Article 1 Subject matter
1. This Regulation establishes the Brexit Adjustment Reserve (the ‘Reserve’). 2. It lays down the objectives of the Reserve, its resources, the forms of Union funding and rules on its implementation, including on the eligibility of expenditure, management and control, and financial management.
Article 2 Objectives
1. The Reserve shall provide support to counter the adverse economic, social, territorial and, where appropriate, environmental consequences of the withdrawal of the United Kingdom from the Union in Member States, including their regions and local communities, and sectors, in particular in those that are most adversely affected by the withdrawal, and to mitigate the related negative impact on the economic, social and territorial cohesion. 2. The objectives of the Reserve shall be pursued in line with the objective of promoting sustainable development as set out in Article 11 TFEU, taking into account the United Nations Sustainable Development Goals, the Paris Agreement and the ‘do no significant harm’ principle.
Article 3 Definitions
For the purposes of this Regulation, the following definitions apply: (1) ‘reference period’ means the reference period referred to in Article 63(5), point (a), of the Financial Regulation, which shall be from 1 January 2020 to 31 December 2023; (2) ‘applicable law’ means Union law and the national law relating to its application; (3) ‘irregularity’ means any breach of applicable law resulting from an act or omission by any public or private entity involved in the implementation of the financial contribution from the Reserve, including Member State authorities, which has, or would have, the effect of prejudicing the Union budget by charging an unjustified item of expenditure to the Union budget; (4) ‘systemic irregularity’ means any irregularity, which may be of a recurring nature, with a high probability of occurrence in similar types of measures; (5) ‘total errors’ means the sum of the projected random errors and, if applicable, delimited systemic errors and uncorrected anomalous errors; (6) ‘total error rate’ means total errors divided by the audit population; (7) ‘residual error rate’ means the total errors less the financial corrections applied by the Member State to reduce the risks identified by the independent audit body, divided by the expenditure to be declared in the application for a financial contribution from the Reserve; (8) ‘relocation’ means a transfer of the same or similar activity or part thereof within the meaning of Article 2, point (61a), of Commission Regulation (EU) No 651/2014 ( 20 ) ; (9) ‘territories with special status’, in the context of this Regulation, means, where appropriate, the British Overseas Territories and the Crown Dependencies.
Article 4 Geographical coverage and resources of the Reserve
1. All Member States shall be eligible for support from the Reserve. 2. The maximum resources of the Reserve shall be EUR 5 470 435 000 in current prices. 3. The resources referred to in paragraph 2 of this Article shall be provisionally allocated, in both commitment and payment appropriations, pursuant to the methodology set out in Annex I. They shall be made available as follows: (a) a pre-financing amount of EUR 4 321 749 000 in current prices shall be made available and paid in three instalments of EUR 1 697 933 000 in 2021, EUR 1 298 919 000 in 2022 and EUR 1 324 897 000 in 2023 in accordance with Article 9; (b) a remaining provisionally allocated amount of EUR 1 148 686 000 in current prices shall be made available in 2025 in accordance with Article 12. The amounts referred to in the first subparagraph, point (a), of this paragraph shall be considered pre-financing within the meaning of Article 115(2), point (b)(i), of the Financial Regulation. 4. Member States whose provisional allocation from the resources of the Reserve includes an amount exceeding EUR 10 million determined on the basis of the factor linked to fish caught in the United Kingdom’s exclusive economic zone shall spend at least 50 % of that amount or 7 % of their provisionally allocated amount, whichever is lower, to support local and regional coastal communities, including the fisheries sector, in particular the small-scale coastal fisheries sector dependent on fishing activities. Where the provisional allocation is not entirely used, the amounts required to be spent for the purpose referred to in the first subparagraph shall be proportionately reduced. Where the amount required to be spent to support local and regional coastal communities is not entirely used for that purpose, 50 % of the amount unused shall be deducted in the calculation of the total accepted amount. The amount of eligible expenditure accepted, as referred to in Article 12(2), point (a), shall specify, where applicable, the accepted amount of expenditure to support local and regional coastal communities. The application for a financial contribution from the Reserve shall include a breakdown of the expenditure incurred and paid for measures supporting local and regional coastal communities, in accordance with Annex II. 5. The Commission shall, by means of an implementing act, set out the provisional amounts allocated to each Member State based on the criteria set out in Annex I. That implementing act shall also set out the minimum amount of resources that shall be spent in accordance with paragraph 4.
Article 5 Eligibility
1. The financial contribution from the Reserve shall only support measures specifically carried out by Member States, including at regional and local levels, to contribute to the objectives set out in Article 2 and may cover in particular the following: (a) measures to support private and public businesses, in particular SMEs, the self-employed, local communities and organisations adversely affected by the withdrawal of the United Kingdom from the Union; (b) measures to support the economic sectors most adversely affected by the withdrawal of the United Kingdom from the Union; (c) measures to support businesses, regional and local communities and organisations, including small-scale coastal fisheries, dependent on fishing activities in United Kingdom waters, in waters of territories with special status or in waters covered by fisheries agreements with coastal states where fishing opportunities for Union fleets have been reduced as a result of the United Kingdom’s withdrawal from the Union; (d) measures to support job creation and protection, including green jobs, short-time work schemes, re-skilling and training in sectors most adversely affected by the withdrawal of the United Kingdom from the Union; (e) measures to ensure the functioning of border, customs, sanitary and phytosanitary, security and fisheries controls, as well as the collection of indirect taxation, including additional personnel and their training, and infrastructure; (f) measures to facilitate regimes for certification and authorisation of products, to assist in meeting establishment requirements, to facilitate labelling and marking, for example for safety, health and environmental standards, as well as to assist in mutual recognition; (g) measures for communication, information and awareness-raising of citizens and businesses about changes to their rights and obligations stemming from the withdrawal of the United Kingdom from the Union; (h) measures aimed at the reintegration of Union citizens as well as persons having the right to reside on the territory of the Union who left the United Kingdom, as a result of the withdrawal of the United Kingdom from the Union. 2. Expenditure shall be eligible for a financial contribution from the Reserve if it is incurred and paid by public authorities in the Member States, at national, regional or local levels, including payments to public or private entities, during the reference period for measures carried out in, or for the benefit of, the Member State concerned. 3. When designing support measures, Member States shall take into account the varied impact of the withdrawal of the United Kingdom from the Union on different regions and local communities and focus financial contribution from the Reserve on those most adversely affected by the withdrawal, while taking into account the partnership principle and encouraging a multi-level dialogue with local and regional authorities and communities of regions and sectors that are most adversely affected by the withdrawal, social partners and civil society, where relevant, and in accordance with their institutional, legal and financial framework. 4. When designing support measures in the field of fisheries, Member States shall take into account the objectives of the Common Fisheries Policy, making sure that those measures contribute to the sustainable management of fish stocks and shall endeavour to support fishers most adversely affected by the United Kingdom’s withdrawal from the Union, including small-scale coastal fisheries. 5. The measures referred to in paragraph 1 shall comply with applicable law. 6. Measures eligible under paragraph 1 may receive support from other Union funds and programmes provided that such support does not cover the same cost. 7. Member States shall repay the contribution from the Reserve to an action comprising investment in infrastructure or productive investment, if within 5 years of the final payment to the recipients of the financial contribution from the Reserve or within the period of time set out in State aid rules, where applicable, that action is subject to any of the following: (a) a cessation of a productive activity or a transfer of a productive activity outside the Member State in which it received financial contribution from the Reserve; (b) a change in ownership of an item of infrastructure which gives to a firm or a public body an undue advantage; (c) a substantial change affecting its nature, objectives or implementation conditions which would result in undermining its original objectives. Member States may reduce the time limit set out in the first subparagraph to 3 years in cases that concern the maintenance of investments or jobs created by SMEs. This paragraph shall not apply to any action that undergoes cessation of a productive activity due to a non-fraudulent bankruptcy.
Article 6 Technical assistance
1. 2,5 % of the financial contribution from the Reserve for each Member State shall be paid as technical assistance for the management, monitoring, information and communication, control and audit of the Reserve, including at regional and local levels, as appropriate. 2. Technical assistance shall be calculated as a flat rate by applying the factor of 25/975 to the amount of eligible expenditure accepted by the Commission pursuant to Article 12(2), point (a).
Article 7 Exclusion from support
The Reserve shall not support VAT and expenditure supporting relocation as defined in Article 3, point (8).
Article 8 Implementation and forms of Union funding
1. The financial contribution from the Reserve to a Member State shall be implemented within the framework of shared management in accordance with Article 63 of the Financial Regulation. 2. Member States shall use the financial contribution from the Reserve to implement the measures referred to in Article 5 to provide non-repayable forms of support. The Union contribution shall take the form of reimbursement of eligible costs actually incurred and paid by public authorities in Member States, including payments to public or private entities, for measures carried out, and of flat-rate financing for technical assistance. 3. Commitments and payments under this Regulation shall be made subject to the availability of funding. 4. By way of derogation from Article 63(5), (6) and (7) of the Financial Regulation, the documents referred to in those provisions shall be submitted once, pursuant to Article 10 of this Regulation. 5. By way of derogation from Article 12 of the Financial Regulation, unused commitment and payment appropriations under this Regulation shall be automatically carried over and may be used until 31 December 2026. The appropriations carried over shall be consumed first in the following financial year.
Article 9 Pre-financing
1. Subject to receipt of the information required under Article 14(1), point (d), of this Regulation, the Commission shall, by means of an implementing act, set out the breakdown of the resources referred to in Article 4(3), point (a), of this Regulation per Member State. That implementing act shall constitute a financing decision within the meaning of Article 110(1) of the Financial Regulation and the legal commitment within the meaning of that Regulation. By way of derogation from Article 110(2) of the Financial Regulation, that financing decision shall not contain a description of the actions to be financed. 2. The budgetary commitments of the Union in respect of each Member State shall be made by the Commission in annual instalments during the period between 1 January 2021 and 31 December 2023. By way of derogation from Article 111(2) of the Financial Regulation, the budgetary commitments for the first instalment shall follow the adoption of the implementing act constituting the legal commitment by the Commission. 3. The Commission shall pay the 2021 instalment of the pre-financing within 30 days of the date of the adoption of the implementing act referred to in paragraph 1 of this Article. The instalments of the pre-financing for 2022 and 2023 shall be paid by the Commission by 30 April 2022 and 30 April 2023, respectively. The pre-financing shall be cleared in accordance with Article 12. 4. Amounts allocated but not paid as pre-financing shall be carried over and shall be used for additional payments pursuant to Article 12(6).
Article 10 Submission of applications for a financial contribution from the Reserve
1. Each Member State shall submit to the Commission an application for a financial contribution from the Reserve by 30 September 2024. The Commission shall assess those applications and establish whether the remaining provisional allocation and additional amounts are due to Member States or if any amounts are to be recovered from Member States in accordance with Article 12. 2. Where a Member State does not submit an application for a financial contribution from the Reserve by 30 September 2024, the Commission shall recover the total amount paid as pre-financing to that Member State.
Article 11 Content of the application for a financial contribution from the Reserve
1. The application for a financial contribution from the Reserve shall be based on the template set out in Annex II. The application shall include information on the total expenditure incurred and paid by public authorities in Member States at national, regional or local levels, including the territorial distribution of the expenditure at NUTS level 2 regions, where relevant, and the values of output indicators for the measures carried out. It shall be accompanied by the documents referred to in Article 63(5), (6) and (7) of the Financial Regulation and by an implementation report. 2. The implementation report for the Reserve shall include: (a) a description of the negative impact of the withdrawal of the United Kingdom from the Union in economic, social, territorial and, where appropriate, environmental terms, including an identification of the sectors, regions, areas and, where relevant, local communities most adversely affected by the withdrawal; (b) a description of the measures carried out to counter the adverse consequences of the withdrawal of the United Kingdom from the Union, of the extent to which those measures alleviated the regional and sectoral impact referred to in point (a), and how they were implemented; (c) a justification of the eligibility of the expenditure incurred and paid, and its direct link to the withdrawal of the United Kingdom from the Union; (d) a description of the arrangements put in place to avoid double funding and to ensure complementarity with other Union instruments and national funding; (e) a description of the contribution of the measures to climate change mitigation and adaptation. 3. The summary referred to in Article 63(5), point (b), of the Financial Regulation shall set out the total error rate and residual error rate for the expenditure entered in the application for a financial contribution from the Reserve submitted to the Commission, as a result of the corrective actions taken.
Article 12 Clearance of the pre-financing of the remaining provisional allocation and calculation of the additional amounts due to Member States
1. The Commission shall assess the application referred to in Article 11 and shall satisfy itself that the application is complete, accurate and true. When calculating the financial contribution from the Reserve due to the Member State, the Commission shall exclude from Union financing expenditure for measures which were implemented or for which disbursements have been made in breach of applicable law. 2. Based on its assessment, the Commission shall, by means of an implementing act, establish the following: (a) the amount of eligible expenditure accepted; (b) the amount of technical assistance calculated in accordance with Article 6(2); (c) the sum of the amounts referred to in points (a) and (b) (‘total accepted amount’); (d) whether the amount provisionally allocated in accordance with the implementing act under Article 4(5) (‘provisional allocation’) is due to the Member State in accordance with paragraph 3 of this Article, or whether amounts need to be recovered pursuant to paragraph 6 of this Article. 3. Where the total accepted amount exceeds the amount of pre-financing paid, an amount shall be due to that Member State from the allocation referred to in Article 4(3), point (b), up to the amount of the provisional allocation for that Member State. 4. With regard to the amounts due pursuant to paragraph 3 of this Article, the implementing act referred to in paragraph 2 of this Article shall constitute a financing decision within the meaning of Article 110(1) of the Financial Regulation and the legal commitment within the meaning of that Regulation. 5. The Commission shall clear the pre-financing and pay any amount due to Member States within 30 days of adoption of the implementing act referred to in paragraph 2. 6. The Commission shall make any unused resources from the provisional allocations available as additional payments by increasing proportionately the financial contribution from the Reserve to Member States whose total accepted amount exceeds their provisional allocation. The unused resources shall consist of amounts carried over pursuant to Article 9(4), the remaining part of the provisional allocation of a Member State whose total accepted amount is lower than its provisional allocation and amounts resulting from recoveries carried out pursuant to the second subparagraph of this paragraph. Where the total accepted amount is lower than the pre-financing paid to the Member State concerned, the difference shall be recovered in accordance with the Financial Regulation. The recovered amounts shall be treated as internal assigned revenue in accordance with Article 21(3), point (b), of the Financial Regulation. Where the sum of the additional amounts calculated for all Member States whose total accepted amount exceeds their provisional allocation is higher than the resources available according to the first subparagraph, the financial contributions from the Reserve for the amounts exceeding the provisional allocations shall be reduced proportionately. Where the additional payments to Member States whose total accepted amount exceeds their provisional allocation have been made at a rate of 100 %, any remaining amount shall be returned to the Union budget. 7. The Commission shall, by means of an implementing act, set out the additional amounts due pursuant to the first subparagraph of paragraph 6 of this Article. That implementing act shall constitute a financing decision within the meaning of Article 110(1) of the Financial Regulation and the legal commitment within the meaning of that Regulation. The Commission shall pay any additional amount due within 30 days of adoption of that implementing act. 8. Prior to the adoption of the implementing acts referred to in paragraphs 2 and 7, the Commission shall inform the Member State concerned of its assessment and invite that Member State to submit its observations within 2 months of informing the Member State of its assessment.
Article 13 Use of the euro
Any amounts declared to the Commission by Member States in the application for a financial contribution from the Reserve shall be denominated in euro. Member States whose currency is not the euro shall convert the amounts in the application for a financial contribution from the Reserve into euro using the monthly accounting exchange rate established by the Commission, in the month during which the expenditure is registered in the accounting systems of the body or bodies responsible for the management of the financial contribution from the Reserve.
Article 14 Management and control
1. When executing tasks relating to the implementation of the Reserve, Member States shall take all the necessary measures, including legislative, regulatory and administrative measures, to protect the financial interests of the Union, namely by: (a) designating a body or, where required by the Member State constitutional framework, bodies responsible for the management of the financial contribution from the Reserve and an independent audit body in accordance with Article 63(3) of the Financial Regulation, and supervising such bodies; (b) setting up management and control systems for the Reserve in accordance with the principles of sound financial management and ensuring that those systems function effectively; (c) drawing up a description of the management and control systems for the Reserve in accordance with the template set out in Annex III, keeping the description up to date and making it available to the Commission on request; (d) notifying the Commission of the identity of the designated body or bodies and of the body to which the pre-financing shall be paid, and confirming that the descriptions of the management and control systems for the Reserve have been drawn up, by 10 December 2021; (e) ensuring that expenditure supported under other Union funds and programmes is not included for support from the Reserve; (f) preventing, detecting and correcting irregularities and fraud, and avoiding conflict of interest; those actions comprise the collection of information on the beneficial owners of the recipients of funding in accordance with point 4(a) of Annex III; the rules related to the collection and processing of such data shall comply with applicable data protection rules; (g) cooperating with the Commission, OLAF, the Court of Auditors and, in respect of those Member States participating in enhanced cooperation, the EPPO pursuant to Regulation (EU) 2017/1939. The use of and access to the data referred to in point (f) shall be limited to the bodies referred to in point (a), the Commission, OLAF, the Court of Auditors and, in respect of those Member States participating in enhanced cooperation pursuant to Regulation (EU) 2017/1939, to the EPPO. Member States and the Commission shall be allowed to process personal data only where it is necessary for the purpose of meeting their respective obligations under this Regulation and shall process personal data in accordance with Regulation (EU) 2016/679 of the European Parliament and of the Council ( 21 ) or Regulation (EU) 2018/1725, whichever is applicable. 2. For the purposes of paragraph 1, points (a) and (b), Member States may make use of bodies, at the appropriate territorial level, and management and control systems already in place for the implementation of cohesion policy funding or the European Union Solidarity Fund. 3. The body or bodies responsible for the management of the financial contribution from the Reserve shall: (a) ensure the functioning of an effective and efficient internal control system; (b) establish criteria and procedures for the selection of measures to be financed and determine the conditions for a financial contribution from the Reserve; (c) verify that the measures financed from the Reserve are implemented in accordance with applicable law and the conditions for a financial contribution from the Reserve, and that the expenditure is based on verifiable supporting documents; (d) establish effective measures to avoid double funding of the same costs by the Reserve and other sources of Union funding; (e) ensure ex post publication in accordance with Article 38(2) to (6) of the Financial Regulation; (f) use an accounting system to record and store electronically data on the expenditure incurred to be covered by the financial contribution from the Reserve that provides accurate, complete and reliable information in a timely manner; (g) keep available all supporting documents regarding expenditure to be covered by the financial contribution from the Reserve for a period of 5 years following the deadline for submission of the application for a financial contribution from the Reserve, and include that obligation in agreements with other entities involved in the implementation of the Reserve; (h) for the purposes of paragraph 1, point (f), collect information in an electronic standardised format to allow for the identification of recipients of a financial contribution from the Reserve and their beneficial owners in accordance with Annex III. 4. The independent audit body shall audit the management and control system for the Reserve and carry out audits of financed measures in order to provide independent assurance to the Commission regarding the effective functioning of that system and the legality and regularity of the expenditure included in the accounts submitted to the Commission. The audit work shall be carried out in accordance with internationally accepted audit standards. The audits of financed measures shall cover expenditure on the basis of a sample. That sample shall be representative and based on statistical sampling methods. Where the population consists of less than 300 sampling units, a non-statistical sampling method may be used based on the professional judgement of the independent audit body. In such cases, the size of the sample shall be sufficient to enable the independent audit body to draw up a valid audit opinion. The non-statistical sampling method shall cover a minimum of 10 % of the sampling units in the population of the reference period, selected randomly. 5. The Commission may carry out on-the-spot audits at the premises of any entity involved in the implementation of the Reserve with regard to the measures financed from the Reserve and shall have access to the supporting documents regarding the expenditure to be covered by the financial contribution from the Reserve. 6. The Commission shall pay particular attention to the establishment of the management and control system for the Reserve where Member States do not make use of existing bodies designated for the implementation of cohesion policy funding or the European Union Solidarity Fund. If risks are identified, the Commission shall carry out an assessment to ensure that the management and control system for the Reserve functions effectively in ensuring the protection of the financial interests of the Union. The Commission shall inform the Member State concerned of its provisional conclusions and invite that Member State to submit its observations within 2 months of informing the Member State of its provisional conclusions.
Article 15 Financial corrections
1. The financial corrections made by Member States in accordance with Article 14(1), point (f), shall consist of cancelling all or part of the financial contribution from the Reserve. Member States shall recover any amount lost as a result of an irregularity detected. 2. The Commission shall take appropriate action to ensure that the financial interests of the Union are protected through the exclusion of irregular amounts submitted to the Commission in the application referred to in Article 11 of this Regulation from Union financing and if irregularities are subsequently identified through the recovery of the amounts unduly paid in accordance with Article 101 of the Financial Regulation. 3. The Commission shall base its financial corrections on individual cases of identified irregularity and shall take account of whether an irregularity is systemic. Where it is not possible to quantify precisely the amount of irregular expenditure, or where the Commission concludes that the management and control system for the Reserve is not working effectively to safeguard the legality and regularity of the expenditure, the Commission shall apply a flat rate or extrapolated financial correction. The Commission shall respect the principle of proportionality by taking account of the nature and gravity of the irregularity and its financial implications for the Union budget. 4. Prior to the application of financial corrections through the recovery of amounts unduly paid, the Commission shall inform the Member State concerned of its assessment and invite that Member State to submit its observations within 2 months of informing the Member State of its assessment.
Article 16 Information and communication
Member States and their regional and local authorities, where appropriate, shall be responsible for informing and publicising to Union citizens, including those potentially benefiting from the Reserve, of the role, the results and impact of the Union contribution from the Reserve through information and communication actions and, in that context, raise awareness about the changes resulting from the withdrawal of the United Kingdom from the Union.
Article 17 Evaluation and reporting
1. By June 2024, the Commission shall inform the European Parliament and the Council on the state of play of the implementation process of this Regulation, based on available information. 2. By 30 June 2027, the Commission shall carry out an evaluation to examine the effectiveness, efficiency, relevance, coherence and Union added value of the Reserve. The Commission may make use of all relevant information already available in accordance with Article 128 of the Financial Regulation. 3. By 30 June 2028, the Commission shall submit to the European Parliament, to the Council, to the European Economic and Social Committee and to the Committee of the Regions a report on the implementation of the Reserve.
Article 18 Entry into force
This Regulation shall enter into force on the day following that of its publication in the Official Journal of the European Union .