(Codecision procedure: first reading)

The European Parliament,

–   having regard to the Commission proposal to the European Parliament and the Council (COM(2004)0495)(1),

–   having regard to Article 251(2) and Articles 162 and 299(2) of the EC Treaty, pursuant to which the Commission submitted the proposal to Parliament (C6-0089/2004),

–   having regard to Article 160 of the EC Treaty,

–   having regard to Rule 51 of its Rules of Procedure,

–   having regard to the report of the Committee on Regional Development and the opinions of the Committee on Budgets, the Committee on Employment and Social Affairs, the Committee on the Environment, Public Health and Food Safety, the Committee on Industry, Research and Energy, the Committee on Transport and Tourism, the Committee on Agriculture and Rural Development, the Committee on Fisheries and the Committee on Women's Rights and Gender Equality (A6-0184/2005),

1.  Approves the Commission proposal as amended;

2.  Calls on the Commission to refer the matter to Parliament again if it intends to amend the proposal substantially or replace it with another text;

3.  Instructs its President to forward its position to the Council and the Commission.

(1) Not yet published in OJ.

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community, and in particular the first paragraph of Article 162 and the second subparagraph of Article 299(2) thereof,

Having regard to the proposal from the Commission,

Having regard to the opinion of the European Economic and Social Committee(1),

Having regard to the opinion of the Committee of the Regions(2),

Acting in accordance with the procedure laid down in Article 251 of the Treaty (3),

Whereas:

(1)  Article 160 of the Treaty provides that the European Regional Development Fund (ERDF) is intended to help redress the main regional imbalances in the Community. The ERDF therefore contributes to reducing the gap between the levels of development of the various regions and the extent to which the less-favoured regions, including rural and urban areas, areas affected by industrial transition and regions affected by serious and permanent natural or demographic disadvantages, areas with a low population density, border and mountain areas and islands, are lagging behind.

(2)  The provisions common to the Structural Funds and the Cohesion Fund are set out in Regulation (EC) No .../2005(4) [laying down general provisions for the European Regional Development Fund, the European Social Fund, and the Cohesion Fund]. Specific provisions concerning the type of activities which may be financed by the ERDF under the objectives defined in that Regulation need to be laid down.

(3)  The ERDF should provide assistance within the framework of an overall strategy for cohesion policy which ensures greater concentration of assistance on the priorities of the Community and seek to address the underlying causes of regional disparities, particularly within the less-developed regions.

(4)  The Member States and the Commission should ensure that there is no discrimination on grounds of gender, race or ethnic origin, religion or belief, disability, age or sexual orientation during the various stages of implementing the ERDF and the other Structural Funds, and in particular in granting access to them.

(5)  Regulation (EC) No .../2005 provides that the rules on eligibility of expenditure are to be established at national level, with certain exceptions for which it is necessary to lay down specific provisions. The exceptions related to the ERDF should therefore be laid down.

(6)  Efficient and effective implementation of the action supported by the ERDF relies on good governance and on the collaboration and involvement of all the relevant territorial, socio-economic and environmental partners, and in particular interregional, regional and local authorities, at all the programming stages: preparation, implementation, follow-up and evaluation. Where necessary, cooperation between regional and local authorities will be stepped up in order to fulfil common objectives.

(7)  As part of the technical assistance provided for in Articles 43 and 44 of Regulation (EC) No .../2005, the ERDF may finance action relating to preparation, monitoring, administrative and technical support, evaluation, audit and control necessary both for the public administrative services and for other relevant territorial players, such as non-governmental organisations (NGOs), associations of elected representatives and socio-professional and environmental organisations.

(8)  Building on the experience and strengths of the Urban Community initiative and of Objective 2 assistance in urban neighbourhoods in crisis under Article 20(1)(b) of Council Regulation (EC) No 1260/1999 of 21 June 1999 laying down general provisions on the Structural Funds(5), the urban dimension, including the level of investment in sustainable urban development, should be reinforced by fully integrating measures in that field into the operational programmes co-financed by the ERDF. Local development and employment initiatives, and their potential for innovation, play a significant role in this connection.

(9)  Particular attention should be paid to guaranteeing complementarity and consistency between the support granted by the ERDF and that granted by the European Agricultural Fund for Rural Development pursuant to Regulation (EC) No .../2005 and by the European Fund for Fisheries pursuant to Regulation (EC) No .../2005. Programmes co-financed by the ERDF should therefore support the diversification of the rural economy, the cultural dimension of rural areas, the development of tourism, the diversification of areas dependent on fisheries away from traditional activities, and the creation of sustainable jobs, and help such regions to become economically and socially more attractive.

(10)  It is necessary to ensure that the action supported by the ERDF in favour of small and medium sized enterprises (SMEs) takes into account and supports the implementation of the European Charter for Small Enterprises adopted at the European Council in Santa Maria de Feira.

(11)  It is desirable to develop the means and areas of support available under the 'convergence' objective by introducing a new mechanism of assistance to SMEs and a new approach to regional development by making available to SMEs free of any charge the findings of research financed wholly by public funds.

(12)  In addition, ERDF operations need to be coordinated more closely with the seventh framework programme of the European Community for research, technological development and demonstration activities (2007 to 2013)(6) ('the Seventh Framework Programme').

(13)  Specific attention should be paid to the outermost regions, namely by enlarging, on an exceptional basis, the scope of the ERDF to the financing of operating aid linked to compensation for the additional costs arising from their special structural economic and social situation, which is compounded by their remoteness, insularity, small size, difficult topography and climate and their economic dependence on a few products, the permanence and combination of which severely restrain their development and access to the internal market, in accordance with Article 299(2) of the Treaty.

(14)  The ERDF should address the problems of accessibility and remoteness from large markets confronting areas with an extremely low population density, as referred to in Protocol No 6 to the Act of Accession of Austria, Finland and Sweden. The ERDF should also address the specific difficulties encountered by islands, mountain areas, border regions and sparsely populated areas whose geographical situation slows down their development, with the aim of supporting independent, sustainable development in these regions.

(15)  With regard to the Trans-European Networks (TENs), the ERDF should furthermore improve connections with the new Member States, particularly in order to strengthen economic relations with these countries.

(16)  The ERDF should ensure synergy with assistance from the European Social Fund and the Cohesion Fund. It should also ensure complementarity and consistency with other Community policies.

(17)  It is necessary to lay down specific provisions concerning the programming, management, monitoring and control of operational programmes under the 'European territorial cooperation' objective and to establish a complementary and coherent relationship with other Community policies, including the "wider neighbourhood" policy.

(18)  It is necessary to support effective cross-border and transnational cooperation with countries neighbouring the Community where this is necessary to ensure that the regions of the Member States which border third-countries can be effectively assisted in their development. It must also be ensured that the EU border regions concerned are no worse off, in terms of their current opportunities and rights, than they previously were and no worse off than regions at internal EU borders. Accordingly, it is appropriate to authorise on an exceptional basis the financing of assistance from the ERDF for projects located on the territory of third countries where they are for the benefit of cross-border cooperation with regions of the Community. It is also necessary to ensure proper weighting of the distribution of financial resources between the transnational and cross-border strands of the 'European territorial cooperation' objective. The cross-border strand requires particular attention, since the borders of the Union have expanded significantly and many of the regions lagging behind are border regions.

(19)  Regulation (EC) No 1783/1999 of the European Parliament and the Council of 12 July 1999 on the European Regional Development Fund(7) should be repealed -

HAVE ADOPTED THIS REGULATION:

CHAPTER I

GENERAL PROVISIONS

Article 1

Subject matter

This Regulation establishes the tasks of the European Regional Development Fund (ERDF), the scope of its assistance with regard to the 'convergence', 'regional competitiveness, employment and social inclusion', and 'European territorial co-operation' objectives as defined in Article 3 of Regulation (EC) No .../2005 [laying down general provisions for the European Regional Development Fund, the European Social Fund and the Cohesion Fund], and the types of expenditure eligible for assistance.

It lays down specific provisions concerning the treatment of urban and rural areas, of areas dependent on fisheries, of the outermost regions, of island regions, of border regions, of areas with serious and permanent natural, demographic handicaps and of mountain regions.

It also sets out specific provisions concerning the 'European territorial cooperation' objective, particularly in terms of programming, implementation, management, monitoring and control.

Article 2

Purpose

The ERDF shall contribute to the financing of assistance seeking to reinforce economic, social and territorial cohesion in the context of the EU sustainable development strategy by addressing and dealing with the underlying causes of inter- and intra-regional disparities and supporting the structural development and adjustment of regional economies, including the conversion of declining industrial regions.

Article 3

Scope of assistance

1.  The ERDF shall focus its assistance on a limited number of thematic priorities. The type and range of actions to be financed within each priority shall reflect the varying nature of the 'convergence', 'regional competitiveness, employment and social inclusion' and 'European territorial cooperation' objectives in accordance with Articles 5, 6 and 7.

2.  The ERDF shall contribute towards the financing of:

Article 4

Balanced and sustainable regional development

Regional development means the preservation, development and, where necessary, reshaping of sustainable living and working conditions in the regions.

Article 5

Convergence

Under the 'convergence' objective, the ERDF shall focus its assistance on supporting sustainable integrated regional, local, urban and rural economic and social development by mobilising and strengthening endogenous capacity through programmes aimed at the modernisation and diversification of regional and local economic, administrative and social structures, and the creation of sustainable jobs, primarily in the following areas:

(1)  Territorial innovation, not least to enhance the potential of regionally and locally based institutional, social and economic players and modernise general government bodies, development agencies and financial institutions;

(2)  Research and technological development (R&TD), innovation and entrepreneurship, including the strengthening of regional research and technological development capacities, and their integration into the European research area, with a view to reducing the technology gap between regions.

Aid to R&TD in SMEs and to technology transfer. Improvement of links in particular between SMEs and universities, NGOs and research and technology centres, development of business networks, private-public partnerships and clusters, support for the provision of business and technology services to groups of SMEs and micro-undertakings, fostering of entrepreneurship and innovation funding for SMEs and micro-undertakings through new financing instruments.

Support for the classic range of instruments of regional economic development, such as targeted support for the establishment of firms and corporate investment, not exclusively in SMEs, as well as the creation and development of economic infrastructure. Particular efforts should be made to improve the expertise, capacity to take action and representativeness of organisations of SMEs, micro enterprises and craft enterprises.

The products of research financed wholly by public funds via the EC budget or national research institutes, which are not yet patented, may be offered to SMEs free of any charge provided that such research is directly transformed into an innovative industrial good. In order to support the exchange of knowledge without the need to develop new expertise, the application of a regional or national "knowledge voucher" should be accessible as a general instrument;

(3)  Information society, including development of local content, services and applications, improvement of access to and development of on-line public services, aid and services to SMEs to adopt and effectively use information and communication technologies (ICTs) or to exploit new ideas;

(4)  Local employment and development initiatives: aid for structures providing neighbourhood services to create new jobs, but excluding measures financed by the European Social Fund;

(5)  Promotion of equality between men and women, including support for the creation of firms, specific measures for female entrepreneurs to facilitate the economic exploitation of new ideas, support for the creation of new firms by universities and existing enterprises, promotion of infrastructures and services enabling family and working life to be reconciled;

(6)  Environment, including investments connected with waste management, water management and quality, including security of water supplies, implementing Directive 2000/60/EC of the European Parliament and of the Council of 23 October 2000 establishing a framework for Community action in the field of water policy(8), urban waste-water treatment and air quality, integrated pollution prevention and control, elimination of contaminated waste dumps and rehabilitation of contaminated sites and land, promotion of biodiversity and nature protection, promotion of the development of infrastructure to implement Natura 2000, aid to SMEs to promote sustainable production patterns through the introduction of cost-effective environmental management systems and the adoption and use of pollution-prevention technologies;

(7)  Conversion, including investigation of contaminated waste dumps, rehabilitation of areas previously in military use and their return to civilian use, return to nature or aforestation, removal of warfare agents, reconstruction and modernisation of barrack buildings and sites for economic, social and cultural regeneration, including the relevant catchment area, and in this connection support for SMEs in particular;

(8)  Risk prevention, including development and implementation of plans to prevent and cope with natural and technological risks;

(9)  Tourism and culture, including promotion of natural and cultural assets as potential for the development of sustainable tourism; protection and enhancement of the physical and cultural heritage in support of economic development; aid to improve the supply of tourism services through new higher value-added services and facilitate the changeover to new, more sustainable patterns of tourism;

(10)  Economic and social regeneration of crisis-hit towns, cities and peripheral urban areas: comprehensive plans for sustainable development of crisis-hit urban areas, medium-sized and small towns functioning as centres and peripheral urban areas, revival of the town-hinterland relationship with regard to services of general economic interest;

(11)  Transport investments, including TENs, major European technical and logistical projects, road construction and upgrading outside the scope of the TEN-T backbone, taking into account the need to create links with island, rural, landlocked and otherwise remote regions and between those regions and the Community's central regions, and integrated city-wide strategies for clean, sustainable urban transport, which contribute to improving the access to and quality of passenger and goods services, especially for persons with reduced mobility, to achieving a more balanced modal split, to promoting intermodal systems and reducing environmental impacts, including ambient noise and respirable dust pollution, introducing substitute fuels and reducing the road accident rate;

(12)  Energy, including TENs, which contribute to improving security and quality of supply, safeguarding jobs, completing the internal market, and integrating environmental considerations, improvement of energy efficiency and the development of renewable energies;

(13)  Education investments, in vocational training and lifelong learning, particularly of young people and women, which contribute to increasing the attractiveness and quality of regional life, to rehabilitating production systems and to supporting the enhancement of skills and the promotion of lifelong learning, even through the application of new technologies;

(14)  Health, including investment to develop and improve health provision, disease prevention and easier access to medical services, which contribute to regional development and quality of life;

(15)  Direct aid to investment in SMEs contributing to creating and safeguarding jobs;

(16)  Public security to facilitate the operation of territorial economic activities, to be achieved through investment in technologies and in information and awareness campaigns to prevent criminal infiltration of the economy and disseminate a culture of legality;

(17)  Strengthening of the structuring, institutional capacity and representativeness of organisations and intermediate chambers of SMEs, micro enterprises and craft enterprises;

(18)  Direct aid to investment, with particular attention to high-quality clean technologies, in order to restructure heavy industry in those regions where transition to a market economy has taken place only recently.

Article 6

Regional competitiveness, employment and social inclusion

Under the 'regional competitiveness, employment and social inclusion' objective, the ERDF shall take into account the objectives of the Seventh Framework Programme and shall focus its assistance, in the context of regional economic and sustainable development strategies, on the following areas, while maintaining some flexibility for regions that are phasing in:

1)   innovation and the knowledge economy, through support for the design and implementation of regional innovation strategies conducive to efficient regional innovation systems capable of reducing the technology gap, taking into account local needs, and specifically:

2)   environment and risk prevention, and specifically:

3)   access, outside major urban centres, to transport and telecommunication services of general economic interest, and specifically:

Article 7

European territorial cooperation

Under the "European territorial cooperation" objective, the ERDF shall concentrate its assistance on:

1)   the development of cross-border economic, social and environmental activities through joint strategies for sustainable territorial development, and primarily by:

In addition, the ERDF may contribute to promoting the integration of cross-border labour markets, local employment initiatives, equal opportunities, training and social inclusion, and sharing of human resources and facilities for R&TD;

2)   the establishment and development of transnational cooperation, including bilateral or multilateral cooperation between maritime regions consistent with the "wider neighbourhood action plan", through the financing of networks and of actions conducive to integrated territorial development in particular with the following priorities:

d)   the creation of scientific and technological networks connected with issues relating to the balanced development of transnational areas and reducing the technology gap, including the establishment of networks between universities, thus making for their effective integration into the European research area, and links for accessing scientific knowledge and technology transfer between R&TD facilities and international centres of R&TD excellence, the development of transnational consortia for sharing R&TD resources, twinning of technology transfer institutions, and development of joint financial engineering instruments directed at supporting R&TD in SMEs;

3)   the development of interregional cooperation and the reinforcement of the effectiveness of regional policy by promoting networking and exchange of experience and project development among regional and local authorities focusing on the topics referred to under Article 6 points (1) and (2) and Articles 9, 10, 11 and 12, including cooperation network programmes covering the whole Community and actions involving studies, data collection, and the observation and analysis of development trends in the Community.

Networking projects shall be coordinated under a single EU wide zone.

Mid-term evaluation of existing networks such as ESPON, URBACT and INTERACT shall be carried out.

Article 8

Rules on eligibility of expenditure

The following expenditure is not eligible for a contribution from the ERDF:

(a)  VAT;

CHAPTER II

SPECIFIC PROVISIONS ON THE TREATMENT OF PARTICULAR TERRITORIAL FEATURES

Article 9

Urban dimension

1.  In the case of action involving sustainable urban development as referred to in Article 25(4) a) and 36(4) b) of Regulation (EC) No .../2005, the ERDF shall support the development of participative, integrated strategies to strengthen sustainable growth and tackle the high concentration of economic, environmental and social problems in urban areas and the removal of architectural barriers.

This shall be intended to improve the urban environment through brownfield redevelopment and the protection and development of the historical and cultural heritage, the development of cultural services providing for appropriate measures to promote innovation and the knowledge economy, entrepreneurship, local employment, the environment and the development of local ways of life as well as the setting-up of services for citizens taking account of changing demographic structures and sustainable mobility.

2.  By way of derogation from Article 33(2) of Regulation (EC) No .../2005, the ERDF funding of measures under the 'regional competitiveness, employment and social inclusion' objective falling within the scope of Regulation (EC) No.../2005 [on the European Social Fund] shall be raised to 20 % of the priority concerned.

Article 10

Rural areas and areas dependent on fisheries

Member States and regional and local authorities shall ensure complementarity and consistency between the measures co-financed by the European Agricultural Fund for Rural Development (EAFRD) pursuant to Regulation (EC) No .../2005 and the actions co-financed by the European Fund for Fisheries (EFF) pursuant to Regulation (EC) No .../2005 on the one hand, and the programmes co-financed by the ERDF on the other.

Member States and regions shall ensure, within the framework of the operational programmes under Article 36 of Regulation (EC) No .../2005, complementarity and coherence, in compliance with the coordination measures under Article 25(4)(c) of that Regulation between the actions co-financed by the EAFRD and those co-financed by the EFF on the one hand, and the actions co-financed by the ERDF on the other hand. To this end, for actions under points (1), (3) and (5) Member States, regions and the relevant partners shall set when preparing operational programmes clear demarcation criteria for actions to be supported from the ERDF by virtue of this Article on the one hand, or from the EAFRD by virtue of Article 49(1), (a), (b) and (i) of Regulation (EC) No .../2005 for rural areas, or from the EFF by virtue of Article … of Regulation (EC) No .../2005 for areas dependent on fisheries. In addition, provision should be made for in itinere and ex post checks to monitor complementarity and coherence.

Article 11

Areas with natural handicaps

Regional programmes co-financed by the ERDF covering areas facing natural handicaps as referred to in Article 52(1) b) of Regulation (EC) No .../2005 shall pay particular attention to addressing the specific difficulties of those areas.

Without prejudice to Article 3 and 5, the ERDF shall in particular contribute towards the financing of investments aimed at improving accessibility at all levels, promoting and developing all kinds of sustainable economic activities, not just those related to the cultural heritage, but also those related to innovation and the new technologies that are especially suited to the features of the region, promoting the sustainable use of natural resources, stimulating the tourism sector and preventing depopulation.

Article 12

Outermost regions

CHAPTER III

SPECIFIC PROVISIONS CONCERNING THE

"EUROPEAN TERRITORIAL COOPERATION" OBJECTIVE

Section 1

Operational programmes

Article 13

Content

All regions (NUTS III) along the internal land and along the external land borders as well as along certain neighbouring maritime borders will be eligible for cross-border co-operation, as well as certain NUTS level III regions of the Community along maritime borders separated, as a general rule flexibly interpreted, by 150 kilometres, according to the criteria for cross-border cooperation.

Member States shall ensure that the regional authorities participate in the planning and follow-up of transfrontier and transnational cooperation operations.

Section 2

Eligibility

Article 14

Rules on eligibility of expenditure

Without prejudice to Article 55 of Regulation (EC) No .../2005, the Commission may propose rules on eligibility for certain categories of expenditure replacing national rules, following a request by Member States, in each case specifying a deadline for drawing up such rules before starting to implement the projects covered. These Community rules on eligibility of expenditure are adopted in a Commission regulation in conformity with the provisions of Article 104(3) of Regulation (EC) No .../2005.

Section 3

Management, monitoring and control

Article 15

Designation of authorities

1.  Member States participating in an operational programme shall appoint a single managing authority, a single certification authority and a single audit authority situated in the Member State of the managing authority. The certification authority shall receive the payments made by the Commission and, as a general rule, shall make the payments to the lead beneficiary.

The Member States shall set up a joint technical secretariat, which shall be functionally located within the managing authority. It shall assist the managing authority and the monitoring committee in carrying out their respective duties.

2.  The audit authority for the operational programme shall be assisted by a group of auditors in carrying out the duties provided for in Article 61 Regulation (EC) No .../2005. This group shall be set up by the Member States participating in an operational programme. It shall comprise a representative of an audit body designated by each Member State participating in the operational programme. Each group of auditors shall be set up within three months of the decision approving the operational programme. It shall draw up its own rules of procedure. It shall be chaired by the audit authority for the operational programme.

The final report of the audit authority for the operational programme referred to in Article 70 of Regulation (EC) No .../2005 shall have been approved by the group of auditors.

3.  Each Member State participating in the operational programme shall appoint representatives to sit on the monitoring committee referred to in Article 64 of Regulation (EC) No .../2005 and shall seek to provide for appropriate representation of the regional or local authorities concerned.

4.  Member States shall undertake these tasks within a timeframe agreed with the Commission in order to prevent any unnecessary delay in the establishment and implementation of the operational programme.

5.  The managing authorities, under the supervision of the Member States, shall publish in a regular and appropriate manner an account of the operations benefiting from Community funding and the appropriations available broken down by eligibility criteria.

Article 16

Function of the managing authority

The managing authority shall perform the duties provided for in Article 59 of Regulation (EC) No .../2005, with the exception of those concerning the regularity of operations and expenditure in relation to national and Community rules. In this connection, its responsibilities shall be limited to checking that the expenditure of each beneficiary participating in an operation has been validated by a qualified auditor.

Article 17

Control system

In order to validate the expenditure as provided for in Article 22, each Member State shall set up an audit system making it possible to check on the delivery of the products and services co-financed, the soundness of the expenditure declared for operations or parts of operations implemented on its territory, and the compliance of such expenditure and of related operations, or parts of those operations, with Community and national rules. Where the check on the delivery of the products and services co-financed can be carried out only in respect of the entire operation, such a check shall be performed by the auditor of the lead beneficiary or by the managing authority.

Each Member State shall ensure that the expenditure can be validated by qualified auditors within a period of two months.

Article 18

Financial management

1.  The ERDF contribution shall be paid into a single account with no national sub-accounts.

2.  Without prejudice to the Member States' responsibility for detecting and correcting irregularities and for recovering amounts unduly paid, the certification authority shall recover from the lead beneficiary any amount paid as a result of an irregularity. The beneficiaries shall repay the lead beneficiary the amounts paid in error in accordance with the agreement existing between them.

If the lead beneficiary does not succeed in securing repayment from the beneficiaries, the Member States on whose territory the relevant beneficiary is located shall reimburse the certification authority the amount paid in error to that beneficiary.

Article 19

European grouping of cross-border cooperation

Member States participating in an operational programme under the "European territorial cooperation" objective may make use of the legal instrument on cooperation established by Regulation (EC) No .../2005 with a view to making it responsible for managing the operational programme by conferring on it the responsibilities of the managing authority and of the joint technical secretariat. In this context, each Member State shall continue to assume financial responsibility.

Section 4

Operations

Article 20

Selection of operations

1.  Operations selected for operational programmes aimed at developing cross-border economic, social and environmental activities as referred to in Article 7(1), and for operational programmes aimed at establishing and developing transnational cooperation as referred to in Article 7(2), shall include beneficiaries from at least two countries, which shall cooperate in at least two of the following ways for each operation: joint development, joint implementation, joint staffing, and joint financing.

However, the operations selected for operational programmes aimed at establishing and developing transnational cooperation may be implemented in a single Member State provided that they have been presented by entities belonging to at least two Member States.

2.  Operations selected for operational programmes involving interregional cooperation and cooperation networks and exchange of experience, as referred to in Article 7(3), shall include at least three beneficiaries from at least three regions of at least two Member States, which shall cooperate in the following ways for each operation: joint development, joint implementation, joint staffing and joint financing.

3.  In addition to the tasks referred to in Article 64 of Regulation (EC) No .../2005, the monitoring committee shall be responsible for selecting operations.

Article 21

Responsibility of the lead partner

1.  For each operation, a lead beneficiary shall be appointed. The lead beneficiary shall assume the following responsibilities:

2.  The managing authority shall lay down the implementing arrangements for each operation, in agreement with the lead beneficiary.

Article 22

Certification of expenditure

The legality and regularity of the expenditure declared by each beneficiary participating in the operation shall be validated as referred to in Article 15(2) by independent and qualified auditors. Each beneficiary participating in the operation shall assume responsibility in the event of any irregularity in the expenditure which it has declared.

Article 23

Special conditions governing the location of operations

1.  In the context of cross-border cooperation, in duly justified cases, financing of up to 20% of the budget for the operational programme concerned may be granted for operations in NUTS level III areas adjacent to the areas referred to in Article 7(1) of Regulation (EC) No .../2005.

2.  In the context of transnational cooperation, in duly justified cases, financing of up to 20% of the budget for the relevant operational programme may be granted for operations which include partners outside the area.

3.  In the context of cross-border and transnational cooperation, the ERDF may finance expenditure incurred in implementing operations or parts of operations on the territory of countries outside the European Community up to a limit of 10% of the amount of its contribution to the operational programme, where they are for the benefit of the regions of the Community.

Member states ensure the legality and regularity of this expenditure.

CHAPTER IV

FINAL PROVISIONS

Article 24

Transitional provisions

This Regulation shall not affect neither the continued implementation nor the modification, including the total or partial cancellation, of measures approved by the Council or by the Commission on the basis of Regulation (EC) No 1783/1999, which applied prior to the entry into force of this Regulation.

Applications made under Regulation (EC) No 1783/1999 shall remain valid.

Article 25

Repeal

Regulation (EC) No. 1783/1999 shall be repealed with effect from (…).

References to Regulation (EC) No 1783/1999 shall be construed as references to this Regulation.

Article 26

Review clause

On a proposal from the Commission, the European Parliament and the Council shall review this Regulation by 31 December 2013.

Article 27

Entry into force

This Regulation shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union.

It shall apply from 1 January 2007.

This Regulation shall be binding in its entirety and directly applicable in all Member States.

Done at

For the European Parliament For the Council

The President The President

(1) OJ C (...), (...), p.(...). (2) OJ C (...), (...), p.(...). (3) Position of the European Parliament of 6 July 2005. (4) OJ L (...), (...), p.(...). (5) OJ L 161, 26.6.1999, p. 1. Regulation as last amended by Regulation (EC) No 173/2005 (OJ L 29, 2.2.2005, p. 3). (6) Proposal for a decision of the European Parliament and of the Council concerning the seventh framework programme of the European Community for research, technological development and demonstration activities (2007 to 2013) (Com (2005)119). (7) OJ L 213, 13.8.1999, p. 1. (8) OJ L 327, 22.12.2000, p. 1. Directive as amended by Decision No 2455/2001/EC (OJ L 331, 15.12.2001, p. 1). (9) OJ L 197, 21.7.2001, p. 30.