Documents considered by the Committee on 12 September 2018 Contents

16Neighbourhood, Development & International Cooperation Instrument 2021–27

Committee’s assessment

Politically important

Committee’s decision

Not cleared from scrutiny; further information requested; drawn to the attention of the Foreign Affairs and International Development Committees

Document details

Proposal for a Regulation establishing the Neighbourhood, Development and International Cooperation Instrument

Legal base

Articles 209, 212 and 322(1) TFEU, ordinary legislative procedure; QMV

Department

Foreign and Commonwealth Office AND International Development

Document Number

(39903), 10148/18 + ADDs 1–2, COM(18) 460

Summary and Committee’s conclusions

16.1For the EU’s next long-term budgetary cycle, the Multiannual Financial Framework 2021–2027 (MFF), the European Commission has proposed a Regulation to consolidate a number of its funding programmes for development assistance into a single legal and financial framework: the Neighbourhood, Development & International Cooperation Instrument (NDICI). It would replace, for example, the current Development Cooperation Instrument and the European Neighbourhood Instrument. Its proposed budget of €89 billion (£81 billion) over the 2021–2027 period would mark a 10 per cent real-terms increase in EU funding for development assistance compared to the current long-term budget, which runs from 2014 until the end of 2020.

16.2In addition to amalgamating many existing funding programmes into one, the proposal —if accepted by the European Parliament and the Member States—would also make a significant change to the set-up of the European Development Fund. This is the assistance facility for countries with former colonial ties to current EU Member States in the Caribbean, Africa and the Pacific, including many Commonwealth countries, under the 2000 Cotonou Agreement. The Commission has recommended that the EDF should be funded directly by the EU budget, rather than via a separate ‘off-budget’ mechanism for the first time. This would increase the oversight of the European Parliament over how the funding is spent, and end the strict separation of EU development funding for the Member States’ former colonies on the one hand and for all other developing countries on the other (see paragraph 0.17 and 0.18 below).

16.3The implications of the NDICI proposal for the UK are currently unclear, given its decision to leave the EU. As a Member State, the UK has a vote on the annual budgets for the EU’s development funding, and over the long-term and annual work programmes that restrict how the European Commission can spend that money. However, given the UK’s decision to leave the EU, it will by default not be a participant in, or contributor to, the NDICI.129 Nevertheless, the Government has been explicit in recent months that, ideally, the UK would like to continue working closely with the EU on development cooperation after Brexit.130 It has said this could involve a financial contribution to the relevant EU programmes, like the NDICI, in return for the UK being “able to shape [them] and to have a say in [their] performance”.131 The size of any potential annual contribution is not known, given the political uncertainty about the nature of any British participation in EU programmes after Brexit.132

16.4However, discussions on UK-EU cooperation in this area have already become strained. The Government and the European Commission are involved in a dispute over the exclusion of UK NGOs from bidding for EU contracts until the Withdrawal Agreement—with its transitional arrangement—is formally approved.133 Moreover, despite an explicit UK request for “mechanisms that go beyond existing arrangements for third parties”134 in the draft legal framework for the NDIC Instrument, the Commission proposal pointedly contains no overarching arrangement for non-EU countries to be comprehensively involved in a capacity as donor. It also does not reflect the UK’s position that some parts of the EU’s development programmes should remain ‘off-budget’ to enable closer partnerships with non-Member States.

16.5The NDICI Regulation is still subject to amendments by the European Parliament and the Member States before its formal adoption. However, even if they insert a ‘third country’ mechanism to allow for closer involvement by the UK, it is unclear by what mechanism the Government proposes to keep oversight over how its contribution—and funding from the Instrument more generally—would be spent. The Secretary of State (Penny Mordaunt) recently acknowledged that, even if the UK were to become a contributor to EU development policy programmes, UK oversight would be different from the “the existing arrangements” as a Member State. However, she has declined to specify how the UK’s demands for a “suitable level of oversight”, including the ability to “shape programmes”, would then be met in practice,135 and in particular whether the Government would seek voting rights on the multiannual and annual work programmes that will underpin how the European Commission is allowed to spend NDICI funding.

16.6We have set out the substance of the NDICI proposal, and the implications of Brexit for UK cooperation with the EU in this area, in more detail in “Background” below.

Conclusions

16.7Even after Brexit, the UK will retain an interest in the EU’s next Multiannual Financial Framework and its new approach to the provision of development assistance. The Government has been explicit that it would like the EU’s next generation of development instruments, including the NDICI, to be “open to third parties to allow for the broadest possible range of development partnerships in the future”.136 As such, we expect the UK to continue pushing for the European Parliament and the Council to include more expansive provisions on ‘third country’ participation in the NDICI legal framework.

16.8With this in mind, we ask the Minister to keep us informed of developments in the legislative process and in particular whether the ‘budgetisation’ of the European Development Fund has the support of the necessary majority of Member States (as keeping it legally separate from the EU budget could make it easier for the UK to remain a donor with a substantive role in the governance of the Fund).137 We understand the Government has therefore suggested keeping at least some of the EU’s development assistance funding under the 2021–2027 Multiannual Financial Framework ‘off budget’. The UK has also previously opposed ‘budgetisation’ of the EDF in the way now proposed unless assistance for the Least Developed Countries, particularly in Africa, was ring-fenced from other areas of spending (such as EU assistance for middle-income countries in Eastern Europe). That precondition is also not reflected in the Commission’s proposal, but could be inserted by the Member States or the European Parliament as part of the legislative process.138

16.9Given the substance of the proposal and the Government’s ambitions for post-Brexit cooperation with the EU on development policy, we take a close interest in the legal mechanism sought by the Government to establish a formal route for UK participation in (and contributions to) the NDIC Instrument. We therefore ask the Minister to write to us by 1 October 2018 to provide more clarity about the meaning of being “able to shape” EU development programmes in return for a financial contribution, and what this would mean in practical terms as far as the Government is concerned, once the UK has become a ‘third country’. In particular, we would like him to explain if any UK financial contribution would be made conditional on being able to block it from being used in relation to individual development assistance projects (for example, if the Government did not believe the project in question delivered value for money).

16.10The question of the UK’s participation in the NDICI is also likely to be of interest to the many Commonwealth countries and other territories with links to Britain who are in receipt of EU development assistance. Without the UK influencing the Instrument’s priorities, they could see a reduction in their support from the EU (as it will be easier for the remaining Member States to prioritise countries with whom they have special ties, ultimately at the expense of developing countries with which the UK has historical links). It is already clear that the six British Overseas Territories currently in receipt of EU development assistance—Anguilla, the Falkland Islands, Montserrat, Pitcairn, St. Helena and the Turks & Caicos Islands139—will become ineligible for EU support when the UK becomes a ‘third country’. They will no longer have a special ‘association’ with the Union, which was dependent on the UK’s EU membership.140

16.11Given the uncertainty about the UK’s future role in the NDIC Instrument and the EU’s development programmes more generally, the Committee has decided to keep the proposed Regulation under scrutiny.

16.12We also draw the proposal to the attention of the Foreign Affairs and International Development Committees, which may wish to consider in more detail how UK participation in the Instrument might impact on the UK’s foreign policy and delivery of development assistance.

Full details of the documents: Proposal for a Regulation of the European Parliament and of the Council establishing the Neighbourhood, Development and International Cooperation Instrument: (39903), 10148/18 + ADD 1–2, COM(2018) 460.

Background

16.13During the EU’s current budgetary cycle, lasting from 2014 until the end of 2020, €66.3 billion141 (£61 billion) has been earmarked for spending under the ‘Global Europe’ heading. This funds the EU’s “external action” instruments, including the provision of development assistance and humanitarian instruments to lower-income countries in the EU’s southern and eastern ‘neighbourhood’, South America, the Middle East and Asia. This funding is channelled via a variety of thematic and geographic programmes, including the Development Cooperation Instrument and the Neighbourhood Instrument.

16.14In addition, the EU Member States have established an ‘off-budget’142 European Development Fund (EDF), which finances development assistance to countries in Africa, the Caribbean and the Pacific with former colonial ties to France, the UK, Spain and the Netherlands. It also performs the same function for low-income dependent island territories —the Overseas Countries & Territories or OCTs—linked to France, the UK and the Netherlands.143 For historical reasons, the EDF is funded by Member States separately; as a result, it is separate from the general EU budget for legal and accounting purposes.144 The Fund, is however, administered by the European Commission and subject to budgetary oversight by EU Financial Affairs Ministers. With a total financial endowment of €30.5 billion between 2014 and 2020, the EDF is the largest of the EU’s individual external financing instruments. The UK contribution during that period is €4.5 billion (£4.1 billion).

The Commission proposal

16.15Under the EU’s next long-term budgetary cycle, the Multiannual Financial Framework (MFF) from 2021 to 2027, the European Commission has renamed the ‘Global Europe’ heading to ‘Neighbourhood and the World’. It has also proposed to increase the Union’s budget for external action to €123 billion.145 It says this “represents an increase of approximately 10 per cent in real terms” compared to the 2014–2020 budgetary period, once the UK’s withdrawal from the EU is taken into account.

16.16At the same time, the Commission is proposing to significantly simplify the legal structure underpinning the management of the majority of this money. Its flagship policy in this regard is its legislative proposal to consolidate eight existing programmes into a single “Neighbourhood, Development & International Cooperation Instrument” (NDICI). This, it says, would allow the EU to “overcome gaps, overlaps and inconsistencies that exist between today’s multitude of geographic and thematic instruments” and “react swiftly to evolving needs and priorities”. The six current external action programmes that would be amalgamated into one legal framework are:

16.17In addition, the new Instrument would take over the functions of two ‘financial instrument’ programmes where the EU budget is used to provide a guarantee against European Investment Bank (EIB) lending outside the EU in support of the EU’s external policies:

16.18Several of the EU’s other funding instruments related to its foreign policy and external relations would remain separate from the NDIC Instrument, including the EU’s Humanitarian Assistance programme, the European Peace Facility (which will finance Common Security & Defence Policy operations and activities with military implications), and the Nuclear Safety Instrument.150 Assistance for EU Member States’ dependent territories, like the British Overseas Territories, which is currently provided from the European Development Fund, would also be funded from a separate programme under the proposed Overseas Association Decision.151

Budgetisation of the European Development Fund

16.19Perhaps the most significant change in the Commission proposal relates to the European Development Fund, which has never previously been funded directly from the EU budget. This ‘budgetisation’ would:

16.20The European Parliament first suggested ending the Fund’s ‘off-budget’ status in 1971,154 but it has so far been resisted by a sufficient number of Member States to block any such change. It is unclear if the Council will be more supportive of the proposal during the negotiations on the 2021–2027 MFF, although some countries—including Germany—are reportedly more amenable to the idea because the ‘budgetisation’ would more or less coincide with the entry into force of the planned new EU-ACP Agreement in late 2020 or early 2021155 The Commission’s own Impact Assessment states that there is “no ‘plan B’” if the Fund is not ‘budgetised’.156 Presumably, in such an eventuality the Member States would have to negotiate a new EDF Agreement among themselves, preserving the Fund’s separate legal and financial status.

16.21The UK supported ‘budgetisation’ of the European Development Fund during the last round of the negotiations on the financial endowment of the Fund in 2012.157 However, it is unclear if this is still the case. As we set out in paragraph 0.37 below, bringing the Fund within the legal framework of the EU Treaties would most likely make it more difficult for the UK to continue acting as a donor with the same influence in the EDF’s governance structures once it becomes a ‘third country’, which is one of the Government’s ambitions for the future UK-EU security partnership.

Management of funding under the NDIC Instrument

16.22The broad priorities for funding under the NDIC Instrument are set by the new European Consensus on Development, itself based on the UN Sustainable Development Goals. In practical terms, the total of €89.2 billion of EU development assistance available under the proposal would be divided—as it is now—between geographic and thematic programmes, complemented by a ‘rapid response’ fund to contribute to “stability and conflict prevention in situations of urgency, emerging crisis, crisis and post-crisis”. There would also be a ‘flexibility cushion’ of €10.2 billion, to be mobilised only if circumstances in one or more of the EU’s partner countries required additional assistance.

16.23Under the terms of the Commission proposal, the NDICI geographic programmes would firstly be broken down into four regions—the European Neighbourhood (Eastern Europe, North Africa and the Near East); Sub-Saharan Africa; Asia and the Pacific; and the Americas and Caribbean—each with a dedicated budget. For each of these regions, additional country-specific work programmes would be drawn up in consultation with their national governments. The geographical programme represents the largest part of the proposed Instrument’s budget for 2021–2027 (representing €68 billion). The thematic programmes would be geographically cross-cutting and focus on areas such as human rights, democracy, stability and peace (with a budget of €7 billion). The proposal would also allow for using funds not earmarked for, but not used in, one financial year to be carried over to another with the agreement of the Member States.158

16.24The two components of the Instrument would have funding earmarked for specific regions or themes as shown in the table below:

Component

Region / Theme

Budget 2021–2027

Share of the total budget 2021–2027

Geographic

Sub-Saharan Africa

€32 billion

36%

Neighbourhood (Eastern Europe, North Africa and the Near East)

€22 billion

25%

Asia and the Pacific

€10 billion

11%

Americas and the Caribbean

€4 billion

5%

Thematic

Human rights and democracy

€1.5 billion

2%

Civil society

€1.5 billion

2%

Stability and peace

€1 billion

1%

Global challenges

€3 billion

3%

Rapid response

-

€4 billion

5%

Flexibility cushion

-

€10.2 billion

11%

Total

-

€89.2 billion

100%

16.25Overall, according to calculations by the Commission, funding for the NDIC Instrument in 2021–2027 would be 10 per cent higher—in real terms—compared to the cumulative budgets for its predecessor programmes under the 2014–2020 MFF. However, different regions or thematic priorities could still see changes in their overall allocation, because of the new unified legal framework and the increased flexibility for shifting funding around based on changing needs and priorities. For example, the proposal’s geographic programmes clusters countries together that are currently separate for EU funding purposes, such as ‘Americas and the Caribbean’: Latin American countries at present receive EU development assistance from the Development Cooperation Instrument, whereas Caribbean countries do so from the European Development Fund. The funding for the two cannot currently be transferred from one to the other, but under the Commission proposal they would be entitled to a hypothecated ‘block’ of joint funding.159

16.26Specific funding decisions for development assistance projects would be taken by the European Commission. However, support would be awarded on the basis of multi-annual work programmes and action plans that first need to be approved by a qualified majority of Member States in a committee of technical experts (the ‘NDICI Committee’).160 Similarly, the €10.2 billion flexibility cushion could only be used in specific circumstances—such as “migratory pressure” in the EU’s neighbourhood—and its mobilisation would require the approval of a qualified majority of Member States. Without such approval, the budget for the NDICI would remain at the lower level of €79 billion.

The Government’s position on the Commission proposal

16.27The Minister for Europe at the Foreign & Commonwealth Office (Sir Alan Duncan) submitted a detailed Explanatory Memorandum on the Commission proposal on 4 July 2018. It summarises the various components of the Instrument by reference to the existing programmes that it will consolidate into one.

16.28The Minister did not articulate any detailed position on the Commission proposal, because it “relates to […] the period 2021–2027, after the UK has left the EU” and “it is not yet possible to determine whether it will be in the UK’s best interests to participate in any future EU instruments”. In particular, there is no comment on the proposed ‘budgetisation’ of the European Development Fund, although this is a highly relevant development in light of the UK’s exit from the EU but the Government’s ambition to continue working closely with the EU on development assistance projects (see below).

Implications of Brexit for UK cooperation with the EU on development assistance

16.29The UK is due to leave the European Union in March 2019, and would cease to be a full contributor to the EU budget by the end of a subsequent transitional period which is due to end on 31 December 2020 (subject to ratification of the Withdrawal Agreement).161 As such, it would not be a contributor to the proposed NDIC Instrument.

16.30However, the UK Government has repeatedly stated it wants to cooperate with the EU collectively on matters of foreign policy and development once it has a become a ‘third country’. In September 2017, it stated that it was looking for “case-by-case” collaboration, potentially leading to “alignment on development policy and programming”.162 We referred to this ambition in our Report of 31 January 2018 on the on-going negotiations on a new EU framework agreement with the developing countries of Africa, the Caribbean and the Pacific (the ‘ACP states’).163 We noted at the time that the Government’s plans remained extremely vague. We also concluded that any ‘budgetisation’ of the EDF was likely to complicate any efforts by the UK to remain a lead contributor to the Fund, because once it became fully integrated into the EU’s legal and budgetary framework it would be difficult for the UK as a non-Member State to retain its current level of influence in its management (see paragraph 0.37 below).

16.31Since September last year, the Government has indicated more explicitly that it would be “open to participation in EU external spending programmes and instruments” as a non-Member State, which could involve the UK making a financial contribution in return for “an appropriate role in the relevant decision-making mechanisms” and as long as UK organisations were “eligible to deliver EU programmes and receive funding”.164 In his Explanatory Memorandum on the NDICI proposal, the Minister reiterated “it is not yet possible to determine whether it will be in the UK’s best interests to participate” because that decision can only be taken once it is clear that “the regulations [meet] our conditions of participation, namely that they are open to third parties, offer sufficient governance oversight over our funds, and that UK organisations are eligible to implement EU programmes”. In July 2018, the Department for International Development disclosed that it had explicitly urged the EU-27 and the Commission to ensure that “future financing instruments [e.g. the NDICI] should be open to third parties to allow for the broadest possible range of development partnerships in the future”.165

16.32The Commission proposal is problematic in this regard, because there is no general mechanism for a ‘third country’ to make a contribution to the Instrument in return for involvement in its management (and by extension rendering its domestic NGOs eligible to receive funding). The draft NDICI Regulation does note that “a variety of actors from Member States and from outside the Union may have access to its funds and/or become partners to implement them”, at the EU’s discretion “when this is in the interest of the Union”. In addition, non-EU countries could contribute to the External Action Guarantee, which provides backing for financial instruments to deliver development assistance.166 Were the UK to do so, British organisations “could become potentially eligible counterparts for its implementation” (i.e. provide financial instruments guaranteed against the EU budget for investment development projects). However, for countries outside the European Economic Area, these contributions “require the prior approval by the Commission” on the basis of a specific bilateral legal agreement.

16.33It is clear that the draft legal framework for the NDIC Instrument falls short of what the Government has pushed for. The crucial matter for the UK at this stage in the legislative deliberations is therefore to what extent the European Parliament and the other Member States are willing to make the Instrument more “open to third parties”. This is an essential requirement, as the EU legal framework needs to allow the UK to be involved before any further parameters for the UK’s participation could be formalised during the negotiations on a future foreign policy partnership. It is unclear whether the Government’s arguments in favour of a more comprehensive ‘third country’ framework for the EU’s next generation of external action programmes—which appears to have been almost comprehensively ignored by the Commission—are viewed more favourably by the other Member States and the European Parliament (which must jointly approve the NDICI legal framework).

16.34In July 2018, Nick Dyer (Director General at the Department for International Development) was asked whether there were “any particular EU instruments” the UK had identified as particularly beneficial in terms of future cooperation. He replied:

The reality is that we do not know. We know what the current suite of instruments is. We know that the European Commission has put forward a proposal on what the future instruments should be, and it is proposing to combine many of the instruments into one. […] Until we know, we do not know whether we can do what we want to do and whether there is sufficient scope to earmark or ring-fence any particular theme of spending within that instrument suite, plus what the regulations that go alongside those instruments allow third countries to do or not to do.167

16.35The question of what the NDIC Regulation will “allow third countries to do or not to do” is therefore a key area of interest for the Committee as it monitors developments in the legislative process. That includes the question of a possible continued UK financial contribution. Under the EU’s typical methodology for calculation the price of ‘third country’ participation in a programme, the contribution is arrived at by reference the EU’s own budget for that programme and the economic size of the country in question. Although this is necessarily highly speculative at this point, applying the same principle to the NDICI would yield an approximate gross UK contribution of €2 billion (£1.8 billion) per year between 2021 and 2027.168 The Government has not indicated publicly whether it would be willing, in principle, to accept such a financial mechanism.

16.36Should systematic UK participation become possible, and present value for money, the question would be how the Minister’s other two criteria—namely that it “offer[s] sufficient governance oversight over our funds” and that “UK organisations are eligible to implement EU programmes”—could be safeguarded. While the latter is relatively straightforward to establish by means of a legal agreement, the governance criterion is extremely subjective, and the Government has not provided any detail on what it believes ‘sufficient oversight’ by the UK would mean in this context.

16.37It is unclear how any UK financial contribution to the EU’s NDIC Instrument would also give the Government an adequate say in how that money was spent. In this regard, it is questionable whether anything less than the status quo—where the UK holds one of the largest weighted votes on the relevant technical committees where work programmes for EU development assistance instruments must be approved by the Member States—could offer “sufficient […] oversight” for the Department of International Development. However, this is also a level of political involvement that the UK as a ‘third country’ would find it extremely difficult to obtain.169 The Secretary of State (Penny Mordaunt) also recently referred to this, telling the International Development Committee in July 2018 that “we are not going to have the existing arrangements but, whatever the future structure looks like, we have to be an active participant”.

16.38If the Government cannot secure an adequate oversight arrangement, it of course is under no obligation to make contributions to the EU’s development assistance programmes. However, the wider ramifications of the UK’s loss of influence within the EU’s development assistance programmes should also be considered: without the UK at the table, Brexit will inevitably have an impact on the EU’s geographical—and to a lesser extent thematic— priorities in its external actions. While the countries who are historically part of the ACP bloc because of their historical ties to the UK—including Kenya, Nigeria and Zambia—will remain eligible for funding under the NDIC Instrument, they will lose an influential voice on the EU side of the table when work programmes are established and funding decisions adopted. The British Overseas Territories will however lose access to EU development funding altogether, as they have previously benefitted from financial support based solely on their link to the UK as an EU Member State.170

16.39As a final remark, we note that it could be more straightforward for the UK to negotiate continued co-management of the European Development Fund if the EDF is not ‘budgetised’ but remained separate in a legal sense, as it is currently. Outside of the legal framework of the EU Treaties, involvement of a non-Member State in its governance structures would be easier to secure. This is shown by the fact that during the proposed post-Brexit transitional period the UK would retain its general right of representation—without voting rights—in the EDF Committee (where work programmes for assistance from the Fund to ACP countries must be approved by the EU Member States), whereas it will lose its representation rights in all other EU bodies, institutions and committees even during the transition—except by explicit invitation.171

16.40Given the ambiguity about the Government’s demands in return for a continued UK financial contribution to the EU’s development policy instruments after Brexit, and in light of the possibility that a more flexible approach to ‘third country’ participation might be inserted into the NDICI Regulation by the European Parliament and the Council, we have retained the proposal under scrutiny.

Previous Committee Reports

None, this is a new legislative proposal.


129 The NDICI is due to launch in early 2021, after the UK has ceased to be a Member State and after the end of the proposed transitional period (during which the Government would continue to co-finance the EU budget). If there were to be an extension to the transition, the Brexit financial settlement would have to be revisited and the UK could end up continuing as contributor to the EU budget for longer.

130 Department for Exiting the EU, “Framework for the UK-EU Security Partnership“ (May 2018), p. 33.

131 Oral evidence by Penny Mordaunt MP to the International Development Committee (17 July 2018), Q4.

132 Based on existing EU approach to calculating the contribution of ‘third countries’ for participation in its programmes, we have estimated the UK contribution to the NDICI over the 2021–2027 period could amount to €2 billion (see “Background”).

133 Idem, Q1.

134 Written evidence by the Department for International Development, “EU exit and future UK/EU development cooperation” (July 2018).

135 Oral evidence by Penny Mordaunt MP (17 July 2018).

136 Written evidence by the Department for International Development, “EU exit and future UK/EU development cooperation” (July 2018).

137 The fact that UK participation would be facilitated by the EDF remaining ‘off-budget’ is clear from the fact that uniquely, under the draft Withdrawal Agreement, the UK would retain its representation rights on the EDF Committee during the post-Brexit transitional period whereas it would lose them on all other EU bodies, institutions and committees. However, it would not have voting rights on the EDF Committee during the transition. (Article 145(2) of the draft Withdrawal Agreement).

138 International Development Committee, “EU development assistance“ (17 April 2012), p. 28.

139 The other three BOTs (Bermuda, the British Virgin Islands and the Cayman Islands).do not qualify for EU support on account of their advanced economic status.

140 Under the proposed Overseas Association Decision 2021–2027, the British Overseas Territories have been removed from the list of territories eligible for EU support.

141 Current prices.

142 The European Development Fund is ‘off budget’ because it has historically been funded by Member State contributions directly. Although managed by the European Commission, those contributions are not—in a legal or accounting sense—part of the EU budget.

143 The six British territories which qualify for EDF funding for the duration of the UK’s EU membership are Anguilla, the Falkland Islands, Montserrat, Pitcairn, St. Helena and the Turks & Caicos Islands. The other three (Bermuda, the British Virgin Islands and the Cayman Islands) do not qualify on account of their advanced economic status. Gibraltar has a special status under Article 355 TFEU, which makes it part of the EU. See our predecessors’ Report of 22 March 2017 for more information on EU financial assistance for its Member States’ dependent territories.

144 When the first EDF was established in 1964, development assistance was seen as a national rather than Community competence and hence a separate treaty was required. It has also allowed Member States with closer ties to ACP countries—notably the UK and France—to pay more towards the EDF than they do (proportionally) to the general EU budget.

146 From 2021, assistance for the EU’s Overseas Countries & Territories would split off from the EDF, and be provided separately under the Overseas Association Decision.

147 There are 16 countries eligible for assistance under the ENI: Algeria, Armenia, Azerbaijan, Belarus, Egypt, Georgia, Israel, Jordan, Lebanon, Libya, Moldova, Morocco, Palestine, Syria, Tunisia and Ukraine.

148 The IcSP operates as a subsidiary or complementary Instrument, meaning that it can only be mobilised in situations where an adequate and effective response cannot be provided by other EU programmes.

149 The External Lending Mandate covers EIB activities in pre-accession countries, the Eastern and Southern Neighbourhood, Asia, Latin America and South Africa.

150 While the Nuclear Safety Instrument has the same general objectives as the NDICI, its subject matter has a specific legal base under the Euratom Treaty and therefore has to be adopted separately as a Council Regulation.

151 EU assistance for the ‘Overseas Countries & Territories’ (OCTs)—its Member States’ dependent island territories, including for the moment the British Overseas Territories (BOTs)—is also currently provided via the European Development Fund. Under the Commission proposal, the OCTs would not receive support from the NDICI, but from a separate Overseas Association Instrument. The BOTs, including low-income territories like the Falklands, St. Helena and Anguilla, are due to become ineligible for EU development assistance when the UK fully becomes a ‘third country’ vis-à-vis the Union. The extent to which the UK will bilaterally make up any shortfall is unclear.

152 The African Peace Facility is the EU’s instrument to support peace and stability in Africa, including through capacity-building of African countries’ security and armed forces. It is funded from the European Development Fund.

153 We have considered the proposal for the European Peace Facility in a separate Chapter of this Report.

154 See European Parliament Report A5–0143/2004 (12 March 2004).

155 The current EU-ACP Agreement, known as the Cotonou Agreement, expires in 2020. It is the basis on which European Development Fund assistance is currently provided, so there is a logic to budgetising the EDF because the underlying agreement with the ACP can also be modified to take account of this.

156 See Commission Impact Assessment SWD(2018) 337, p. 106.

157 International Development Committee, “EU development assistance“ (17 April 2012), p. 28. The Government’s precondition at the time was that EU assistance for ACP countries should be ringfenced. That is clearly not the case under the Commission proposal.

158 The Commission Impact Assessment notes that, under the proposal, “uncommitted funds [could] be used the following year; and committed funds that have not been spent for a specific project/programme [could] be reused for another project/programme in subsequent years”.

159 The Commission recognises this in its Impact Assessment, stating: “The political and financial implications of bringing the EDF on-budget include that the EU would lose its visible and symbolic financial basis for cooperation with African, Caribbean and Pacific countries. Implications for ACP partners include that they may see their relations with the EU as being downgraded as certain procedures would change. There could also be a risk that the broad instrument would receive less funding than the sum of the EDF and the other external action instruments combined”.

160 Legally speaking, work programmes and action plans would take the form of Implementing Acts.

161 The financial implications of any extension to the transitional period would have to be assessed as and when such a situation were to arise.

163 Financial support for these countries would be a major component of the NDICI, as it would incorporate the European Development Fund currently used for that purpose.

164 Department for Exiting the EU, “Framework for the UK-EU Security Partnership“ (May 2018), p. 33.

165 Written evidence by the Department for International Development, “EU Exit and Future UK/EU Development Cooperation“ (July 2018).

166 Article 28 of the draft NDICI Regulation.

168 The proposed budget for the NDICI is €89.2 billion, while the UK’s GDP represents 16 per cent of the EU at 28 Member States. Accordingly, under the normal methodology, the UK would be expected to make a contribution amounting to 16 per cent of €89.2 billion between 2021 and 2027, which amounts to €2 billion per annum.

169 No other country has secured such concessions where they participate in any of the EU’s many funding programmes (whether related to development assistance or not), with the input of ‘associated’ countries like Norway and Switzerland typically limited to observer status in the relevant EU committees.

170 The Commission has proposed a draft Overseas Association Decision in parallel to the NDICI, which will fund EU development assistance for the dependent island territories of France, the Netherlands and Denmark. The UK’s Overseas Territories have been removed from the scope of that legislation, which is also due to take effect on 1 January 2021.

171 See Article 145(2) of the draft Withdrawal Agreement.




Published: 18 September 2018