6 Financial instruments for EU external
+ ADD 1
Commission Communication: Mid-term review of the financial instruments for external actions
Commission Staff Working Document: Report evaluating the implementation of the financial instruments for external action
Council Regulation amending Regulation (EC) No.1934/2006 establishing a financing instrument for cooperation with industrialised and other high-income countries and territories
Commission Communication concerning the position of the Council on the adoption of a Regulation of the European Parliament and of the Council amending Regulation (EC) No.1934/2006 establishing a financing instrument for cooperation with industrialised and other high-income countries and territories
|Legal base||(a) and (b)
(c) and (d) Article 207(2) and 209(1) TFEU; QMV; ordinary legislative procedure
|Documents originated||(d) 13 December 2011
|Deposited in Parliament||
|Department||Foreign and Commonwealth
|Basis of consideration||(a) and (b)Minister's letter or 10 January 2011
(c) and (d) EM of 10 January 2011
|Previous Committee Report||(a) and (b) (30572) (30573) (30612) (30639): HC 19-xxiv (2008-09), chapter 5 (15 July 2009)
(c) and (d) None; but see (32201) and (32175): HC 428-xi (2010-11), chapters 8 and 9 (15 December 2010)
|Discussed in Council
To be discussed in Council
|(a) and (b) July 2009
(c) and (d) To be determined
|Committee's assessment||Politically important
|Committee's decision||(a) and (b) Cleared; further information requested
(c) and (d) Not cleared; further information awaited
6.1 In preparation for the 2007-13 financial perspective, the
Commission, Council and the European Parliament simplified a plethora
of different financial regulations, or Instruments. The main elements
are as follows:
EUROPEAN NEIGHBOURHOOD AND PARTNERSHIP INSTRUMENT (ENPI)
The ENPI provides EU assistance to 17 countries: Algeria, Armenia,
Azerbaijan, Belarus, Egypt, Georgia, Israel, Jordan, Lebanon,
Libya, Moldova, Morocco, the Palestinian Authority, Russia, Syria,
Tunisia and Ukraine. It comprises a specific cross-border co-operation
component covering border regions in the European Union Member
DEVELOPMENT CO-OPERATION INSTRUMENT (DCI)
The DCI covers three main components. The first is to provide
assistance to South Africa and 47 developing countries in Latin
America, Asia and Central Asia, and the Middle East (only those
countries not covered by the European Neighbourhood and Partnership
Instrument or the European Development Fund).
Secondly, it supports the restructuring of sugar production in
18 ACP countries. Thirdly, it runs five thematic programmes: investing
in people; environment and sustainable management of natural
resources including energy; non-state actors and local
authorities in development; food security; as well
as migration and asylum.
The five DCI thematic programmes support actions
in all developing countries (including those covered by ENPI and
the EDF), global actions and external projections of as well as
the fleshing out of Commission internal policies.
EUROPEAN INSTRUMENT FOR DEMOCRACY & HUMAN RIGHTS
The EIDHR contributes to the development of democracy,
the rule of law, respect for human rights and fundamental freedoms.
It was designed to complement the various other tools for implementation
of EU policies in this area, which range from political dialogue
and diplomatic demarches to various instruments of financial and
technical co-operation, including both geographic and thematic
programmes. It also complements the more crisis-related interventions
of the new Stability Instrument.
INSTRUMENT FOR STABILITY (IFS)
The IfS aims to contribute to stability in countries
in crisis by providing an effective response to help preserve,
establish or re-establish the conditions essential to the proper
implementation of the EU's development and co-operation policies.
NUCLEAR SAFETY CO-OPERATION INSTRUMENT (NSCI)
NSCI finances measures to support a higher level
of nuclear safety, radiation protection and the application of
efficient and effective safeguards of nuclear materials in third
THE INSTRUMENT FOR COOPERATION WITH INDUSTRIALISED
The ICI promotes cooperation between the European
Union and seventeen industrialised and other high-income countries
and territories in North America, the Asia-Pacific region and
the Gulf region
THE INSTRUMENT FOR PRE-ACCESSION ASSISTANCE (IPA)
This is the vehicle by which pre-accession technical
assistance is delivered to candidate countries.
THE HUMANITARIAN AID REGULATION
The extant Humanitarian Aid Regulation was not amended.
6.2 The Committee considered these on several occasions
during the gestation process, culminating in a debate in the European
Standing Committee on 10 November 2005,
and subsequently, particularly during the formulation of the thematic
The Commission Communication
6.3 The Communication and accompanying Staff Working
Document were published by the Commission on 21 April 2009, and
considered by the previous Committee on 15 July 2009.
6.4 The Commission noted that the new instruments
were being implemented through Country Strategy Papers, Regional
Strategy Papers, Thematic Strategy Papers and, for the IPA, Multi-annual
Indicative Planning Documents.
6.5 The Commission further noted that:
they are required under these regulations to submit a report on
their implementation by 31 December 2010, and to propose any necessary
in final negotiations before the instruments
were adopted, the Commission agreedat the European Parliament's
requestto carry out the review before the 2009 European
Parliament elections and to take Parliament's reports and recommendations
this mid-term review (MTR) would cover
the legal instruments only;
European Parliament recommendations not
affecting the legal texts would be considered in the mid-term
review of the strategy and programming documents;
that latter review would assess performance
so far and update the strategies in the light of developments
in partner countries, when "particular attention" would
be paid at that point to civil society participation and aid effectiveness;
the review process and updated strategy
papers, together with multi-annual indicative programmes allocating
the budget for 2011-13 by sector, was expected to be completed
by the end of 2009;
the IPA was governed by a different strategy
and programming framework covering a rolling three-year period
updated annually in line with the Enlargement Strategy Paper.
6.6 This present MTR aimed "to verify that the
instruments are meeting the objectives set for the reform, partly
through major simplification". Thereafter, "simplification
being an ongoing process, the Commission will also consider the
scope for further improvements, including amendments to the Financial
Regulation, in particular as regards the control environment."
6.7 The Commission Staff Working Paper reported in
more detail on the individual instruments; and outlined two legislative
proposals, where the Commission had concluded from the review
that certain amendments were necessary.
6.8 The previous Committee's earlier Report contains
the helpful and extensive analysis and comments of the then Minister
for Europe at the Foreign and Commonwealth Office (Baroness Kinnock
of Holyhead, as set out in her EM of 7 July 2009).
6.9 The then Minister strongly supported the need
for reviews of Instruments funded from the EC Budget, to ensure
sound financial management and that objectives were being met,
professed herself generally satisfied with progress to date, and
looked forward to the mid term performance reviews of each Instrument.
6.10 She noted that the European Parliament had taken
the view that some activities programmed by the Commission under
the DCI were not sufficiently geared to poverty eradication and
the Millennium Development Goals or did not fulfil the criteria
for Official Development Assistance (ODA). The Commission propose
to address this by amending the ICI regulation to extend its geographical
scope to include DCI countries. How the activities were funded
under the revised ICI needed to be closely monitored. The UK would
be opposed to any reduction in the financial allocation for the
DCI, so any proposed amendment to the ICI would need to be framed
within the ICI's current financial ceiling.
6.11 Looking ahead, the Minister said that discussion
of the overview Communication was expected to begin in July 2009,
with discussions on the individual proposals to amend the various
instruments expected to commence that autumn.
The previous Committee's assessment
6.12 The previous Committee noted that, as the Commission
had made clear, the Mid-Term Review that was to be completed by
the end of 2009 was perhaps the more important of these two exercises.
Even so, the Minister had indicated that the proposed amendments
to the regulations were not entirely straightforward. They therefore
asked the Minister to write after the "overview" Communication
had been considered by the Council; and also to keep it informed
about discussions with the European Parliament.
6.13 In the meantime, the documents were retained
The Minister's letter of 10 January 2011
6.14 The Minister for Europe (Mr David Lidington)
begins his letter by saying that "it has come to my attention"
that the questions asked by the previous Committee have not been
answered; apologises for their having remained unanswered for
so long; and says that he continues to take his scrutiny obligations
seriously, and that measures the FCO has put in place recently
should prevent such oversights in future.
6.15 The Minister continues as follows:
"The 'overview' Communication was not considered
again by the Council after July 2009. The changes to the regulations
governing each of the instruments were considered by the relevant
Council working groups during the course autumn 2009 and early
2010 with proposals put to the European Parliament. The European
Parliament considered all of the proposed changes to the instruments
and set out its first reading opinion on 21 October 2010. The
Competitiveness Council considered the EP's changes on 10 December
"I regret that the FCO did not submit the
Common Position on the ICI for scrutiny before it was considered
by the Council on 10 December 2010. The UK made clear at the Council
that it had not received policy or scrutiny clearance for the
dossier and so voted against the Common Position. It was, nonetheless,
agreed. I have included with this letter an Explanatory Memorandum
that sets out the Government's view on the Council's Common Position.
"On 17 December the Commission issued a
supportive response to the Council's Common Position. I enclose
the relevant document. We will keep the Committees informed on
the progress of this dossier through the remaining stages."
The Council Regulation and the Commission Communication
6.16 As noted earlier, the proposal to extend its
geographical scope to include a number of countries covered by
the DCI and to fund certain activities in those countries using
the ICI was first made in the Commission's Mid Term Review of
the financial instruments for external action, following the European
Parliament opinion that a number of proposed DCI activities were
not sufficiently geared to poverty eradication or did not fulfil
the criteria for ODA.
6.17 The documents set out the Council's and Commission's
position, after consideration of the European Parliament's first
reading opinion, on proposed amendments to the regulation for
the ICI (the financial instrument for cooperation with industrialised
and other high-income countries and territories).
6.18 The Commission sees the Council position as
the outcome of constructive negotiations between the three institutions
and as being in line with the essential objectives and the underlying
approach of the Commission's initial proposal.
6.19 The Commission notes two specific amendments
by the European Parliament that are not acceptable to the Council:
Delegated acts (Article 290 TFEU):
the Commission says that the EP seeks by its first reading amendments
to apply this procedure to the adoption of multiannual strategy
papers by the Commission; and that, despite what it describes
as long and intensive negotiations, it was not possible to reach
agreement on this issue. It notes that the Council has not accepted
these amendments in its positions at first reading, and says that
it is ready to continue efforts to reconcile the positions of
the institutions and to find ways to meet the substantive concerns
behind Parliament's amendments, in particular in ensuring that
Parliament can exercise appropriate oversight over the formulation
of external cooperation strategies and the proper implementation
of external financial instruments;
Article 16 on the financial reference amount:
The Commission notes that the Council has not accepted the proposed
EP amendment, preferring to retain the text proposed initially
by the Commission. The Commission says it supports the Council
position since it reflects the standard text on financial reference
amounts which is included in every financial instrument; but that,
in order to facilitate agreement and re-assure the institutions,
the Commission is ready to make the Declaration concerning Article
16 attached to the Communication.
6.20 All in all, the Commission says the Council
position incorporates a negotiated compromise text which reflects
to a very large extent the European Parliament's requests and
amendments at first reading, and that the Commission can therefore
accept the Council position.
6.21 In his Explanatory Memorandum of 10 January
2011, the Minister for Europe (David Lidington) explains that
the relevant changes to the ICI regulation are effected by modifying
and replacing several articles and annexes: articles 1 to 4 are
replaced; articles 5(2) and 6(1) are replaced; article 7 is amended
with additional paragraphs 7(2) and 7(3) added; article 8(3) is
replaced; article 9 paragraphs (1) and (3) are replaced; article
12 is amended and paragraphs (1) and (2) replaced; articles 13,
14 and 16 are replaced; the title of Annex I is amended, and a
new annex II is added listing those developing countries to be
covered by the instrument.
The Government's view
6.22 The Minister goes on to say that the Government
continues to support the policy of widening the geographical scope
of the ICI in order to ensure that the activities funded under
the DCI remain focused on poverty reduction and are eligible as
ODA, and of opposing any reduction in funding for the DCI as a
result of changes to the ICI regulation, as set out by the then
Minister in her Explanatory Memorandum of 7 July 2009. He continues
"In the subsequent Council working group
discussions the UK took a strong line to this effect. The Commission
eventually proposed funding the additional uplift of 176
million to the end of the current Financial Perspective from savings
elsewhere in Heading 4 of the EU Budget ("EU as a Global
Player"). The Commission also made a declaration that funding
for ICI would come from dedicated non-ODA budget lines and that
the amount foreseen for DCI would not be reduced as a result."
6.23 The Minister then notes that the European Parliament
adopted its first reading opinion on 21 October 2010. He describes
most of the EP's amendments as either technical or textual in
nature, such as references to the EU's values and labour standards,
and references to support to SMEs, and says that there was a good
deal of cooperation between the Council and the EP early in the
legislative process and that the Council was able to incorporate
in its first reading position many of the proposed amendments
from the EP's first reading. He then says:
"However, the Council did not agree with
the EP's interpretation that Geographic Strategy Papers, Multi-Annual
Indicative Programmes and Strategy Papers for thematic programmes
constitute "delegated acts". The definition of "delegated
acts" is intended to cover only the Commission's legislative
proposals. Strategy and Multi-Annual Papers simply implement the
relevant Instruments, rather than amending them; we therefore
do not consider them to be legislative proposals.
"The EP's attempt to interpret Strategy
and Multi-Annual Papers as delegated acts which fall under Article
290 would give it increased powers of scrutiny before the implementation
of programmes and risk considerably delaying the programming of
EU instruments, reversing recent progress in speeding up disbursement.
We do not accept the EP's interpretation of "delegated acts"
in this context, which in our view would constitute "competency
creep" by the European Parliament. The Council rejected the
EP's tabled amendments at the Competiveness Council on 10 December.
The EP is pursuing a similar strategy in relation to a number
of EU Financial Instruments as described in two Explanatory Memoranda
submitted by DFID on 9 December 2010."
6.24 With regard to the EP proposal to amend Article
16 of the regulation, the Minister says:
"Article 16 on Financial Provisions contained
standard text on the financial reference amount and the annual
budget procedure used in all external instruments' regulations.
The EP's amendments would have deviated from this standard text,
and pre-judged the annual budget process by specifying that the
source of funding could not be the DCI. We agree with the Council's
position to block the changes to the standard text and we did
not wish to set a precedent which could undermine the annual budget
6.25 The Minister again notes that, although the
UK voted against the proposal at the Competitiveness Council on
10 December 2010 because it had not yet received Scrutiny clearance,
the Council's first reading position was nonetheless adopted;
and that the European Parliament will now consider it.
6.26 The situation having moved on from the 2009
mid-term review, we now clear the Commission Communication and
Commission Staff Working Document (documents (a) and (b)). In
so doing, however, we note the Minister's assurances about the
measures he has taken to avoid such lapses in future, and ask
that he writes to the Committee in six months' time with a report
on how well the new system has worked.
6.27 As the Minister also notes, the Committee
has already considered similar Explanatory Memoranda on the Development
Co-operation Instrument (DCI) and the European Instrument for
Democracy & Human Rights (EIDHR).
Now, as then, we endorse the Government's position.
6.28 Once the EP responds, the Council will need
to adopt a further agreed position; in which case we shall expect
a further Explanatory Memorandum from the Minister, outlining
the nature of the EP response and the Council position, and the
Government's views thereon. If it is still proposed to include
some sort of Commission Declaration about Article 16about
which the Minister makes no comment on this occasionwe
ask him to ensure that his Explanatory Memorandum covers it. We
shall also be interested in his views on the extent to which the
outcome with regard to the Commission goal of providing the EP
with "appropriate oversight over the formulation of external
cooperation strategies and the proper implementation of external
financial instruments" safeguards, or changes, the status
6.29 In the meantime, we shall retain documents
(c) and (d) under scrutiny.
31 European Development Fund (EDF); based on the Cotonou agreement,
which provides the bedrock of EU co-operation with African, Caribbean
and Pacific countries, the EDF supports assistance to the Union's
78 ACP partner countries and the overseas countries and territories
of Member States. The 10th EDF entered into force in January 2008.
See http://ec.europa.eu/europeaid/how/finance/index_en.htm for
full details. Back
for the record of this debate. Back
See headnote: (32201) and (32175): HC 428-xi (2010-11), chapters
8 and 9 (15 December 2010). Back