CELEX: 52022PC0063
Language: en
Date: 2022-02-24
Title: Proposal for a COUNCIL DECISION on the position to be taken on behalf of the European Union in the written procedure by the Participants to the Arrangement on Officially Supported Export Credits amending Annex IV

EUROPEAN
                             COMMISSION
                                                      Brussels, 24.2.2022
                                                      COM(2022) 63 final
                                                      2022/0043 (NLE)
                                         Proposal for a
                                    COUNCIL DECISION
   on the position to be taken on behalf of the European Union in the written procedure by
   the Participants to the Arrangement on Officially Supported Export Credits amending
                                           Annex IV
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 ---pagebreak---                                      EXPLANATORY MEMORANDUM
   1.         SUBJECT MATTER OF THE PROPOSAL
   This proposal concerns a decision establishing the position to be taken on the European
   Union's behalf by the Commission in the context of an amendment to the OECD Arrangement
   on Officially Supported Export Credits limited to its Annex IV, the Sector Understanding on
   Export Credits for Renewable Energy, Climate Change Mitigation and Adaptation, and Water
   Projects. Annex IV is also referred to as Climate Change Sector Understanding, or CCSU.
   The amendment under discussion at the level of the Participants to the Arrangement focuses
   more specifically on Appendix III of the CCSU, which is the appendix defining the eligibility
   criteria for climate change adaptation projects. It follows a proposal from the European Union
   seeking to make those criteria more efficient in identifying the relevant adaptation projects.
   The European Union should continue demonstrating its strong ambitions for climate action,
   and prepare to take a position on a possible agreement that could be reached before the next
   meeting of the Participants in March 2022.
   2.         CONTEXT OF THE PROPOSAL
   2.1.       The Arrangement on Officially Supported Export Credits
   The Arrangement is a gentlemen's agreement between the EU, the US, Canada, Japan, Korea,
   Norway, Switzerland, Australia, New Zealand, Turkey and the United Kingdom, which
   provides a framework for the orderly use of officially supported export credits. In practice,
   this means establishing a level playing field (whereby competition is based on the price and
   quality of the exported goods and services and not on the financial terms provided), while
   working to eliminate subsidies and trade distortions related to officially supported export
   credits. The Arrangement entered into force in April 1978, it is of indefinite duration and
   although it receives the administrative support of the OECD Secretariat, is not an OECD Act 1.
   The Arrangement is subject to regular updates, taking into account financial market and
   policy developments affecting the provision of officially supported export credits. The
   Arrangement has been transposed, and hence been made legally binding in the EU by
   Regulation (EU) No 1233/2011 of the European Parliament and of the Council2 3. Revisions
   of the terms and conditions of the Arrangement are incorporated into EU law through
   delegated Acts pursuant to Article 2 of this Regulation.
   2.2.       The Participants to the Arrangement on Officially Supported Export Credits
   The European Commission represents the Union in meetings of the Participants to the
   Arrangement, as well as in the written procedures for decision-making by the Participants to
   the Arrangement. Decisions on all amendments of the Arrangement are taken by consensus.
   The position of the Union is adopted by the Council and is discussed by Member States in the
   Council Working Group on Export Credits4.
   1
            As defined in Article 5 of the OECD Convention.
   2
            Regulation (EU) No 1233/2011 of the European Parliament and of the Council of 16 November 2011
            on the application of certain guidelines in the field of officially supported export credits and repealing
            Council Decisions 2001/76/EC and 2001/77/EC (OJ L 326, 8.12.2011, p. 45).
   3
            In the past, earlier versions of the OECD Arrangement were transposed into EU law through Council
            Decisions.
   4
            Council Decision setting up a Policy Co-ordination Group for Credit Insurance, Credit Guarantees and
            Financial Credits, (OJ 66, 27.10.1960, p. 1339).
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 ---pagebreak---    2.3.      The envisaged act of the Participants to the CCSU
   An update of the eligibility criteria contained in Appendix III of the CCSU is under discussion
   at the level of the Participants following a proposal from the European Union submitted on 16
   November 2021.
   The European Union, in its proposal, both proposed to make the adaptation section (Appendix
   III) a permanent part of the Arrangement, given the relevance of boosting climate finance, and
   to update the eligibility criteria for adaptation projects contained in Appendix III. The update
   proposed would move the criteria for identifying adaptation projects closer to some standards
   used by the development banks, as experience proves that current criteria – that require
   adaptation to be the principal objective of a project – are not fit for export credit transactions,
   that would usually also involve commercial activities to generate a cash flow. The proposed
   criteria would capture partial adaptation projects, with CCSU conditions then only applying to
   the adaptive share of a project.
   The proposal to update Appendix III was discussed on 1 December 2021 in the 151th meeting
   of the Participants and received support. One Participant asked that new criteria would be
   agreed with a sunset clause allowing for a reassessment of their appropriateness in due time.
   Given the support, the chairman proposed that the European Union would revise its proposal
   taking into consideration the drafting suggestions that other Participants would send by end
   2021, with a view to launching a written procedure at the beginning of 2022 to adopt it.
   As such, the envisaged act of the Participants is to decide on amending the eligibility criteria
   for adaptation projects in the CCSU by written procedure in the beginning of 2022.
   3.        POSITION TO BE TAKEN ON THE UNION'S BEHALF
   The European Union proposal, which the Participants broadly supported, was first discussed
   and adopted in the Council Working Group on Export Credits.
   The position to be taken on the Union’s behalf is annexed to this decision, and is based on the
   European Union proposal and the outcome of the discussion on 1 December 2021.
   The proposed position consists in updating the criteria for adaptation projects in Appendix III
   of the CCSU, using as a source of inspiration the Common Principles for Climate Change
   Adaptation Finance Tracking developed by some multilateral development banks. As the new
   criteria also capture partial adaptation projects, the proposed update of Appendix III leads to
   some changes in some articles of the CCSU, to reflect this.
   As the positive momentum at the OECD should be preserved, the European Union would seek
   agreement as soon as possible to make this relevant update to the CCSU.
   4.        LEGAL BASIS
   4.1.      Procedural legal basis
   4.1.1.    Principles
   Article 218(9) of the Treaty on the Functioning of the European Union (TFEU) provides for
   decisions establishing ‘the positions to be adopted on the Union’s behalf in a body set up by
   an agreement, when that body is called upon to adopt acts having legal effects, with the
   exception of acts supplementing or amending the institutional framework of the agreement.’
   The concept of ‘acts having legal effects’ includes acts that have legal effects by virtue of the
   rules of international law governing the body in question. It also includes instruments that do
EN                                                   2                                                 EN
 ---pagebreak---    not have a binding effect under international law, but that are ‘capable of decisively
   influencing the content of the legislation adopted by the EU legislature’5.
   4.1.2.    Application to the present case
   The envisaged act is capable of decisively influencing the content of EU legislation, namely
   Regulation (EU) No 1233/2011 of the European Parliament and of the Council of 16
   November 2011 on the application of certain guidelines in the field of officially supported
   export credits and repealing Council Decisions 2001/76/EC and 2001/77/EC. This is because
   of Article 2 of this Regulation, which states that "[t]he Commission shall adopt delegated acts
   in accordance with Article 3 to amend Annex II as a result of amendments to the guidelines
   agreed by the Participants to the Arrangement". This includes amendments of annexes to the
   Arrangement.
   Therefore, the procedural legal basis for the proposed decision is Article 218(9) TFEU.
   4.2.      Substantive legal basis
   4.2.1.    Principles
   The substantive legal basis for a decision under Article 218(9) TFEU depends primarily on
   the objective and content of the envisaged act in respect of which a position is taken on the
   Union's behalf. If the envisaged act pursues two aims or has two components and if one of
   those aims or components is identifiable as the main one, whereas the other is merely
   incidental, the decision under Article 218(9) TFEU must be founded on a single substantive
   legal basis, namely that required by the main or predominant aim or component.
   4.2.2.    Application to the present case
   The main objective and content of the envisaged act relate to export credits, which is within
   the scope of the common commercial policy. Therefore, the substantive legal basis of the
   proposed decision is Article 207 TFEU.
   4.3.      Conclusion
   The legal basis of the proposed decision should be Article 207(4), first subparagraph, TEFU
   in conjunction with Article 218(9) TFEU.
   5
           Judgment of the Court of Justice of 7 October 2014, Germany v Council, C-399/12,
           ECLI:EU:C:2014:2258, paragraphs 61 to 64.
EN                                                   3                                             EN
 ---pagebreak---                                                                    2022/0043 (NLE)
                                                   Proposal for a
                                            COUNCIL DECISION
    on the position to be taken on behalf of the European Union in the written procedure by
     the Participants to the Arrangement on Officially Supported Export Credits amending
                                                     Annex IV
   THE COUNCIL OF THE EUROPEAN UNION,
   Having regard to the Treaty on the Functioning of the European Union, and in particular
   Article 207in conjunction with Article 218(9) thereof,
   Having regard to the proposal from the European Commission,
   Whereas:
   (1)     The guidelines contained in the Arrangement on Officially Supported Export Credits
           (the ‘Arrangement’) have been transposed, and hence been made legally binding in the
           Union by virtue of Regulation (EU) No 1233/2011 of the European Parliament and of
           the Council6.
   (2)     In accordance with Article 9 of Annex IV of the Arrangement, the Participants shall
           undertake a review of its Appendix III by the end of 2020, with a view to assessing the
           international initiatives related to adaptation, market conditions, and the body of
           experience developed from the notification process to determine if the definitions,
           project criteria, terms and conditions should be continued and or amended.
   (3)     The participants are to decide by written procedure on an envisaged decision to amend
           Appendix III of Annex IV to the Arrangement.
   (4)     The envisaged decision should be in line with the international commitments of the
           European Union pursuant to the Paris Agreement and the Union’s climate policy.
   (5)     It is appropriate to establish the position to be taken on the Union's behalf regarding a
           written procedure of the Participants to the Arrangement, as the envisaged decision of
           the Participants to the Arrangement will be binding on the Union and capable of
           decisively influencing the content of Union law, by virtue of Article 2 of Regulation
           (EU) No 1233/2011,
   HAS ADOPTED THIS DECISION:
                                                      Article 1
   The position to be taken on the Union's behalf regarding the adoption by the participants of a
   decision by written procedure amending Annex IV of the Arrangement on Officially
   Supported Export Credits is set out in the Annex.
   6
           Regulation (EU) No 1233/2011 of the European Parliament and of the Council of 16 November 2011
           on the application of certain guidelines in the field of officially supported export credits and repealing
           Council Decisions 2001/76/EC and 2001/77/EC (OJ L 326, 8.12.2011, p. 45) (‘Regulation (EU) No
           1233/2011’).
EN                                                         4                                                          EN
 ---pagebreak---                                               Article 2
   Minor modifications to the proposed amendments to Annex IV of the Arrangement on
   Officially Supported Export Credits set out in the Annex, may be agreed to by the
   representatives of the Union without further decision of the Council.
                                              Article 3
   This Decision is addressed to the Commission.
   Done at Brussels,
                                                For the Council
                                                The President
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 ---documentbreak---                              EUROPEAN
                             COMMISSION
                                                     Brussels, 24.2.2022
                                                     COM(2022) 63 final
                                                     ANNEX
                                            ANNEX
                                              to the
                                Proposal for a Council Decision
   on the position to be taken on behalf of the European Union in the written procedure by
   the Participants to the Arrangement on Officially Supported Export Credits amending
                                           Annex IV
EN                                                                                         EN
 ---pagebreak---                                                  ANNEX
                                               PROPOSAL
   The position of the European Union is to support the following amendments to Annex IV of
   the Arrangement on Officially Supported Export Credits:
   Article 3 of Annex IV should be replaced with:
            “3. SCOPE OF APPLICATION FOR CLIMATE CHANGE ADAPTATION
            PROJECTS ELIGIBLE TO APPENDIX III
                   a)    This Sector Understanding sets out the financial terms and conditions
                         that apply to officially supported export credits relating to contracts for
                         projects with an adaptive share that meet the eligibility criteria set out in
                         Appendix III of this Sector Understanding.
                   b)    Such contracts shall relate to the export of complete projects or parts
                         thereof, comprising all components, equipment, materials and services
                         (including the training of personnel) directly required for the execution
                         and commissioning of an identifiable project, providing that:
                         1)     The conditions set out in Appendix III are met;
                         2)     The terms and conditions provided shall be extended only to
                                address specific financial disadvantages encountered by a project,
                                and shall be based on the individual financial needs and specific
                                market conditions of each project.
                   c)    This Sector Understanding applies to the modernisation of existing
                         projects, to take into consideration adaptation concerns, in cases where
                         the economic life of the project is likely to be extended by at least the
                         repayment period to be awarded. If this criterion is not met, the terms of
                         the Arrangement apply.”
   Article 5 d) of Annex IV should be replaced with:
                   “d)   For officially supported export credits relating to contracts with an
                         adaptive share, as defined in Appendix III, the maximum repayment term
                         is 15 years for the component of the project related to climate change
                         adaptation. The terms of the Arrangement apply to the remaining project
                         share.”
   Article 9 d) and e) of Annex IV should be replaced with:
                   “d)   The Participants shall undertake a review of Appendix III of this Sector
                         Understanding by the end of 2027, with a view to assessing the
                         international initiatives related to adaptation, market conditions, and the
                         body of experience developed from the notification process to determine
                         if the definitions, project criteria, terms and conditions should be
                         continued or amended.
                   e)    After 31 December 2027, the terms and conditions related to Appendix
                         III shall be discontinued unless the Participants agree otherwise.”
   Appendix III of Annex IV should be replaced with:
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 ---pagebreak---       “APPENDIX III: ELIGIBILITY                        CRITERIA          FOR      CLIMATE CHANGE
      ADAPTATION PROJECTS
      The adaptive share are those project activities (projects, project components,
      elements or shares of projects) that are clearly linked to reducing vulnerability to
      climate change.
      The adaptive share of a project is eligible for the financial terms and conditions set
      out in this Sector Understanding if:
            a)      It substantially contributes to reducing the vulnerability to climate change
                    identified in the project area. This should be explicitly indicated and
                    explained as such in the project plan and supporting documents, as being
                    fundamental to the design of the project. The project documentation
                    should articulate a clear and direct link between the climate vulnerability
                    context and the specific project activities.
            b)      The project’s proposal shall include an explicit statement of intent to
                    address climate vulnerability. This shall be supported by an analysis of
                    how the project’s adaptation-related activities will directly address
                    climate vulnerability and/or strengthen the resilience of communities,
                    goods, or ecosystems to climate change.
            c)      For projects relating to contracts of a value of at least SDR 10 million1,
                    there is an independent third-party review conducted on the project,
                    either separately or as an integral part of the project documentation. The
                    review is publicly available, such as published on the project website or
                    the website of the relevant public body. The review shall evaluate the
                    specific and relevant climate change-related risks and vulnerabilities and
                    how the proposed measures contained within the project will directly
                    address them.”
   1
     This amount refers to the entire project value, not limited to the adaptive share.
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