
 ---pagebreak--- III .   EXTENT OP THE GUARANTEE
       1.   The direct guarantee to a bank shall cover the risk of non-
            payment by the foreign debtor , within the limit of the amount
            of the credit ( principal and interest ) extended by the bank
            to the exporter .
       2.   The guarantee may be unconditional except where the loss is
            due to the fault or negligence of the bank, the credit insurer
            or the institution which has given the guarantee to the bank
            shall undertake not to apply to the bank the exceptions which
            would have been applied to the exporter .
       3 . The guarantee may cover lOO/o of the value of principal and
            interest .
       4 . The qualifying period for claims shall be a minimum of 3 months .
IV . EFFECTIVE DATS OP THE GUARANTEE
     The direct guarantee may become effective :
     - as soon as i;he goods have been despatched ; or
     - as soon as the goods have been despatched and the exporter has
        received in exchange of documents , the accepted bills related to
        the said goods ; or
     - when the export contract stipulates that the buyer has the right to
        refuse the delivered goods , as soon as the goods have been formally
       accepted by the buyer and , without prejudice to any guarantee
        contained in the contract , have been accepted as being in accordance
       with the specifications of the contract .
 ---pagebreak---                             - 3 -
V. PRINCIPLES OP ITTO®!NTFI CATION
   If the loss is due to the fault or the negligence of the bank no
   indemnity shall be paid to the bank .
   When the contract provides for payment in a foreign currency, the
   loss ehall be calculated on the basis of the lower of the following
   two conversion rates :
   - rate ruling at the end of the qualifying period of the claim ,
   – rate ruling at the date of contract .
   Payment of a claim to the bank shall not prejudice the right of
   the credit insurer or the institution which has granted the said
   guarantee to request the exporter to exercise on its behalf the
   rights and guarantees which it holds against the buyer .
VI RECOURSE .
   The giving of a direct guarantee to a bank shall not affect the
   terms of guarantee issued to the exporter .
   The insurer shall have recourse to the exporter , to the full extent
   to which the ihsurer is not liable under the tenns of the guarantee
   issued to the exporter .
   When only political risks are covered , the credit insurer or the
   institution which has given the guarantee to the bank may delay
   taking recourse up to the date appearing in the exporter 's policy
   at which the qualifying period for claims ends .
 ---pagebreak---         I
                                 - 4 -
      In the event of the right of recourse being exercised the exporter
      shall repay the amounts demanded of him plus interest calculated
      from the date of payment of claim to the hank .
VII . PREMIUM
      The giving of a direct guarantee to the hank shall render the
      exporter liable to a premium to the credit insurer or to the
      institution which has given the guarantee .
 ---pagebreak---                                                          ANNEX IV
I.   COMMON -PRINCIPLES TO BE APPLIED TO THE FINANCIAL GUARANTEE
     1.   The field of application of common principles shall cover the
          guarantee or credits defined in para 2 below extended to the
          buyer or the borrower by a bank established in the country of
          the credit insurer or of the institution which has given the
          guarantee .
     2.   The loan agreement shall provide exclusively for the direct
          payment by the bank to the exporter of stuns due in respect
          of the export contract to which the latter is party.
II .  EXTENT OF THE GUARANTEE
     1.   The financial guarantee shall relate to the indemnification of
          the bank to a maximum of 100$ of the losses it ni^it encounter
          under the loan' agreement in the event of, this- occurence of the
          risk covered .
     2.   The risk covered shall consist of the non-recovery by the bank
          of all or part of the stuns due to it within 3 months of their
          due date .
     3.   The guarantee may be unconditional except where the loss is
          due to the- fault or negligence of the bank .
 ---pagebreak---                                  - 2 -
III . EFFECTIVE DATE AND EXTENT OP THE GUARANTEE
     ( l ) Effective date
     The guarantee shall become effective as and when the conditions
     precedent set out in the loan agreement have been fulfilled .
     ( 2 ) Extent of the guarantee
     The guarantee shall relate exclusively to the amount of the sums
     due to the bank ( principal and interest ) which the buyer or borrower
     is committed to repay to the bank by virtue of the loan agreement .
IV .   PRINCIPLES OP DTDEMHIFICATIOII
       If the loss is'due to the fault or the negligence of the bank
       no indemnity shall be paid to the bank .             • * '
      .When the contract provides for payment in a foreign currency ,
       the loss: shall be calculated on the basis of the lower of the
       following tWo conversion rates :
       - rate ruling at the end of the qualifying period of the claim ,
       - rate ruling at the date of contract .
V.   RECOURSE
     The giving of a financial guarantee shall not affect the terms
     of the exporter 's own insurance .
     The credit insurer has a right to exercise recourse to the exporter
     in the event of non-recovery by the bank if all or part of its
     debt is due to a failure by the exporter in the execution of the
     contract .
vi . PRUIIUI :
     The giving of a financial guarantee shall render the exporter
     liable to a premium to the credit insurer or to the institution
     which has given the guarr.-' bee .
 ---pagebreak---                                                          ANNEX V
BEnaJTITTOÎTS
A.    The term "Public "buyer" shall be defined as follows
      ( a) a buyer who , in one form or another, represents the public
            pov/er itself, ( States , regional or local authorities having
            a subordinate status such as provinces or local government
            units ; public undertakings ) and who cannot , either judically
            or administratively, be made insolvent .
      (b ) The following shall be considered as public buyers ;
            – State trading corporations
            - public corporations
            - and organisations in the public sector financed in whole
              by or fully accountable to any of ( a) above .
B.    "Insolvency" shall be deemed to occur when -
      1 . ' The buyer is declared bankrupt ;- . or
   .  2 . • If the buyer is a company , an 'order for winding-up has been
 0
            made on the grounds that the- company xs insolvent ; or
      3.    An order for administration of the buyer 's affairs has been
            made by a court for the benefit of his creditors ; or
      4.    In the course of execution of a judgement , the levy of execution
            has not satisfied the debt either in full or in part ; or
      5.    The buyer has made a valid assignment , composition or other
            arrangement for the benefit of his creditors generally ; or
      6.    The Insured shows , to the satisfaction of the Insurer , that
            the - financial state of the buyer is such that even partial
            payment is 'unlikely and that to enforce judgment or to request
            thaf'the buyer be declared bankrupt or wound up would have
            no other foreseeable result than one out of proportion to
            the costs of the proceedings ;- or
   7 . Such conditions exist as are by any other system of law substantiall
         equivalent in effect to any of the foregoing conditions .
 ---pagebreak---        PROPOSAL  FOR  A  COUNCIL  DIRECTIVE
repealing the Council Directives of 27 October 1970
authorizing derogations from the provisions of the
common credit insurance policies for medium-and
long-term transactions with public and private buyers
 ---pagebreak---                PROPOSAL  FOR  A  COUNCIL   DIRECTIVE
       repealing the Council Directives of 27 October 1970
       authorizing derogations from the provisions of the
       common credit insurance policies for medium-and
       long-term transactions with public and private buyers
THE COUNCIL OP THE EUROPEAN COMMUNITIES ,
Having regard to the Treaty establishing the European Economio Community
and in particular Article 113 thereof,
Having regard to the •proposal from the Commission, v
Whereas the repeal of the Council . Directives' of 27 October 1970 on the
adoption of common credit insurance policies for medium-and long-term
transactions with public and private buyers'1" renders inoperative the
unpublished Council Directives of the same date authorizing derogations
from the provisions of the said common policies ;
Whereas the unpublished Directives in question should therefore be
 abrogated,
HAS ADOPTED THIS DIRECTIVE :
1 Directivos 70/509/EEC and 70/510/EEC, OJ No L 254, 23.11.1970.
 ---pagebreak---                           Article 1
The Counoil Directives of 27 October 1970 authorizing derogations from
the provisions of the Council Directives of 27 October 1970 ( 70/509/SBC
and 70/510/EEC) are hereby abrogated.
                          Article 2
This Directive is addressed to the Member States .
Done at Brussels ,
                                    Por the Council
                                    The President