Index 
Texts adopted
Wednesday, 27 March 2019 - StrasbourgFinal edition
Resources for the specific allocation for the Youth Employment Initiative ***I
 General arrangements for excise duty (recast) *
 Products eligible for exemption from or a reduction in dock dues *
 Neighbourhood, Development and International Cooperation Instrument ***I
 Instrument for Pre-accession Assistance (IPA III) ***I
 Framework for the recovery and resolution of central counterparties ***I
 European Crowdfunding Service Providers (ECSP) for business ***I
 Markets in financial instruments: crowdfunding service providers ***I
 European Regional Development Fund and Cohesion Fund ***I
 Emission performance standards for new passenger cars and for new light commercial vehicles ***I
 Reduction of the impact of certain plastic products on the environment ***I
 EU fertilising products ***I
 Protection of workers from the risks related to exposure to carcinogens or mutagens at work ***I
 Common rules for certain types of combined transport of goods between Member States ***I
 Disclosure of income tax information by certain undertakings and branches ***I
 Common provisions on the European Regional Development Fund, the European Social Fund Plus, the Cohesion Fund, and the European Maritime and Fisheries Fund and financial rules for those ***I
 Asylum, Migration and Integration Fund
 Instrument for financial support for external borders and visa
 Genetically modified soybean MON 87751 (MON-87751-7)
 Genetically modified maize 1507 × NK603 (DAS-Ø15Ø7-1 × MON-ØØ6Ø3-6)
 Certain uses of bis(2-ethylhexyl) phthalate (DEHP) (DEZA a.s.)
 Certain uses of bis(2-ethylhexyl) phthalate (DEHP) (Grupa Azoty Zakłady Azotowe Kędzierzyn S.A.)
 Certain uses of chromium trioxide
 Post-Arab Spring: way forward for the Middle East and North Africa (MENA) region

Resources for the specific allocation for the Youth Employment Initiative ***I
PDF 123kWORD 44k
Resolution
Text
European Parliament legislative resolution of 27 March 2019 on the proposal for a regulation of the European Parliament and of the Council amending Regulation (EU) No 1303/2013 as regards the resources for the specific allocation for the Youth Employment Initiative (COM(2019)0055 – C8-0041/2019 – 2019/0027(COD))
P8_TA(2019)0295A8-0085/2019

(Ordinary legislative procedure: first reading)

The European Parliament,

–  having regard to the Commission proposal to Parliament and the Council (COM(2019)0055),

–  having regard to Article 294(2) and Article 177 of the Treaty on the Functioning of the European Union, pursuant to which the Commission submitted the proposal to Parliament (C8‑0041/2019),

–  having regard to Article 294(3) of the Treaty on the Functioning of the European Union,

–  having regard to the opinion of the European Economic and Social Committee of 22 March 2019(1),

–  after consulting the Committee of the Regions,

–  having regard to Rule 59 of its Rules of Procedure,

–  having regard to the report of the Committee on Regional Development and also the opinion of the Committee on Budgets (A8-0085/2019),

A.  Whereas for reasons of urgency it is justified to proceed to the vote before the expiry of the deadline of eight weeks laid down in Article 6 of Protocol No 2 on the application of the principles of subsidiarity and proportionality;

1.  Adopts its position at first reading hereinafter set out;

2.  Calls on the Commission to refer the matter to Parliament again if it replaces, substantially amends or intends to substantially amend its proposal;

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

Position of the European Parliament adopted at first reading on 27 March 2019 with a view to the adoption of Regulation (EU) 2019/… of the European Parliament and of the Council amending Regulation (EU) No 1303/2013 as regards the resources for the specific allocation for the Youth Employment Initiative

P8_TC1-COD(2019)0027


(As an agreement was reached between Parliament and Council, Parliament's position corresponds to the final legislative act, Regulation (EU) 2019/711.)

(1) Not yet published in the Official Journal.


General arrangements for excise duty (recast) *
PDF 115kWORD 42k
European Parliament legislative resolution of 27 March 2019 on the proposal for a Council directive laying down the general arrangements for excise duty (recast) (COM(2018)0346 – C8-0381/2018 – 2018/0176(CNS))
P8_TA(2019)0296A8-0117/2019

(Special legislative procedure – consultation – recast)

The European Parliament,

–  having regard to the Commission proposal to the Council (COM(2018)0346),

–  having regard to Article 113 of the Treaty on the Functioning of the European Union, pursuant to which the Council consulted Parliament (C8‑0381/2018),

–  having regard to the Interinstitutional Agreement of 28 November 2001 on a more structured use of the recasting technique for legal acts(1),

–  having regard to the letter of 22 February 2019 from the Committee on Legal Affairs to the Committee on Economic and Monetary Affairs in accordance with Rule 104(3) of its Rules of Procedure,

–  having regard to Rules 104 and 78c of its Rules of Procedure,

–  having regard to the report of the Committee on Economic and Monetary Affairs (A8-0117/2019),

A.  whereas, according to the Consultative Working Party of the legal services of the European Parliament, the Council and the Commission, the Commission proposal does not include any substantive amendments other than those identified as such in the proposal and whereas, as regards the codification of the unchanged provisions of the earlier acts together with those amendments, the proposal contains a straightforward codification of the existing texts, without any change in their substance;

1.  Approves the Commission proposal as adapted to the recommendations of the Consultative Working Party of the legal services of the European Parliament, the Council and the Commission;

2.  Calls on the Council to notify Parliament if it intends to depart from the text approved by Parliament;

3.  Asks the Council to consult Parliament again if it intends to substantially amend the text approved by Parliament;

4.  Instructs its President to forward its position to the Council, the Commission and the national parliaments.

(1) OJ C 77, 28.3.2002, p. 1.


Products eligible for exemption from or a reduction in dock dues *
PDF 119kWORD 42k
European Parliament legislative resolution of 27 March 2019 on the proposal for a Council decision amending Decision No 940/2014/EU as regards products eligible for exemption from or a reduction in dock dues (COM(2018)0825 – C8-0034/2019 – 2018/0417(CNS))
P8_TA(2019)0297A8-0112/2019

(Special legislative procedure – consultation)

The European Parliament,

–  having regard to the Commission proposal to the Council (COM(2018)0825),

—  having regard to Article 349 of the Treaty on the Functioning of the European Union, pursuant to which the Council consulted Parliament (C8-0034/2019),

—  having regard to Rule 78c of its Rules of Procedure,

—  having regard to the report of the Committee on Regional Development (A8-0112/2019),

1.  Approves the Commission proposal;

2.  Calls on the Council to notify Parliament if it intends to depart from the text approved by Parliament;

3.  Asks the Council to consult Parliament again if it intends to substantially amend the text approved by Parliament;

4.  Instructs its President to forward its position to the Council, the Commission and the national parliaments.


Neighbourhood, Development and International Cooperation Instrument ***I
PDF 629kWORD 222k
Resolution
Consolidated text
European Parliament legislative resolution of 27 March 2019 on the proposal for a regulation of the European Parliament and of the Council establishing the Neighbourhood, Development and International Cooperation Instrument (COM(2018)0460 – C8-0275/2018 – 2018/0243(COD))
P8_TA(2019)0298A8-0173/2019

(Ordinary legislative procedure: first reading)

The European Parliament,

–  having regard to the Commission proposal to Parliament and the Council (COM(2018)0460),

–  having regard to Article 294(2) and Articles 209, 212 and 322(1) of the Treaty on the Functioning of the European Union, pursuant to which the Commission submitted the proposal to Parliament (C8‑0275/2018),

–  having regard to Article 294(3) of the Treaty on the Functioning of the European Union,

–  having regard to the opinion of the Court of Auditors of 13 December 2018,(1)

–  having regard to the opinion of the European Economic and Social Committee of 12 December 2018(2),

–  having regard to the opinion of the Committee of the Regions of 6 December 2018(3),

–  having regard to Rule 59 of its Rules of Procedure,

–  having regard to the joint deliberations of the Committee on Foreign Affairs and the Committee on Development under Rule 55 of the Rules of Procedure,

–  having regard to the report of the Committee on Foreign Affairs and the Committee on Development and also the opinions of the Committee on Budgets, the Committee on International Trade, the Committee on the Environment, Public Health and Food Safety, the Committee on Culture and Education, the Committee on Civil Liberties, Justice and Home Affairs and the Committee on Women's Rights and Gender Equality (A8-0173/2019),

1.  Adopts its position at first reading hereinafter set out;

2.  Calls on the Commission to refer the matter to Parliament again if it replaces, substantially amends or intends to substantially amend its proposal;

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

Position of the European Parliament adopted at first reading on 27 March 2019 with a view to the adoption of Regulation (EU) …/… of the European Parliament and of the Council establishing the Neighbourhood, Development and International Cooperation Instrument

P8_TC1-COD(2018)0243


THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the Functioning of the European Union, and in particular Articles 209, 212 and 322(1) thereof,

Having regard to the proposal from the European Commission,

After transmission of the draft legislative act to the national parliaments,

Having regard to the opinion of the Court of Auditors(4),

Having regard to the opinion of the European Economic and Social Committee(5),

Having regard to the opinion of the Committee of the Regions(6),

Acting in accordance with the ordinary legislative procedure(7),

Whereas:

(1)  The general objective of the Programme "Neighbourhood, Development and International Cooperation Instrument" (the ‘Instrument’) should be to uphold and promote provide the financial framework to support the upholding and promotion of the Union’s values, and principles and fundamental interests worldwide in order to pursue accordance with the objectives and principles of the Union’s external action, as laid down in Article 3(5), Articles 8 and 21 of the Treaty on European Union (TEU). [Am. 1]

(2)  In accordance with Article 21 TEU, the Union shall pursue consistency between the different areas of its external action and between these and its other policies, as well as it shall work for a high degree of cooperation in all fields of international relations. The wide array of actions enabled by this Regulation should contribute to the objectives set out in that Article of the TEU.

(2a)  In accordance with Article 21 TEU, the application of this Regulation is to be guided by the principles of the Union’s external action, namely democracy, the rule of law, the universality and indivisibility of human rights and fundamental freedoms, respect for human dignity, equality and solidarity, and respect for the principles of the United Nations Charter and international law. This Regulation is intended to contribute to achieving the objectives of the Union’s external action, including the Union’s policies relating to human rights and the objectives outlined in the EU Strategic Framework and Action Plan on Human Rights and Democracy. Union action should favour adherence to the Universal Declaration on Human Rights. [Am. 2]

(3)  In accordance with Article 8 TEU, the Union shall develop a special relationship with neighbouring countries, aiming to establish an area of prosperity and good neighbourliness, founded on the values of the Union and characterised by close and peaceful relations based on cooperation. This Regulation should contribute to such objective.

(3a)   In accordance with Article 167 of the Treaty on the Functioning of the European Union (TFEU), The Union and the Member States should foster cooperation with third countries and the competent international organisations in the sphere of culture. This Regulation should contribute to the objectives set out in that Article. [Am. 3]

(4)  The primary objective of Union’s development cooperation policy, as laid down in Article 208 TFEU is the reduction and, in the long term, the eradication of poverty. The Union’s development cooperation policy also contributes to the objectives of the Union’s external action, in particular to foster the sustainable economic, social and environmental development of developing countries, with the primary aim of eradicating poverty, as set out in Article 21(2)(d) of the Treaty on European Union TEU, and to preserve lasting peace, prevent conflicts and strengthen international security, as set out in point (c) of Article 21(2) TEU. [Am. 4]

(5)  The Union shall ensure policy coherence for development as required by Article 208 TFEU. The Union should take account of the objectives of development cooperation in the policies that are likely to affect developing countries, which will be a crucial element of the strategy to achieve the Sustainable Development Goals defined in the 2030 Agenda for Sustainable Development ('2030 Agenda') adopted by the United Nations in September 2015(8). Ensuring policy coherence for sustainable development, as embedded in the 2030 Agenda, requires taking into account the impact of all policies on sustainable development at all levels — nationally, within the Union, in other countries and at global level. Union and Member States development cooperation policies should complement and reinforce each other. [Am. 5]

(6)  This Instrument provides for actions in support of those objectives and of the external action policies and builds on the actions previously supported under Regulation (EU) No 233/2014(9); the 11th European Development Fund (EDF)'s Internal Agreement(10) and Implementing Regulation(11); Regulation (EU) No 232/2014(12); Regulation (EU) No 230/2014(13); Regulation (EU) No 235/2014(14); Regulation (EU) No 234/2014(15); Regulation (Euratom) No 237/2014(16); Regulation (EU) No 236/2014(17); Decision No 466/2014/EU; Regulation (EC, Euratom) No 480/2009(18) and Regulation (EU) 2017/1601(19).

(7)  The global context for action is the pursuit of a rules-based rules-and values-based global order, with multilateralism as its key principle and the United Nations at its core. The 2030 Agenda, together with the Paris Agreement on Climate Change(20) (‘the Paris Agreement’) and the Addis Ababa Action Agenda(21) is the international community’s response to global challenges and trends in relation to sustainable development. With the Sustainable Development Goals at its core, the 2030 Agenda is a transformative framework to eradicate poverty, and achieve sustainable development globally and promote peaceful, just and inclusive societies, while tackling climate change and working to preserve oceans and forests. It is universal in scope, providing a comprehensive shared framework for action that applies to the Union, to its Member States and to its partners. It balances the economic, social, cultural, educational and environmental dimensions of sustainable development, recognising the essential interlinkages between its goals and targets. The 2030 Agenda aims to leave no one behind and seeks to reach the furthest behind first. The implementation of the 2030 Agenda will be closely coordinated with the Union's other relevant international commitments. Actions undertaken by this Regulation should pay be guided by the principles and objectives set out in the 2030 Agenda, the Paris Agreement and the Addis Ababa Action Agenda and should contribute to achieving the Sustainable Development Goals, paying particular attention to interlinkages between Sustainable Development Goals them and to integrated actions that can create co-benefits and meet multiple objectives in a coherent way without undermining other objectives. [Am. 6]

(8)  The implementation application of this Regulation should be guided by based on the five priorities established in the Global Strategy for the European Union’s Foreign and Security Policy (the 'Global Strategy')(22), presented on 19 June 2016, which represents the Union's vision and the framework for united and responsible external engagement in partnership with others, to advance its values and interests. The Union should enhance partnerships, promote policy dialogue and collective responses to challenges of global concern. Its action should support the Union’s fundamental interests, principles and values in all its aspects, including promoting democracy and human rights, contributing to the eradication of poverty, preserving peace, preventing conflicts conflict prevention, mediation and post-conflict reconstruction including women at all stages, ensuring nuclear safety, strengthening international security, fighting addressing root causes of irregular migration and forced displacement and assisting populations, countries and regions confronting confronted with natural or man-made disasters, bringing about the conditions to create an international legal framework for the protection of persons displaced due to climate change, fostering inclusive quality education, supporting a fair, sustainable and rules- and value-based trade policy as a tool for development and to bring improvements to the rule of law and human rights, economic and cultural diplomacy and economic cooperation, promoting innovation, digital solutions and technologies, protecting cultural heritage especially in conflict areas, addressing global public health threats and fostering the international dimension of Union’s policies. In promoting its fundamental interests, principles and values, the Union should comply with, and promote, the principles of respect for high social, labour and environmental standards including with regard to climate change, for the rule of law, for international law, and for including in respect of humanitarian and international human rights law. [Am. 7]

(9)  The new application of this Regulation should also be based on the European Consensus on Development ('the Consensus')(23), signed on 7 June 2017, which provides the framework for a common approach to development cooperation by the Union and its Member States to implement the 2030 Agenda and the Addis Ababa Action Agenda. Eradicating poverty, tackling discrimination and inequalities, leaving no one behind, protecting the environment and fighting climate change, and strengthening resilience are at the heart of development cooperation policy should underpin the application of this Regulation. [Am. 8]

(9a)  In addition to the UN 2030 Agenda, the Paris Agreement on Climate Change the Addis Ababa Action Agenda, the EU Global Strategy, and the European Consensus on Development and the European Neighbourhood Policy, which constitute the primary policy framework, the following documents and their future revisions should also guide the application of this Regulation:

   the EU Strategic Framework and Action Plan on Human Rights and Democracy;
   the EU Human Rights guidelines;
   the EU Integrated Approach to External Conflicts and Crises and the EU's comprehensive approach to external conflicts and crises of 2013;
   the Comprehensive approach to the EU implementation of the United Nations Security Council Resolutions 1325 and 1820 on women, peace and security;
   the Union Programme for the Prevention of Violent Conflicts;
   the Council conclusions of 20 June 2011 on conflict prevention;
   the Concept on Strengthening EU Mediation and Dialogue Capacities;
   the EU-wide Strategic Framework to support Security Sector Reform (SSR);
   the EU strategy against illicit firearms, small arms and light weapons (SALW) and their ammunition;
   the EU Concept for Support to Disarmament, Demobilisation and Reintegration (DDR);
   the Council conclusions of 19 November 2007 on a EU response to situations of fragility and the conclusions of the Council and the Representatives of the Governments of the Member States meeting within the Council, also dated 19 November 2007, on security and development;
   the European Council Declaration of 25 March 2004 on Combating Terrorism, the European Union Counter-Terrorism Strategy, of 30 November 2005 and the Council conclusions of 23 May 2011 on enhancing the links between internal and external aspects of counter-terrorism;
   the OECD guidelines for multinational enterprises;
   the UN guiding principles on business and human rights;
   the UN New Urban Agenda;
   the UN Convention on the Rights of Persons with Disabilities;
   the Refugee Convention;
   the Convention on the Elimination of All Forms of Discrimination against Women,
   the outcomes of the Beijing Platform for Action and the Programme of Action of the International Conference on Population and Development (ICPD);
   the UNCTAD Roadmap towards Sustainable Sovereign Debt Workouts (April 2015);
   the Guiding Principles on Foreign Debt and Human Rights drawn up by the Office of the UN High Commissioner for Human Rights;
   the Global Compact on Refugees;
   the Global Compact on Safe, Orderly and Regular Migration, adopted in Marrakech on December 10th 2018;
   the United Nations Convention on the Rights of the Child. [Am. 9]

(10)  In order to implement the new international framework established by the 2030 Agenda, the Global Strategy and the Consensus, this Regulation should aim at increasing the coherence and ensuring the effectiveness of the Union's external action by concentrating its efforts through a streamlined instrument to improve the implementation of the different external action policies.

(11)  In accordance with the Global Strategy and the Sendai Framework for Disaster Risk Reduction (2015-2030) as adopted on 18 March 2015(24), recognition should be given to the need to move away from crisis response and containment to a more structural, preventive long-term approach that more effectively addresses situations of fragility, natural and man-made disasters, and protracted crises. Greater emphasis and collective approaches are required on risk reduction, prevention, mitigation and preparedness; and further efforts are required to enhance swift response and a durable recovery. This Regulation should therefore contribute to strengthening resilience and linking humanitarian aid and development action particularly through rapid response actions as well as relevant geographic and thematic programmes, while ensuring the appropriate predictability, transparency and accountability, as well as coherence, consistency and complementarity with humanitarian aid and full compliance with international humanitarian law and without hindering the delivery of humanitarian aid according to the principles of humanity, neutrality, impartiality and independence in emergency and post-emergency contexts. [Am. 10]

(12)  In line with the international commitments of the Union on development effectiveness as adopted in Busan in 2011 and renewed at the Nairobi High Level Forum in 2016 and recalled in the Consensus, the Union’s Union, in the context of its official development cooperation assistance and across all aid modalities, should apply the development effectiveness principles, namely ownership of development priorities by developing countries, a focus on results, inclusive development partnerships as well as mutual transparency and accountability, in addition to the principles of alignment and harmonisation. [Am. 11]

(13)  Pursuant to the Sustainable Development Goals, this Regulation should contribute to reinforced monitoring and reporting with a focus on results, covering outputs, outcomes and impacts in partner countries benefiting from the Union's external financial assistance. In particular, as agreed in the Consensus, actions under this Regulation are expected to should contribute at least 20 % of the Official Development Assistance funded under this Regulation to social inclusion and human development, including with a focus on basic social services, such as health, education, nutrition, water, sanitation and hygiene, and social protection, particularly to the most marginalised, taking into account gender equality, and women's empowerment and children’s rights as horizontal issues. [Am. 12]

(14)  Whenever possible and appropriate, In order to improve effective accountability and transparency of the Union budget, the Commission should set up clear monitoring and evaluation mechanisms to ensure effective assessment of progress towards the achievement of this Regulation’s objectives. The results of the Union's external action should be monitored and assessed on the basis of pre-defined, transparent, country-specific and measurable indicators, adapted to the specificities and objectives of the Instrument and preferably based on the results framework of the partner country. The Commission should regularly monitor its actions and review progress, making the results publicly available, in particular in the form of an annual report to the European Parliament and the Council. [Am. 13]

(15)  This Regulation should contribute to the collective Union objective of providing 0,7% of Gross National Income as Official Development Assistance within the timeframe of the 2030 Agenda. That commitment should be based on a clear roadmap for the Union and its Member States to set out deadlines and modalities for its achievement. In that regard, at least 92 % 95 % of the funding under this Regulation should contribute to actions designed in such a way that they fulfil the criteria for Official Development Assistance as established by the Development Assistance Committee of the Organisation for Economic Cooperation and Development. [Am. 14]

(16)  In order to ensure resources are provided to where the need is greatest, especially to the Least Developed Countries and the countries in situation of fragility and conflict, this Regulation should contribute to the collective target of reaching 0,20 % of the Union Gross National Income towards Least Developed Countries within the timeframe of the 2030 Agenda. This commitment should be based on a clear roadmap for the EU and its Member States to set out deadlines and modalities for its achievement. [Am. 15]

(16a)  In line with existing commitments in the EU Gender Action Plan II, at least 85 % of Official Development Assistance funded programmes, geographic and thematic, should have gender equality as a principal or a significant objective, as defined by the OECD DAC. A mandatory review of the spending should ensure that a significant part of these programmes have gender equality and women’s and girls’ rights and empowerment as a principal objective. [Am. 16]

(16b)  This regulation should give particular attention to children and youth as contributors to the realisation of Agenda 2030. The Union's external action under this Regulation should give particular attention to their needs and empowerment and will contribute to the realisation of their potential as key agents of change by investing in human development and social inclusion. [Am. 17]

(16c)   The inhabitants of the countries of Sub-Saharan Africa are mainly adolescents and young people. Each country should decide on its demographic policy. However, the demographic dynamic should be tackled in a global way in order to ensure that current and future generations will be able to achieve their full potential in a sustainable way. [Am. 18]

(17)  This Regulation should reflect the need to focus on strategic priorities, both geographically – the European Neighbourhood and Africa, as well as countries that are fragile and most in need, particularly Least Developed Countries, but also thematically – sustainable development, poverty eradication, democracy and human rights, the rule of law, good governance, security, safe, orderly and regular migration, the reduction of inequalities, gender equality, addressing environmental degradation and climate change and human rights global public health threats. [Am. 19]

(17a)  This Regulation should contribute to creating State and societal resilience in the area of global public health by addressing global public health threats, strengthening health systems, achieving universal health coverage, preventing and combatting communicable diseases and helping to secure affordable medicines and vaccines for all. [Am. 20]

(18)  The special relationship developed with the Union’s neighbouring countries, in accordance with Article 8 TEU, should be preserved and enhanced through the application of this Regulation. This Regulation should contribute to reinforcing States’ and societies’ resilience in the Union’s neighbourhood, following the engagement taken in the Global Strategy. It should support the implementation of the European Neighbourhood Policy, as reviewed in 2015, and the implementation of regional cooperation frameworks, such as cross-border cooperation and the external aspects of relevant macro-regional and sea basin strategies and policies in the eastern and southern neighbourhood, including the Northern Dimension and the Black Sea regional cooperation. Those initiatives offer supplementary political frameworks for deepening relations with and among partner countries, based on the principles of mutual accountability, shared ownership and responsibility. [Am. 21]

(19)  The European Neighbourhood Policy, as reviewed in 2015(25), aims at the deepening of democracy, promotion of human rights and upholding of the rule of law, the stabilisation of neighbouring countries and strengthening resilience, particularly by boosting promoting political, economic development and social reforms, as the Union's main political priorities. In order to attain its objective, the implementation of the reviewed European Neighbourhood Policy has been focusing on four through this Regulation should focus on the following priority areas: good governance, democracy, the rule of law and human rights, with a particular focus in engaging further with civil society; economic socio-economic development, including the fight against youth unemployment, as well as education and environmental sustainability; security; migration and mobility, including tackling the root causes of irregular migration and forced displacement and supporting populations, countries and regions confronted with enhanced migratory pressure. This Regulation should support the implementation of the Union’s association agreements and deep and comprehensive free trade agreements with countries in the neighbourhood. Differentiation and enhanced mutual ownership are the hallmark of the European Neighbourhood Policy, recognising different levels of engagement, and reflecting the interests of each country concerning the nature and focus of its partnership with the Union. The performance-based approach is one of the key tenets of the European Neighbourhood Policy. In the case of a serious or persistent degradation of democracy in one of the partner countries, support should be suspended. Neighbourhood funding is a key lever in addressing common challenges, such as irregular migration and climate change, as well as in spreading prosperity, security and stability through economic development and better governance. The visibility of Union assistance in the neighbourhood area should be enhanced. [Am. 22]

(20)  This Regulation should support the implementation of a modernised association agreement with countries of the Africa, Caribbean and Pacific (ACP) Group of States and allow the EU and its ACP partners to develop further strong alliances on key and shared global challenges. In particular, this Regulation should support the continuation of the established cooperation between the Union and the African Union in line with the Joint Africa-EU Strategy, including the engagement from Africa and the Union to promote children’s rights as well as the empowerment of Europe’s and Africa’s youth, and build on the future EU-ACP agreement after 2020, including through a continental approach towards Africa, and a mutually beneficial partnership of equals between the EU and Africa. [Am. 23]

(20a)   This Regulation should also contribute to the trade-related aspects of the Union's external relations, such as cooperation with third countries on supply chain due diligence for tin, tantalum and gold, the Kimberley Process, the Sustainability Compact, the implementation of commitments under Regulation (EU) No 978/2012 of the European Parliament and the Council(26) (GSP Regulation), cooperation under the Forest Law Enforcement, Governance and Trade (FLEGT) and Aid for Trade initiatives in order to ensure consistency and mutual support between Union trade policy and development goals and actions. [Am. 24]

(21)  The Union should seek the most efficient use of available resources in order to optimise the impact of its external action. That should be achieved through coherence, consistency and complementarity among the Union's external financing instruments, notably the Instrument for Pre-Accession III(27), the Humanitarian Aid Instrument(28), the Decision on Overseas Countries and Territories(29), the European Instrument for Nuclear Safety to complement the Neighbourhood, Development and International Cooperation Instrument on the basis of the Euratom Treaty(30), the common foreign and security policy and the newly proposed European Peace Facility(31) which is financed outside the Union budget, as well as the creation of synergies with other Union policies and Programmes, including Trust Funds as well as policies and programmes of the EU Member States. This includes coherence and complementarity with macro-financial assistance, where relevant. In order to maximise the impact of combined interventions to achieve a common objective, this Regulation should allow for the combination of funding with other Union Programmes, as long as the contributions do not cover the same costs. [Am. 25]

(22)  Funding from this Regulation should be used to finance actions under the international dimension of Erasmus and Creative Europe, the implementation of which should be done according to Regulation (EU) .../... of the European Parliament and of the Council (‘the Erasmus Regulation’)(32) and Regulation (EU) .../... of the European Parliament and of the Council (‘the Creative Europe Regulation’)(33). [Am. 26]

(22a)   The international dimension of the Erasmus Plus Programme should be boosted aiming at increasing opportunities for mobility and cooperation for individuals and organisations from less developed countries of the world - supporting capacity-building in third countries, skills’ development, people-to-people exchanges, while offering a greater number of opportunities for cooperation and mobility with developed and emerging countries. [Am. 27]

(22b)  Considering the relevance of addressing education and culture in line with the 2030 Agenda for Sustainable Development and the EU strategy for international cultural relations, this Regulation should contribute to ensure inclusive and equitable quality education, promote life-long learning opportunities for all, foster international cultural relations, and recognise the role of culture in promoting European values through dedicated and targeted actions designed to have a clear impact on the Union’s role on the global scene. [Am. 28]

(23)  The main approach for actions financed under this Regulation should be through geographic programmes, in order to maximise the impact of the Union's assistance and bring Union's action closer to partner countries and populations, .This general approach while supporting thematic priorities such as human rights, civil society and sustainability. The objectives under the geographic and thematic programmes should be consistent and coherent with each other and should be complemented by thematic programmes and by rapid response actions, where relevant. Effective complementarity between the geographic, thematic and rapid response programmes and actions should be ensured. In order to take account of the specificities of each programme, the power to adopt acts in accordance with Article 290 TFEU should be delegated to the Commission to supplement the provisions of this Regulation by setting out the Union’s strategy, the priority areas, detailed objectives, the expected results, specific performance indicators and the specific financial allocation for each programme. It is of particular importance that the Commission carry out appropriate consultations during its preparatory work, including at expert level, and that those consultations be conducted in accordance with the principles laid down in the Interinstitutional Agreement of 13 April 2016 on Better Law-Making(34). In particular, to ensure equal participation in the preparation of delegated acts, the European Parliament and the Council receive all documents at the same time as Member States' experts, and their experts systematically have access to meetings of Commission expert groups dealing with the preparation of delegated acts. [Am. 29]

(24)  In line with the Consensus, the Union and its Member States should enhance joint programming to increase their collective impact by bringing together their resources and capacities. Joint programming should build on the partner countries’ engagement, appropriation and ownership. The Union and its Member States should seek to support partner countries through joint implementation application, whenever appropriate. Joint application should be inclusive and open to all Union partners who agree and can contribute to a common vision, including Member States’ agencies and their development financial institutions, local authorities, the private sector, civil society and academia. [Am. 30]

(24a)  In the case of a serious or persistent degradation of democracy, human rights and rule of law in one of the partner countries, support may, by means of a delegated act, be partially or fully suspended. The Commission should take due account of relevant European Parliament resolutions in its decision-making. [Am. 31]

(24b)  This Regulation should reconfirm nuclear safety as an important part of the Union external action and facilitate the objectives of cooperation specified in Regulation (EU) .../... of the European Parliament and of the Council(35) (‘Regulation EINS’). Therefore, in the event where a partner country persistently fails to respect the basic nuclear safety standards, such as provisions of the relevant international Conventions within the Framework of the IAEA, the Espoo and Aarhus Conventions and their subsequent amendments, the Treaty on the Non-Proliferation of Nuclear Weapons and the additional Protocols thereto, the commitments to implementation of stress tests and related measures, and the objectives of cooperation specified in Regulation EINS, assistance under this Regulation for the country concerned should be reconsidered and may be suspended or partly suspended. [Am. 32]

(25)  Whilst democracy and human rights and fundamental freedoms, including the protection of children, minorities, persons with disabilities and LGBTI persons, as well as gender equality, and women's women and girls’ empowerment should be consistently reflected and mainstreamed throughout the implementation application of this Regulation, Union assistance under the thematic programmes for human rights and democracy and civil society organisations - local authorities should have a specific complementary and additional role by virtue of its global nature and its independence of action from the consent of the governments and public authorities of the third countries concerned. In doing so, the Union should pay particular attention to countries and urgency situations where human rights and fundamental freedoms are most at risk and where disrespect for those rights and freedoms is particularly pronounced and systematic, as well as to situations where space for civil society is at stake. The Union’s assistance under this Regulation should be designed in such a way as to allow for support to, and cooperation and partnership with civil society on sensitive and human rights and democracy issues, providing the flexibility and requisite reactivity to respond to changing circumstances, needs of beneficiaries, or periods of crisis, and when necessary, contributing to capacity building of civil society. In such cases, the political priorities should be to promote respect for international law and to provide means of action to local civil society and other relevant human rights stakeholders in order to contribute to work that is carried out in very difficult circumstances. This Regulation should offer also the possibility for civil society organisations to receive small grants in a fast and efficient manner when necessary, in particular in the most difficult situations, such as those of fragility, crisis, and inter-community tensions. [Am. 33]

(25a)  In accordance with Articles 2, 3 and 21 TEU and Article 8 TFEU, the implementation of this Regulation should be guided by the principles of gender equality, women and girls’ empowerment, and should seek to protect and promote women’s rights in line with the Gender Action Plan II, the Council Conclusions on Women Peace and Security of 10 December 2018, the Council of Europe Istanbul Convention and Goal 5 of the 2030 Agenda for Sustainable Development. [Am. 34]

(25b)  This Regulation should address and mainstream the promotion of women’s rights and gender equality globally, including by supporting organisations which are working on promoting sexual and reproductive health and rights (access to quality and accessible information, education and services) and combating gender-based violence and discrimination, as well as recognising and addressing the close links between the issues of peace, security, development and gender equality. This work should be coherent with, and promote the implementation of relevant international and European principles and conventions. [Am. 35]

(26)  Civil society organisations should embrace a wide range of actors with different multiple roles and mandates which includes all non-State, not-for-profit structures, non-partisan and non-violent structures, through which people organise to pursue shared objectives and ideals, whether political, cultural, social, or religious, environmental, economic or holding authorities to account. Operating from the local to the national, regional and international levels, they comprise urban and rural, formal and informal organisations. Other bodies or actors not specifically excluded by this Regulation should be able to be financed when it is necessary to achieve the objectives of this Regulation. [Am. 36]

(26a)  In line with the Consensus for Development, the Union and its Member States should foster the participation of civil society organisations (CSOs) and local authorities (LAs) in contributing to sustainable development and to the implementation of the SDGs, inter alia in the sectors of democracy, the rule of law, fundamental freedoms and human rights, social justice and as providers of basic social services to populations most in need. They should recognise the multiple roles played by CSOs and LAs, the latter as promoters of a territorial approach to development, including decentralisation processes, participation, oversight and accountability. The Union and its Member States should promote an operating space and enabling environment for CSOs, and further enhance their support for CSOs’ and LAs’ capacity building in order to strengthen their voice in the sustainable development process and advance political, social and economic dialogue, including through civil society facilities programmes. [Am. 37]

(26b)   The Union should support civil society organisations and promote their greater strategic involvement in all external instruments and programmes, including geographical programmes and the rapid response actions under this Regulation, in keeping with the Council conclusions of 15 October 2012 on 'The roots of democracy and sustainable development: Europe’s engagement with civil society in external relations’. [Am. 38]

(27)  This Regulation lays down a financial envelope for this Instrument, which is to constitute the prime reference amount, within the meaning of point 17 of the Interinstitutional Agreement of 2 December 2013 between the European Parliament, the Council and the Commission on budgetary discipline, on cooperation in budgetary matters and on sound financial management(36), for the European Parliament and the Council during the annual budgetary procedure.

(28)  Reflecting the importance of tackling climate change, protecting the environment and fight biodiversity loss, in line with the Union commitments to implement the Paris Agreement, the Convention on Biological Diversity and the United Nations Sustainable Development Goals, this Regulation should contribute to mainstream climate and environmental action in the Union policies and to the achievement of an the overall target of 25 % of the Union budget expenditures supporting climate objectives and support actions with clean and identifiable co-benefits across sectors. Actions under this Regulation are expected to contribute 25 % 45 % of its overall financial envelope to climate objectives, environmental management and protection, biodiversity and combatting desertification, of which 30 % of the overall financial envelope should be dedicated to climate change mitigation and adaptation. Relevant actions will be identified during the implementation application of this Regulation, and the overall contribution from this Regulation should be part of relevant evaluations and review processes. Union action in this area should favour the adherence to the Paris Agreement and to the Rio Conventions, and not contribute to environmental degradation or cause harm to the environment or climate. Actions and measures contributing to meeting the target on climate shall put special emphasis on support for adaptation to climate change in poor, highly vulnerable countries, and should take into consideration the relation between climate, peace and security, women’s empowerment and the fight against poverty. This Regulation should contribute to the sustainable management of natural resources and promote sustainable and secure mining, forest management and agriculture. [Am. 39]

(29)  It is essential to further step up Cooperation on migration with partner countries, reaping the benefits of well-managed and regular can lead to mutually benefiting from orderly, safe and responsible migration and to effectively addressing irregular migration and forced displacement. Such cooperation should contribute to facilitating safe and legal pathways for migration and asylum, ensuring access to international protection, addressing the root causes of irregular migration and forced displacement, engaging with diasporas, enhancing border management and pursuing efforts in the fight against addressing irregular migration, trafficking in human beings and migrant smuggling, and working on safe, dignified and sustainable returns, readmission and reintegration where relevant, in a conflict-sensitive manner, on the basis of mutual accountability, and in full respect of humanitarian and human rights obligations. Therefore, third countries' effective cooperation with the under international and Union in this area should be an integral element in the general principles of this Regulation. An increased law. Coherence between migration and development cooperation policies is important to ensure that development assistance supports partner countries to manage fight poverty and inequality, promote rights and freedoms, as well as contribute to an orderly, safe and responsible migration more effectively management. This Regulation should contribute to a coordinated, holistic and structured approach to migration, maximising the synergies and applying the necessary leverage the positive impact of migration and mobility on development. [Am. 40]

(30)  This Regulation should enable the Union to respond to challenges, needs and opportunities related to migration, in complementarity with Union migration policy and development policies. To contribute to that end, in order to maximise the contribution of migration to development, and without prejudice to unforeseen circumstances new emerging challenges or new needs, a maximum of 10 % of its financial envelope is expected to be dedicated to addressing the root causes of irregular migration and forced displacement and to supporting strengthened engagement to facilitate safe, orderly, regular and responsible migration management and the implementation of planned and well-managed migration policies and governance, including the protection of refugees and migrants' rights based on international and Union law within the objectives of this Regulation. This Regulation should also contribute to addressing the brain-drain phenomenon and to help support the needs of displaced people and host communities, in particular through the provision of access to basic services and livelihoods opportunities. [Am. 41]

(30a)   Information and communication technologies (ICT) and services are proven enablers of sustainable development and inclusive growth. They can be key to improving citizens' lives even in the poorest countries, in particular by empowering women and girls, enhancing democratic governance and transparency, and boosting productivity and job creation. Nevertheless, connectivity and affordability remain a problem both across and within regions, since there are large variations between high and lower income countries and between cities and rural areas. This regulation should therefore help the Union to further mainstream digitalisation into the Union development policies. [Am. 42]

(30b)  The 2030 Agenda for Sustainable Development, adopted by a Resolution of the United Nations General Assembly on 25 September 2015, underlined the importance of promoting peaceful and inclusive societies both as a Sustainable Development Goal (SDG) 16 and in order to achieve other development policy outcomes. SDG 16.a specifically requests to ‘Strengthen relevant national institutions, including through international cooperation, for building capacities at all levels, in particular in developing countries, to prevent violence and combat terrorism and crime’. [Am. 43]

(30c)  In the High Level Meeting Communiqué of 19 February 2016, the Development Assistance Committee of the Organisation for Economic Cooperation and Development updated the reporting directives on Official Development Assistance in the field of peace and security. The financing of the actions undertaken in accordance with this Regulation constitutes Official Development Assistance when it fulfils the criteria set out in those reporting directives or any subsequent reporting directives, upon which the Development Assistance Committee is able to agree. [Am. 44]

(30d)  The capacity building in support of development and security for development should be used in exceptional cases only, where the objectives of the Regulation cannot be met by other development cooperation activities. Giving support to security sector actors in third countries, including, under exceptional circumstances, the military, in a conflict prevention, crisis management or stabilisation context is essential to ensure appropriate conditions for poverty eradication and development. Good governance, effective democratic control and civilian oversight of the security system, including of the military, as well as compliance with human rights and the rule of law principles are essential attributes of a well-functioning State in any context, and should be promoted through a wider security sector reform support to third countries. [Am. 45]

(30e)  This Regulation should build on the conclusions of the evaluation by the Commission requested for June 2020, including a wide-ranging, multi-stakeholder public consultation, assessing the coherence of capacity building in support of development and security for development within the security-development nexus funded by the Union and its Member States with the Global Strategy and the UN Sustainable Development Goals. [Am. 46]

(30f)  The Union should also promote a conflict-sensitive and gender-sensitive approach in all actions and programmes under this Regulation, with the aim of avoiding negative impacts and maximising positive ones. [Am. 47]

(31)  Horizontal financial rules adopted by the European Parliament and the Council on the basis of Article 322 TFEU should apply to this Regulation. These rules are laid down in Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the Council(37) (“the Financial Regulation”) and determine in particular the procedure for establishing and implementing the budget through grants, procurement, prizes, indirect implementation, financial assistance, budget support, trust funds, financial instruments and budgetary guarantees, and provide for checks on the responsibility of financial actors. Rules adopted on the basis of Article 322 TFEU also concern the protection of the Union's budget in case of generalised deficiencies as regards the rule of law in Member States and third countries, as the respect for the rule of law is essential for sound financial management and effective EU funding.

(32)  The types of financing and the methods of implementation application under this Regulation should be chosen on the basis of partner’s needs, preferences and specific context, their relevance, sustainability and ability to comply with the development effectiveness principles, achieve the specific objectives of the actions and to deliver results, taking into account, in particular, the costs of controls, the administrative burden, and the expected risk of non-compliance. This should include consideration of the use of lump sums, flat rates and unit costs, as well as financing not linked to costs as referred to in Article 125(1) of the Financial Regulation. The role of the European Endowment for Democracy (EED) as a foundation mandated through the European institutions for the support of democracy, civil society and human rights worldwide should be strengthened and increased under this Regulation. The EED should be given the administrative flexibility and the financial opportunities to disburse targeted grants to civil society actors in the European Neighbourhood standing for the implementation of the European Neighbourhood Policy, in particular where it concerns the development of democracy, human rights, free elections and the rule of law. [Am. 48]

(33)  The new European Fund for Sustainable Development Plus (‘EFSD+’), building on its successful predecessor, the EFSD(38), should constitute an integrated financial package supplying financing capacity in the form of grants, budgetary guarantees and financial instruments worldwide. The EFSD+ should support the External Investment Plan and combine blending and budgetary guarantee operations covered by the External Action Guarantee, including those covering sovereign risks associated with lending operations, previously carried out under the external lending mandate to the European Investment Bank. Given its role under the Treaties and its experience over the last decades in supporting Union policies, the European Investment Bank should remain a natural partner for the Commission for the implementation application of operations under the External Action Guarantee. Other Multilateral Development Banks (MDBs) or EU National Development Banks (NDBs) also have skills and capital which can add significant value to the impact of Union development policy and their participation under the EFSD+ should therefore also be strongly promoted through this Regulation. [Am. 49]

(34)  The EFSD+ should aim at supporting investments as a means of contributing to the achievement of the Sustainable Development Goals by fostering sustainable and inclusive economic, cultural and social development and promoting the socio-economic resilience in partner countries with a particular focus on the eradication of poverty, preventing conflict and the promotion of peaceful, just and inclusive societies, sustainable and inclusive growth economic progress, tackling climate change through mitigation and adaptation, environmental degradation, the creation of decent jobs in compliance with relevant ILO standards and economic opportunities, in particular for women, young and vulnerable people. Emphasis should be placed on providing inclusive and equitable quality education, and the development of skills and entrepreneurship by strengthening educational and cultural structures, including for children in humanitarian emergencies and situations of forced displacement. It should also aim at supporting a stable investment environment, industrialisation, socioeconomic sectors, cooperatives, social enterprises, micro, small and medium-sized enterprises as well as addressing strengthening democracy the rule of law and human rights, the lack of which often constitute the specific socioeconomic root causes of irregular migration and forced displacement, in accordance with the relevant indicative programming documents. Special attention should be given to countries identified as experiencing fragility or conflict, Least Developed Countries and heavily indebted poor countries. A special focus should be placed also to improve the delivery of essential public basic services, food security, and to improve the quality of life of rapidly growing urban populations, including through adequate, safe and affordable housing. The EFSD+ should encourage for-profit/non-profit partnerships as a means of guiding private sector investments towards sustainable development and poverty eradication. The strategic involvement of civil society organisations and of Union Delegations in partner countries should also be promoted at all stages of the project cycle, to help finding tailor-made solutions for promoting the socioeconomic development of communities, job creation, and new business opportunities. Investments should be based on conflict analysis, focus on the root causes of conflict, fragility and instability, maximising the potential for fostering peace and minimising the risks of exacerbating conflicts. [Am. 50]

(35)  The EFSD+ should maximise additionality of funding, address market failures and sub-optimal investment situations, deliver innovative products and ‘crowd-in’ private sector funds to optimise the contribution of private finance to local sustainable development. Involvement of the private sector in the Union’s cooperation with partner countries through the EFSD+ should yield measurable and additional development impact in full respect of the environment and local communities’ rights and livelihoods and without distorting the local market and unfairly competing with local economic actors. It should be cost-effective based on mutual accountability and risk and cost sharing. The EFSD+, while based on adequate accountability and transparency criteria, should operate as a ‘one-stop-shop’, receiving financing proposals from financial institutions and public or private investors and delivering a wide range of financial support to eligible investments. [Am. 51]

(35a)  An EU guarantee for the sovereign investments operations in the public sector shall form part of the EFSD+. That EU guarantee shall not be extended to sovereign investment operations that involve on-lending to the private sector or lending to, or for the benefit of, sub-sovereign entities that can access sub-sovereign financing without sovereign guarantees. In order to assist capacity planning by the EIB, a minimum guaranteed volume of such sovereign investments operations shall be allocated to the EIB. [Am. 52]

(36)  An External Action Guarantee should be established building on the existing EFSD Guarantee and the Guarantee Fund for external actions. The External Action Guarantee should support the EFSD+ operations covered by budgetary guarantees, macro-financial assistance and loans to third countries on the basis of Council Decision 77/270/Euratom(39). These operations should be supported by appropriations under this Regulation, together with those under Regulation (EU) No …/… of the European Parliament and of the Council (40) (‘IPA III Regulation’) and Regulation EINS , which should also cover the provisioning and liabilities arising from macro-financial assistance loans and loans to third countries referred to in Article 10(2) of Regulation EINS, respectively. When funding EFSD+ operations, priority should be given to those which have a high impact on decent job creation and livelihoods and whose cost-benefit ratio enhances the sustainability of investment and which provide the highest guarantees of sustainability and long-term development impact throughout local ownership. The operations supported with the External Action Guarantee should be accompanied by an in-depth ex ante assessment of environmental, financial and social aspects, as appropriate and including the impact on human rights and livelihoods of affected communities and the impact on inequalities and the identification of ways to address those inequalities in line with the better regulation requirements and taking due account of the principle of free and prior informed consent (FPIC) of affected communities in land-related investments. The External Action Guarantee should not be used to provide essential public services, which remains a government responsibility. Ex-post impact assessments should also happen to measure the development impact of the EFSD+ operations. [Am. 53]

(37)  In order to provide for flexibility, increase the attractiveness for the private sector, promote fair competition and maximise the impact of the investments a derogation from the rules related to the methods of implementation of the Union budget, as laid down in the Financial Regulation, should be provided as regards the eligible counterparts. Those eligible counterparts could also be bodies which are not entrusted with the implementation of a public-private partnership and could also be bodies governed by the private law of a partner country. [Am. 54]

(38)  In order to increase the impact of the External Action Guarantee, Member States and contracting parties to the Agreement on the European Economic Area should have the possibility of providing contributions in the form of cash or a guarantee. Contribution in the form of a guarantee should not exceed 50 % of the amount of operations guaranteed by the Union. The financial liabilities arising from this guarantee should not be provisioned and the liquidity cushion should be provided by the common provisioning fund.

(39)  External actions are often implemented applied in a highly volatile environment requiring continuous and rapid adaptation to the evolving needs of Union partners and to global challenges to human rights and fundamental freedoms, democracy and good governance, security and stability, climate change and environment, oceans, and the migration, crisis and including its root causes such as poverty and inequality, and the impact of the increasing number of displaced persons, especially on developing countries. Reconciling the principle of predictability with the need to react rapidly to new needs consequently means adapting the financial implementation application of the programmes. To increase the ability of the EU to respond to unforeseen needs not covered by programmes and programming documents, building on the successful experience of the European Development Fund (EDF), an a pre-defined amount should be left unallocated as an emerging challenges and priorities cushion. It should be mobilised in duly justified cases in accordance with the procedures established in this Regulation. [Am. 55]

(40)  Therefore, while respecting the principle that the Union budget is set annually, this Regulation should preserve the possibility to apply the flexibilities already allowed by the Financial Regulation for other policies, namely carryovers and re-commitments of funds, to ensure efficient use of the Union funds both for Union citizens and the partner countries, thus maximising the Union funds available for the Union’s external action interventions.

(41)  Pursuant to Article 83 of Council Decision …/… (OCTs), persons and entities established in overseas countries and territories should be eligible for funding under this Regulation, subject to its rules and objectives and possible arrangements applicable to the Member State to which the relevant overseas country or territory is linked. Moreover, cooperation between the partner countries and the overseas countries and territories as well as the Union outermost regions under Article 349 TFEU should be encouraged in areas of common interest.

(42)  In order to enhance partner countries' democratic ownership of their development processes and the sustainability of external aid, the Union should, where relevant, favour the use of partner countries' own institutions, resources, expertise and of partner countries’ systems and procedures for all aspects of the project cycle for cooperation while ensuring local resources and expertise and the full involvement of local governments and civil society. The Union should also provide training programmes on how to apply for Union funding to local authorities’ civil servants and civil society organisations with the aim of helping them to enhance the eligibility and efficiency of their projects. These programmes should be carried out in the countries concerned, be available in the language of the country and complement any distance learning programmes also established, in order to ensure a targeted training responding to the needs of that country. [Am. 56]

(43)  Annual or multi-annual action plans and measures referred to in Article 19 constitute work programmes under the Financial Regulation. Annual or multi-annual action plans consist of a set of measures grouped into one document.

(44)  In accordance with the Financial Regulation, Regulation (EU, Euratom) No 883/2013 of the European Parliament and of the Council(41), Council Regulation (EC, Euratom) No 2988/95(42), Council Regulation (Euratom, EC) No 2185/96(43) and Council Regulation (EU) 2017/1939(44), the financial interests of the Union are to be protected through effective and proportionate measures, including the prevention, detection, correction and investigation of irregularities, including fraud, the recovery of funds lost, wrongly paid or incorrectly used and, where appropriate, the imposition of administrative sanctions. In particular, in accordance with Regulation (EU, Euratom) No 883/2013 and Regulation (Euratom, EC) No 2185/96 the European Anti-Fraud Office (OLAF) may carry out administrative investigations, including on-the-spot checks and inspections, with a view to establishing whether there has been fraud, corruption or any other illegal activity affecting the financial interests of the Union. In accordance with Regulation (EU) 2017/1939, the European Public Prosecutor's Office may investigate and prosecute fraud and other criminal offences affecting the financial interests of the Union, as provided for in Directive (EU) 2017/1371(45) of the European Parliament and of the Council. In accordance with the Financial Regulation, any person or entity receiving Union funds is to fully cooperate in the protection of the Union’s financial interests and grant the necessary rights and access to the Commission, OLAF and the European Court of Auditors, and to ensure that any third parties involved in the implementation of Union funds grant equivalent rights; for this reason, agreements with third countries and territories and with international organisations, and any contract or agreement resulting from the implementation of this Regulation should contain provisions expressly empowering the Commission, the Court of Auditors and OLAF to conduct such audits, on-the-spot checks and inspections, according to their respective competences and ensuring that any third parties involved in the implementation of Union funding grant equivalent rights.

(44a)  In order to contribute to the international fight against tax fraud, tax evasion, fraud, corruption and money laundering all financing through this Regulation should be provided in a completely transparent manner. Furthermore, the eligible counterparts should not support any activities carried out for illegal purposes nor participate in any financing or investment operation through a vehicle located in a non-cooperative jurisdiction or in a tax haven. Counterparts should also refrain from making any use of tax avoidance or aggressive tax planning schemes. [Am. 57]

(45)  In order to ensure uniform conditions for the implementation of the relevant provisions of this Regulation, implementing powers should be conferred on the Commission. Those powers should be exercised in accordance with Regulation (EU) No 182/2011(46) of the European Parliament and of the Council. [Am. 58]

(46)  In order to supplement or non-essential elements of this Regulation, the power to adopt acts in accordance with Article 290 TFEU should be delegated to the Commission in respect of setting out the Union’s strategy, the priority areas, detailed objectives, the expected results, specific performance indicators and the specific financial allocation and cooperation modalities for each geographic and thematic programme, as well as for action plans and measures not based on programming documents establishing a human rights operational framework, establishing a risk management framework, deciding on the needs not covered by programmes or programming documents, deciding on the suspension of assistance, establishing the performance-based approach framework, establishing the provisioning rates, establishing a monitoring and evaluation framework and extending the scope of actions to countries and territories not covered by this Regulation. In order to amend non-essential elements of this Regulation, the power to adopt acts in accordance with Article 290 of the Treaty on the Functioning of the European Union TFEU should be delegated to the Commission in respect of the provisioning rates laid down in Article 26(3), to the areas of cooperation and intervention listed in Annexes II, III and IV, the priority areas of the EFSD+ operations and the investment windows listed in Annex V, the governance of the EFSD+ in Annex VI, to review or complement as well as the indicators listed in Annex VII where considered necessary and to supplement this Regulation with provisions on the establishment of a monitoring and evaluation framework. [Am. 59]

(47)  Pursuant to paragraph 22 and 23 of the Inter-institutional agreement for Better Law-Making of 13 April 2016(47), there is a need to evaluate this Programme on the basis of information collected through specific monitoring requirements, while avoiding overregulation and administrative burdens, in particular on Member States. These requirements, where appropriate, can should include measurable indicators, as a basis for evaluating the effects of the Programme on the ground. It is of particular importance that the Commission carry out appropriate consultations during its preparatory work, including at expert level with relevant stakeholders such as civil society and experts, and that those consultations be conducted in accordance with the principles laid down in the Interinstitutional Agreement on Better Law-Making of 13 April 2016. In particular, to ensure equal participation in the preparation of delegated acts, the European Parliament and the Council receive all documents at the same time as Member States' experts, and their experts systematically have access to meetings of Commission expert groups dealing with the preparation of delegated acts. [Am. 60]

(48)  The references to Union instruments in Article 9 of Council Decision 2010/427/EU(48), which are replaced by Due to the broad nature and scope of this Regulation, should be read as references to and to ensure coherence between the principles, objectives and spending under both this Regulation and the other external financing instruments, such as Regulation EINS , or Instruments which are intrinsically linked to external policies, such as the IPA III Regulation, a horizontal steering group composed of all relevant Commission and EEAS services and chaired by the Vice-President of the Commission/High Representative of the Union for Foreign Affairs and Security Policy (VP/HR) or a representative of that office should ensure that be responsible for the steering, coordinating and managing of the policies, programmes, objectives and actions under this Regulation is implemented in accordance with the role of in order to ensure consistency, efficiency, transparency and accountability of Union external financing. The VP/HR should ensure overall political coordination of the Union’s external action. For all actions, including rapid response actions and exceptional assistance measures, and throughout the whole cycle of programming, planning and application of the instrument, the High Representative and the EEAS as provided in that Decision should work with the relevant members and services of the Commission, identified on the basis of the nature and objectives of the action foreseen, building upon their expertise. All proposals for decisions should be prepared by following the Commission’s procedures and should be submitted to the Commission for adoption. [Am. 61]

(48a)  The application of this Regulation should, where relevant, be complementary to, and should be consistent with, measures adopted by the Union in pursuit of the Common Foreign and Security Policy objectives within the framework of Chapter Two of Title V TEU and measures adopted within the framework of Part Five TFEU. [Am. 62]

(49)  The envisaged actions as provided for hereunder should strictly follow the conditions and procedures set out by the restrictive measures of the Union, [Am. 63]

(49a)  The European Parliament should be fully involved in the design, programming, monitoring and evaluation phases of the instruments in order to guarantee political control and democratic scrutiny and accountability of Union funding in the field of external action. An enhanced dialogue between the institutions should be established in order to ensure that the European Parliament is in a position to exercise political control during the application of this Regulation in a systematic and smooth manner thereby enhancing both efficiency and legitimacy, [Am. 64]

HAVE ADOPTED THIS REGULATION:

TITLE I

GENERAL PROVISIONS

Article 1

Subject matter

This Regulation establishes the Programme “Neighbourhood, Development and International Cooperation Instrument” (the ‘Instrument’).

It lays down the objectives of the Instrument, the budget for the period 2021 – 2027, the forms of Union funding and the rules for providing such funding.

It also establishes the European Fund for Sustainable Development Plus (the ‘EFSD+’) and an External Action Guarantee.

Article 2

Definitions

For the purposes of this Regulation, the following definitions apply:

(1)  “country programme” shall mean an indicative programme covering one country;

(2)  “multi-country programme” shall mean an indicative programme covering more than one country;

(3)  “cross-border cooperation” shall mean cooperation between one or more Member States, and one or more third countries and territories along the external borders of the Union.

(4)  “regional programme” shall mean an indicative multi-country programme covering more than one third country within the same geographic area as established in Article 4 (2);

(5)  “trans-regional programme” shall mean an indicative multi-country programme covering more than one third country from different areas as established in Article 4 (2) of this Regulation;

(6)  “legal entity” shall mean any natural or legal person created and recognised as such under national law, Union law or international law, which has legal personality and which may, acting in its own name, exercise rights and be subject to obligations, or an entity without a legal personality in accordance with Article 197(2)(c) of the Financial Regulation;

(6a)  “civil society organisations” means all non-State, not-for-profit, and non-violent structures through which people organise to pursue shared objectives and ideals, whether political, cultural, social, economic, religious, environmental, or holding authorities to account, which operate at local, national, regional or international level, and which may include urban and rural as well as formal and informal organisations; in the context of the thematic programme on human rights and democracy, “civil society” includes individuals or groups that are independent from the State and whose activities help to promote human rights and democracy, including human rights defenders as defined by the UN Declaration on the Right and Responsibility of Individuals; [Am. 65]

(6b)  “local authorities” means branches of government or public authorities, which operate at sub-national level (e.g. municipal, community, district, county, provincial or regional level); [Am. 66]

(7)  “investment window” shall mean a targeted area for support by the EFSD+ Guarantee to portfolios of investments in specific regions, countries or sectors;

(8)  “contributor” shall mean means a Member State, an international finance institution, or a public institution of a Member State, a public agency or other public or private entities contributing in cash or in guarantees to the common provisioning fund; [Am. 67]

(8a)  ‘additionality’ means the principle which ensures that the External Action Guarantee contributes to sustainable development by operations which could not have been carried out without it, or which achieve positive results above and beyond what could have been achieved without it, as well as crowding in private sector funding and addressing market failures or sub-optimal investment situations as well as improving the quality, sustainability, impact or scale of an investment. The principle also ensures that investment and financing operations covered by the External Action Guarantee do not replace the support of a Member State, private funding or another Union or international financial intervention, and avoid crowding out other public or private investments. Projects supported by the External Action Guarantee typically have a higher risk profile than the portfolio of investments supported by the eligible counterparts under their normal investment policies without the External Action Guarantee; [Am. 68]

(8b)  “industrialised countries” means third countries other than developing countries included in the OECD-Development Assistance Committee’s (‘OECD-DAC’) list of Official Development Assistance (‘ODA’) recipients; [Am. 69]

(8c)  “poverty” means all the conditions in which people are deprived and perceived as incapacitated in different societies and local contexts; the core dimensions of poverty include economic, human, political, socio-cultural and protective capabilities; [Am. 70]

(8d)   “gender sensitivity” means acting with the aim of understanding and taking account of the societal and cultural factors involved in gender-based exclusion and discrimination in all spheres of public and private life; [Am. 71]

(8e)   “conflict sensitivity” means acting with the aim of understanding that any initiative conducted in a conflict-affected environment will interact with that conflict and that such interaction will have consequences that may have positive or negative effects; conflict sensitivity also means ensuring that, to the best of its abilities, Union actions (political, policy, external assistance) avoid having a negative impact and maximise the positive impact on conflict dynamics, thereby contributing to conflict prevention, structural stability and peace building. [Am. 72]

Where reference is made to human rights, it shall be understood as to include fundamental freedoms; [Am. 73]

In the context of Article 15, “countries most in need” may also include the countries listed in Annex I. [Am. 74]

Article 3

Objectives

1.  The general objective of this Regulation is to lay down the financial framework enabling the Union to uphold and promote the Union’s its values, and principles and fundamental interests worldwide, in order to pursue in accordance with the objectives and principles of the Union’s external action, as laid down in Article 3(5), Articles 8 and 21 TEU, as well as Articles 11 and 208 TFEU. [Am. 75]

2.  In accordance with paragraph 1, the specific objectives of this Regulation are the following:

(a)  to support and foster dialogue and cooperation with third countries and regions in the Neighbourhood, in Sub-Saharan Africa, in Asia and the Pacific, and in the Americas and the Caribbean;

(aa)  to contribute to the achievement of the international commitments and objectives that the Union has agreed to, in particular the 2030 Agenda, the SDGs and the Paris Agreement; [Am. 76]

(ab)  to develop a special strengthened relationship with the countries in the eastern and southern neighbourhood of the Union, founded on cooperation, peace and security, mutual accountability and shared commitment to the universal values of democracy, rule of law and respect for human rights, socio-economic integration and environmental protection and climate action; [Am. 77]

(ac)  to pursue the reduction and, in the long term, the eradication of poverty, particularly in least developed countries (LDCs); to enable sustainable social and economic development; [Am. 78]

(b)  at global level, to consolidate and support democracy, rule of law and human rights, support civil society organisations and local authorities, further stability and peace, prevent conflict and promote just and inclusive societies, advance multilateralism, international justice and accountability, and address other global and regional challenges including migration and mobility climate change and environmental degradation as well as foreign policy needs and priorities, as set out in Annex III, including the promotion of confidence building and good neighbourly relations; [Am. 79]

(ba)  to protect, promote and advance human rights, democracy, the rule of law as well as gender and social equality, including in the most difficult circumstances and urgent situations, in partnership with civil society including human rights defenders worldwide; [Am. 80]

(c)  to respond rapidly to: situations of crisis, instability and conflict; resilience challenges and linking of humanitarian aid and development action; and foreign policy needs and priorities. [Am. 81]

The achievement of these objectives shall be measured using relevant indicators as referred to in Article 31.

3.  At least 92 % 95 % of the expenditure under this Regulation shall fulfil the criteria for Official Development Assistance, established by the Development Assistance Committee of the Organisation for Economic Cooperation and Development. This Regulation shall contribute to reaching the collective target of achieving 0,2 % of the Union’s Gross National Income to Least Developed Countries and 0,7 % of the Union Gross National Income as Official Development Assistance within the timeframe of the 2030 Agenda. [Am. 82]

3a.  At least 20 % of the Official Development Assistance funded under this Regulation, across all programmes, geographic and thematic, annually and over the duration of its actions, shall be ring-fenced for social inclusion and human development, in order to support and strengthen the provision of basic social services, such as health, education, nutrition and social protection, particularly to the most marginalised, and with an emphasis on women and children. [Am. 83]

3b.  At least 85% of the Official Development Assistance funded programmes, geographic and thematic, under this Regulation shall have gender equality and women’s and girls’ rights and empowerment as a principal or a significant objective, as defined by the OECD DAC. A significant part of these programmes shall have gender equality and women’s and girls’ rights and empowerment as a principal objective. [Am. 84]

Article 4

Scope and structure

1.  Union funding under this Regulation shall be implemented applied through: [Am. 85]

(a)  geographic programmes;

(b)  thematic programmes;

(c)  rapid response actions.

2.  The geographic programmes shall encompass country and multi-country cooperation in the following areas:

(a)  Neighbourhood;

(b)  Sub-Saharan Africa;

(c)  Asia and the Pacific;

(d)  Americas and the Caribbean.

Geographic programmes may cover all third countries, except for candidates and potential candidates as defined in Regulation (EU) No …/….(49) (IPA) and overseas countries and territories as defined in Council Decision …/… (EU). Geographic programmes of a continental or trans-regional scope may also be established, in particular a pan-African programme covering African countries under points (a) and (b) and a programme covering African, Caribbean and Pacific countries under points (b), (c) and (d). [Am. 86]

Geographic programmes in the Neighbourhood area may cover any country referred to in Annex I.

In order to attain the objectives laid down in Article 3, geographic programmes shall be based on the areas of cooperation listed in Annex II.

3.  The thematic programmes shall encompass actions linked to the pursuit of the Sustainable Development Goals at global level, in the following areas:

(a)  Human Rights and Democracy;

(b)  Civil Society Organisations and Local Authorities; [Am. 87]

(c)  Stability and Peace;

(d)  Global Challenges;

(da)  Foreign Policy Needs and Priorities. [Am. 88]

Thematic programmes may cover all third countries. as well as Overseas countries and territories as defined shall have full access to thematic programmes, as laid down in Council Decision …/… (EU). Their effective participation shall be ensured, with account taken of their specific characteristics and the particular challenges they must address. [Am. 89]

In order to attain the objectives laid down in Article 3, thematic programmes shall be based on the areas of intervention listed in Annex III.

4.  The rapid response actions shall enable early action to:

(a)  contribute to peace, stability and conflict prevention in situations of urgency, emerging crisis, crisis and post-crisis; [Am. 90]

(b)  contribute to strengthening the resilience of states, including local authorities, societies, communities and individuals and to linking humanitarian aid and development action. [Am. 91]

(c)  address foreign policy needs and priorities. [Am. 92]

Rapid response actions may cover all third countries as well as overseas countries and territories as defined in Council Decision …/… (EU).

In order to attain the objectives laid down in Article 3, rapid response actions shall be based on the areas of intervention listed in Annex IV.

5.  Actions under this Regulation shall be primarily implemented applied through geographic programmes. [Am. 93]

Actions implemented applied through thematic programmes shall be complementary to actions funded under geographic programmes and shall support global and trans-regional initiatives for aimed at achieving internationally agreed goals, in particular the Sustainable Development Goals, protecting as referred in point (aa) of Article 3(2), as well as global public goods or addressing global challenges. Actions through thematic programmes may also be undertaken independently, including where there is no geographic programme, or where it has been suspended, or where there is no agreement on the action with the partner country concerned, or where the action cannot be adequately addressed by geographic programmes. [Am. 94]

Rapid response actions shall be complementary to geographic and thematic programmes. These as well as to actions funded through the Council Regulation (EC) No 1257/96 of 20 June 1996 (the ‘Humanitarian Aid Regulation’). Those actions shall be designed and implemented applied to enable, where relevant, their continuity under geographic or thematic programmes. [Am. 95]

6.  The Commission shall be empowered to adopt delegated acts in accordance with Article 34 to supplement or amend Annexes II, III and IV.

Article 5

Coherence, consistency and complementarity

1.  In implementing applying this Regulation, consistency, coherence synergies and complementarity with other all areas of Union external action, including other external financing instruments, the IPA III Regulation in particular, as well as measures adopted under Chapter Two of Title V TEU and Part Five TFEU, with other relevant Union policies and Programmes, as well as policy coherence for development shall be ensured. The Union shall take account of the objectives of development cooperation in the policies that it applies which are likely to affect developing countries. [Am. 96]

1a.   The Union and Member States shall coordinate their respective support programmes with the aim of increasing effectiveness and efficiency of their delivery and preventing overlapping of funding. [Am. 97]

1b.  In applying this Regulation, the Commission and the EEAS shall duly take into consideration the positions of the European Parliament. [Am. 98]

2.  Actions falling within the scope of Council Regulation (EC) No 1257/96 shall not be funded under this Regulation.

3.  Where appropriate, other Union Programmes may contribute to actions established under this Regulation, provided that the contributions do not cover the same costs. This Regulation may also contribute to measures established under other Union Programmes, provided that the contributions do not cover the same costs. In such cases, the work programme covering those actions shall establish which set of rules shall be applicable.

Article 6

Budget

1.  The financial envelope for the implementation application of this Regulation for the period 2021 – 2027 shall be EUR 89 20082 451 million in 2018 prices (EUR 93 154 million in current prices) [100 %]. [Am. 99]

2.  The financial envelope referred to in paragraph 1 shall be composed of:

(a)  EUR 68 00063 687 million in 2018 prices (EUR 71 954 million in current prices) [77,24 %] for geographic programmes: [Am. 100]

–  Neighbourhood at least EUR 22 00020 572 million in 2018 prices (EUR 23 243 million in current prices) [24,95 %], [Am. 101]

–  Sub-Saharan Africa at least EUR 32 00030 723 million in 2018 prices (EUR 34 711 million in current prices) [37,26 %], [Am. 102]

–  Asia and the Pacific EUR 8 851 million in 2018 prices (EUR 10 000 million in current prices) [10,73 %], including at least EUR 620 million in 2018 prices (EUR 700 million in current prices) for the Pacific, [Am. 103]

–  Americas and the Caribbean EUR 3 540 million in 2018 prices (EUR 4 000 million in current prices) [4,29 %], including EUR 1 062 million in 2018 prices (EUR 1 200 million in current prices) for the Caribbean, [Am. 104]

(b)  EUR 7 0009 471 million in 2018 prices (EUR 10 700 million in current prices) [11,49 %] for thematic programmes: [Am. 105]

–  Human Rights and Democracy EUR 1 500 at least EUR 1 770 million in 2018 prices (EUR 2 000 million in current prices) [2,15 %], with up to 25 % of the programme to be devoted to the funding of EU Election Observation Missions, [Am. 106]

–  Civil Society Organisations EUR 1 500(CSOs) and Local Authorities (LAs) EUR 2 390 million in 2018 prices (EUR 2 700 million in current prices) [2,90 %], of which EUR 1 947 million in 2018 prices (EUR 2 200 million in current prices) [2,36 %] for CSOs and EUR 443 million in 2018 prices (EUR 500 million in current prices) [0,54 %] for LAs, [Am. 107]

–  Stability and Peace EUR 885 million in 2018 prices (EUR 1 000 million in current prices) [1,07 %], [Am. 108]

–  Global Challenges EUR 3 000 3 983 million in 2018 prices (EUR 4 500 million in current prices) [4,83 %], [Am. 109]

–  Foreign Policy Needs and Priorities EUR 443 million in 2018 prices (EUR 500 million in current prices) [0,54 %], [Am. 110]

(c)  EUR 4 0003 098 million in 2018 prices (EUR 3 500 million in current prices) [3,76 %] for rapid response actions:

–  Stability and conflict prevention in situations of urgency, emerging crisis, crisis and post-crisis EUR 1 770 million in 2018 prices (EUR 2 000 million in current prices) [2,15 %],

–  Strengthening resilience of states, societies, communities and individuals and linking humanitarian aid and development action EUR 1 328 million in 2018 prices (EUR 1 500 million in current prices) [1,61 %], [Am. 111]

3.  The emerging challenges and priorities cushion of an amount of EUR 10 2006 196 million in 2018 prices (EUR 7 000 million in current prices) [7,51 %], shall increase the amounts referred to in paragraph 2 in accordance with Article 15. [Am. 112]

4.  The financial envelope referred to in paragraph 2 (a) shall correspond to at least 75 % of the financial envelope referred to in paragraph 1.

4a.  The actions under Article 9 shall be financed to up to the amount of EUR 270 million. [Am. 113]

4b.  The annual appropriations shall be authorised by the European Parliament and by the Council within the limits of the multiannual financial framework during the budgetary procedure, after the priorities have been agreed by the Institutions. [Am. 114]

Article 7

Policy framework

The association agreements, partnership and cooperation agreements, multilateral trade agreements, and other agreements that establish a legally binding relationship with partner countries, recommendations and acts adopted in the bodies set up by those agreements, as well as relevant multilateral agreements, Union legislative acts, European Council conclusions, and Council conclusions, summit declarations or and other international declarations and conclusions of high-level meetings with partner countries, relevant European Parliament resolutions, communications of the Commission or Joint and positions, communications of the Commission and the High Representative of the Union for Foreign Affairs and Security Policy and United Nations Conventions and resolutions, shall constitute the overall policy framework for the implementation application of this Regulation. [Am. 115]

Article 8

General principles

1.  The Union shall seek to promote, develop and consolidate the principles of democracy, the rule of law and respect for human rights and fundamental freedoms on which it is founded, through dialogue and cooperation with partner countries and regions, through action in the United Nations and other international fora and through its cooperation with civil society organisations, local authorities and private actors, the principles on which it is founded, namely democracy, the rule of law, good governance, the universality and indivisibility of human rights and fundamental freedoms, respect for human dignity, the principles of equality and solidarity, and respect for the principles of the United Nations Charter and international law. Funding under this Regulation shall comply with these principles, as well as with the Union’s commitments under international law. [Am. 116]

1a.  Consistent with Articles 2 and 21 TEU, the Union's contribution to democracy and the rule of law and to the promotion and protection of human rights and fundamental freedoms shall be rooted in the Universal Declaration Human Rights, international human rights law and international humanitarian law. [Am. 117]

2.  A rights-based approach encompassing all human rights, whether civil and political or economic, social and cultural shall be applied in order to integrate human rights principles, to support the right holders in claiming their rights with a focus on poorer and more marginalised and vulnerable groups, including minorities, women, children and youth, older people, indigenous people, LGBTI persons, and persons with disabilities, on essential labour rights and social inclusion, and to assist partner countries in implementing their international human rights obligations. This Regulation shall promote gender equality and women’s the empowerment of women, youth and children, including with regard to sexual and reproductive health and rights. [Am. 118]

3.  The Union shall support, as appropriate, the implementation of bilateral, regional and multilateral cooperation and dialogue, partnership agreements and triangular cooperation.

The Union shall promote a multilateral and rules-based rules- and values-based approach to global public goods and challenges and shall cooperate with Member States, partner countries, international organisations, including international financial institutions and UN agencies, funds and programmes, and other donors in that respect. [Am. 119]

The Union shall foster cooperation with international and regional organisations and other donors. [Am. 120]

In relations with partner countries, their track record in implementing commitments, international agreements, in particular the Paris Agreement, and contractual relations with the Union, in particular association agreements, partnership and cooperation agreements and trade agreements, shall be taken into account. [Am. 121]

4.  Cooperation between the Union and the Member States, on the one hand, and partner countries, on the other hand, shall be based on and shall promote the development effectiveness principles, where applicable, across all modalities namely: ownership of development priorities by partner countries, a focus on results, inclusive development partnerships, transparency and mutual accountability, and alignment to the priorities of partner countries. The Union shall promote effective and efficient resource mobilisation and use. [Am. 122]

In line with the principle of inclusive partnership, where appropriate, the Commission shall ensure that relevant stakeholders of partner countries, including civil society organisations and local authorities, are duly consulted and have timely access to relevant information allowing them to play a meaningful role during the design, implementation application and associated monitoring processes of programmes. [Am. 123]

In line with the principle of ownership the Commission, where appropriate, shall favour the use of partner countries' systems for the implementation application of programmes. [Am. 124]

5.  In order to promote the complementarity and efficiency of their action, the Union and the Member States shall coordinate their policies and shall consult each other on their assistance programmes, including in international organisations and during international conferences.

6.  Programmes and actions under this Regulation shall mainstream climate change, environmental protection and in accordance with Art. 11 TFEU, disaster risk reduction and preparedness, human development, conflict prevention and peace building, gender equality and the empowerment of women, children and youth, non-discrimination, education and culture, and digitalisation and shall address interlinkages between Sustainable Development Goals, to promote integrated actions that can create co-benefits and meet multiple objectives in a coherent way. These programmes and actions shall be based on an analysis of capacities, risks and vulnerabilities, integrate a people and community centred resilience approach and be conflict sensitive. They shall be guided by the principle principles of leaving no one behind and “do no harm”. [Am. 125]

7.  Without prejudice to the other objectives of Union external action, a more coordinated, holistic and structured approach to migration shall be pursued, with partners and its effectiveness be regularly assessed, without conditioning the allocation of development aid to third countries to cooperation on migration management and in full respect of human rights, including the right of every individual to leave his or her country of origin. [Am. 126]

7a.  The Commission shall ensure that actions adopted under this Regulation in relation to security, stability and peace, in particular with regard to capacity building of military actors in support of development and security for development, fight against terrorism and organised crime, and cyber-security, are carried out in accordance with international law, including international human rights and humanitarian law. The Commission may develop roadmaps jointly with the beneficiary partners to improve the institutional and operational compliance of military actors with transparency and human rights standards. The Commission shall carefully monitor, evaluate and report on the application of such actions for each relevant objective pursuant to Article 31 in order to ensure compliance with human rights obligations. For such actions, the Commission shall pursue a conflict sensitive approach, including a rigorous and systematic ex ante conflict analysis which fully integrates gender analysis, in addition to the provisions on risk management under Article 8(8)b. The Commission shall adopt a delegated act in accordance with Article 34 supplementing this Regulation by establishing an operational framework, based on the existing guidance to ensure that human rights are taken into consideration in the design and application of the measures referred to in this Article, in particular as regards the prevention of torture and other cruel, inhuman or degrading treatment and respect for due process, including the presumption of innocence, the right to a fair trial and rights of defence. [Am. 127]

8.  The Commission shall regularly inform and have regular exchanges of views meaningful policy dialogues with the European Parliament, at its own initiative and when requested by the European Parliament. [Am. 128]

8a.  The Commission shall have regular exchanges of information with civil society and local authorities. [Am. 129]

8b.  The Commission shall adopt a delegated act in accordance with Article 34 supplementing this Regulation by establishing an appropriate risk management framework, including an assessment and mitigations measures for each relevant objective of the Regulation. [Am. 130]

8c.  Transparency and accountability, with a strong focus on reporting and scrutiny shall underpin the entire instrument. That shall comprise a transparent control system, including the reporting of information on the recipients of funds and whether payments have been made on time. [Am. 131]

Article 9

Capacity building of military actors in support of development and security for development

1.  In accordance with Article 41(2) of the Treaty on European Union, Union funding under this Regulation shall not be used to finance the procurement of arms or ammunition, or operations having military or defence implications. Any equipment, service or technology supplied under this Regulation shall be subject to strict transfer controls as set out in the Common Position 944/2008/CFSP, the Dual-Use Regulation and any other Union restrictive measures in force. In accordance with Regulation (EU) .../... [EU Regulation on Products used for Capital Punishment and Torture], this Regulation shall not be used to finance the provision of any type of equipment that may be used for torture, mistreatment or other human rights violations. [Am. 132]

2.  In order to contribute to sustainable development, which requires the achievement of stable, peaceful and inclusive societies, Union assistance under this Regulation may be used in the context of a wider security sector reform or to build the capacity of military actors in partner countries, under the exceptional circumstances set out in paragraph 4, to deliver development activities and security for development activities, in line with the overarching objective of achieving sustainable development. [Am. 133]

3.  Assistance pursuant to this Article may cover in particular the provision of capacity building programmes in support of development and security for development, including training, mentoring and advice, as well as the provision of equipment, infrastructure improvements and services directly related to that assistance.

4.  Assistance pursuant to this Article shall be provided only:

(a)  where requirements cannot be met by recourse to non-military actors to adequately reach Union objectives under this Regulation and there is a threat to the existence of functioning State institutions or to the protection of human rights and fundamental freedoms and State institutions cannot cope with that threat; and

(b)  where a consensus exists between the partner country concerned and the Union that military actors are key for preserving, establishing or re-establishing the conditions essential for sustainable development and that those military actors are not implicated in human rights violations or pose a threat to the functioning of State institutions, including in crises and fragile or destabilised contexts and situations. [Am. 134]

5.  Union assistance pursuant to this Article shall not be used to finance capacity building of military actors for purposes other than the delivery of development activities and security for development activities. In particular, it shall not be used to finance:

(a)  recurrent military expenditure;

(b)  the procurement of arms and ammunition, or any other equipment designed to deliver lethal force;

(c)  training which is designed to contribute specifically to the fighting capacity of the armed forces.

6.  When designing and implementing applying measures pursuant to this Article, the Commission shall promote ownership by the partner country. It shall also develop the necessary elements and the good practices required to ensure sustainability and accountability in the medium and long term and shall promote the rule of law and established international law principles. The Commission shall ensure that those measures generate direct human security benefits for the population, are integrated into a broader security sector reform policy comprising strong democratic and parliamentary oversight and accountability elements, including in terms of improved security service provision, and fit into long-term peace and development strategies designed to address the root causes of conflict. The Commission shall also ensure that actions aimed at reforming military forces contribute to making them more transparent, accountable and compliant with the human rights of those coming under their jurisdiction. For measures aimed at providing partner military forces with equipment, the Commission shall specify the type of equipment to be provided in the context of each measure. The Commission shall apply the provisions specified under Article 8 – paragraph 8 b (new) in order to ensure that this equipment will be used only by its intended beneficiaries. [Am. 135]

7.  The Commission shall establish appropriate risk assessment, monitoring and undertake, within the evaluation procedures for measures pursuant to this Article 32, and in particular with regard to a mid-term evaluation, joint evaluations with Member States. The results shall inform programme design and resource allocation, and further enhance the consistency and complementarity of the Union's external action. [Am. 136]

TITLE II

IMPLEMENTATION APPLICATION OF THIS REGULATION [Am. 137]

Chapter I

Programming

Article 9a

Scope of the Geographic programmes

1.  Union cooperation activities under this Article shall be applied for activities of a local, national, regional, trans-regional and continental nature.

2.  In order to attain the objectives laid down in Article 3, geographic programmes shall be drawn up from the following areas of cooperation:

(a)  good governance, democracy, rule of law, human rights, fundamental freedoms and civil society;

(b)  poverty eradication, fight against inequalities and human development;

(c)  migration and mobility;

(d)  environment and climate change;

(e)  inclusive and sustainable economic growth and decent employment;

(f)  security, stability and peace;

(g)  partnership;

3.  Further details of the areas of cooperation referred to in paragraph 2 are set out in Annex II. [Am. 138]

Article 9b

Scope of the thematic programmes

1.  Thematic programmes shall cover the following areas of intervention:

(a)  Human Rights, Fundamental Freedoms and Democracy:

–  protecting and promoting human rights and human rights defenders in countries and urgency situations where human rights and fundamental freedoms are most at risk, including through addressing urgent protection needs of human rights defenders in a flexible and comprehensive manner.

–  upholding human rights and fundamental freedoms for all, contributing to forging societies in which participation, non-discrimination, equality, social justice and accountability prevails.

–  consolidating and supporting democracy, addressing all aspects of democratic governance, including reinforcing democratic pluralism, enhancing citizen participation, including through supporting citizen election observation organisations and their regional networks worldwide, creating an enabling environment for civil society and supporting credible, inclusive and transparent electoral processes throughout the entire electoral cycle, in particular by means of EU Election Observation Missions (EU EOMs).

–  promoting effective multilateralism and strategic partnerships contributing to reinforcing capacities of international, regional and national frameworks and empowering local actors in promoting and protecting human rights, democracy and the rule of law.

–  fostering new cross-regional synergies and networking among local civil societies and between civil society and other relevant human rights bodies and mechanisms so as to maximise the sharing of best practices on human rights and democracy, and create positive dynamics.

(b)  Civil Society Organisations and Local Authorities:

–  supporting inclusive, participatory, empowered and independent civil society in partner countries;

–  promoting dialogue with and between civil society organisations;

–  supporting capacity building of local authorities and mobilising their expertise to promote a territorial approach to development;

–  increasing awareness, knowledge and engagement of Union citizens about objectives specified in Article 3 of this Regulation;

–  supporting civil society to participate in public policy advocacy and dialogue with governments and international institutions;

–  supporting civil society to sensitise consumers and citizens and raise their awareness about environmental friendly and fair trade production and consumption, to encourage them to adopt more sustainable behaviour;

(c)  Stability and Peace

–  assistance for conflict prevention, peace-building and crisis preparedness;

–  assistance in addressing global and trans-regional threats and emerging threats;

(d)  Global challenges

–  health,

–  education,

–  gender equality,

–  children and youth,

–  migration and forced displacement,

–  decent work, social protection and inequality,

–  culture,

–  ensuring a healthy environment and tackling climate change,

–  sustainable energy,

–  sustainable and inclusive growth, decent jobs and private sector engagement,

–  food and nutrition,

–  promoting inclusive societies, good economic governance, and transparent public finance management,

–  access to safe water, sanitation and hygiene,

(e)  Foreign Policy Needs and Priorities

–  providing support for the Union's bilateral, regional and inter-regional cooperation strategies, promoting policy dialogue and developing collective approaches and responses to challenges of global concern;

–  providing support for Union trade policy;

–  contributing to the implementation of the international dimension of internal Union policies and promoting the widespread understanding and visibility of the Union and of its role on the world scene;

2.  Further details of the areas of cooperation referred to in paragraph 1 are set out in Annex III. [Am. 139]

Article 10

General programming approach

1.  Cooperation and interventions under this Regulation shall be programmed, except for rapid response actions referred to in Article 4 (4).

2.  On the basis or Article 7, programming under this Regulation shall be based on the following:

(a)  programming documents shall provide a coherent framework for cooperation between the Union and partner countries or regions, consistent with the overall purpose and scope, objectives and principles set out in this Regulation, and based on Union strategy towards a partner country or region or based on Union thematic strategies; [Am. 140]

(b)  the Union and the Member States shall consult each other at an early stage of and throughout the programming process in order to promote coherence, complementarity and consistency among their cooperation activities. Joint programming shall be the preferred approach for country programming. Joint programming shall be open to other donors where relevant;

(c)  the Union shall also consult at an early stage and throughout the programming process encourage a regular multi-stakeholder and inclusive dialogue with other Union and non-Union donors and actors, including representatives of civil society and local authorities, where relevant; and private and political foundations. The European Parliament shall be informed about the outcome of those consultations. [Am. 141]

(d)  the Human Rights and Democracy, and Civil Society Organisations and Local Authorities, and Stability and Peace thematic programmes referred to in Article 4(3)(a) and (b) and (c) shall provide assistance independently of the consent of governments and other public authorities of the third countries concerned. These The Human Rights and Democracy, and the Civil Society Organisations and Local Authorities thematic programmes shall mainly support civil society, organisations including human rights defenders and journalists under pressure. [Am. 142]

Article 11

Programming principles for geographic programmes [Am. 143]

-1.  Programming under this Regulation shall have due regard to human rights, fundamental freedoms, good governance and democracy in partner countries. [Am. 144]

-1a.  The preparation, application and review of all programming documents under this Article shall comply with the principles of policy coherence for development and those of aid effectiveness. [Am. 145]

-1b.  Geographic and thematic programmes shall be complementary and coherent with each other, and create added value. [Am. 146]

1.  Programming of geographic programmes shall be based on the following principles:

(a)  without prejudice to paragraph 4, actions shall be based, to the extent possible, on a on an inclusive dialogue between the institutions of the Union, the Member States and the partner countries concerned, including national and local and regional authorities, involving civil society organisations, regional, national and local parliaments, communities and other stakeholders, in order to enhance democratic ownership of the process and to encourage support for national and regional strategies; [Am. 147]

(b)  where appropriate whenever possible, the programming period shall be synchronised with the strategy cycles of partner countries; [Am. 148]

(c)  programming may envisage cooperation activities funded from different allocations listed in Article 6(2) and from other Union Programmes according to their basic acts.

2.  Without prejudice to paragraph 1, programming of geographic programmes shall provide a specific, tailor-made framework for cooperation based on: [Am. 149]

(a)  the partners’ needs, established on the basis of specific criteria and in-depth analysis, taking into account the population, poverty, inequality, human development, the state of human rights, fundamental freedoms, democracy and gender equality, civic space, economic and environmental vulnerability, and state and societal resilience; [Am. 150]

(b)  the partners’ capacities to generate and access financial of mobilisation and effective use of domestic resources to support national development priorities and on their absorption capacities; [Am. 151]

(c)  the partners’ commitments, and performance including those jointly agreed with the Union, and efforts, established on the basis of criteria such as political reform, and progress in the rule of law, good governance, human rights and the fight against corruption, economic and social development, environmental sustainability, and the effective use of aid; [Am. 152]

(d)  the potential impact of Union funding in partner countries and regions;

(e)  the partner's capacity and commitment to promote shared values, principles and fundamental interests and values, and to support common goals and multilateral alliances, as well as the advancement of Union priorities. [Am. 153]

3.  The countries most in need, in particular the Least Developed Countries, low income countries, countries in crisis, post-crisis, fragile and vulnerable situations, including small islands developing states, shall be given priority in the resource allocation process.

4.  Cooperation with industrialised countries shall focus on the promotion of Union and mutual interests, as well as shared fundamental interests and values, commonly agreed objectives and multilateralism. Such cooperation shall be, where relevant, based on a dialogue between the Union, including the European Parliament, and the Member States, involving civil society. [Am. 154]

5.  Programming documents for geographic programmes shall be results-based and shall take into account results oriented and include, wherever possible, clear targets and indicators to measure progress and impact of Union assistance. Indicators may be based, where appropriate, on internationally agreed targets and indicators, standards in particular those set out for the Sustainable Development Goals, as well as country-level result frameworks, to assess and communicate the Union contribution to results, at the level of outputs, outcomes and impact. [Am. 155]

6.  When drawing up the programming documents for countries and regions in crisis, or post-crisis, fragile and vulnerable situations, due account shall be taken of the special needs and circumstances of the countries or regions concerned, as well as vulnerabilities, risks and capacities in order to increase resilience. Attention shall also be paid to conflict prevention, State and peace-building, post-conflict reconciliation and reconstruction, disaster preparedness as well as to the role of women and the rights of children in those processes. A human-rights based and people-centred approach shall be applied.

Where partner countries or regions are directly involved in, or affected by, a crisis, post-crisis or situation of fragility, special emphasis shall be placed on stepping up coordination amongst all relevant actors to help the prevention of violence and the transition from an emergency situation to the development phase. [Am. 156]

7.  This Regulation shall contribute from the programmes established under Article 4(2) of this Regulation to actions established under the Erasmus Regulation. An indicative amount of EUR 2 000 000 000 from the geographical programmes should be allocated to actions dedicated to mobility, cooperation and political dialogue with the authorities, institutions and organisations of the partner countries. A single programming document shall be drawn up from this Regulation for seven years, including funds from the IPA III Regulation. The Erasmus Regulation shall apply to the use of these funds, while ensuring conformity with the IPA III Regulation. [Am. 157]

7a.   This Regulation shall contribute to actions established under the Creative Europe Regulation. A single programming document shall be drawn up from this Regulation for seven years, including funds from the IPA III Regulation. The Creative Europe Regulation shall apply to the use of these funds. [Am. 158]

Article 12

Programming documents for geographic programmes

-1.  The Commission is empowered to adopt delegated acts in accordance with Article 34 in order to supplement non-essential elements of this Regulation by establishing frameworks for each specific country and multi-country multiannual programme. Those framework provisions shall:

(a)  specify the priority areas among the ones defined in Articles 9a and 15b;

(b)  lay down the specific detailed and measurable objectives of each programme;

(c)  set expected results with measurable targets, and clear and specific performance indicators linked to the objectives;

(d)  set out the indicative financial allocation both overall and per priority area;

(e)  establish cooperation modalities, including contributions to the External Action Guarantee. [Am. 159]

1.  The implementation of this Regulation shall be carried out for geographic programmes through multiannual country and multi-country indicative programmes. [Am. 160]

2.  Multiannual indicative programmes shall set out the priority areas selected for Union financing, the specific objectives, the expected results, clear and specific performance indicators, and the indicative financial allocations, both overall and per priority area. [Am. 161]

3.  The multiannual indicative programmes shall be built on: [Am. 162]

(-a)  a report containing an analysis in accordance with Article 11(2) of the needs, capacities, commitments and performance of partner country or countries concerned and the potential impact of Union funding, as well as one or more of the following: [Am. 163]

(a)  a national or regional strategy in the form of a development plan or a similar document based on a meaningful consultation with the local population and civil society and accepted by the Commission as a basis for the corresponding multiannual indicative programme, at the time of adoption of the latter document; [Am. 164]

(b)  a framework document laying down the Union policy towards the concerned partner or partners, including a joint document between the Union and Member States; [Am. 165]

(c)  a joint document between the Union and the concerned partner or partners setting out common priorities.

4.  To increase the impact of collective cooperation of the Union, where possible, a joint programming document shall replace the Union’s and Member States programming documents. A joint programming document may replace the Union’s multiannual indicative programme, provided it is approved in an act adopted in accordance with Article 14 and complies with Articles 10 and 11, contains the elements listed in paragraph 2 of this Article and sets out the division of labour between the Union and Member States. [Am. 166]

4a.  Multiannual programmes may provide for an amount of funds, not exceeding 5 % of the total amount, that is not allocated to a priority area or partner country or group of countries. Those funds shall be committed in accordance with Article 21. [Am. 167]

Article 13

Programming documents for thematic programmes

-1.  The Commission is empowered to adopt delegated acts in accordance with Article 34 in order to supplement non-essential elements of this Regulation by establishing frameworks for each specific thematic multiannual programme. Those framework provisions shall:

(a)  specify the priority areas among the ones defined in Article 9b;

(b)  lay down the specific detailed and measurable objectives of each programme;

(c)  set expected results with measurable targets, and clear and specific performance indicators linked to the objectives;

(d)  set out the indicative financial allocation both overall and per priority area;

(e)  establish cooperation modalities. [Am. 168]

1.  The implementation of this Regulation shall be carried out for thematic programmes through multiannual indicative programmes. [Am. 169]

2.  Multiannual indicative programmes for thematic programmes shall set out the Union's strategy, the priorities selected for financing by the Union, the specific objectives, the expected results, clear and specific performance indicators, and the international situation and the activities of the main partners for the theme concerned. [Am. 170]

Where applicable, resources and intervention priorities shall be laid down for participation in global initiatives.

Multiannual indicative programmes for thematic programmes shall set out the indicative financial allocation, overall, by area of cooperation and by priority. The indicative financial allocation may be given in the form of a range. [Am. 171]

The framework provisions referred to in Articles 12 and 13 shall be built on a report containing an analysis of the international situation and of the activities of the main partners for the theme concerned and indicating the results expected from the programme. [Am. 172]

2a.   Multiannual programmes may provide for an amount of funds, not exceeding 5 % of the total amount, that is not allocated to a priority area or partner country or group of countries. Those funds shall be committed in accordance with Article 21. [Am. 173]

Article 14

Adoption and amendment of multiannual indicative programmes [Am. 174]

1.  The Commission shall adopt is empowered to adopt delegated acts in accordance with Article 34 in order to supplement non-essential elements of this Regulation by establishing frameworks for multiannual indicative programmes referred to in Articles 12 and 13 by means of implementing delegated acts. Those implementing delegated acts shall be adopted in accordance with the examination procedure referred to in Article 35(2) 34. This procedure shall also apply to reviews referred to in paragraphs 3, 4 and 5 of this Article, which have the effect of significantly modifying the content of the multiannual indicative programme. [Am. 175]

2.  When adopting joint multi-annual programming documents referred to in Article 12, the Commission decision delegated act shall only apply to the Union’s contribution to the joint multiannual programming document. [Am. 176]

3.  Multiannual indicative programmes for geographic and thematic programmes may be reviewed where necessary for effective implementation, in particular where there are substantive changes in the policy framework shall expire on 30 June 2025 at the latest. The Commission shall adopt new multiannual programmes by 30 June 2025, based on the results, findings and conclusions of the mid-term evaluation referred to in Article 7 or following a crisis or post-crisis situation 32. [Am. 177]

4.  Multiannual indicative programmes for thematic programmes may be reviewed modified where necessary for effective implementation application, in particular where there are substantive changes in the policy framework referred to in Article 7. Multiannual programmes shall be modified in cases where the mobilisation of the emerging challenges and priorities cushion requires a change of the framework provisions of the relevant programme. [Am. 178]

5.  On duly justified imperative grounds of urgency, such as crises or immediate threats to democracy, the rule of law, human rights or fundamental freedoms, the Commission may amend multiannual indicative programmes referred to in Articles 12 and 13 of this Regulation by implementing delegated acts adopted in accordance with the urgency procedure referred to in Article 35(4) 34a. [Am. 179]

Article 15

Emerging challenges and priorities cushion

1.  The amount referred to in Article 6(3) shall be used inter alia in duly justified cases, with priority given to the countries most in need, and in full complementarity and consistency with acts adopted under this Regulation: [Am. 180]

(a)  to ensure an appropriate response of the Union in the event of unforeseen circumstances needs not covered by programmes and programming documents; [Am. 181]

(b)  to address new needs or emerging challenges, such as those at the Union’s or its neighbours’ borders or those in third countries linked to crisis, either natural or man-made, and post-crisis situations or migratory pressure to migration phenomena, in particular forced displacement; [Am. 182]

(c)  to promote or respond to new Union led or international initiatives or priorities. [Am. 183]

2.  The use of these funds shall be decided in accordance with the procedures established in Articles 14 and 21.

Article 15a

Suspension of assistance

1.  Without prejudice to the provisions on the suspension of aid in agreements with partner countries and regions, where a partner country persistently fails to observe the principles of democracy, the rule of law, good governance, respect for human rights and fundamental freedoms, or nuclear safety standards, the Commission shall be empowered, in accordance with Article 34, to adopt delegated acts amending Annex VII-a, by adding a partner country to the list of partner countries for which Union assistance is suspended or partly suspended. In the case of a partial suspension, the programmes for which the suspension applies shall be indicated.

2.  Where the Commission finds that the reasons justifying the suspension of assistance no longer apply, it shall be empowered to adopt delegated acts, in accordance with Article 34 to amend Annex VII-a in order to reinstate Union assistance.

3.  In cases of partial suspension, Union assistance shall primarily be used to support civil society organisations and non-state actors for measures aimed at promoting human rights and fundamental freedoms and supporting democratisation and dialogue processes in partner countries.

4.  The Commission shall take due account of relevant European Parliament resolutions in its decision-making. [Am. 184]

Chapter II

Specific provisions for the Neighbourhood

Article 15b

Specific objectives for the neighbourhood area

1.  In accordance with Articles 3 and 4, Union support under this Regulation in the Neighbourhood area shall have as objectives:

(a)  enhancing political cooperation and ownership of the European Neighbourhood Policy by the Union and its partner countries;

(b)  supporting the implementation of association agreements, or other existing and future agreements, and jointly agreed association agendas and partnership priorities or equivalent documents;

(c)  strengthening and consolidating democracy, state-building, good governance, rule of law and human rights as well as promoting a more effective way of implementing reforms agreed in mutual formats;

(d)  stabilising the neighbourhood in political, economic and security terms;

(e)  enhancing regional cooperation, in particular in the framework of the Eastern Partnership, the Union for the Mediterranean, and European Neighbourhood-wide collaboration as well as cross-border cooperation;

(f)  promoting confidence-building, good neighbourly relations and other measures contributing to security in all its forms and the prevention and settlement of conflicts, including protracted conflicts, support to affected populations and reconstruction, and respect for multilateralism and international law;

(g)  promoting a strengthened partnership with societies between the Union and the partner countries, including through enhanced mobility and people-to-people contacts, in particular in relation to cultural, educational, professional and sporting activities;

(h)  intensifying cooperation on both regular and irregular migration;

(i)  achieving progressive integration into the Union internal market and enhanced sectoral and cross-sectoral cooperation, including through legislative approximation and regulatory convergence towards Union and other relevant international standards, and improved market access including through deep and comprehensive free trade areas, related institution building and investment;

(j)  supporting sustainable, inclusive and socially beneficial economic and social development for all by promoting job creation and employability, in particular for young people;

(k)  contributing to the implementation of the Paris Agreement by strengthening cooperation on energy security and promoting renewable energy, sustainable energy and energy efficiency objectives;

(l)  encouraging the establishment of thematic frameworks with the neighbouring countries of neighbourhood partner countries to address common challenges such as migration, energy, security and health. [Am. 185]

Article 16

Programming documents and allocation criteria

1.  For partner countries listed in Annex I, priority areas for Union financing shall be mainly selected from those included in documents referred to in Article 12(3)(c), in accordance with the areas of cooperation of the Neighbourhood area set out in Annex II.

2.  By way of derogation from Article 11(2), Union support under geographic programmes in the Neighbourhood area shall be differentiated in form and amounts, taking into account the following elements, reflecting the partner country's:

(a)  needs, using indicators such as population and level of development;

(b)  commitment to and progress in implementing jointly agreed political, economic, environmental and social reform objectives; [Am. 186]

(c)  commitment to and progress in building deep and sustainable democracy, including the promotion of human rights, good governance, the upholding of the rule of law and the fight against corruption; [Am. 187]

(ca)  commitment to multilateralism; [Am. 188]

(d)  partnership with the Union, including the level of ambition for that partnership;

(e)  absorption capacity and potential impact of Union support under this Regulation.

3.  The support referred to in paragraph 2 shall be reflected in the programming documents referred to in Article 12.

3a.  Union support to partner countries listed in Annex I shall be applied in compliance with the co-financing principle set out in Article 190 of the Financial Regulation. [Am. 189]

Article 17

Performance-based approach

1.  Indicatively At least 10 % of the financial envelope set out in Article 4(2)(a) 6(2)(a) first indent, to supplement the country financial allocations referred to in Article 12 shall be allocated to partner countries listed in Annex I in order to implement apply the performance-based approach. The performance-based allocations shall be decided on the basis of their progress towards democracy, human rights, rule of law, good governance, cooperation on safe, orderly and regular migration, economic governance and implementing agreed reforms. The progress of partner countries shall be assessed annually with the active involvement of civil society, in particular by means of country progress reports which include trends as compared to previous years. [Am. 190]

1a.  The application of the performance-based approach under this Regulation shall be the subject of a regular exchange of views in the European Parliament and in the Council. [Am. 191]

2.  The performance-based approach shall not apply to support to civil society, people-to-people contacts, including cooperation between local authorities, support for the improvement of human rights, or crisis-related support measures. In the event of serious or persistent degradation of democracy, human rights or rule of law, support to these actions may shall be increased, where appropriate. [Am. 192]

2a.  The Commission and EEAS shall review the performance-based support in the event of serious or persistent degradation of democracy, human rights or rule of law. [Am. 193]

2b.  The Commission shall adopt a delegated act in accordance with Article 34 to supplement this Regulation establishing the methodological framework of the performance-based approach. [Am. 194]

Article 18

Cross-Border Cooperation

1.  Cross-border cooperation, as defined in Article 2(3), shall cover cooperation on adjacent land and maritime borders, transnational cooperation over larger transnational territories, maritime cooperation around sea-basins, as well as interregional cooperation. Cross-border cooperation shall aim to be coherent with the objectives of existing and future macro-regional strategies and regional integration processes. [Am. 195]

2.  The Neighbourhood area shall contribute to cross-border cooperation programmes referred to in paragraph 1 co-financed by the European Regional Development Fund in the framework of Regulation (EU) .../... of the European Parliament and of the Council (50) (‘ETC Regulation’). Up to 4 % of the financial envelope for the Neighbourhood area shall be indicatively allocated to support those programmes.

3.  Contributions to cross-border cooperation programmes shall be determined and used pursuant to Article 10(3) of the ETC Regulation.

4.  The Union co-financing rate shall not be higher than 90 % of the eligible expenditure of a cross-border cooperation programme. For technical assistance the co-financing rate shall be 100 %.

5.  Pre-financing for cross-border cooperation programmes shall be determined in the work programme in accordance with needs of the participating third countries and territories and may exceed the percentage referred to in Article 49 of the ETC Regulation.

6.  A multiannual indicative strategy document for cross border cooperation, setting out the elements referred to in Article 12(2) of this Regulation, shall be adopted in accordance with Article 10(1) of the ETC Regulation.

7.  Where cross-border cooperation programmes are discontinued in accordance with Article 12 of the ETC Regulation, support from the Neighbourhood area to the discontinued programme that remains available may be used to finance any other activity under the Neighbourhood area.

Chapter III

Action plans, measures and implementing methods Execution [Am. 196]

Article 19

Action plans and measures

1.  The Commission shall adopt annual or multiannual action plans or measures. The measures may take the form of individual measures, special measures, support measures or exceptional assistance measures. Action plans and measures shall specify for each action the objectives pursued, the expected results and main activities, the methods of implementation application, the budget and any associated support expenditures. [Am. 197]

2.  Action plans shall be based on programming documents, except for cases referred to in paragraphs 3 and 4.

When necessary, an action may be adopted as an individual measure before or after the adoption of action plans. Individual measures shall be based on programming documents, except for cases referred to in paragraph 3 and in other duly justified cases.

In the event of unforeseen needs or circumstances, and when funding is not possible from more appropriate sources, the Commission may adopt special measures not provided for in based on the programming documents. [Am. 198]

3.  Annual or multiannual action plans and individual measures may be used to implement execute rapid response actions referred to in Article 4(4)(b) and (c). [Am. 199]

4.  The Commission may adopt exceptional assistance measures for rapid response actions as referred to in Article 4(4)(a).

An exceptional assistance measure may have a duration of up to 18 months, which may be extended twice by a further period of up to six months, up to a total maximum duration of 30 months, in the event of objective and unforeseen obstacles to its implementation, provided that there is no increase in the financial amount of the measure. [Am. 200]

In cases of protracted crisis and conflict, the Commission may adopt a second exceptional assistance measure of a duration of up to 18 months. In duly justified cases further measures may be adopted where the continuity of the Union’s action is essential and cannot be ensured by other means. [Am. 201]

4a.  Measures taken under Article 19 (3) and (4) may have a duration of up to 18 months, which may be extended twice by a further period of up to six months, up to a total maximum duration of 30 months, in the event of objective and unforeseen obstacles to execution, provided that there is no increase in the financial amount of the measure.

In cases of protracted crisis and conflict, the Commission may adopt a second exceptional assistance measure of a duration of up to 18 months. In duly justified cases, further measures may be adopted where the continuity of the Union’s action under this paragraph is essential and cannot be ensured by other means. [Am. 202]

Article 20

Support measures

1.  Union financing may cover support expenditure for the implementation execution of the Instrument and for the achievement of its objectives, including administrative support associated with the preparation, follow-up, monitoring, control, audit and evaluation activities necessary for such implementation execution, as well as expenditure at headquarters and Union delegations for the administrative support needed for the programme, and to manage operations financed under this Regulation, including information and communication actions, and corporate information technology systems. [Am. 203]

2.  When support expenditure is not included in the action plans or measures referred to in Article 21, the Commission shall adopt, where applicable, support measures. Union financing under support measures may cover:

(a)  studies, meetings, information, awareness-raising, training, preparation and exchange of lessons learnt and best practices, publication activities and any other administrative or technical assistance expenditure necessary for the programming and management of actions, including remunerated external experts;

(b)  research and innovation activities and studies on relevant issues and the dissemination thereof;

(c)  expenditures related to the provision of information and communication actions, including the development of communication strategies and corporate communication and visibility of the political priorities of the Union.

Article 21

Adoption of action plans and measures

1.  Action plans and measures shall be adopted by means of implementing acts adopted a Commission decision in accordance with the examination procedure referred to in Article 35(2) Financial Regulation. [Am. 204]

2.  The procedure referred to in paragraph 1 shall not be required for:

(a)  action plans, individual measures and support measures, for which the Union's funding does not exceed EUR 10 million;

(b)  special measures as well as action plans and measures adopted in order to implement rapid response actions for which the Union's funding does not exceed EUR 20 million;

(c)  technical amendments, provided such amendments do not substantially affect the objectives of the action plan or measure concerned, such as:

(i)  change of method of implementation;

(ii)  reassignments of funds between actions contained in an action plan;

(iii)  increases or reductions of the budget of action plans and measures by not more than 20 % of the initial budget and not exceeding EUR 10 million;

In case of multiannual action plans and measures, the thresholds referred to in paragraph (2)(a), (b) and (c) (iii) shall be applicable on a yearly basis.

When adopted in accordance with this paragraph, action plans and measures, except exceptional assistance measures, and technical amendments shall be communicated to the European Parliament and to the Member States through the relevant committee referred to in Article 35 within one month of their adoption. [Am. 205]

3.  Before the adoption or extension of exceptional assistance measures not exceeding EUR 20 million, the Commission shall inform the Council of their nature and objectives and of the financial amounts envisaged. The Commission shall inform the Council before making significant substantive changes to exceptional assistance measures already adopted. The Commission shall take account of the relevant policy approach of the Council and the European Parliament for the planning and subsequent implementation application of such measures, in the interests of consistency of the Union's external action. [Am. 206]

The Commission shall keep immediately inform the European Parliament duly informed, in a timely manner, about the planning and the implementation of exceptional assistance of measures pursuant to this Article, including the financial amounts envisaged, and shall also inform the European Parliament when making substantial changes or extensions to that assistance. As soon as possible following the adoption or substantial modification of a measure, and in any case within one month thereof, the Commission shall report to the European Parliament and to the Council and give an overview of the nature and the rationale of the measure adopted, its duration, budget and its context, including the complementarity of that measure with other ongoing and planned Union assistance. For exceptional assistance measures, the Commission shall also indicate whether, to what extent and how it will ensure the continuity of the policy executed through the exceptional assistance by medium- and long-term assistance under this Regulation. [Am. 207]

3a.  Before adopting action plans and measures not based on programming documents pursuant to Article 19(2), except for cases referred to in Article 19 (3) and (4), the Commission shall adopt a delegated act in accordance with Article 34 in order to supplement this Regulation by setting out the specific objectives to be pursued, the results expected, the instruments to be used, the main activities and the indicative financial allocations of these action plans and measures. [Am. 208]

4.  In the event of duly justified imperative grounds of urgency, such as crises including natural or man-made disasters, immediate threats to democracy, the rule of law, human rights or fundamental freedoms, the Commission may adopt action plans and measures or amendments to existing action plans and measures, as immediately applicable implementing acts, in accordance with the procedure referred to in Article 35(4). [Am. 209]

5.  Appropriate human rights, social and environmental screening, including for climate change and biodiversity impacts, shall be undertaken at the level of actions, in accordance with the applicable legislative acts of the Union, including Directive 2011/92/EU(51) of the European Parliament and of the Council and Council Directive 85/337/EEC(52), comprising, where applicable, an environmental impact assessment for environmentally sensitive actions, in particular for major new infrastructure. [Am. 210]

Additionally, ex-ante human rights, gender, social and labour impact assessments, as well as conflict analysis and risk assessment shall be conducted. [Am. 211]

Where relevant, human rights, social and strategic environmental assessments shall be used in the implementation execution of sectoral programmes. The involvement of interested stakeholders in environmental these assessments and public access to the results of such assessments shall be ensured. [Am. 212]

Article 21a

European Parliament’s assistance programmes

The Commission shall hold a dialogue with the European Parliament, and take into account the European Parliament’s views on areas in which the latter is running its own assistance programmes, such as capacity-building and election observation. [Am. 213]

Article 22

Methods of cooperation

1.  Financing under this Instrument shall be implemented by the Commission, as provided for by the Financial Regulation, either directly by the Commission itself, by Union delegations and by executive agencies, or indirectly through any of the entities listed in Article 62 (1) c) of the Financial Regulation.

2.  Financing under this Instrument may also be provided through contributions to international, regional or national funds, such as those established or managed by the EIB, by Member States, by partner countries and regions or by international organisations, or other donors.

3.  The entities listed in Article 62(1)(c) of the Financial Regulation and in Article 29(1) of this Regulation shall annually fulfil their reporting obligations under Article 155 of the Financial Regulation. The reporting requirements for any of these entities are laid down in the framework partnership agreement, the contribution agreement, the agreement on budgetary guarantees or the financing agreement.

4.  Actions financed under the Instrument may be implemented by means of parallel or joint co-financing.

5.  In the case of parallel co-financing, an action is split into a number of clearly identifiable components which are each financed by the different partners providing co-financing in such a way that the end-use of the financing can always be identified.

6.  In the case of joint co-financing, the total cost of an action is shared between the partners providing the co-financing and the resources are pooled in such a way that it is no longer possible to identify the source of financing for any given activity undertaken as part of the action.

7.  Cooperation between the Union and its partners may take the form, inter alia, of:

(a)  triangular arrangements whereby the Union coordinates with third countries its assistance funding to a partner country or region;

(b)  administrative cooperation measures such as twinning between public institutions, local authorities, national public bodies or private law entities entrusted with public service tasks of a Member State and those of a partner country or region, as well as cooperation measures involving public sector experts dispatched from the Member States and their regional and local authorities;

(c)  contributions to the necessary costs of setting up and administering a public-private partnership including support of broad participation by setting up independent third party CSO body to assess and monitor public-private partnership set-ups; [Am. 214]

(d)  sector policy support programmes whereby the Union provides support to a partner country's sector programme

(e)  contributions to the cost of the countries' participation in Union programmes and actions implemented by Union agencies and bodies, as well as bodies or persons entrusted with implementation of specific actions in the Common Foreign and Security Policy pursuant to Title V of the TEU;

(f)  interest rate subsidies.

Article 23

Forms of EU Union funding and methods of implementation application [Am. 215]

1.  The Union funding may be provided through the types of financing envisaged by the Financial Regulation and in particular:

(a)  grants;

(b)  procurement contracts for services, supplies or works;

(c)  budget support;

(d)  contributions to trust funds set up by the Commission, in accordance with Article 234 of the Financial Regulation;

(e)  financial instruments;

(f)  budgetary guarantees;

(g)  blending;

(h)  debt relief in the context of internationally agreed debt relief programme;

(i)  financial assistance;

(j)  remunerated external experts.

2.  When working with stakeholders of partner countries, the Commission shall take into account their specificities, including their needs and the relevant context, when defining the financing modalities, the type of contribution, the award modalities and the administrative provisions for the management of grants, with a view to reaching and best responding to the widest possible range of such stakeholders. That assessment shall take into account the conditions for a meaningful participation and involvement of all stakeholders, in particular local civil society. Specific modalities shall be encouraged in accordance with the Financial Regulation, such as partnership agreements, authorisations of financial support to third parties, direct award or eligibility-restricted calls for proposals, or lump sums, unit costs and flat-rate financing as well as financing not linked to costs as envisaged in Article 125(1) of the Financial Regulation. Those different modalities shall ensure transparency, traceability and innovation. Cooperation between local and international NGOs shall be encouraged in order to bolster local civil society’s capacities with a view to achieving its full participation in development programmes. [Am. 216]

3.  In addition of the cases referred to in Article 195 of the Financial Regulation, the direct award procedure may be used for;

(a)  low-value grants to human rights defenders and to mechanisms for the protection of human rights defenders at risk, to finance urgent protection actions, where appropriate without the need for co-financing, as well as to mediators and other civil society actors involved in crisis and armed conflict related dialogue, conflict resolution, reconciliation and peace-building; [Am. 217]

(b)  grants, where appropriate without the need for co-financing, to finance actions in the most difficult conditions where the publication of a call for proposals would be inappropriate including situations where there is a serious lack of fundamental freedoms, threats to democratic institutions, escalation of crisis, armed conflict where human security is most at risk or where human rights organisations and defenders, mediators and other civil society actors involved in crisis and armed conflict related dialogue, reconciliation and peace-building operate under the most difficult conditions. Such grants shall not exceed EUR 1 000 000 and shall have a duration of up to 18 months, which may be extended by a further 12 months in the event of objective and unforeseen obstacles to their implementation application; [Am. 218]

(c)  grants to the Office of the UN High Commissioner for Human Rights as well as to Global Campus, the European Inter-University Centre for Human Rights and Democratisation, providing a European Master's Degree in Human Rights and Democratisation, and its associated network of universities delivering human rights postgraduate diplomas, including scholarships to students, researchers, teachers, and human rights defenders from third countries. [Am. 219]

(c a)   Small projects as described in article 23a [Am. 220]

Budget support as referred to in point (c) of paragraph 1, including through sector reform performance contracts, shall be based on country ownership, mutual accountability and shared commitments to universal values, democracy, human rights, gender equality, social inclusion and human development and the rule of law, and aims at strengthening partnerships between the Union and partner countries. It shall include reinforced policy dialogue, capacity development, and improved governance, complementing partners' efforts to collect more and spend better in order to support sustainable and inclusive economic growth and jobs socio-economic development which benefits all, decent job creation, with particular attention to young people, the reduction of inequalities and poverty eradication with due regard to local economies, environmental and social rights. [Am. 221]

Any decision to provide budget support shall be based on budget support policies agreed by the Union, a clear set of eligibility criteria and a careful assessment of the risks and benefits. One of the key determinants of that decision shall be an assessment of the commitment, record and progress of partner countries with regard to democracy, human rights and the rule of law. [Am. 222]

4.  Budget support shall be differentiated in such a way as to respond better to the political, economic and social context of the partner country, taking into account situations of fragility.

When providing budget support in accordance with Article 236 of the Financial Regulation, the Commission shall clearly define and monitor criteria for budget support conditionality, including progress in reforms and transparency, and shall support the development of parliamentary control, national audit capacities, CSO participation in monitoring and increased transparency and public access to information and development of strong public procurement systems that support local economic development and local businesses. [Am. 223]

5.  Disbursement of the budget support shall be based on indicators demonstrating satisfactory progress being made towards achieving the objectives agreed with the partner country.

6.  Financial instruments under this Regulation may take forms such as loans, guarantees, equity or quasi-equity, investments or participations, and risk-sharing instruments, whenever possible and in accordance with the principles laid down in Article 209(1) of the Financial Regulation under the lead of the EIB, a multilateral European finance institution, such as the European Bank for Reconstruction and Development, or a bilateral European finance institution, such as bilateral development banks, possibly pooled with additional other forms of financial support, both from Member States and third parties.

Contributions to Union financial instruments under this Regulation may be made by Member States as well as any entity referred to in Article 62(1)(c) of the Financial Regulation.

7.  Those financial instruments may be grouped into facilities for implementation application and reporting purposes. [Am. 224]

7a.   The Commission and the EEAS shall not enter into new or renewed operations with entities incorporated or established in jurisdictions defined under the relevant Union policy as non-cooperative, or that are identified as high risk third countries pursuant to Article 9(2) of Directive(EU) 2015/849 of the European Parliament and of the Council, or that do not effectively comply with Union or internationally agreed tax standards on transparency and exchange of information. [Am. 225]

8.  The Union's funding shall not generate or activate the collection of specific taxes, duties or charges.

9.  Taxes, duties and charges imposed by partner countries may be eligible for financing under this Regulation.

Article 23a

Small projects funds

1.  Financing under this Regulation may be provided to small projects funds, aimed at the selection and implementation of projects of limited financial volume.

2.  The beneficiaries of a small project fund shall be civil society organisations.

3.  The final recipients within a small project fund shall receive support under this Regulation, through the beneficiary, and implement the small projects within that small project fund (‘small project’).

4.  Where the public contribution to a small project does not exceed EUR 50 000, it shall take the form of unit costs or lump sums or include flat rates. [Am. 226]

Article 24

Eligible persons and entities

1.  Participation in procurement, grant and prize award procedures for actions financed under geographic programmes and under the Civil Society Organisations and Global Challenges programmes shall be open to international organisations and to all other legal entities who are nationals of and, in the case of legal persons, who are also effectively established in, the following countries or territories:

(a)  Member States, beneficiaries of the IPA III Regulation, and contracting parties to the Agreement on the European Economic Area;

(b)  Neighbourhood partner countries and the Russian Federation when the relevant procedure takes place in the context of the programmes referred to in Annex I in which it participates;

(c)  developing countries and territories, as included in the list of Official Development Assistance recipients published by the Development Assistance Committee of the Organisation for Economic Cooperation and Development, which are not members of the G-20 group, and overseas countries and territories as defined in Council Decision …/… (EU);

(d)  developing countries, as included in the list of Official Development Assistance recipients, which are members of the G-20 group, and other countries and territories, when the relevant procedure takes place in the context of an action financed by the Union under this Regulation in which they participate;

(e)  countries for which reciprocal access to external funding is established by the Commission; that access may be granted, for a limited period of at least one year, whenever a country grants eligibility on equal terms to entities from the Union and from countries eligible under this Regulation; the Commission shall decide on the reciprocal access and on its duration after consultation of the recipient country or countries concerned;

(f)  member countries of the Organisation for Economic Cooperation and Development, in the case of contracts implemented applied in a Least Developed Country or a Highly Indebted Poor Country, as included in the list of Official Development Assistance recipients. [Am. 227]

2.  Without prejudice to the limitations inherent to the nature and objectives of the action, participation in procurement, grant and prize award procedures for actions financed under the Human Rights and Democracy and Stability and Peace programmes as well as rapid response actions, shall be open without limitations.

3.  All supplies and materials financed under this Regulation may originate from any country.

4.  The rules laid down in this Article shall not apply to, and shall not create, nationality restrictions for natural persons employed or otherwise legally contracted by an eligible contractor or, where applicable, subcontractor.

5.  For actions jointly co-financed by an entity, or implemented applied in direct or indirect management with entities as referred to point (c) (ii) to (viii) of Article 62(1) of the Financial Regulation, the eligibility rules of those entities shall also apply. [Am. 228]

6.  Where donors provide financing to a trust fund established by the Commission or through external assigned revenues, the eligibility rules in the constitutive act of the trust fund or in the agreement with the donor in case of external assigned revenues shall apply.

7.  In the case of actions financed under this Regulation and by another Union Programme, eligible entities under any of those Programmes shall be considered eligible.

8.  In the case of multi-country actions legal entities who are nationals of and, in the case of legal entities who are also effectively established in, the countries and territories covered by the action may be considered eligible.

9.  The eligibility rules of this Article may be restricted with regard to the nationality, geographical location or nature of applicants, where such restrictions are required on account of the specific nature and the objectives of the action and where they are necessary for its effective implementation application. Nationality restrictions shall not apply to international organisations. [Am. 229]

10.  Tenderers, applicants and candidates from non-eligible countries may be accepted as eligible in the case of urgency or the unavailability of services in the markets of the countries or territories concerned, or in other duly substantiated cases where application of the eligibility rules would make the realisation of an action impossible or exceedingly difficult.

11.  In order to promote local capacities, markets and purchases, priority shall be given to local and regional contractors, while paying attention to their track record in environmental sustainability or fair trade when the Financial Regulation provides for an award on the basis of a single tender. In all other cases, participation of local and regional contractors shall be promoted in accordance with the relevant provisions of that Regulation. In all cases sustainability and due diligence criteria shall be applied. [Am. 230]

12.  Under the Democracy and Human Rights programme, any entity not covered under the definition of legal entity in Article 2(6) shall be eligible when this is necessary to pursue the areas of intervention of this programme.

12a.  The Neighbourhood, Development and International Cooperation Instrument shall not support actions that, according to the environmental screening referred to in Article 21, cause harm to the environment or climate. Allocations shall be fully compatible with the Paris Agreement and overall, European financing dedicated to external action shall contribute to the Paris agreement’s long term objectives. In particular, the instrument shall not support:

(a)  Actions incompatible with recipient countries’ Nationally Determined Contributions under the Paris Agreement;

(b)  investment in upstream, midstream and downstream fossil fuels. [Am. 231]

Article 25

Carry-overs, annual instalments, commitment appropriations, re-payments and revenue generated by financial instruments

1.  In addition to Article 12(2) of the Financial Regulation, unused commitment and payment appropriations under this Regulation shall be automatically carried over and may be committed up to 31 December of the following financial year. The carried-over amount shall be used first in the following financial year.

The Commission shall inform submit to the European Parliament and to the Council of carried over commitment information on appropriations which were automatically carried over, including the amounts involved, in line with Article 12(6) of the Financial Regulation. [Am. 232]

2.  In addition to the rules laid down in Article 15 of the Financial Regulation on making appropriations available again, commitment appropriations corresponding to the amount of decommitments made as a result of total or partial non implementation of an action under this Regulation shall be made available again to the benefit of the budget line of origin.

References to Article 15 of the Financial Regulation in Article 12(1)(b) of Regulation laying down the multi annual financial framework shall be understood as including a reference to this paragraph for the purpose of this Regulation.

3.  Budgetary commitments for actions extending over more than one financial year may be broken down over several years into annual instalments, in line with Article 112(2) of the Financial Regulation.

The third subparagraph of Article 114(2) of the Financial Regulation shall not apply to these multiannual actions. The Commission shall automatically de-commit any portion of a budgetary commitment for an action that by 31 December of the fifth year following that of the budgetary commitment has not been used for the purpose of pre-financing or making interim payments or for which no certified statement of expenditure or any payment request has been submitted.

Paragraph 2 of this Article shall also apply to annual instalments.

4.  By way of derogation from Article 209(3) of the Financial Regulation repayments and revenues generated by a financial instrument shall be assigned to the budget line of origin as internal assigned revenue after deduction of management costs and fees. Every five years, the Commission shall examine the contribution made to the achievement of Union objectives, and the effectiveness, of existing financial instruments.

Chapter IV

EFSD+, budgetary guarantees and financial assistance to third countries

Article 26

Scope and financing

1.  The financial envelope referred to in Article (6)(2)(a) shall finance The European Fund for Sustainable Development Plus (EFSD+) and the External Action Guarantee shall be financed through the financial envelopes for geographic programmes referred to in point (a) of Article 6(2), whilst ensuring that this financing is not to the detriment of other actions supported by geographic programmes. [Am. 233]

The purpose of the EFSD+ as an integrated financial package supplying financial capacity drawing on the methods of implementation set up in the form of grants, guarantees and other financial instruments as set out in Article 23(1)(a), (e), (f) and (g), shall be to support investments and increase access to financing, while maximising additionality, delivering innovative products and crowding in private sector, in order to foster sustainable and inclusive economic, environmental and social development, and industrialisation and a stable investment environment, in order to promote the socio-economic and environmental resilience in partner countries with a particular focus on the, eradication of poverty, sustainable and inclusive growth, climate change adaptation and mitigation, environmental protection and management, the creation of decent jobs in compliance with relevant ILO standards, in particular for vulnerable groups, including women and young people, economic opportunities, skills and entrepreneurship, socioeconomic sectors, with a focus on social enterprises and cooperatives in view of their potential to reduce poverty, inequalities, and promote human rights and livelihoods, supporting micro, small and medium-sized enterprises as well as addressing specific socioeconomic root causes of irregular migration and forced displacement, and contributing to the sustainable reintegration of returned migrants in their countries of origin, in accordance with the relevant indicative programming documents. 45 % of the financing shall be allocated to investments that contribute to climate objectives, environmental management and protection, biodiversity and combatting desertification, of which 30 % of the overall financial envelope shall be dedicated to climate change mitigation and adaptation. Special attention, and additional support for institutional capacity building, economic governance, and technical assistance, shall be given to countries identified as experiencing fragility or conflict, Least Developed Countries and heavily indebted poor countries. The External Action Guarantee shall be used in addition to the government’s investment in essential public services, which remain a governmental responsibility. [Am. 234]

2.  The External Action Guarantee shall support the EFSD+ operations covered by budgetary guarantees in accordance with Articles 27, 28 and 29 of this Regulation, macro-financial assistance and loans to third countries referred to in Article 10(2) of Regulation EINS.

3.  Under the External Action Guarantee, the Union may guarantee operations, signed between 1 January 2021 and 31 December 2027, up to EUR 60 000 000 000. That ceiling shall be reviewed in the context of the mid-term evaluation report pursuant to Article 32. [Am. 235]

4.  The provisioning rate shall range between 9 % and 50 % depending on the type of operations. A maximum amount of EUR 10 billion shall be provisioned from the Union budget through a specific budget line in the framework of the annual budgetary procedure or through a budget transfer. The Commission shall be empowered to adopt delegated acts in accordance with Article 34 to amend this maximum amount if the need arises. [Am. 236]

The provisioning rate for the External Action Guarantee shall be 9 % for the Union's macro-financial assistance and for budgetary guarantees covering sovereign risks associated with lending operations.

The provisioning rates shall be reviewed every three two years starting from the date of application of this Regulation laid down in Article 40. The Commission shall be empowered to adopt delegated acts in accordance with Article 34 to supplement or amend these rates, and the financial amounts involved. [Am. 237]

5.  The External Action Guarantee shall be considered as a single guarantee in the common provisioning fund established by Article 212 of the Financial Regulation.

6.  The EFSD+ and the External Action Guarantee may support financing and investment operations in partner countries in the geographical areas referred to in Article 4(2). The provisioning of the External Action Guarantee shall be financed from the budget of the relevant geographic programmes established by Article 6(2)(a) and shall be transferred into the common provisioning fund. The geographic distribution of EFSD+ operations shall, to the maximum extent possible, also reflect the relative weight of the financial allocations for the different regions as outlined in point (a) of Article 6(2). The EFSD+ and the External Action Guarantee may also support operations in beneficiaries listed in Annex I of the IPA III Regulation. The funding for these operations under the EFSD+ and for the provisioning of the External Action Guarantee shall be financed from the Regulation IPA. The provisioning of the External Action Guarantee for loans to third countries referred to in Article 10 (2) of Regulation EINS shall be financed from Regulation EINS. [Am. 238]

7.  The provisioning referred to in Article 211(2) of the Financial Regulation shall be constituted on the basis of the Union's total outstanding liabilities arising from each operation, including operations signed before 2021 and guaranteed by the Union. The annual amount of provisioning required may be constituted during a period of up to seven years.

8.  The balance of assets by 31 December 2020 in the EFSD Guarantee Fund and in the Guarantee fund for external actions established respectively by Regulation EU 2017/1601 of the European Parliament and the Council and Council Regulation (EC, Euratom) No 480/2009 shall be transferred into the common provisioning fund for the purpose of provisioning its respective operations under the same single guarantee provided for in paragraph 4 of this Article.

Article 26a

Objectives for the EFSD+

1.  The EFSD+ operations eligible for support through the External Action Guarantee shall contribute to the following priority areas:

(a)  providing finance and support to private, cooperative and social enterprise sector development to contribute to sustainable development in its economic, social and environmental dimensions with a particular focus on the eradication of poverty and, where appropriate, the European Neighbourhood Policy and the objectives set out in Article 3 of the IPA III Regulation;

(b)  addressing bottlenecks to private investments, in particular by ensuring the legal security of investments;

(c)  leveraging private sector financing, with a particular focus on micro, small and medium-sized enterprises;

(d)  strengthening socio-economic sectors and areas and related public and private infrastructure and sustainable connectivity and sustainable production, with the objective of promoting an inclusive and sustainable socio-economic development that respects human rights and the environment;

(e)  contributing to climate action and environmental protection and management; [Am. 239]

(f)  contributing, by promoting sustainable development, to addressing specific root causes of migration, including irregular migration and forced displacement, and contribute to safe, orderly and regular migration and mobility.

Article 27

Eligibility and selection of operations and counterparts

1.  The financing and investment operations eligible for support through the External Action Guarantee shall be consistent and aligned with Union policies, in particular its development policy and the European Neighbourhood Policy, as well as with the partner countries’ strategies and policies and address local market failures or sub-optimal investment operations and without unfairly competing with local economic actors. They shall in particular support the objectives, general principles and policy framework of this Regulation and the relevant indicative programming documents, with due regard to the priority areas laid down in Article 26 a and further described in Annex V. [Am. 240]

1a.  The granting of the External Action Guarantee shall be subject to the conclusion of the respective EFSD guarantee agreements between the Commission on behalf of the Union and the eligible counterpart. [Am. 241]

2.  The External Action Guarantee shall support financing and investment operations which address market failures or sub-optimal investment situations. Operations shall also be compliant with the conditions set out in points (a) to (c) (d) of Article 209(2) of the Financial Regulation and that: [Am. 242]

(-aa)   provide financial and development additionality; [Am. 243]

(-ab)   undergo a publicly available participatory ex ante human rights, social, labour and environmental impact assessment identifying and addressing risks in those fields and taking due account of the principle of free and prior informed consent (FPIC) of affected communities in land related investments; [Am. 244]

(a)  ensure complementarity with other initiatives;

(b)  are economically and financially viable, with due regard to the possible support from, and co-financing by, private and public partners to the project, while taking into account the specific operating environment and capacities of countries identified as experiencing fragility or conflict, Least Developed Countries and heavily indebted poor countries which may benefit from concessional terms;

(c)  are technically viable and are sustainable from an environmental and social socio-economic point of view; [Am. 245]

(ca)  target sectors and issues where there are clear market or institutional failures inhibiting private sector financing; [Am. 246]

(cb)  are structured in a manner which contributes to catalysing market development and to mobilising private sector resources towards investment gaps; [Am. 247]

(cc)  focus on projects involving greater risks than private lenders are prepared to undertake on a commercial basis alone; [Am. 248]

(cd)  do not distort markets in partner countries and regions. [Am. 249]

(ce)  maximise, where possible, the mobilisation of local private sector capital; [Am. 250]

(cf)  respect the development effectiveness principles as set out in the Busan Partnership for Effective Development Cooperation and reaffirmed in Nairobi in 2016, including ownership, alignment, focus on results, transparency and mutual accountability, as well as the objective of untying aid; [Am. 251]

(cg)  are designed to fulfil the criteria for ODA established by the OECD-DAC, taking into account the specificities of private sector development, except for operations in industrialised countries non eligible for ODA; [Am. 252]

(ch)  are applied with full respect for international human rights law as well as internationally agreed guidelines, principles and conventions, including the Principles for Responsible Investment, UN Guiding Principles on Business and Human Rights, OECD Guidelines for Multinational Enterprises, the UN Food and Agriculture Organization’s (FAO) Principles for Responsible Investment in Agriculture and Food Systems and International Labour Organization conventions and standards , the UN Convention on the Elimination of All Forms of Discrimination Against Women, the Maastricht Principles on the Extraterritorial Obligations of States in the Area of Economic, Social and Cultural Rights and the FAO Voluntary Guidelines on the Responsible Governance of Tenure of Land, Fisheries and Forests in the Context of National Food Security. [Am. 253]

3.  The External Action Guarantee shall be used to cover the risks for the following instruments:

(a)  loans, including local currency loans and macro-financial assistance loans;

(b)  guarantees;

(c)  counter-guarantees;

(d)  capital market instruments;

(e)  any other form of funding or credit enhancement, insurance, and equity or quasi-equity participations.

4.  The eligible counterparts for the purposes of the External Action Guarantee shall be the ones identified in Article 208(4) of the Financial Regulation, including those from third countries contributing to the External Action Guarantee, subject to approval by the Commission in accordance with Article 28 of this Regulation, and the opinion of the strategic board. In addition, and by derogation to Article 62(2)(c) of the Financial Regulation, bodies governed by the private law of a Member State or a third country which has contributed to the External Action Guarantee in accordance with Article 28, and which provide adequate assurance of their financial capacity shall be eligible for the purpose of the Guarantee. [Am. 254]

4a.  The European Investment Bank group, shall, inter alia:

(a)  participate, together with other European financial institutions, in the risk management of the EFSD+, having due regard to the need to avoid possible conflict of interest;

(b)  exclusively implement part of an investment window covering sovereign lending to be provisioned with at least EUR 1 000 000 000 from the financial envelopes of the geographic programmes, in accordance with the procedures laid down in chapters 1 and 3 of this title;

(c)  be an eligible counterpart of implementing activities under other investment windows. [Am. 255]

5.  Eligible counterparts shall comply with the rules and conditions provided for in Article 62(2)(c) of the Financial Regulation. In the case of bodies governed by the private law of a Member State or a third country which have contributed to the External Action Guarantee in accordance with Article 28 of this Regulation, preference shall be given to those bodies that disclose information related to environment, social, tax and corporate governance criteria. [Am. 256]

The Commission shall ensure an effective, efficient and fair use of available resources among eligible counterparts, while promoting cooperation between them.

The Commission shall ensure fair treatment and equal access to funding for all eligible counterparts and shall ensure that conflicts of interest are avoided throughout the implementation application period of the EFSD+. In order to ensure complementarity, the Commission may request any relevant information from eligible counterparts about their non-EFSD+ operations. [Am. 257]

5a.  The European Parliament or the Council may invite eligible counterparts, CSOs and local communities to an exchange of views concerning the financing and investment operations covered by this Regulation. [Am. 258]

6.  The Commission shall select the eligible counterparts in accordance with Article 154 of the Financial Regulation, taking due account of:

(a)  the advice of the strategic and regional operation boards, in accordance with Annex VI;

(b)  the objectives of the investment window;

(c)  the experience and risk management capacity of the eligible counterpart;

(d)  the amount of own resources, as well as private sector co-financing, that the eligible counterpart is ready to mobilise for the investment window.

(da)   the principles of fair and open tender procedures. [Am. 259]

7.  The Commission shall set up investment windows for regions, specific partner countries or both, for specific sectors, or for specific projects, specific categories of final beneficiaries or both, which are to be funded by this Regulation, to be covered by the External action Guarantee up to a fixed amount. The Commission shall inform the European Parliament and the Council on how the investment windows comply with this Article and their detailed funding priorities. All requests for financial support within investment windows shall be made to the Commission.

The choice of investment windows shall be duly justified by an analysis of the market failure or sub-optimal investment situations. That analysis shall be carried out by the Commission in cooperation with potentially eligible counterparts and stakeholders.

Eligible counterparts may provide the instruments referred to in paragraph 3 under an investment window or individual project administered by an eligible counterpart. The instruments may be provided for the benefit of partner countries, including countries experiencing fragility or conflict or countries facing challenges in reconstruction and post-conflict recovery, for the benefit of those partner countries’ institutions, including their public national and private local banks and finance institutions, as well as for the benefit of private sector entities of those partner countries. [Am. 260]

8.  The Commission shall assess the operations supported by the External Action Guarantee against the eligibility criteria set out in paragraphs 2 and 3., where possible drawing The Commission shall establish a scoreboard of indicators to guide project selection. Implementing partners shall fill in the scoreboard for all operations under EFSD+. The Commission shall assess all operations supported by the Guarantee against eligibility criteria listed in Article 27 and shall use the scoreboard to perform an independent quality check on the existing result measurement systems of eligible counterparts. due diligence and assessment made by implementing partners at project level. If necessary, the Commission shall ask for clarification and modifications to the implementing partners. The Commission shall publish the scoreboard for all projects after approval for the use of the guarantee by the Commission and implementing partners, and the result of all guarantee tools and individual projects under its assessment for each investment window on an annual basis. [Am. 261]

9.  The Commission shall be empowered to adopt delegated acts in accordance with Article 34 to supplement or amend the priority areas and investment windows indicated in Annex V and the governance of the EFSD+ in Annex VI. When supplementing or amending investment windows for specific regions, specific partner countries or both, for specific sectors, or for specific projects, specific categories of final beneficiaries or both, which are to be funded by this Regulation, to be covered by the External action Guarantee up to a fixed amount, the Commission shall take due account of the advice provided by the strategic board, and consult the operational boards.

The Commission shall inform the European Parliament and the Council on how the investment windows comply with the requirements set out in Article 26a and this Article and their detailed funding priorities. All requests for financial support within investment windows shall be made to the Commission.

The choice of investment windows shall be duly justified by an analysis of the market failure or sub-optimal investment situations. That analysis shall be carried out by the Commission in cooperation with potentially eligible counterparts and stakeholders.

Eligible counterparts may provide the instruments referred to in paragraph 3 under an investment window or individual project administered by an eligible counterpart. The instruments may be provided for the benefit of partner countries, including countries experiencing fragility or conflict or countries facing challenges in reconstruction and post-conflict recovery, for the benefit of those partner countries’ institutions, including their public national and private local banks and finance institutions, as well as for the benefit of private sector entities of those partner countries. In countries experiencing fragility or conflict, and other countries, where justified, support may be provided to public sector investments that have relevant effects on private sector development. [Am. 262]

Article 27a

Governance and structure of the EFSD +

1.  The EFSD+ shall be composed of regional investment platforms established on the basis of the working methods, procedures and structures of the existing external blending facilities of the Union, which may combine their blending operations and External Action Guarantee operations under the EFSD+.

2.  The Commission shall be responsible for the overall management of the EFSD+ and the External Action Guarantee. Beyond that, the Commission shall not seek to carry out general banking operations. The Commission shall inform the European Parliament regularly to ensure the highest standards of transparency and financial accountability.

3.  In the management of the EFSD+ the Commission shall be advised by a strategic board, except in the case of the operations covering the Union’s Enlargement policy and financed by IPA III, where the Commission shall be advised by a strategic board of the Western Balkans Investment Framework (WBIF). The Commission shall also work in close cooperation with all eligible counterparts as regards the operational management of the External Action Guarantee. To that end, a technical working group, composed of experts from the Commission and eligible counterparts, shall be established in order to assess the risk and the related pricing.

4.  The strategic board shall advise the Commission on the strategic orientation and priorities of External Action Guarantee investments under the EFSD+ and contribute to their alignment with the guiding principles and objectives of the Union’s external action, development policy, European Neighbourhood policy, as well as with the objectives set out in Article 3 and the purpose of the EFSD+ as set out in Article 26. It shall also support the Commission in setting overall investment goals as regards the use of the External Action Guarantee to support EFSD+ operations and monitor an appropriate and diversified geographical and thematic coverage for investment windows, while giving special attention to countries identified as experiencing fragility or conflict, Least Developed Countries (‘LDCs’) and heavily indebted poor countries.

5.  The strategic board shall also support overall coordination, complementarity and coherence between the regional investment platforms, between the three pillars of the European Investment Plan, between the European Investment Plan and the Union’s other efforts on migration and on the implementation of the 2030 Agenda, as well as with other programmes set out in this Regulation, other Union funding instruments and Trust Funds.

6.  The strategic board shall be composed of representatives of the Commission and of the High Representative, of all Member States and of the European Investment Bank. The European Parliament shall have observer status. Contributors, eligible counterparts, partner countries, relevant regional organisations and other stakeholders may be given observer status, where appropriate. The strategic board shall be consulted prior to the inclusion of any new observer. The strategic board shall be co-chaired by the Commission and the High Representative.

7.  The strategic board shall meet at least twice a year and, when possible, adopt opinions by consensus. Additional meetings may be organised at any time by the chair or at the request of one third of its members. Where consensus cannot be reached, the voting rights as agreed during the first meeting of the strategic board and laid down in its rules of procedure shall apply. Those voting rights shall take due account of the source of financing. The rules of procedure shall set out the framework regarding the role of observers. The minutes and agendas of the meetings of the strategic board shall, following their adoption, be made public.

8.  The Commission shall report annually to the strategic board about the progress made in respect of the application of the EFSD+. The strategic board of the WBIF shall provide progress made on the application of the guarantee instrument for the Enlargement region to complement that reporting. The strategic board shall regularly organise a consultation of relevant stakeholders on the strategic orientation and application of the EFSD+.

9.  The existence of the two strategic boards does not bear influence on the need to have a single, unified EFSD+ risk management framework.

10.  During the application period of the EFSD+, the strategic board shall, as soon as possible, adopt and publish guidelines setting out how conformity of EFSD+ operations with the objectives and eligibility criteria set out in Articles 26 a and 27 is to be ensured.

11.  In its strategic guidance, the strategic board shall take due account of relevant European Parliament resolutions and Council decisions and conclusions.

12.  The operational boards of regional investment platforms shall support the Commission at the application level in defining regional and sectoral investment goals and regional, sectoral and thematic investment windows and shall formulate opinions on blending operations and on the use of the External Action Guarantee covering EFSD+ operations. [Am. 263]

Article 28

Contribution from other donors to the External Action Guarantee

1.  Member States, third countries and other third parties may contribute to the External Action Guarantee.

By derogation from the second sub-paragraph of Article 218(2) of the Financial Regulation, the contracting parties to the Agreement on the European Economic Area may contribute in the form of guarantees or cash.

Contribution from third countries other than the contracting parties to the Agreement on the European Economic Area and from other third parties shall be in the form of cash and subject to the opinion of the Strategic Board and to approval by the Commission. [Am. 264]

The Commission shall inform the European Parliament and the Council without delay of the contributions confirmed.

At the request of the Member States, their contributions may be earmarked for the initiation of actions in specific regions, countries, sectors or existing investment windows. [Am. 265]

2.  Contributions in the form of a guarantee shall not exceed 50 % of the amount referred to in Article 26(2) of this Regulation.

The contributions made by the Member States and the contracting parties to the Agreement on the European Economic Area in the form of a guarantee may only be called for payments of guarantee calls after the funding from the general budget of the Union increased by any other cash contributions has been used on payments of guarantee calls.

Any contribution may be used to cover guarantee calls regardless of earmarking. [Am. 266]

A contribution agreement shall be concluded between the Commission, on behalf of the Union, and the contributor, and shall contain, in particular, provisions concerning the payment conditions.

Article 29

Implementation Application of External Action Guarantee agreements [Am. 267]

1.  The Commission, on behalf of the Union, shall conclude External Action Guarantee agreements with the eligible counterparts selected pursuant to Article 27. Those agreements shall be unconditional, irrevocable, at first demand, and in favour of selected counterparts. Agreements may be concluded with a consortium of two or more eligible counterparts. [Am. 268]

2.  One or more External Action Guarantee agreements shall be concluded for each investment window between the Commission and the eligible counterpart or eligible counterparts selected. In addition, in order to address specific needs, the External Action Guarantee may be granted for individual financing or investment operations.

All External Action Guarantee agreements shall, upon request, be made available to the European Parliament and to the Council, taking into account the protection of confidential and commercially sensitive information. [Am. 269]

3.  External Action Guarantee agreements shall contain, in particular:

(a)  detailed rules on the coverage, requirements, eligibility, eligible counterparts, and procedures;

(b)  detailed rules on the provision of the External Action Guarantee, including its arrangements on the coverage and its defined coverage of portfolios and of projects of specific types of instruments, as well as a risk analysis of projects and project portfolios, including at sectoral, regional and national levels;

(c)  a mention of the objectives and purpose of this Regulation, a needs assessment and an indication of the expected results, taking into account the promotion of corporate social responsibility and the need to ensure a responsible business conduct, including, in particular, by respect for the internationally agreed guidelines, principles and legal instruments referred to in point (c h) of Article 27(2); [Am. 270]

(d)  the remuneration of the guarantee, which is to reflect the risk level, and the possibility for the remuneration to be partly subsidised in order to give concessional terms in duly justified cases, and in particular countries experiencing fragility or conflict, LDCs and heavily indebted countries; [Am. 271]

(e)  requirements for the use of the External Action Guarantee, including payment conditions, such as specific time frames, interest to be paid on due amounts, expenses and recovery costs and possibly necessary liquidity arrangements;

(f)  claims procedures, including, but not limited to, triggering events and waiting periods, and procedures regarding the recovery of claims;

(g)  transparent monitoring, reporting and evaluation obligations; [Am. 272]

(h)  clear and accessible complaints procedures for third parties that could be affected by the implementation application of projects supported by the External Action Guarantee. [Am. 273]

4.  The eligible counterpart shall approve financing and investment operations following its own rules and procedures and in compliance with the terms of the External Action Guarantee agreement.

5.  The External Action Guarantee may cover:

(a)  for debt instruments, the principal and all interests and amounts due to the selected eligible counterpart, but not received by it in accordance with the terms of the financing operations after an event of default has occurred;

(b)  for equity investments, the amounts invested and their associated financing costs;

(c)  for other financing and investment operations referred to in Article 27(2), the amounts used and their associated funding costs;

(d)  all relevant expenses and recovery costs related to an event of default, unless deducted from recovery proceeds.

5a.  The Commission, when concluding External Action Guarantee agreements with eligible counterparts, shall take due account of:

(a)  the advice and guidance of the strategic and regional operational boards;

(b)  the objectives of the investment window;

(c)  the experience and operational, financial and risk management capacity of the eligible counterpart;

(d)  the amount of own resources, as well as private sector co-financing, that the eligible counterpart is ready to mobilise for the investment window. [Am. 274]

6.  For the purposes of the Commission’s accounting, its reporting of the risks covered by the External Action Guarantee and in line with Article 209(4) of the Financial Regulation, eligible counterparts with which a guarantee agreement has been concluded shall provide the Commission and the Court of Auditors annually with the financial reports on financing and investment operations covered by this Regulation, audited by an independent external auditor, containing, inter alia, information on:

(a)  the risk assessment of financing and investment operations of the eligible counterparts, including information on Union liabilities measured in compliance with the accounting rules referred to in Article 80 of the Financial Regulation and IPSAS;

(b)  the outstanding financial obligation for the Union arising from the EFSD+ operations provided to the eligible counterparts and their financing and investment operations, broken down by individual operations.

7.  The eligible counterparts shall, upon request, provide the Commission with any additional information necessary to fulfil the Commission’s obligations in relation to this Regulation, in particular with regard to the implementation of recommendations from the ex-ante human rights, social, labour and environment impact assessment and other selection criteria listed in Article 27. [Am. 275]

8.  The Commission shall report on financial instruments, budgetary guarantees, financial assistance in accordance with Article 241 and 250 of the Financial Regulation. To this purpose, the eligible counterparts shall provide annually the information necessary to allow the Commission to comply with the reporting obligations. In addition, the Commission shall submit an annual report to the European Parliament and to the Council as set out in Article 31(6a). [Am.276 ]

8a.  The Commission or the eligible counterparts shall immediately notify OLAF when, at any stage of the preparation, implementation or closure of financing and investment operations covered by this Regulation, there are grounds for suspecting fraud, corruption, money laundering or any other illegal activity that may affect the financial interests of the Union. The Commission or the eligible counterparts shall provide OLAF with all necessary information to enable it to carry out a full and thorough investigation. [Am. 277]

Article 29a

Grievance and redress mechanism

In view of possible grievances of third parties in partner countries, including communities and individuals affected by projects supported by the EFSD+ and the External Action Guarantee, the Commission and European Union Delegations shall publish on their websites direct references to the complaints mechanisms of the relevant counterparts that have concluded agreements with the Commission. The Commission shall also establish an EU centralised grievance mechanism for all projects pursuant to Chapter IV of this Regulation to provide the possibility of directly receiving complaints related to the treatment of grievances by eligible counterparts. The Commission shall take that information into account in view of future cooperation with those counterparts. [Am. 278]

Article 29b

Excluded activities and non-cooperative jurisdictions

1.  The External Action Guarantee shall not support financing and investment operations which:

(a)  are linked to the military or state security sector.

(b)  support the development of nuclear energy, except for loans provided in accordance with Regulation EINS, and fossil fuels and promote further carbon lock-in of economies and societies.

(c)  have significant environmental external costs, such as those that involve degradation of protected areas, Critical Habitats and Heritage sites for which no sustainable development and management plan is carried out.

(d)  result in violation of human rights in partner countries, such as depriving communities from their right to access and control natural resources such as land, contribute to forced displacement of populations, or involve forced labour or child labour.

2.  In their financing and investment operations, the eligible counterparts shall comply with applicable Union law and agreed international and Union standards and, therefore, shall not support projects under this Regulation that contribute to money laundering, terrorism financing, tax avoidance, tax fraud and tax evasion. In addition, the eligible counterparts shall not enter into new or renewed operations with entities incorporated or established in jurisdictions listed under the relevant Union policy on non-cooperative jurisdictions, or that are identified as high risk third countries pursuant to Article 9(2) of Directive (EU) 2015/849 of the European Parliament and of the Council, or that do not effectively comply with Union or internationally agreed tax standards on transparency and exchange of information. The eligible counterparts may derogate from this principle only if the project is physically implemented in one of those jurisdictions, and does not present any indication that the relevant operation falls under any of the categories listed in the first subparagraph of this paragraph. When concluding agreements with financial intermediaries, the eligible counterparts shall transpose the requirements referred to in this Article into the relevant agreements and shall request the financial intermediaries to report on their observance.

3.  In its financing and investment operations, the eligible counterpart shall apply the principles and standards set out in Union law on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing and in particular Regulation (EU) 2015/847 of the European Parliament and of the Council (2) and Directive (EU) 2015/849. The eligible counterparts shall make both direct funding and funding via intermediaries under this Regulation contingent upon the disclosure of beneficial ownership information in accordance with Directive (EU) 2015/849 and publish country-by-country reporting data in accordance with Article 89(1) of Directive 2013/36/EU of the European Parliament and of the Council. [Am. 279]

Article 30

Capital participation in a development bank

The envelope for geographic programmes, referred to in Article 6(2)(a), may be used to contribute to the capital endowment of European and other development finance institutions.

Chapter V

Monitoring, reporting and evaluation

Article 31

Monitoring and reporting

-1.  The achievement of the objectives of this Regulation shall be measured through an adequate, transparent and accountable monitoring, reporting and evaluation system, ensuring the proper involvement of the European Parliament and the Council, as well as enhancing the participation of all Union partners, including civil society, in the application of the programmes. [Am. 280]

1.  Indicators to report on progress under this Regulation towards the achievement of the specific objectives set out in Article 3 (2) are set in Annex VII, in line with the Sustainable Development Goals indicators. The values of the indicators on 1 January 2021 shall be used as a basis for assessing the extent to which the objectives have been achieved. [Am. 281]

2.  The Commission shall regularly monitor its actions and review progress made towards delivering the targets established in Article 3, as well as expected results, covering outputs and outcomes. [Am. 282]

Progress with respect to expected results should shall be monitored on the basis of clear, transparent and, where appropriate, measurable indicators set in Annex VII and in the monitoring and evaluation framework adopted pursuant to paragraph 9, as well as in accordance with the provisions on Union budgetary execution. Indicators shall be kept at a limited number to facilitate timely reporting and, as a minimum, shall be disaggregated by sex and age. [Am. 283]

3.  Joint results frameworks included within joint programming documents that fulfil the criteria set out in Article 12(4) shall provide the basis for the joint monitoring by the Union and the Member States of the implementation application of their collective support to a partner country. [Am. 284]

The performance reporting system shall ensure that data for monitoring programme implementation application and results are collected efficiently, effectively, and in a timely manner. To that end, proportionate reporting requirements shall be imposed on recipients of Union funds. [Am. 285]

4.  The Commission shall examine the progress made in implementing applying this Regulation. From 2022 onwards, the Commission shall submit to the European Parliament and to the Council an annual report on the achievement of the objectives of this Regulation by means of indicators, including, but not limited to, those set in Annex VII as well as Union budgetary execution, measuring the results delivered and the efficiency of the Regulation. That report shall also be submitted to the European Economic and Social Committee and to the Committee of the Regions. [Am. 286]

5.  The annual report shall contain information relating to the previous year on the measures financed, the results of monitoring and evaluation exercises, the involvement and level of cooperation of the relevant partners, and the implementation application of budgetary commitments and of payment appropriations broken down by country, region and cooperation sector. It shall include an assessment of progress made towards expected results and regarding the incorporation of cross-cutting issues as mentioned in Article 8(6). It shall assess the results of the Union funding using, as far as possible, specific and measurable indicators of its role in meeting the objectives of this Regulation. In the case of development cooperation, the report shall also assess, where possible and relevant, the adherence to development effectiveness principles, including for innovative financial instruments. [Am. 287]

6.  The annual report prepared in 2021 shall contain consolidated information from annual reports concerning the period from 2014 to 2020 on all funding from the Regulations referred to in Article 40(2) 39(2), including external assigned revenues and contributions to trust funds, and offering a breakdown of spending by country, use of financial instruments, commitments and payments. The report shall reflect the main lessons learnt and the follow-up to the recommendations of the external evaluative exercises carried out in previous years. It shall include an assessment of the level of staff capacity at headquarters and Union delegations level for the delivery of all objectives covered in this Regulation. [Am. 288]

6a.  The Commission shall submit as part of the annual report detailed reporting on the financing and investment operations covered by the External Action Guarantee, and the functioning of the EFSD+, its management and its effective contribution to its objectives. That part of the annual report shall be accompanied by an opinion of the Court of Auditors. It shall include the following elements:

(a)  an assessment of the results contributing to the purpose and objectives of the EFSD+ as set out in this Regulation;

(b)  an assessment of current financing and investment operations and covered by the External Action Guarantee at sector, country and regional levels and their compliance with this Regulation, including the risk measures and their impact on the financial and economic stability of the partners;

(c)  an assessment of the additionality and added value, the mobilisation of private sector resources, the estimated and actual outputs and the outcomes and impact of the financing and investment operations covered by the External Action Guarantee on an aggregated basis, including the impact on decent job creation and the ability to provide a living wage, the eradication of poverty and the reduction of inequality; that assessment shall include a gender analysis of the operations covered based on evidence and data broken down by gender, where possible, and an analysis of the type of private sector supported, including cooperatives and social enterprises;

(d)  an assessment of the compliance with the requirements concerning the use of the External Action Guarantee and of the achievement of key performance indicators established for each proposal submitted;

(e)  an assessment of the leverage effect achieved by the operations covered by the External Action Guarantee and the EFSD+ ;

(f)  the financial amount transferred to beneficiaries and an assessment of financing and investment operations by each eligible counterpart on an aggregated basis;

(g)  an assessment of the additionality and added value of financing and investment operations of the eligible counterparts, and of the aggregate risk associated with those operations;

(h)  detailed information on calls on the External Action Guarantee, losses, returns, amounts recovered and any other payments received, as well as overall risk exposure;

(i)  the financial reports on financing and investment operations of the eligible counterparts covered by this Regulation, audited by an independent external auditor;

(j)  an assessment of the synergies and complementarity between operations covered by the External Action Guarantee and the second and third pillars of the EIP based on relevant existing reports, with particular regard to progress made on good governance, including in the fight against corruption and illicit financial flows, respect for human rights, the rule of law and gender-responsive policies, as well as the boosting of entrepreneurship, the local business environment and local financial markets;

(k)  an assessment of the compliance of the External Action Guarantee operations with the internationally agreed development effectiveness principles;

(l)  an assessment of the remuneration of the guarantees;

(m)  an assessment of the implementation of provisions related to excluded activities and non-cooperative jurisdictions. [Am. 289]

7.  An annual estimate of the overall spending related to climate action and biodiversity the targets set by this Regulation shall be made on the basis of the indicative programming documents adopted. The funding allocated under this Regulation shall be subject to an annual tracking system based on the methodology of the Organisation for Economic Cooperation and Development including (‘Rio markers’), without excluding the use of more precise methodologies where these are available, integrated into the existing methodology for performance management of Union programmes, to quantify the expenditure related to climate action, and biodiversity and environment, human development and social inclusion, gender equality, and Official Development Assistance, at the level of the action plans and measures referred to in Article 19 and recorded within evaluations and the annual report. The Commission shall transmit the estimate to the European Parliament as part of the annual report. [Am. 290]

8.  The Commission shall make available information on development co-operation cooperation through recognised international standards, including those of the International Labour Organisation, and using the framework for a common standard developed by the International Aid Transparency Initiative. [Am. 291]

9.  To ensure effective assessment of progress of this Regulation towards the achievement of its objectives, the Commission shall be empowered to adopt delegated acts in accordance with Article 34 to amend Annex VII to review or complement the indicators where considered necessary, including in the context of the mid-term review pursuant to Article 32, and to supplement this Regulation with provisions on the establishment of a monitoring and evaluation framework, which may include additional performance indicators applicable for each of the specific objectives of this Regulation. [Am. 292]

Article 32

Mid-term review and evaluation [Am. 293]

1.  An interim No later than 30 June 2024, the Commission shall submit a mid-term evaluation report on the application of this Regulation. The mid-term evaluation report shall be performed once there is sufficient information available about its implementation, but no later than four years after the start of the implementation cover the period from 1 January 2021 to 31 December 2023 and shall examine the Union contribution to the achievement of the instrument objectives of this Regulation, by means of indicators measuring the results delivered, and any findings and conclusions concerning the impact of this Regulation, including of the European Fund for Sustainable Development Plus and the External Action Guarantee. [Am. 294]

The European Parliament may provide input to this evaluation. The Commission and the EEAS shall organise a consultation with key stakeholders and beneficiaries, including civil society organisations. The Commission and EEAS shall give particular attention to ensure that the most marginalised are represented. [Am. 295]

The Commission shall also evaluate the impact and effectiveness of its actions per area of intervention, and the effectiveness of programming, by means of external evaluations. The Commission and the EEAS shall take into account proposals and views of the European Parliament and the Council on independent external evaluations. Where appropriate applicable evaluations shall make use of the good practise practice principles of the Development Assistance Committee of the Organisation for Economic Cooperation and Development, seeking to ascertain whether the objectives have been met and to formulate recommendations with a view to improving future actions. The interim evaluation shall assess how the Union performed on targets established by this Regulation. [Am. 296]

2.  At the end of the implementation of the Regulation, but no later than four years after the end of the period specified in Article 1, a final The mid-term evaluation report of the Regulation shall also address efficiency, the added value, the functioning of the simplified and streamlined external financing architecture, internal and external coherence, and the continued relevance be carried out by the Commission. This evaluation shall look at the Union contribution to the achievement of the objectives of this Regulation, taking into account indicators measuring the results delivered and any the complementarity and synergies between the actions funded, the contribution of the measures to consistent Union external action, and the degree to which the public in recipient countries are aware of Union financial support, where appropriate, and include the findings and conclusions concerning the impact of this Regulation. of the reports referred to in article 31(4). [Am. 297]

The final evaluation report shall also address efficiency, the added value, the scope for simplification, internal and external coherence, and the continued relevance of the objectives of this Regulation. [Am. 298]

The final mid-term evaluation report shall be undertaken for the specific purpose of improving the implementation application of the Union funding. It shall inform decisions on the renewal, modification or suspension of the types of actions implemented under this Regulation. [Am. 299]

The final mid-term evaluation report shall also contain consolidated information from relevant annual reports on all funding governed by this Regulation, including external assigned revenues and contributions to trust funds offering a breakdown of spending by, beneficiary country, use of financial instruments, commitments and payments, as well as by geographic and thematic programme and rapid response action, including funds mobilised from the emerging challenges and priorities cushion. [Am. 300]

The Commission shall communicate the conclusions of the evaluations accompanied by its observations, to the European Parliament, to the Council and to the Member States through the relevant committee referred to in Article 35. Specific evaluations may be discussed in that committee at the request of Member States. The results shall feed into programme design and resource allocation. [Am. 301]

The Commission shall, to an appropriate extent, associate all relevant stakeholders and beneficiaries, including CSOs in the evaluation process of the Union's funding provided under this Regulation, and may, where appropriate, seek to undertake joint evaluations with the Member States and development partners with close involvement of the partner countries. [Am. 302]

2a.  The Commission shall submit the mid-term evaluation report referred to in paragraph 2 to the European Parliament and to the Council. The report shall be accompanied, if appropriate, by legislative proposals setting out necessary amendments to this Regulation. [Am. 303]

2b.  At the end of the period of application of this Regulation, but no later than three years after the end of the period specified in Article 1, the Commission shall carry out a final evaluation of the Regulation on the same terms as the mid-term evaluation referred to in paragraph 2 of this Article. [Am. 304]

3.  In line with the specific reporting provisions in the Financial Regulation, by 31 December 2025 and every three years thereafter, the Commission shall evaluate the use and the functioning of the External Action Guarantee. The Commission shall submit its evaluation report to the European Parliament and to the Council. That evaluation report shall be accompanied by an opinion of the Court of Auditors.

TITLE III

FINAL PROVISIONS

Article 33

Participation by a country or territory not covered by this Regulation

1.  In duly justified cases and where the action to be implemented applied is of a global, trans-regional or regional nature, the Commission may decide, within the relevant multiannual indicative programmes or within the relevant action plans or measures to extend the scope of actions to shall be empowered to adopt a delegated act in accordance with Article 34 in order to supplement this Regulation by adding countries and territories not to those covered by this Regulation pursuant to Article 4 in order to ensure the coherence and effectiveness of Union financing or to foster regional or trans-regional cooperation for the purpose of those actions. [Am. 305]

2.  The Commission may include a specific financial allocation to assist partner countries and regions in strengthening their cooperation with neighbouring Union outermost regions and with overseas countries and territories covered by Council Decision OCT Decision. To this end, this Regulation, may contribute, where appropriate and on the basis of reciprocity and proportionality as regards the level of funding from the OCT Decision and/or the ETC Regulation, to actions implemented by a partner country or region or any other entity under this Regulation, by a country, territory or any other entity under the OCT Decision or by a Union outermost region in the frame of joint operational programmes or to interregional cooperation programmes or measures established and implemented under the ETC Regulation. [Am. 306]

Article 33a

Cooperation between partner countries and regions with neighbouring Union outermost regions and with overseas countries and territories

1.  The Commission may include a specific financial allocation to assist partner countries and regions in strengthening their cooperation with neighbouring Union outermost regions and with overseas countries and territories covered by Council Decision OCT Decision. To this end, this Regulation, may contribute, where appropriate and on the basis of reciprocity and proportionality as regards the level of funding from the OCT Decision and/or the ETC Regulation, to actions applied by a partner country or region or any other entity under this Regulation, by a country, territory or any other entity under the OCT Decision or by a Union outermost region in the frame of joint operational programmes or to interregional cooperation programmes or measures established and applied under the ETC Regulation.

2.  The Union co-financing rate shall not be higher than 90 % of the eligible expenditure of a programme or measure. For technical assistance, the co-financing rate shall be 100 %. [Am. 307]

Article 34

Exercise of the delegation

1.  The power to adopt delegated acts is conferred on the Commission subject to the conditions laid down in this Article.

2.  The power to adopt delegated acts referred to in Article 4(6), Article 26(3) 8(7a), Article 8(8b), Article 14(1), Article 15(a), Article 17(4), Article 21(3a), Article 26(4), Article 27(9), and Article 31(9) and Article 33(1) shall be conferred on the Commission for the period of validity of this Regulation. The Commission shall adopt those delegated acts as soon as possible. However, the delegated acts referred to in Article 8(7a), Article 8(8b), Article 17(4), and Article 31(9) shall be adopted by ...[6 months after the date of entry into force of this Regulation]. [Am. 308]

3.  The delegation of power referred to in Article 4(6), Article 26(3), 8(7a), Article 8(8b), Article 14(1), Article 15a, Article 17(4), Article 21(3a), Article 26(4), Article 27(9), Article 31(9) and Article 33(1) may be revoked at any time by the European Parliament or by the Council. A decision to revoke shall put an end to the delegation of power specified in that decision. It shall take effect the day following the publication of the decision in the Official Journal of the European Union or at a later date specified therein. It shall not affect the validity of any delegated acts already in force. [Am. 309]

4.  Before adopting a delegated act, the Commission shall consult experts designated by each Member State in accordance with the principles laid down in the Interinstitutional Agreement on Better Law-Making of 13 April 2016.

5.  As soon as it adopts a delegated act, the Commission shall notify it simultaneously to the European Parliament and to the Council.

6.  A delegated act adopted pursuant to Article 4(6), Article 26(3), 8(7a), Article 8(8b), Article 14(1), Article 15a, Article 17(4), Article 21(3a), Article 26(4), Article 27(9), Article 31(9) and Article 33(1) shall enter into force only if no objection has been expressed either by the European Parliament or the Council within a period of two months of notification of that act to the European Parliament and the Council or if, before the expiry of that period, the European Parliament and the Council have both informed the Commission that they will not object. That period shall be extended by two months at the initiative of the European Parliament or of the Council. [Am. 310]

Article 34a

Urgency procedure

1.  Where, in the case of natural or man-made disasters, or immediate threats to democracy, the rule of law, human rights or fundamental freedoms, imperative grounds of urgency so require, the Commission is empowered to adopt delegated acts and the procedure provided for in paragraphs 2 and 3 of this Article shall apply.

2.  Delegated acts adopted under this Article shall enter into force without delay and shall apply as long as no objection is expressed in accordance with paragraph 3. The notification of a delegated act to the European Parliament and to the Council shall state the reasons for the use of the urgency procedure.

3.  Either the European Parliament or the Council may object to a delegated act in accordance with the procedure referred to in Article 34(6). In such a case, the Commission shall repeal the act immediately following the notification of the decision to object by the European Parliament or by the Council. [Am. 311]

Article 34b

Democratic accountability

1.  In order to enhance dialogue between the institutions of the Union, in particular the European Parliament, Commission and the EEAS, and to ensure greater transparency and accountability, as well as the expediency in the adoption of acts and measures by the Commission, the European Parliament may invite the Commission and the EEAS to appear before it to discuss the strategic orientations and guidelines for the programming under this Regulation. That dialogue shall also foster the overall coherence of all External Financing Instruments in line with Article 5. That dialogue may take place prior to the adoption of delegated acts and of the draft annual budget by the Commission. That dialogue may also take place on an ad hoc basis in view of major political developments, at the request of the European Parliament or the European Commission or the EEAS.

2.  The Commission and the EEAS shall present to the European Parliament all relevant documents in that regard at least one month prior to the dialogue. For the dialogue related to the annual budget, consolidated information on all action plans and measures adopted or planned in accordance with Article 21, information on cooperation per country, region and thematic area, and the use of rapid response actions, the emerging challenges and priorities cushion, and the External Action Guarantee shall be provided by the Commission and the EEAS.

3.  The Commission and the EEAS shall take utmost account of the position expressed by the European Parliament. In the event that the Commission or the EEAS do not take European Parliament's positions into account, it shall provide due justification.

4.  The Commission and the EEAS, in particular through the steering group pursuant to Article 38, shall be responsible for keeping the European Parliament informed about the state of this Regulation’s application, in particular about ongoing measures, actions and results. [Am. 312]

Article 35

Committee

1.  The Commission shall be assisted by the Neighbourhood, Development and International Cooperation committee. This committee shall be a committee within the meaning of Regulation (EU) No 182/2011.

2.  Where reference is made to this paragraph, Article 5 of Regulation (EU) No 182/2011 shall apply.

3.  Where the opinion of the committee is to be obtained by a written procedure, the procedure shall be terminated without result when, within the time limit for delivery of the opinion, the chair of the committee so decides or a simple majority of committee members so requests.

4.  Where reference is made to this paragraph, Article 8 of Regulation (EU) No 182/2011, in conjunction with Article 5 thereof, shall apply.

5.  The adopted decision shall remain in force for the duration of the adopted or modified document, action programme or measure.

6.  An observer from the European Investment Bank shall take part in the Committee's proceedings with regard to questions concerning the European Investment Bank. [Am. 313]

Article 36

Information Transparency, communication and publicity public disclosure of information [Am. 314]

1.  The recipients of Union funding shall acknowledge the origin and ensure the visibility of the Union funding in particular when promoting the actions and their results by providing coherent, effective and proportionate targeted information to multiple audiences, including the media and the public. The Commission shall be responsible for monitoring recipients’ compliance with those requirements. [Am. 315]

2.  The Commission shall implement apply information and communication actions relating to this Regulation, and its actions and results. Financial resources allocated to this Regulation shall also contribute to the corporate communication of the political priorities of the Union, as far as those priorities are directly related to the objectives referred to in Article 3. [Am. 316]

2a.  The Commission shall take measures to strengthen strategic communication and public diplomacy for communicating the values of the Union and the Union’s added value. [Am. 317]

2b.  The Commission shall establish a single comprehensive public central electronic repository of all actions financed under this Regulation, including the criteria used to establish partners’ needs in the resource allocation process, and ensure its regular update, with the exception of those actions deemed to give rise to security issues or local political sensitivities pursuant to Article 37. [Am. 318]

2c.  The repository shall also include information on all financing and investment operations, including at individual and project level and the essential elements of all EFSD + guarantee agreements, including information on the legal identity of eligible counterparts, expected development benefits and complaints procedures, taking into account the protection of confidential and commercially sensitive information. [Am. 319]

2d.  In accordance with their transparency policies and Union rules on data protection and on access to documents and information, eligible EFSD + counterparts shall proactively and systematically make publicly available on their websites information relating to all financing and investment operations covered by the External Action Guarantee, relating in particular to the manner in which those operations contribute to the achievement of the objectives and requirements of this Regulation. Such information shall be broken down at project level. Such information shall always take into account the protection of confidential and commercially sensitive information. Eligible counterparts shall also publicise Union support in all information which they publish on financing and investment operations covered by the External Action Guarantee in accordance with this Regulation. [Am. 320]

Article 37

Derogation from visibility requirements

Security issues or local political sensitivities may make it preferable or necessary to limit communication and visibility activities in certain countries or areas or during certain periods. In such cases, the target audience and the visibility tools, products and channels to be used in promoting a given action shall be determined on a case-by-case basis, in consultation and agreement with the Union. Where rapid intervention is required in response to a sudden crisis, it is not necessary to produce a full communication and visibility plan immediately. In such situations, however, the Union's support shall nevertheless be appropriately indicated from the start.

Article 38

EEAS clause

This Regulation shall apply in accordance with Decision 2010/427/EU. [Am. 321]

Article 38a

Governance

A horizontal steering group composed of all relevant Commission and EEAS services and chaired by the VP/HR or a representative of that office shall be responsible for the steering, coordination and management of this instrument throughout the management cycle in order to ensure consistency, efficiency, transparency and accountability of all Union external financing. The VP/HR shall ensure overall political coordination of the Union’s external action. For all actions, including rapid response actions and exceptional assistance measures, and throughout the whole cycle of programming, planning and application of the instrument, the High Representative and the EEAS shall work with the relevant members and services of the Commission, identified on the basis of the nature and objectives of the action foreseen, building upon their expertise. All proposals for decisions shall be prepared by following the Commission’s procedures and shall be submitted to the Commission for adoption.

The European Parliament shall be fully involved in the design, programming, monitoring and evaluation phases of the instruments in order to guarantee political control and democratic scrutiny and accountability of Union funding in the field of external action. [Am. 322]

Article 39

Repeal and transitional provisions

1.  Decision No 466/2014/EU, Regulation (EC, Euratom) No 480/2009 and Regulation (EU) 2017/1601 are repealed with effect from 1 January 2021.

2.  The financial envelope for this Regulation may also cover technical and administrative assistance expenditures necessary to ensure the transition between this Regulation and the measures adopted under its predecessors: Regulation (EU) No 233/2014; Regulation (EU) No 232/2014; Regulation (EU) No 230/2014; Regulation (EU) No 235/2014; Regulation (EU) No 234/2014, Regulation (Euratom) No 237/2014, Regulation (EU) No 236/2014, Decision No 466/2014/EU, Regulation (EC, Euratom ) No 480/2009 and Regulation (EU) 2017/1601.

3.  The financial envelope for this regulation may cover expenditures related to the preparation of any successor to this Regulation.

4.  If necessary, appropriations may be entered in the budget beyond 2027 to cover the expenditures provided for in Article 20(1), to enable the management of actions not completed by 31 December 2027.

Article 40

Entry into force

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

It shall apply from 1 January 2021 until 31 December 2027. [Am. 323]

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

ANNEX I

LIST OF COUNTRIES AND TERRITORIES IN THE NEIGHBOURHOOD AREA

Algeria

Armenia

Azerbaijan

Belarus

Egypt

Georgia

Israel

Jordan

Lebanon

Libya

The Republic of Moldova

Morocco

occupied Palestinian territory

Syria

Tunisia

Ukraine

Union support under this area may also be used for the purpose of enabling the Russian Federation to participate in cross-border cooperation programmes and in other relevant multi-country programmes, including cooperation on education, in particular student exchanges. [Am. 324]

ANNEX II

AREAS OF COOPERATION FOR THE GEOGRAPHIC PROGRAMMES

A.  For all geographic regions

PEOPLE

1.  Good governance, democracy, rule of law and human rights

(a)  Strengthening democracy and inclusive democratic processes, governance and oversight, including an independent judiciary, the rule of law and transparent, peaceful and credible electoral processes; [Am. 325]

(b)  Strengthening the promotion and the protection of human rights and fundamental freedoms as proclaimed in the Universal Declaration of Human Rights and the fulfilment of related international instruments, supporting and protecting human rights defenders, contributing to the implementation of global and regional pacts and frameworks, increasing the capacities of civil society in their implementation and monitoring, and laying the foundations for the creation of a legal framework for the protection of persons displaced due to climate change; [Am. 326]

(c)  Promoting the fight against discrimination in all its forms, and the principle of equality, in particular gender equality, women's and girls’ rights and empowerment, and the rights of children and young people, people with disabilities, persons belonging to minorities, LGBTI persons and indigenous populations; [Am. 327]

(d)  Supporting a thriving civil society, and strengthening its role in political transitions, reform processes and democratic transformations, and promoting an enabling space for civil society and citizens' engagement in political life and in scrutiny of decision-making; [Am. 328]

(e)  Improving the pluralism, independence and professionalism of a free and independent media;

(f)  Building resilience of states, societies, communities and individuals to political, economic, prepare them to resist, adapt and recover quickly from environmental, food, demographic and societal pressures and and economic shocks, natural and man-made disasters and, conflicts, health crises and food security; [Am. 329]

(g)  Strengthening the development of democratic public institutions at international, national and sub-national levels, including an independent, effective, efficient and accountable judicial system, the promotion of rule of law, international justice, accountability and access to justice for all; [Am. 330]

(h)  Supporting public administration reform processes, including through using citizen centred eGovernment approaches, strengthening legal frameworks and institutional set up, national statistical systems, capacities, sound public finance management, and contributing to the fight against corruption, tax avoidance, tax evasion and aggressive tax planning; [Am. 331]

(i)  Promoting inclusive, balanced and integrated territorial and urban policies through strengthening public institutions and bodies at the national and sub-national levels and supporting efficient decentralisation and state restructuring processes;

(j)  Increasing transparency and accountability of public institutions, strengthening public procurement including encouraging the development of sustainability criteria (environmental, social and economic) and targets and public finance management, developing eGovernment and strengthening service delivery; [Am. 332]

(k)  Supporting the sustainable, accountable and transparent management of natural resource sectors and related revenues, and reforms to ensure fair, just and sustainable tax policies;

(ka)   promoting parliamentary democracy. [Am. 333]

2.  Poverty eradication, fight against inequalities and human development

(a)  Eradicating poverty in all its dimensions, tackling discrimination and inequalities, and leaving no-one behind; and reaching the furthest behind first, by prioritising investments in public services on health, nutrition, education and social protection; [Am. 334]

(b)  Enhancing efforts for the adoption of policies and appropriate investment to promote, protect and fulfil women, and young people’s people and children’s and persons with disabilities’ rights, to facilitate their engagement and meaningful participation in social, civic and economic life, and to ensure their full contribution to inclusive growth and sustainable development; [Am. 335]

(c)  Promoting the protection and fulfilment of women's and girls' rights and empowerment, including economic, labour and social rights, land rights and sexual and reproductive health and rights, and preventing and protecting them from sexual and gender-based violence in all forms; this includes promoting access for all to comprehensive sexual and reproductive health information and comprehensive sexuality education; promoting cooperation in research and innovation for new and improved tools for sexual and reproductive healthcare including family planning, particularly in low resource settings; [Am. 336]

(d)  Giving special attention to those who are disadvantaged, vulnerable and marginalised, inter alia children, older persons, persons with disabilities, LGBTI persons and indigenous peoples. This includes promoting the transition from institutional to community-based care for children with and without disabilities; [Am. 337]

(e)  Promoting an integrated approach to supporting communities, particularly the poorest, in and hardest to reach, by improving universal access to basic needs and services, in particular health, including sexual and reproductive health services, information and supplies, education, nutrition and social protection; [Am. 338]

(f)  Giving children, particularly the most marginalised, the best start in life by investing in early childhood development and ensuring that children experiencing poverty or inequality have access to basic services such as health, nutrition, education and social protection; supporting the provision of a safe, nurturing environment for children as an important element for fostering a healthy young population able to reach its full potential, and paying special attention to the needs of girls; [Am. 339]

(g)  Supporting universal access to sufficient, affordable, safe and nutritious food, particularly for those in the most vulnerable situations, inter alia children under the age of five, adolescents, both girls and boys, and women, especially during pregnancy and breastfeeding, and strengthening food security and nutrition, particularly in countries facing protracted or recurrent crises; fostering multi-sectoral nutrition-sensitive approaches to agriculture; [Am. 340]

(h)  Supporting universal access to safe and sufficient drinking water sanitation, and hygiene, and sustainable and integrated water management as key determinants of health, education, nutrition, climate change resilience and gender equality; [Am. 341]

(i)  Achieving universal health coverage, with equitable access to quality and affordable health services, including sexual and reproductive health services, and through supporting the building of inclusive strong, quality and resilient health systems that are accessible to all, and enhancing capacity for early warning, risk reduction, management and recovery; complementing action through the Union’s framework programme for research and innovation to tackle global health threats, develop safe, efficient and affordable vaccines and treatments against poverty-related and neglected diseases, and to improve responses to health challenges including communicable diseases, antimicrobial resistance and emerging diseases and epidemics; [Am. 342]

(j)  Supporting universal and equitable social protection and strengthening social safety nets to guarantee basic income, prevent lapses into extreme poverty and build resilience;

(ja)  Strengthening resilience of people and communities, including through increased investment in community-led disaster risk reduction (DRR) and preparedness projects; [Am. 343]

(jb)  Supporting national, regional and local governments and administrations to create the required infrastructure, inter alia physical, technological and human resources, and using the latest technological and administrative developments to enable all civil registrations (from birth through to death) to be accurately registered, and officially recognised duplicated documents to be published when necessary in order to ensure that all citizens officially exist and are able to access their fundamental rights; [Am. 344]

(k)  Promoting inclusive sustainable urban development to address urban inequality, focusing on those most in need. and adopting a gender-sensitive approach; [Am. 345]

(l)  Supporting local authorities to improve at city level the delivery of basic services and equitable access to food security, accessible, decent and affordable housing and the quality of life, in particular for those living in informal settlements and slums. [Am. 346]

(m)  Promoting the achievement of internationally agreed goals in education with particular focus on free public education systems, through inclusive and equitable quality formal, informal and non-formal education, and promoting life-long learning opportunities for all, at all levels and including early childhood development technical and vocational training, including in emergency and crisis situations, and including through the use of digital technologies to improve education teaching and learning; [Am. 347]

(ma)  Supporting education corridors to ensure that students from countries at war can study at Union universities; [Am. 348]

(n)  Supporting actions of capacity building, learning mobility, capacity building and cultural cooperation to, from or between partner countries, as well as of cooperation and policy dialogue with institutions, organisations, local implementing bodies and authorities, from those countries; [Am. 349]

(na)   Promoting capacity building and cooperation in the areas of science, technology and research, in particular addressing poverty-related, societal challenges disproportionately affecting partner countries and neglected areas of research and innovation with limited private sector investments, and open data and fostering social innovation; [Am. 350]

(o)  Promoting capacity building and cooperation in the areas of science, technology and research, and open data, big data, artificial intelligence, and innovation, in coordination with the Union’s framework programme for research and innovation, to combat the phenomenon of the brain drain; [Am. 351]

(p)  Stepping up coordination amongst all relevant actors to help the transition from an emergency situation to the development phase;

(q)  Promoting intercultural dialogue and cultural diversity in all its forms, and preserve and promote cultural heritage, and unlocking the potential of cultural and creative industries sectors for sustainable, social and economic development; [Am. 352]

(qa)  Supporting actions, and promoting cooperation, in the area of sport to contribute to the empowerment of women, young people, individuals and communities as well as to the health, education and social inclusion objectives of the 2030 Agenda; [Am. 353]

(r)  Promoting the dignity and resilience of long-term forcibly displaced persons and their inclusion in the economic and social life of host countries and host communities.

3.  Migration, and mobility and forced displacement [Am. 354]

(-a)  Supporting effective and human rights-based migration policies, at all levels, including protection programmes, to facilitate safe, orderly and regular migration; [Am. 355]

(a)  Contributing to strengthening bilateral, regional, including South-South, and international partnerships on migration and mobility based on an integrated and balanced approach, covering all aspects of migration, including assistance in implementing and in compliance with international and Union bilateral or regional agreements and arrangements, including, mobility partnerships law and human rights obligations; [Am. 356]

(aa)  Providing assistance in implementing Union bilateral or regional agreements and arrangements with third countries, including mobility partnerships, and the creation of safe and legal pathways, including by developing visa facilitation and resettlement agreements and on the basis of mutual accountability and full respect of humanitarian and human rights obligations; [Am. 357]

(b)  Supporting sustainable and successful socio-economic reintegration of returning migrants; [Am. 358]

(c)  Addressing and mitigating root causes of irregular migration and forced displacement;

(d)  Tackling Reducing the vulnerabilities in migration, including through addressing irregular migration, and strengthening the transnational response to trafficking in human beings, and smuggling of migrants, stepping up cooperation on integrated border management in accordance with international and Union law; [Am. 359]

(e)  Strengthening scientific, technical, human and institutional capacity for the management of migration, including the collection and use of accurate and disaggregated data as a basis for evidence-based policies in order to facilitate safe, orderly and responsible migration; [Am. 360]

(f)  Supporting effective and human rights based migration policies including protection programmes; [Am. 361]

(g)  Promoting conditions for facilitating legal migration and well-managed mobility, and people-to-people contacts, maximising the development impact including by providing accurate and timely information at all stages of migration; [Am. 362]

(ga)  Maximising the development impact of migration and improving a common understanding of the migration-development nexus; [Am. 363]

(h)  Ensuring protection of migrants and forcibly displaced persons, paying special attention to vulnerable groups and applying a rights-based approach and ensuring the recognition and status determination of persons in need of international protection among mixed migratory flows; [Am. 364]

(i)  Supporting development-based solutions for forcibly displaced persons and their host communities, including through access to education and decent jobs, to promote the dignity, resilience and self-reliance of displaced persons, and their inclusion in the economic and social life of host countries; [Am. 365]

(j)  Supporting diaspora engagement in countries of origin, to contribute fully to sustainable development; [Am. 366]

(k)  Promoting faster, cheaper and safer remittance transfers in both source and recipient countries, thus harnessing their potential for development.

(ka)  Contributing to empowering migrants and societies to realise their full inclusion and social cohesion. [Am. 367]

Cooperation in this area will be managed in coherence with the [Asylum and Migration Fund], in full respect of the principle of policy coherence for development. [Am. 368]

PLANET

4.  Environment and climate change

(a)  Strengthening scientific, technical, human and institutional capacity for climate and environmental management, mainstreaming and monitoring; Strengthening regional and national climate governance.

(b)  Supporting adaptation to climate change, with special emphasis on particularly vulnerable States and populations lacking resources for taking necessary measures; contributing to partners’ efforts to pursue their commitments on climate change in line with the Paris Agreement on Climate Change, including the implementation of Nationally Determined Contribution (NDCs) and mitigation and adaptation plans of action including synergies between adaptation and mitigation, as well as their commitments under other multilateral environmental agreements, such as the Convention on Biological Diversity and the United Nations Convention to Combat Desertification; [Am. 369]

(c)  Developing and/or strengthening sustainable green and blue growth in all economic sectors;

(d)  Promoting access to sustainable energy in developing countries, with a view to honouring the Union’s 2012 pledge to provide such access for an additional 500 million people by 2030, giving priority to small-scale, mini-grid and off-grid solutions of high environmental and development value. Strengthening sustainable energy cooperation. Promoting and increasing cooperation on energy efficiency and the use of renewable energy sources; promoting access to reliable, secure, affordable, clean and sustainable energy services, in particular local and decentralized solutions that ensure energy access for people living in poverty and in remote regions; [Am. 370]

(da)  Building capacity to mainstream environmental sustainability and climate change objectives, and pursuing green growth into national and local development strategies including supporting sustainability criteria in public procurement; [Am. 371]

(db)  Promoting corporate social responsibility, due diligence in supply chains, and the consistent application of the “precautionary approach” and the “polluter pays” principle; [Am. 372]

(dc)   Promoting environmentally sustainable agriculture practices, including agroecology, which are proven to contribute to protection of ecosystems and biodiversity and enhance environmental and social resilience to climate change in the long term; [Am. 373]

(e)  Improving local, national regional and continental multi-modal transport networks and services to strengthen further opportunities for sustainable climate-resilient economic development and job creation, in view of low-carbon, climate resilient development. Strengthening transport facilitation and liberalisation, improve sustainability, road safety and resilience of transport domains;

(f)  Strengthening the involvement of local communities and indigenous peoples in climate change responses, the fight against biodiversity loss and wildlife crime, conservation of ecosystems and the governance of natural resources, including through the improvement of land tenure and water resources management. Promoting sustainable urban development and resilience in urban areas; [Am. 374]

(fa)  Putting an end to the trade in conflict minerals as well as the abuse of miners, and supporting the development of local communities in accordance with Regulation (EU) 2017/821 on supply chain due diligence obligations and accompanying measures, as well as elaborating such approach to minerals currently not yet covered; [Am. 375]

(fb)   Promoting Education for Sustainable Development (ESD) to empower people to transform society and build a sustainable future; [Am. 376]

(g)  Promoting the conservation, sustainable management and use, and restoration of natural resources, healthy ecosystems and halting biodiversity loss, and protecting wildlife including combatting poaching, and wildlife trafficking; [Am. 377]

(ga)  Addressing biodiversity loss, implementing international and Union initiatives to address it, in particular through the promotion of the conservation, sustainable use and management of terrestrial and marine ecosystems and associated biodiversity; [Am. 378]

(h)  Promoting integrated and sustainable management of water resources and transboundary water cooperation in accordance with international law; [Am. 379]

(i)  Promoting conservation and enhancement of carbon stocks through sustainable management of land use, land-use change, and forestry and combatting environmental degradation, desertification and land and forest degradation, and drought; [Am. 380]

(j)  Limiting deforestation and promoting forest law enforcement, governance and trade (FLEGT), and combating illegal logging, trade of illegal timber and wood products. Supporting better governance and capacity building for the sustainable management of natural resources; supporting the negotiation and the implementation of Voluntary Partnership Agreements; [Am. 381]

(k)  Supporting ocean governance, including the protection and restoration preservation of coastal and marine areas in all its forms, including ecosystems, the fight against marine litter, the fight against illegal, unreported and unregulated (IUU) fishing and the protection of maritime biodiversity in accordance with the United Nations Convention on the Law of the Sea (UNCLOS); [Am. 382]

(l)  Strengthening regional disaster risk reduction (DRR), preparedness and resilience by means of a community-based and people-centred approach, in synergy with climate change adaption policies and actions; [Am. 383]

(m)  Promoting resource efficiency and sustainable consumption and production (including throughout the entire supply chain), including by curbing the use of natural resources financing conflicts, and by supporting compliance by stakeholders with initiatives such as the Kimberley process Certification Scheme; tackling pollution and a sound management of chemicals and waste; [Am. 384]

(n)  Supporting efforts to improve sustainable economic diversification, competitiveness, and value-sharing supply chains and fair trade, private sector development with a particular focus on low-carbon climate-resilient green growth, microenterprises, social enterprises and SMEs and cooperatives, taking advantage of the development benefits of existing trade agreements with the EU; [Am. 385]

(na)  Achieving the international commitments regarding biodiversity conservation in treaties such as the Convention on Biological Diversity (CBD), the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES), the Convention on the Conservation of Migratory Species of Wild Animals (CMS) and other biodiversity-related treaties; [Am. 386]

(nb)   Increasing the integration and mainstreaming of climate change and environmental objectives in Union development cooperation through support for methodological and research work on, in and by developing countries, including monitoring, reporting and verification mechanisms, ecosystem mapping, assessment and valuation, enhancing environmental expertise and promoting innovative actions and policy coherence; [Am. 387]

(nc)   Addressing global and trans-regional effects of climate change having a potentially destabilising impact on development, peace and security. [Am. 388]

PROSPERITY

5.  Inclusive and sustainable economic growth and decent employment

(a)  Supporting entrepreneurship, including through microfinance, decent employment and employability through the development of skills and competences, including education, the improvement of the full application of ILO labour standards and including social dialogue and the fight against child labour, working conditions in a healthy environment, living wages and the creation of opportunities particularly for the youth; [Am. 389]

(b)  Supporting national development paths that maximise positive social outcomes and impacts, and promoting progressive effective and sustainable taxation and redistributive public policies, and the setting-up and strengthening of sustainable social protection systems and social insurance schemes; supporting efforts at national and international levels to combat tax evasion and tax havens; [Am. 390]

(c)  Improving the responsible business and investment climate, creating an enabling regulatory environment for economic development and supporting companies, in particular MSMEs, cooperatives and social enterprises in expanding their business and creating jobs, supporting the development of a solidarity economy and boosting private sector accountability; [Am. 391]

(ca)  Promoting corporate accountability and redress mechanisms for violations of human rights related to private sector activities; supporting efforts at local, regional and global level to ensure corporate compliance with human rights standards and regulatory developments, including on mandatory due diligence and an international binding instrument on business and human rights at a global level; [Am. 392]

(d)  Strengthening social and environmental sustainability, corporate social responsibility and responsible business conduct throughout the entire value chains, ensuring value sharing, fair prices and fair trading conditions; [Am. 393]

(e)  Increasing effectiveness and sustainability of public spending, including through promoting sustainable public procurement; and promoting more strategic use of public finance, including through blending instruments to crowd in additional public and private investment; [Am. 394]

(f)  Boosting the potential of cities as hubs for sustainable and inclusive growth and innovation;

(g)  Promoting internal economic, social and territorial cohesion, forging stronger links between urban and rural areas and facilitating the development of the both creative industries and the cultural tourism sector as a leverage for sustainable development; [Am. 395]

(h)  Boosting and diversifying sustainable and inclusive agricultural and food value chains, promoting food security and economic diversification, value addition, regional integration, competiveness and fair trade, and strengthening sustainable, low-carbon and climate-change-resilient, innovations; [Am. 396]

(ha)   Focusing on ecologically efficient agricultural intensification for smallholder farmers, and in particular women, by providing support for effective and sustainable national policies, strategies and legal frameworks, and for equitable and sustainable access to resources, including land, water, (micro) credit and other agricultural inputs; [Am. 397]

(hb)   Actively support greater participation of civil society and farmer organisations in policy making and research programmes and increase their involvement in the implementation and evaluation of government programmes; [Am. 398]

(i)  Supporting sustainable fisheries management and sustainable aquaculture;

(j)  Fostering universal access to safe, affordable and sustainable energy, promoting a low-carbon, climate resilient resource efficient and circular economy in line with the Paris Agreement on Climate Change; [Am. 399]

(k)  Promoting smart, sustainable, inclusive, safe mobility, as well as improving transport connectivity with the Union;

(l)  Promoting affordable, inclusive and reliable and secure digital connectivity and strengthening the digital economy; promoting digital literacy and skills; fostering digital entrepreneurship and job creation; promoting the use of digital technologies as an enabler for sustainable development; addressing cybersecurity, data privacy and other regulatory issues linked to digitalisation; [Am. 400]

(m)  Developing and strengthening markets and sectors in a way that would bolster inclusive and sustainable growth, and fair trade; [Am. 401]

(n)  Supporting the regional integration agenda and optimal trade policies in support of inclusive and sustainable development, and supporting the consolidation and implementation of fair trade agreements between the EU Union and its partners, including holistic and asymmetrical agreements with developing country partners; promoting and strengthening multilateralism, sustainable economic cooperation, as well as the rules of the World Trade Organisation; [Am. 402]

(o)  Promoting cooperation in the areas of science, technology and research, and digitalisation, open data, big data and artificial intelligence and innovation, including the development of science diplomacy; [Am. 403]

(p)  Promoting intercultural dialogue and cultural diversity in all its forms, developing local crafts as well as contemporary arts and cultural expressions, and preserve and promote cultural heritage; [Am. 404]

(q)  Empowering women to take up a greater economic role and in decision-making;

(r)  Improving access to decent work for all within a healthy environment, and creating more inclusive and well-functioning labour markets and employment policies directed towards decent work, respect for human rights and labour rights, including living wages for all, especially the women and youth; [Am. 405]

(ra)   Ensuring that access to extractive sectors is fair and sustainable while not contributing to conflicts or corruption; [Am. 406]

(s)  Promoting fair, sustainable and undistorted access to extractive sectors; ensuring increased transparency, due diligence and investor responsibility while promoting private sector accountability; applying measures to accompany the Regulation (EU) 2017/821 of the European Parliament and of the Council of 17 May 2017 laying down supply chain due diligence obligations for Union importers of tin, tantalum and tungsten, their ores, and gold originating from conflict-affected and high-risk areas. [Am. 407]

PEACE

6.  Peace, security, and stability and peace [Am. 408]

(a)  Contributing to peace, and the prevention of conflict and therefore to stability through building resilience of states, societies, communities and individuals to political, economic, environmental, demographic and societal pressures and shocks, including by supporting resilience assessments designed to identify the indigenous capacities within societies that allow them to withstand, adapt to and quickly recover from these pressures and shocks; [Am. 409]

(aa)  Promoting a culture of non-violence, including by supporting formal and informal peace education; [Am. 410]

(b)  Supporting conflict prevention, early warning and peacebuilding through mediation, crisis management, and stabilisation and post-conflict reconstruction, including an enhanced role for women at all of these stages; promoting, facilitating and building capacity in confidence building, mediation, dialogue and reconciliation, good neighbourly relations and other measures contributing to the prevention and settlement of conflicts, with particular regard to emerging inter-community tensions as well as conciliation measures between segments of societies and protracted conflicts and crises; [Am. 411]

(ba)  Supporting rehabilitation and reintegration of victims of armed conflicts as well as disarmament, demobilisation and reintegration of former combatants and their families into civil society, including the specific needs of women; [Am. 412]

(bb)  Enhancing the role of women and youth in peacebuilding and conflict prevention, and their inclusion, meaningful civil and political participation and social recognition; supporting the implementation of UNSCR 1325, in particular in fragile, conflict and post-conflict situations and countries; [Am. 413]

(c)  Supporting conflict sensitive security sector reform that gradually provides individuals and the state with more effective, democratic and accountable security for sustainable development and peace; [Am. 414]

(d)  Supporting capacity-building of military actors in support of development and security for development (CBSD); [Am. 415]

(da)   supporting regional and international disarmament initiatives and arms export control regimes and mechanisms; [Am. 416]

(e)  Supporting local, regional and international initiatives, contributing to security, stability and peace as well as linking those different initiatives; [Am. 417]

(f)  Preventing and countering radicalisation leading to violent extremism and terrorism by means of context-specific, conflict- and gender- sensitive and people-centred programmes and actions; [Am. 418]

(fa)  Addressing the socio-economic impact on the civilian population of antipersonnel landmines, unexploded ordnance or explosive remnants of war, including the needs of women; [Am. 419]

(fb)  Addressing the social effects or restructuring the armed forces, including the needs of women; [Am. 420]

(fc)  Supporting ad hoc local, national, regional and international tribunals, truth and reconciliation commissions and mechanisms; [Am. 421]

(g)  Fighting against any form of violence, corruption and organised crime and money laundering;

(h)  Promoting transboundary cooperation regarding the sustainable management of shared natural resources in accordance with international and Union law; [Am. 422]

(i)  Cooperating with third countries in the peaceful use of nuclear energy, notably through capacity building and infrastructure development in third countries in the areas of health, agriculture and food safety; as well as supporting social actions addressing the consequences on the most vulnerable population exposed to any radiological accident and aiming at improving their living conditions; promoting knowledge-management, training and education in nuclear-related fields. Such activities shall be developed in conjunction with those under the European Instrument for Nuclear Safety established by Regulation EINS; [Am. 423]

(j)  Enhancing maritime security and safety to allow for safe, secure, clean and sustainably managed oceans; [Am. 424]

(k)  Supporting capacity-building in cyber security, resilient digital networks, data protection and privacy.

PARTNERSHIP

7.  Partnership

(a)  Enhancing country ownership, partnership and dialogue, in order to contribute to greater effectiveness of development cooperation in all its dimensions (giving special consideration for the specific challenges of Least Developed Countries and countries affected by conflict, as well as specific transitional challenges of more advanced developing countries);

(b)  Deepening political, economic, social, environmental and cultural dialogue between the Union and third countries and regional organisations, and supporting implementation of bilateral and international commitments;

(c)  Encouraging good neighbourly relations, regional integration, enhanced connectivity, cooperation and dialogue;

(ca)  Supporting and increasing cooperation by partner countries and regions with neighbouring Union outermost regions and with overseas countries and territories covered by the Council Decision1 [...]on the association of the overseas countries and territories with the European Union; [Am. 425]

_________________________

1 Council Decision .../... of ... on the association of the overseas countries and territories with the European Union...(OJ ...)

(d)  Promoting an enabling environment for civil society organisations, including foundations, enhancing their meaningful and structured participation in domestic policies and their capacity to perform their roles as independent development and governance actors; and strengthening new ways of partnering with civil society organisations, promoting a substantive and structured dialogue with the Union and the effective use and implementation of country roadmaps for EU the Union’s engagement with civil society; [Am. 426]

(e)  Engaging with local authorities and support their role as policy and decision-makers to boost local development and improved governance;

(f)  Engaging more effectively with citizens and human rights defenders in third countries, including by making full use of economic, cultural, sport and public diplomacy; [Am. 427]

(g)  Engaging industrialised and more advanced developing countries on the implementation of the 2030 Agenda, global public goods and challenges, including in the area of South-South and triangular cooperation;

(h)  Encouraging regional integration and cooperation, in a result-oriented way through support for regional integration and dialogue.

B.  Specific for the Neighbourhood area

(a)  Promoting enhanced political cooperation;

(b)  Supporting the implementation of association agreements, or other existing and future agreements, and jointly agreed association agendas and partnership priorities or equivalent documents;

(c)  Promoting a strengthened partnership with societies between the Union and the partner countries, including through people-to-people contacts;

(d)  Enhancing regional cooperation, in particular in the framework of the Eastern Partnership, the Union for the Mediterranean, and European Neighbourhood-wide collaboration as well as cross-border cooperation;

(e)  Achieving progressive integration into the Union internal market and enhanced sectoral and cross-sectoral cooperation, including through legislative approximation and regulatory convergence towards Union and other relevant international standards, and improved market access including through deep and comprehensive free trade areas, related institution building and investment. [Am. 428]

ANNEX III

AREAS OF INTERVENTION FOR THEMATIC PROGRAMMES

1.  AREAS OF INTERVENTION FOR HUMAN RIGHTS AND DEMOCRACY

–  Contributing to advancing the fundamental values of democracy, the rule of law, the universality and indivisibility of human rights, respect for human dignity, the principles of non-discrimination, equality and solidarity, and respect for the principles of the United Nations Charter and international law. [Am. 429]

–  Allowing for cooperation and partnership with civil society on human rights and democracy issues, including in sensitive and pressing situations. A coherent and holistic strategy at all levels shall be developed to achieve the below objectives. [Am. 430]

–  Upholding human rights and fundamental freedoms for all, contributing to forging societies in which participation, non-discrimination, tolerance, justice and accountability, solidarity and equality prevail. Respect for and observance of human rights and fundamental freedoms for all shall be monitored, promoted and strengthened in accordance with the principles of universality, indivisibility and interdependence of human rights. The scope of the programme includes civil, political, economic, social and cultural rights. Human rights challenges shall be addressed while invigorating civil society and protecting and empowering human rights defenders, also in relation to shrinking space for their actions. [Am. 431]

–  Developing, enhancing and protecting democracy, comprehensively addressing all aspects of democratic governance, including reinforcing democratic pluralism, enhancing citizen participation, and supporting credible, inclusive and transparent electoral processes. Democracy shall be strengthened by upholding the main pillars of democratic systems, including the rule of law, democratic norms and values, independent media, accountable and inclusive institutions including political parties and parliaments, and the fight against corruption. Election observation plays a full part in the wider support for the democratic processes. Within this context, EU election observation shall continue to be a major component of the programme as well as the follow-up to recommendations of EU election observation missions. [Am. 432]

–  Promoting effective multilateralism and strategic partnership, contributing to reinforcing capacities of international, regional and national frameworks in promoting and protecting human rights, democracy and the rule of law. Strategic Partnerships shall be boosted, with a particular attention to the Office of the High Commissioner for Human Rights (OHCHR), the International Criminal Court (ICC) and relevant regional and national human rights mechanisms. Furthermore, the programme shall promote education and research on human rights and democracy, including through the Global Campus for Human Rights and Democracy. [Am. 433]

Under this programme, the Union shall provide assistance to address global, regional, national and local human rights and democratisation issues in partnership with civil society within the following strategic areas of intervention:

1a.  Protecting and promoting human rights and human rights defenders in countries and urgency situations where human rights and fundamental freedoms are most at risk, including by addressing urgent protection needs of human rights defenders in a flexible and comprehensive manner.

The focus is on human rights and democracy issues which cannot be addressed by geographic or other thematic programmes due to their sensitive character or emergency nature. In such cases, the priority shall be to promote respect for the relevant international law and to provide tangible support and means of action to local civil society carried out in very difficult circumstances. Special attention shall also be paid to strengthening a specific human rights defenders protection mechanism.

1b.  Upholding human rights and fundamental freedoms for all, contributing to forging societies in which participation, non-discrimination, equality, social justice, international justice and accountability prevail.

The Union’s assistance shall have the ability to address the most sensitive political issues such as the death penalty, torture, freedom of expression in restrictive contexts, discrimination against vulnerable groups, as well as the protection and promotion of the rights of the child (e.g. child labour, child trafficking, child prostitution and child soldiers) and shall respond to emerging and complex challenges such as the protection of persons displaced due to climate change, due to its independence of action and its high flexibility in terms of cooperation modalities.

1c.  Consolidating and supporting democracy, addressing all aspects of democratic governance, including reinforcing democratic pluralism, enhancing citizen participation, creating an enabling environment for civil society, and supporting credible, inclusive and transparent electoral processes, in particular by means of EU EOMs.

Democracy shall be strengthened by upholding the main pillars of democratic systems, including the rule of law, democratic norms and values, independent media, accountable and inclusive institutions including political parties and parliaments, as well as an accountable security sector, and the fight against corruption. The priority shall be to provide tangible support and means of action to political actors carrying out their activities in very difficult circumstances. Election observation plays a full part in the wider support of the democratic processes. Within that context, EU election observation shall continue to be a major component of the programme as well as the follow-up to recommendations of EU EOMs. Another focus will be through supporting citizen election observation organisations and their regional networks worldwide.

The capacity and visibility of citizen election observation organisations in the European Neighbourhood East and South and of the respective regional platform organisations shall be strengthened, in particular by promoting sustainable peer-learning programme for independent, non-partisan, citizen election observation organisations. The Union shall seek to improve the capacities of domestic citizen election observation organisations, provide voter education, media literacy, programmes for the monitoring of the implementation of domestic and international election observation missions’ recommendations, and shall defend credibility and trust in the institutes of election and of election observation.

1d.  Promoting effective multilateralism and strategic partnerships contributing to reinforcing capacities of international, regional and national frameworks and empowering local actors in promoting and protecting human rights, democracy and the rule of law.

Partnerships for human rights, which shall focus on strengthening the national and international human rights architecture, including support to multilateralism, as the independence and effectiveness of the Office of the High Commissioner for Human Rights (OHCHR), the International Criminal Court (ICC) and relevant regional human rights mechanisms, are essential. Support to education and research on human rights and democracy, as well as the promotion of academic freedom shall continue, including through support to the Global Campus for Human Rights and Democracy.

1e.  Fostering new cross-regional synergies and networking among local civil society and between civil society and other relevant human rights bodies and mechanisms so as to maximise the sharing of best practises on human rights and democracy, and create positive dynamics.

The focus shall be placed on the protection and promotion of the principle of universality, identifying and sharing best practices on all human rights, whether civil and political, or economic, social and cultural, and fundamental freedoms, i.e. when addressing major challenges, including sustainable security, the fight against terrorism, irregular migration and shrinking space for NGOs. That will require an enhanced effort to bring together a broad range of human rights related stakeholders (e.g. local civil society and human rights activists, lawyers, academia, national human rights and women rights institutions, syndicates) from different countries and continents who together can create a positive narrative on human rights with a multiplying effect.

1f.  The Union shall further promote, in its relations with third countries under the instrument, international efforts towards a multilateral agreement to ban trade in goods used for torture and capital punishment. [Am. 434]

2.  AREAS OF INTERVENTION FOR CIVIL SOCIETY ORGANISATIONS AND LOCAL AUTHORITIES [Am. 435]

1.  Inclusive, participatory, empowered and independent civil society civic space and local authorities in partner countries [Am. 436]

(a)  Creating an enabling environment for citizen participation and civil society action, including by supporting active civil society participation in policy dialogue through foundations; [Am. 437]

(b)  Supporting and building the capacity of civil society organisations, including foundations, to act as both actors of development and governance; [Am. 438]

(c)  Increasing the capacity of partner countries' civil society networks, platforms and alliances.

(ca)  Capacity building, coordination and institutional strengthening for CSOs and local authorities - including Southern networks of CSOs and local authorities and umbrella organisations to engage within their organisations and between different types of stakeholders active in the public debate on development, and to dialogue with governments on public policy and participate effectively in the development process. [Am. 439]

2.  Dialogue with and between civil society organisations on development policy [Am. 440]

(a)  Promoting other inclusive multi-stakeholder dialogue fora and institutional strengthening of civil society and local authority networks, including interaction and coordination between citizens, civil society organisations, local authorities, member states, partner countries and other key development stakeholders; [Am. 441]

(b)  Enabling cooperation and exchange of experience between civil society actors;

(c)  Ensuring a substantive and continued structured dialogue and partnerships with the EU.

3.  Awareness, knowledge and engagement of European citizens about development issues

(a)  Empowering people to increase their engagement;

(b)  Mobilising public support in the Union, candidate countries and potential candidates for poverty reduction and sustainable and inclusive development strategies in partner countries. [Am. 442]

(ba)   Raising awareness of sustainable consumption and production, awareness of supply chains and the effects of Union’s citizens’ purchasing power in enabling sustainable development. [Am. 443]

3a.  Provision of basic social services delivered to populations in need

Interventions in partner countries which support vulnerable and marginalised groups by providing basic social services such as health - including nutrition, education, social protection, and access to safe water, sanitation and hygiene delivered through civil society organisations and local authorities. [Am. 444]

3b.  Strengthen the role of local authorities as actors of development by:

(a)  increasing the capacity of Union and developing countries’ local authority networks, platforms and alliances to ensure a substantive and continued policy dialogue and effective participation in the field of development and to promote democratic governance, in particular through the Territorial Approach to Local Development;

(b)  increasing interactions with Union citizens on development issues (awareness raising, knowledge sharing, engagement, including through adopting sustainability criteria in public procurement), in particular concerning those related to the Sustainable Development Goals, including in the Union and candidate countries and potential candidate countries;

(c)  increasing aid ownership and absorption via in-country training programmes for local authorities’ civil servants on how to apply for Union funding. [Am. 445]

3.  AREAS OF INTERVENTION FOR PEACEBUILDING, CONFLICT PREVENTION AND STABILITY AND PEACE [Am. 446]

1.  Assistance for conflict prevention, peace-building and crisis preparedness

The Union shall provide technical and financial assistance covering support for measures aimed at building and strengthening the capacity of the Union and its partners to prevent conflict, build peace and address pre- and post-crisis needs in close coordination with the United Nations and other international, regional and sub-regional organisations, and State and civil society actors, in relation to their efforts mainly in the following areas, including specific attention to women gender equality, women's empowerment and youth participation: [Am. 447]

(a)  early warning and conflict-sensitive risk analysis; confidence-building, mediation, dialogue and reconciliation measures in the policy-making and the implementation of policy; [Am. 448]

(aa)  facilitation and building capacity in confidence-building, mediation, dialogue and reconciliation measures, with particular regard to emerging inter-community tensions, especially prevention of genocide and crimes against humanity; [Am. 449]

(ab)  strengthening capacities for participation and deployment in civilian stabilisation missions; strengthening the Union, civil society and Union partners’ capacities for the participation and the deployment of civilian peacekeeping and peacebuilding missions; the exchange of information and best practices on peacebuilding, conflict analysis, early warning or training and service delivery; [Am. 450]

(b)  supporting post-conflict recovery, including addressing the issue of missing persons in post-conflict situations, and including supporting implementation of relevant multilateral agreements addressing landmines and explosive remnants of war as well as post-disaster recovery with relevance to the political and security situation; [Am. 451]

(c)  supporting peace-building and state-building support actions, including local and international civil society organisations, states and international organisations; and development of structural dialogues amongst them at various levels, between local civil society and partner countries, and with the Union; [Am. 452]

(d)  conflict prevention and crisis response;

(da)  curbing the use of natural resources to finance conflicts, and supporting compliance by stakeholders with initiatives such as the Kimberley Process Certification Scheme, and including those related to Regulation (EU) 2017/821 of the European Parliament and of the Council of 17 May 2017 laying down supply chain due diligence obligations for Union importers of tin, tantalum and tungsten, their ores, and gold originating from conflict-affected and high-risk areas(53), especially as regards the implementation of efficient domestic controls over the production of, and trade in, natural resources; [Am. 453]

(e)  Capacity Building for Security and of military actors in support of development (CBSD) and security for development. [Am. 454]

(ea)  Supporting actions promoting gender equality and women’s empowerment, in particular through implementation of UNSCR 1325 and 2250 as well as participation and representation of women and youth in formal and informal peace processes; [Am. 455]

(eb)  Supporting actions promoting a culture of non-violence, including formal, informal and non-formal peace education; [Am. 456]

(ec)  Supporting actions strengthening the resilience of states, societies, communities and individuals, including resilience assessments designed to identify the endogenous capacities within societies that allow them to withstand, adapt to and quickly recover from pressures and shocks; [Am. 457]

(ed)   support for international criminal tribunals and ad hoc national tribunals, truth and reconciliation commissions, transitional justice and other mechanisms for the legal settlement of human rights claims and the assertion and adjudication of property rights, established in accordance with international standards in the fields of human rights and the rule of law; [Am. 458]

(ee)   support for measures to combat the illicit use of, and access to, firearms, small arms and light weapons; [Am. 459]

Measures in this area:

(a)  shall include know-how transfer, the exchange of information and best practices, risk or threat assessment, research and analysis, early warning systems, training and service delivery;

(b)  shall contribute to the further development of a structural dialogue on peace-building issues;

(c)  may include technical and financial assistance for the application of peace-building and state-building support actions. [Am. 460]

2.  Assistance in addressing global and trans-regional threats and emerging threats

The Union shall provide technical and financial assistance to support partners’ efforts and Union actions addressing global and trans-regional threats and emerging threats mainly in the following areas: [Am. 461]

(a)  threats to law and order, and to the security and safety of individuals including terrorism, violent extremism, organised crime, cyber-crime, hybrid threats, illicit trafficking, trade and transit, ; in particular strengthening the capacity of law enforcement and judicial and civil authorities involved in the fight against terrorism, organised crime, including cyber-crime, and all forms of illicit trafficking and in the effective control of illegal trade and transit.

Priority shall be given to trans-regional cooperation involving two or more third countries which have demonstrated a clear political will to address the arising problems.

The measures shall place particular emphasis on good governance and shall be in accordance with international law. Cooperation in the fight against terrorism may also be conducted with individual countries, regions or international, regional and sub-regional organisations.

With regard to assistance to authorities involved in the fight against terrorism, priority shall be given to supporting measures concerning the development and strengthening of counter-terrorism laws, the implementation and practice of financial law, of customs law and of immigration law, the development of law-enforcement procedures which are aligned with the highest international standards and which comply with international law, the strengthening of democratic control and institutional oversight mechanisms, and the prevention of violent radicalism.

With regard to assistance relating to the problem of drugs, due attention shall be given to international cooperation aimed at promoting best practices relating to the reduction of demand, production and harm. [Am. 462]

(b)  threats to public spaces, critical infrastructure, including international transport, including passenger and freight traffic, energy operations and energy distribution, cybersecurity, to public health, including sudden epidemics with a potential trans-national impact, or to environmental stability, maritime security threats, global and trans-regional threats deriving from climate change impacts having a potentially destabilising impact on peace and security; [Am. 463]

(c)  mitigation against risks, whether of an intentional, accidental or natural origin, related to chemical, biological, radiological and nuclear materials or agents and risks to related installations or sites, in particular in the following areas:

(1)  supporting and promoting civilian research activities as an alternative to defence-related research;

(2)  enhancing safety practices related to civilian facilities where sensitive chemical, biological, radiological and nuclear materials or agents are stored or are handled in the context of civilian research programmes;

(3)  supporting, within the framework of Union cooperation policies and their objectives, the establishment of civil infrastructure and relevant civilian studies necessary for the dismantlement, remediation or conversion of weapons-related facilities and sites where these are declared to be no longer part of a defence programme;

(4)  strengthening the capacity of the competent civilian authorities involved in the development and enforcement of effective control of illicit trafficking in chemical, biological, radiological and nuclear materials or agents (including the equipment for their production or delivery);

(5)  developing the legal framework and institutional capacities for the establishment and enforcement of effective export controls, in particular on dual-use goods, including regional cooperation measures and as regards the implementation of the provisions of the Arms Trade Treaty and the promotion of adherence to it;

(6)  developing effective civilian disaster-preparedness, emergency planning, crisis response, and capabilities for clean-up measures.

Such activities shall be developed in conjunction with those under the European Instrument for Nuclear Safety established by Regulation EINS. [Am. 464]

(d)  Capacity Building for Security and of military actors in support of Development (CBSD) and security for development. [Am. 465]

4.  AREAS OF INTERVENTION FOR GLOBAL CHALLENGES

A.  PEOPLE

1.  Health

(a)  Developing crucial elements of an effective and comprehensive health system that are best addressed at a supra-national level to secure equitable, affordable, inclusive and universal access to public health services and sexual and reproductive health and rights; [Am. 466]

(aa)  Promoting, providing and expanding essential services and psychological support services for victims of violence, in particular women and children rape victims; [Am. 467]

(b)  Reinforcing global initiatives that are key enablers of universal health coverage through global leadership on a ‘health in all policies’ approach with a continuum of care, including health promotion, from prevention to post-treatment;

(c)  Addressing global health security through communicable diseases research, including on poverty-related and neglected diseases - and control, by combating such diseases and fake medicines, translate knowledge into safe, accessible and affordable products and policies that tackle the changing disease immunisation, the wide spectrum of the persistent burden of infections, emerging and re-emerging diseases and epidemics and antimicrobial resistance (non-communicable diseases, all forms of malnutrition and environmental risk factors), and shape global markets to improve access to essential health commodities and healthcare services, especially for sexual and reproductive health. [Am. 468]

(ca)  Supporting initiatives to scale up access to safe, efficient and affordable medicines (including generic medicines), diagnostics and related health technologies and utilising all available tools to reduce the price of life-saving drugs and diagnostics. [Am. 469]

(cb)  Fostering good health and combatting communicable diseases by strengthening health systems and attaining the Sustainable Developments Goals, including by enhancing focus on prevention and tackling vaccine-preventable diseases; [Am. 470]

2.  Education

(a)  Promoting the achievement of internationally agreed goals in education and combat educational poverty through joint global efforts for inclusive and equitable quality education and training at all levels, for all ages, including early childhood development, in emergency and crisis situations and with a particular priority on strengthening free public education systems; [Am. 471]

(b)  Strengthening knowledge, research and innovation, skills and values through partnerships and alliances, for active citizenship and productive, educated, democratic, inclusive and resilient societies; [Am. 472]

(c)  Supporting global action on reducing all dimensions of discrimination and inequalities, such as the gaps between girls/women and boys/men, to ensure that everyone has equal opportunity to take part in economic, and political, social and cultural life. [Am. 473]

(ca)   Supporting efforts and improving good practices adopted by civil-society actors to ensure inclusive and quality education in fragile environments where governance structures are weak. [Am. 474]

(cb)  Supporting actions, and promoting cooperation, in the area of sport to contribute to the empowerment of women and of young people, individuals and communities as well as to health, education and social inclusion objectives of the 2030 Agenda; [Am. 475]

3.  Women and children [Am. 476]

(a)  Leading and supporting local, national, regional initiatives and global efforts, partnerships and alliances to for the rights of women as set out in the UN Convention on the Elimination of All Forms of Discrimination against Women and the Optional Protocol thereto to eliminate all forms of violence, harmful practices and all forms of discrimination against women and girls; this includes physical, psychological, sexual, economic, political and other types of violence and discrimination, including exclusion that women suffer in the different areas of their private and public lives; [Am. 477]

(aa)  Addressing root causes of gender inequalities as a means of supporting conflict prevention and peacebuilding; promoting the empowerment of women, including in their roles as development actors and peace-builders; empowering women’s and girls’ agency, voice and participation in social, economic, political and civic life; [Am. 478]

(ab)  Promoting the protection and fulfilment of women’s and girls’ rights, including economic, labour, social and political rights, and sexual and reproductive health and rights, including sexual and reproductive health services, education and supplies. [Am. 479]

(b)  Promoting new initiatives to build stronger child protection systems in third countries, ensuring that children are protected in all areas from violence, abuses and neglect, including by promoting the transition from institutional to community-based care for children. [Am. 480]

3a.  Children and youth

(a)  Promoting new initiatives to build stronger child protection systems in third countries, ensuring that children get the best start in life and are protected in all areas from violence, abuses and neglect, including by promoting the transition from institutional to community-based care for children.

(b)  Promoting access to basic social services for children and youth, including the most marginalised, with a focus on health, nutrition, education, early childhood development and social protection, and including sexual and reproductive health services, information and supplies, dedicated youth-friendly services and comprehensive sexuality education, nutrition, education and social protection;

(c)  Promoting youth access to skills, decent and quality jobs through education, vocational and technical training, and access to digital technologies; supporting youth entrepreneurship and promoting the creation of sustainable jobs with decent working conditions;

(d)  Promoting initiatives that empower young people and children, and support policies and actions that guarantee their inclusion, meaningful civil and political participation and social recognition, recognizing their true potential as positive agents of change in areas such as peace, security, sustainable development, climate change, environmental protection and the reduction of poverty. [Am. 481]

4.  Migration, mobility and forced displacement [Am. 482]

(a)  Ensure continued EU leadership in shaping the global agenda on migration and forced displacement governance in all its dimensions, to facilitate safe, orderly and regular migration; [Am. 483]

(b)  Steering and supporting global and cross-regional policy dialogues, including on South-South migration and exchange and cooperation on migration and forced displacement; [Am. 484]

(c)  Supporting the implementation of international and EU commitments on migration and forced displacement, including as a follow-up to the Global Compact on Migration and the Global Compact on Refugees;

(d)  Improving the global evidence base, including on the migration/development nexus, and initiate actions of pilot character aiming at developing innovative operational approaches in the area of migration and forced displacement.

(da)  Cooperation in this area shall adopt a human rights based approach and be managed in coherence with the [Asylum and Migration Fund], in full respect of human dignity and the principle of policy coherence for development. [Am. 485]

5.  Decent work, social protection and inequality

(a)  Shaping the global agenda and support initiatives on the integration of a strong pillar on equity and social justice in accordance to European values;

(b)  Contributing to the global agenda on decent work for all within a healthy environment, on the basis of the basic ILO labour standards, including social dialogue, living wages and the fight against child labour, in particular in making global value chains sustainable and responsible, based on horizontal due diligence obligations, and enhancing knowledge on effective employment policies that respond to labour market needs, including VET and life-long learning; [Am. 486]

(ba)   supporting global initiatives on business and human rights, including corporate accountability for rights violations and access to remedies; [Am. 487]

(c)  Supporting global initiatives on universal social protection that follow the principles of efficiency, sustainability and equity; , including support to address inequality and ensure social cohesion, in particular with the setting-up and strengthening of sustainable social protection systems, social insurance schemes, and with fiscal reform, reinforcing the capacity of tax systems and the fight against fraud, tax evasion, and aggressive tax planning; [Am. 488]

(d)  Continuing global research and development through social innovation that enhances social inclusion and addresses the needs of the most vulnerable sections of society.

6.  Culture

(a)  Promoting initiatives for cultural diversity, and intercultural and interreligious dialogue for peaceful inter-community relations; [Am. 489]

(b)  Supporting culture and creative and artistic expression as an engine for sustainable social and economic development and reinforcing cooperation on, and preservation of cultural heritage. and contemporary arts and other cultural expressions; [Am. 490]

(ba)  Developing local crafts, as a means to preserve local cultural heritage; [Am. 491]

(bb)  Reinforcing cooperation on safeguarding, conservation and enhancement of cultural heritage, including the preservation of particularly vulnerable cultural heritage, in particular from minority and isolated communities and indigenous peoples; [Am. 492]

(bc)   Supporting initiatives for the return of cultural property to their countries of origin or their restitution in case of illicit appropriation; [Am. 493]

(bd)  Supporting cultural cooperation with the Union , including through exchanges, partnerships and other initiatives and the recognition of the professionalism of authors, artists and cultural and creative operators; [Am. 494]

(be)  Supporting cooperation and partnerships among sport organisations. [Am. 495]

B.  PLANET

1.  Ensuring a healthy environment and tackling climate change

(a)  Strengthening global climate and environmental governance, the implementation of the Paris Agreement on Climate Change, the Rio Conventions and other multilateral environmental agreements;

(b)  Contributing to the external projection of the Union's environment and climate change policies with full respect for the principle of policy coherence for development; [Am. 496]

(c)  Integrating environment, climate change and disaster risk reduction objectives in policies, plans and investments including through improved knowledge and information, including in interregional cooperation programmes or measures between partner countries and regions on the one hand, and neighbouring outermost regions and overseas countries and territories covered by the OCT Decision on the other; [Am. 497]

(d)  Implementing international and EU initiatives to promote climate change adaptation and mitigation and climate resilient low-emission development, including through the implementation of the Nationally Determined Contributions (NDCs) and low emission climate resilient strategies, promoting disaster risk reduction, address environmental degradation and halting biodiversity loss, promoting the conservation and sustainable use and management of terrestrial and marine ecosystems and renewable natural resources -including land, water, oceans, fisheries and forests, addressing deforestation, desertification, land degradation, illegal logging and wildlife trafficking, tackling pollution and ensuring a healthy environment, addressing emerging climate and environmental issues, promoting resource efficiency, sustainable consumption and production, integrated water resource management and the sound management of chemicals and waste and supporting the transition to low emission, climate resilient green and circular economies. ; [Am. 498]

(da)  Promoting environmentally sustainable agricultural practices, including agro-ecology, in order to protect ecosystems and biodiversity and enhance environmental and social resilience to climate change, with a particular focus on supporting smallholder farmers, workers and artisans; [Am. 499]

(db)  Implementing international and Union initiatives to address biodiversity loss, promoting the conservation, sustainable use and management of terrestrial and marine ecosystems and associated biodiversity. [Am. 500]

2.  Sustainable Energy

(a)  Supporting global efforts, commitments, partnerships and alliances, including most notably the sustainable energy transition; [Am. 501]

(aa)  Promoting energy security for partner countries and local communities through, for instance, diversification of sources and routes, considering price volatility issues, emission reduction potential, improving markets and fostering energy and, in particular, electricity interconnections and trade; [Am. 502]

(b)  Encouraging partner governments to embrace energy sector policy and market reforms so to establish a conducive environment for inclusive growth and investments increasing access to energy services that are climate-friendly, affordable, modern, reliable and sustainable, with a strong focus on priority to renewable energy and energy efficiency; [Am. 503]

(c)  Exploring, identifying, mainstreaming globally and supporting financially sustainable business models with scalability and replicability potential providing innovative and digital technologies through innovative research ensuring increased efficiency in particular for decentralised approaches providing energy access through renewable energy including in areas where the local market capacity is limited.

C.  PROSPERITY

1.  Sustainable and inclusive growth, decent jobs and private sector engagement

(a)  Promoting sustainable private investment through innovative financing mechanisms and risk-sharing including for LDCs and fragile states that would otherwise not attract such investment and where additionality can be proven; [Am. 504]

(b)  Developing a socially and ecologically responsible local private sector, improving business environment and investment climate, supporting enhanced public-private dialogue, and building capacities of, competitiveness and resilience of local Micro, Small and Medium Enterprises as well as cooperatives and social enterprises, and their integration into the local, regional and global economy; [Am. 505]

(ba)  Promoting financial inclusion by fostering access to and effective use of financial services, such as micro-credit and savings, micro-insurance and payment transfer, by microenterprises and SMEs and households, in particular disadvantaged and vulnerable groups; [Am. 506]

(c)  Supporting the implementation of the Union trade policy and trade agreements aiming at sustainable development; and improving access to partner country markets and boosting fair trade, responsible and accountable investment and business opportunities for companies from the Union while eliminating barriers to market access and investment, as well as aiming at easing access to climate-friendly technologies and intellectual property, while ensuring as much value sharing and human rights due diligence in supply chains, and with full respect to policy coherence for development, where developing countries are concerned; [Am. 507]

(d)  Promoting an effective policy mix supportive of economic diversification, value addition, and regional integration and sustainable green and blue economy;

(e)  Fostering access to digital technologies, including promoting access to finance and financial inclusion;

(f)  Promoting sustainable consumption and production and innovative technologies and practices for low-carbon, resource efficient and circular economy.

2.  Food and nutrition security

(a)  Supporting and influencing international strategies, organisations, mechanisms and actors that roll-out major global policy issues and frameworks around sustainable food and nutrition security, and contributing to accountability on international commitments on food security, nutrition and sustainable agriculture including the Sustainable Development Goals and the Paris Agreement; [Am. 508]

(b)  Ensuring equitable access to food including by helping to address the financing gap for nutrition; improving global public goods pursuing an end to hunger and malnutrition; tools like the Global Network on Food Crises enhance the capacity to adequately respond to food crises and nutrition in the context of the humanitarian-development-peace nexus (hence assist in mobilising pillar 3 resources); [Am. 509]

(ba)   Improving in a coordinated and accelerated manner cross-sectoral efforts to increase capacity for diversified local and regional food production, ensure nutritional and food security and access to drinking water, and enhance the resilience of the most vulnerable, particularly in countries facing protracted or recurrent crises; [Am. 510]

(c)  Reaffirming at global level the central role of sustainable agriculture and fisheries and aquaculture, including smallholder agriculture, livestock-keeping and pastoralism for increased food security, poverty eradication, job creation, equitable and sustainable access to, and management of resources, including land and land rights, water, (micro) credit, open source seeds and other agricultural inputs, mitigating and adapting to climate change, resilience and healthy ecosystems; [Am. 511]

(d)  Providing innovations through international research and reinforce global knowledge and expertise, promotion and reinforcement of local and autonomous adaptation strategies, in particular related to climate change adaptation and mitigation, agrobiodiversity, global and inclusive value chains, fair trade, food safety, responsible investments, governance of land and natural resource tenure; [Am. 512]

(da)   Actively supporting greater participation of civil society and farmer organisations in policy-making and research programmes and increase their involvement in the implementation and evaluation of government programmes. [Am. 513]

D.  PARTNERSHIPS

1.  Strengthen the role of Local Authorities as actors of development through:

(a)  Increasing the capacity of European and Southern local authority networks, platforms and alliances to ensure a substantive and continued policy dialogue in the field of development and to promote democratic governance, notably through the Territorial Approach to Local Development;

(b)  Increasing interactions with European citizens on development issues (awareness raising, knowledge sharing, engagement), notably in relation to the related to the Sustainable Development Goals, including in the Union and candidate countries and potential candidate countries.

2.  Promote inclusive societies, good economic governance, including fair and inclusive domestic revenue mobilisation and fight tax avoidance, transparent public finance management and effective and inclusive public spending. [Am. 514]

4a.  AREAS OF INTERVENTION FOR FOREIGN POLICY NEEDS AND PRIORITIES

Actions to support the objectives set out in point (da) of Article 4(3) shall support Union foreign policy across political, development, economic and security issues. Those actions shall enable the Union to act where there is a foreign policy interest, or a window of opportunity to achieve its objectives, and which are difficult to address by other means. They may cover the following:

(a)  support for the Union's bilateral, regional and inter-regional cooperation strategies, promoting policy dialogue and developing collective approaches and responses to challenges of global concern, including migration, development, climate change and security issues, in particular in the following areas:

–  supporting the implementation of Partnership and Cooperation Agreements, action plans and similar bilateral instruments;

–  deepening the political and economic dialogue with third countries of particular relevance in world affairs, including in foreign policy;

–  supporting engagement with relevant third countries on bilateral and global issues of common concern;

–  promoting an adequate follow-up or coordinated implementation of the conclusions reached and commitments made in relevant international fora;

(b)  support for Union trade policy:

–  support for Union trade policy and the negotiation, implementation and enforcement of trade agreements, under full respect of policy coherence for development, where developing countries are concerned, and full alignment with the pursuit of the Sustainable Development Goals;

–  support for improving access to partner country markets and boosting trade, investment and business opportunities for companies from the Union, in particular SMEs, while eliminating barriers to market access and investment and protecting intellectual property rights, by means of economic diplomacy, business and regulatory cooperation, with necessary adaptations in relation to developing country partners;

(c)  contributions to the implementation of the international dimension of internal Union policies:

–  contributions to the implementation of the international dimension of internal Union policies such as, inter alia, environment, climate change, energy, science and education and cooperation on management and governance of the oceans;

–  promoting the Union’s internal policies with key partner countries and supporting regulatory convergence in this regard;

(d)  promotion of widespread understanding and visibility of the Union and of its role on the world scene:

–  promotion of widespread understanding and visibility of the Union and of its role on the world scene, by means of strategic communication, public diplomacy, people-to-people contacts, cultural diplomacy, cooperation in educational and academic matters, and outreach activities to promote the Union's values and interests;

–  enhancing student and academic staff mobility, leading to the creation of partnerships aimed at improving the quality of higher education and of joint degrees leading to academic recognition (‘Erasmus+ Programme’).

Those actions shall apply innovative policies or initiatives, corresponding to current or evolving short- to medium-term needs, opportunities and priorities, including with the potential of informing future actions under geographic or thematic programmes. They shall focus on deepening the Union's relations and dialogue and building partnerships and alliances with key countries of strategic interest, especially those emerging economies and middle-income countries who play an increasingly important role in world affairs, global governance, foreign policy, the international economy, and multilateral fora. [Am. 515]

ANNEX IV

AREAS OF INTERVENTION FOR RAPID RESPONSE ACTIONS

1.  Actions contributing to peace stability and conflict prevention in situations of urgency, emerging crisis, crisis and postcrisis [Am. 516]

Rapid response actions referred to in point a) of Article 4 (4) shall be designed for an effective Union response to the following exceptional and unforeseen situations:

(a)  a situation of urgency, crisis, emerging crisis or natural disasters, where relevant for stability, peace and security; [Am. 517]

(b)  a situation posing a threat to peace, democracy, law and order, the protection of human rights and fundamental freedoms, or the security and safety of individuals, in particular those exposed to gender-based violence in situations of instability; [Am. 518]

(c)  a situation threatening to escalate into armed conflict or to severely destabilise the third country or countries concerned.

1a.  The technical and financial assistance referred to in paragraph 1 may cover the following:

(a)  support, through the provision of technical and logistical assistance, for the efforts undertaken by international, regional and local organisations and by State and civil society actors in promoting confidence-building, mediation, dialogue and reconciliation, transitional justice, women’s and youth empowerment, in particular with regards to community tensions and protracted conflicts;

(b)  support for the implementation of United Nations Security Council resolutions, with particular regard to those on women, peace and security and youth, peace and security, in particular in fragile, conflict and post-conflict countries;

(c)  support for the establishment and functioning of interim administrations mandated in accordance with international law;

(d)  support for the development of democratic, pluralistic state institutions, including measures to enhance the role of women in such institutions, effective civilian administration and civilian oversight over the security system, as well as measures to strengthen the capacity of law-enforcement and judicial authorities involved in the fight against terrorism, organised crime and all forms of illicit trafficking;

(e)  support for international criminal tribunals and ad hoc national tribunals, truth and reconciliation commissions, transitional justice and other mechanisms for the legal settlement of human rights claims and the assertion and adjudication of property rights, established in accordance with international standards in the fields of human rights and the rule of law;

(f)  support for reinforcement of State capacity - in the face of significant pressures to rapidly build, maintain or restore its core functions, and basic social and political cohesion;

(g)  support for measures necessary to start the rehabilitation and reconstruction of key infrastructure, housing, public buildings and economic assets, and essential productive capacity, as well as other measures for the re-starting of economic activity, the generation of employment and the establishment of the minimum conditions necessary for sustainable social development;

(h)  support for civilian measures related to the demobilisation and reintegration of former combatants and their families into civil society, and where appropriate their repatriation, as well as measures to address the situation of child soldiers and female combatants;

(i)  support for measures to mitigate the social effects of restructuring the armed forces;

(j)  support for measures to address, within the framework of Union cooperation policies and their objectives, the socio-economic impact on the civilian population of anti-personnel landmines, unexploded ordnance or explosive remnants of war. Activities financed under this Regulation may cover, inter alia, risk education, mine detection and clearance and, in conjunction therewith, stockpile destruction;

(k)  support for measures to combat, within the framework of Union cooperation policies and their objectives, the illicit use of and access to firearms, small arms and light weapons;

(l)  support for measures to ensure that the specific needs of women and children in crisis and conflict situations, including preventing their exposure to gender-based violence, are adequately met;

(m)  support for the rehabilitation and reintegration of the victims of armed conflict, including measures to address the specific needs of women and children;

(n)  support for measures to promote and defend respect for human rights and fundamental freedoms, democracy and the rule of law, and the related international instruments;

(o)  support for socio-economic measures to promote equitable access to, and transparent management of, natural resources in a situation of crisis or emerging crisis, including peace-building;

(p)  support for measures to address the potential impact of sudden population movements with relevance to the political and security situation, including measures addressing the needs of host communities in a situation of crisis or emerging crisis, including peace-building;

(q)  support for measures to promote the development and organisation of civil society and its participation in the political process, including measures to enhance the role of women in such processes and measures to promote independent, pluralist and professional media;

(r)  capacity building of military actors in support of development and security for development. [Am. 519]

2.  Actions contributing to strengthening resilience and linking humanitarian aid and development action

Rapid response actions referred to in point b) of Article 4(4) shall be designed to effectively strengthen resilience and to link humanitarian aid and development actions, which cannot be swiftly addressed through geographic and thematic programmes and ensuring coherence, consistency and complementarity with humanitarian aid as specified in Article 5. [Am. 520]

These actions may cover the following:

(a)  strengthen resilience by supporting individuals, communities, institutions, and countries to better prepare for, withstand, adapt to and quickly recover from political, economic, and societal pressures and shocks, natural or man-made disasters, conflicts and global threats; including by reinforce reinforcing the capacity of a state - in the face of significant pressures to rapidly build, maintain or restore its core functions, and basic social and political cohesion and of societies, communities and individuals to manage opportunities and risks in a peaceful and conflict sensitive stable manner and to build, maintain or restore livelihoods in the face of major pressures, and by supporting individuals, communities and societies to identify and strengthen their existing indigenous capacities to withstand, adapt to and quickly recover from these pressures and shocks, including those that could lead to an escalation of violence; [Am. 521]

(b)  mitigate the short-term adverse effects resulting from exogenous shocks creating macroeconomic instability and aims at safeguarding socioeconomic reforms and priority public expenditure for socio-economic development and poverty reduction;

(c)  carry out short-term rehabilitation and reconstruction to enable the victims from natural or man-made disasters, conflicts and global threats to benefit from a minimum of socio-economic integration and, as soon as possible, create the conditions for a resumption of development on the basis of long-term objectives set by the countries and regions concerned; this includes addressing the urgent and immediate needs arising from the forced displacement of people (refugees, displaced persons and returnees) following natural or man-made disasters; and [Am. 522]

(d)  assist the State, region, local authorities or relevant non-governmental organisations in setting up short term disaster prevention and preparedness mechanisms, including for prediction and early warning, with a view to reducing the consequences of disasters. [Am. 523]

3.  Actions addressing foreign policy needs and priorities

Rapid response actions to support the objectives set out in point c) of Article 4 (4) shall support Union foreign policy across political, economic and security issues. They shall enable the Union to act where there is an urgent or imperative foreign policy interest, or a window of opportunity to achieve its objectives, requiring a rapid reaction and which are difficult to address by other means.

These actions may cover the following:

(a)  support for the Union's bilateral, regional and inter-regional cooperation strategies, promoting policy dialogue and developing collective approaches and responses to challenges of global concern including migration and security issues, and exploiting windows of opportunity in this regard;

(b)  support for Union trade policy and trade agreements and the implementation thereof; and for improving access to partner country markets and boosting trade, investment and business opportunities for companies from the Union, in particular SMEs, while eliminating barriers to market access and investment, by means of economic diplomacy, business and regulatory cooperation;

(c)  contributions to the implementation of the international dimension of internal Union policies such as inter alia environment, climate change, energy, and cooperation on management and governance of the oceans;

(d)  promotion of widespread understanding and visibility of the Union and of its role on the world scene, by means of strategic communication, public diplomacy, people-to-people contacts, cultural diplomacy, cooperation in educational and academic matters, and outreach activities to promote the Union's values and interests.

These actions shall implement innovative policies or initiatives, corresponding to current or evolving short- to medium-term needs, opportunities and priorities, including with the potential of informing future actions under geographic or thematic programmes. They shall focus on deepening the Union's relations and dialogue and building partnerships and alliances with key countries of strategic interest, especially those emerging economies and middle-income countries who play an increasingly important role in world affairs, global governance, foreign policy, the international economy, and multilateral fora. [Am. 524]

ANNEX V

PRIORITY AREAS OF THE EFSD+ OPERATIONS COVERED BY THE EXTERNAL ACTION GUARANTEE

The EFSD+ operations eligible for support through the External Action Guarantee shall in particular aim at contribute to the following priority areas: [Am. 525]

(a)  provide finance and support to private, social enterprise and cooperative sector development compliant with the conditions set out in Article 209(2) of the Financing Regulation, to contribute to sustainable development in its economic, social and environmental dimensions, and to the implementation of the 2030 Agenda, the Paris Agreement and, where appropriate, the European Neighbourhood Policy and the objectives set out in Article 3 of the of IPA III Regulation, the eradication of poverty, promoting skills and entrepreneurship, gender equality and the empowerment of women and young people, while pursuing and strengthening the rule of law, good governance and human rights, with a particular focus on local companies, social enterprises and micro, small and medium-sized enterprises, on promoting decent job creation in compliance with relevant ILO standards, living wages, economic opportunities, and encouraging the contribution of European companies to the EFSD+ purpose; [Am. 526]

(b)  address bottlenecks to private investments by providing financial instruments, which may be denominated in the local currency of the partner country concerned, including first loss guarantees to portfolios, guarantees to private sector projects such as loan guarantees for small and medium-sized enterprises, and guarantees for specific risks for infrastructure projects and other risk capital;

(c)  leverage private sector financing, with a particular focus on micro, small and medium-sized enterprises, by addressing bottlenecks and obstacles to investment;

(d)  strengthen socioeconomic sectors and areas and related public and private infrastructure and sustainable connectivity, including renewable and sustainable energy, water and waste management, transport, information and communications technologies, as well as environment, sustainable use of natural resources, sustainable agriculture and blue economy, social infrastructure, health, and human capital, in order to improve the socioeconomic environment;

(e)  contribute to climate action and environmental protection and management, thus producing climate and environment co-benefits, allocating 45 % of the financing to investments that contribute climate objectives, environmental management and protection, biodiversity and combatting desertification, of which 30 % of the overall financial envelope shall be dedicated to climate change mitigation and adaptation; [Am. 527]

(f)  contribute by promoting sustainable development, to addressing specific root causes of poverty and inequality as drivers of migration, including irregular migration, as well as and forced displacement, and contribute to safe, orderly and regular migration, by fostering the resilience of transit and host communities, and contributing to the sustainable reintegration of migrants returning to their countries of origin, with due regard to the strengthening of the rule of law, good governance, gender equality, social justice and human rights. [Am. 528]

The following investment windows shall be created:

–  Sustainable Energy and Sustainable Connectivity

–  Micro, Small and Medium Enterprises (MSMEs) Financing

–  Sustainable agriculture, rural entrepreneurs, including subsistence and smallholder farming, pastoralists and environmentally friendly agroindustry

–  Sustainable cities

–  Digitalisation for Sustainable Development

–  Human Development [Am. 529]

ANNEX VI

GOVERNANCE OF THE EFSD+

1.  Structure of the EFSD+

1.  The EFSD+ shall be composed of regional investment platforms established on the basis of the working methods, procedures and structures of the existing external blending facilities of the Union, which may combine their blending operations and External Action Guarantee operations under the EFSD+.

2.  The management of the EFSD+ shall be ensured by the Commission.

2.  Strategic board of the EFSD +

1.  In the management of the EFSD+ the Commission shall be advised by a strategic board, except in the case of the operations covering the EU Enlargement policy and financed by [IPA III], which shall have its strategic board ensured under the Western Balkans Investment Framework (WBIF).

2.  The strategic board shall advise the Commission on the strategic orientation and priorities of External Action Guarantee investments under the EFSD+ and contribute to their alignment with the guiding principles and objectives of the Union’s external action, development policy, European Neighbourhood policy, as well as with the objectives set out in Articles 3 of this Regulation and the purpose of the EFSD+ as set out in Article 26. It shall also support the Commission in setting overall investment goals as regards the use of the External Action Guarantee to support EFSD+ operations and monitor an appropriate and diversified geographical and thematic coverage for investment windows.

3.  The strategic board shall also support overall coordination, complementarity and coherence between the regional investment platforms, between the three pillars of the European Investment Plan, between the European Investment Plan and the Union’s other efforts on migration and on the implementation of the 2030 Agenda, as well as with other programmes set out in this Regulation.

4.  The strategic board shall be composed of representatives of the Commission and of the High Representative, of all Member States and of the European Investment Bank. The European Parliament shall have observer status. Contributors, eligible counterparts, partner countries, relevant regional organisations and other stakeholders may be given observer status, where appropriate. The strategic board shall be consulted prior to the inclusion of any new observer. The strategic board shall be co-chaired by the Commission and the High Representative.

5.  The strategic board shall meet at least twice a year and, when possible, adopt opinions by consensus. Additional meetings may be organised at any time by the chair or at the request of one third of its members. Where consensus cannot be reached, the voting rights as agreed during the first meeting of the strategic board and laid down in its rules of procedure shall apply. Those voting rights shall take due account of the source of financing. The rules of procedure shall set out the framework regarding the role of observers. The minutes and agendas of the meetings of the strategic board shall, following their adoption, be made public.

6.  The Commission shall report annually to the strategic board about the progress made in respect of the implementation of the EFSD+. The strategic board of the WBIF shall provide progress made on the implementation of the guarantee instrument for the Enlargement region to complement the above mentioned reporting. The strategic board shall regularly organise a consultation of relevant stakeholders on the strategic orientation and implementation of the EFSD+.

7.  The existence of the two strategic boards does not bear influence on the need to have a single, unified EFSD+ risk management framework.

3.  Regional operational boards

The operational boards of regional investment platforms shall support the Commission at the implementation level in defining regional and sectoral investment goals and regional, sectoral and thematic investment windows and shall formulate opinions on blending operations and on the use of the External Action Guarantee covering EFSD+ operations. [Am. 530]

ANNEX VII

LIST OF KEY PERFORMANCE INDICATORS

In coherence with the Sustainable Development Goals, the following list of key performance indicators shall be used to help measure the Union’s contribution to the achievement of its specific objectives.

(1)  Rule of Law score

(2)  Proportion of population below the international poverty line

(3)  Number of women of reproductive age, adolescent girls, and children under 5 reached by nutrition programmes with EU support

(4)  Number of 1-year olds fully immunised with EU support

(5)  Number of students enrolled in having completed primary and/or secondary education and acquired minimal skills in reading and mathematics, and training with EU the Union’s support [Am. 531]

(6)  Greenhouse gas emissions reduced or avoided (Ktons CO2eq) with EU support

(7)  Area of marine, terrestrial and freshwater ecosystems protected and/or sustainably managed with EU support

(8)  Leverage of investments and multiplier effect achieved

(9)  Political stability and absence of violence indicator built on a baseline assessment [Am. 532]

(10)  Number of processes related to partner country practices on trade, investment and business, or promoting the external dimension of EU internal policies, which have been influenced

All indicators Indicator (4) shall be sex disaggregated, whenever relevant and indicators (2), (3) and (5) shall be sex and age disaggregated. [Am. 533]

Annex VIIa

Partner countries in relation to which Union assistance is suspended.

[To be established by the Commission pursuant to Article 15a.] [Am. 534]

(1) OJ C 45, 4.2.2019, p. 1
(2) OJ C 110, 22.3.2019, p. 163.
(3) OJ C 86, 7.3.2019, p. 295.
(4) OJ C 45, 4.2.2019, p. 1.
(5)OJ C 110, 22.3.2019, p. 163.
(6) OJ C 86, 7.3.2019, p. 295.
(7) Position of the European Parliament of 27 March 2019
(8) "Transforming our world: the 2030 Agenda for Sustainable Development", adopted at the United Nations Sustainable Development Summit on 25 September 2015 (A/RES/70/1).
(9) Regulation (EU) No 233/2014 of the European Parliament and of the Council of 11 March 2014 establishing a financing instrument for development cooperation for the period 2014-2020 (OJ L 77, 15.3.2014, p. 44.)
(10) Internal agreement between the Representatives of the Governments of the Member States of the European Union, meeting within the Council, on the financing of European Union aid under the multiannual financial framework for the period 2014 to 2020, in accordance with the ACP-EU Partnership Agreement, and on the allocation of financial assistance for the Overseas Countries and Territories to which Part Four of the Treaty on the Functioning of the European Union applies (OJ L210/1, 6.8.2013).
(11) Council Regulation (EU) 2015/322 of 2 March 2015 on the implementation of the 11th European Development Fund (OJ L 58/1, 3.3.2015).
(12) Regulation (EU) No 232/2014 of the European Parliament and of the Council of 11 March 2014 establishing a European Neighbourhood Instrument (OJ L 77, 15.3.2014, p. 27.)
(13) Regulation (EU) No 230/2014 of the European Parliament and of the Council of 11 March 2014 establishing an instrument contributing to stability and peace (OJ L 77, 15.3.2014, p. 1.)
(14) Regulation (EU) No 235/2014 of the European Parliament and of the Council of 11 March 2014 establishing a financing instrument for democracy and human rights worldwide (OJ L 77, 15.3.2014, p. 85.)
(15) Regulation (EU) No 234/2014 of the European Parliament and of the Council of 11 March 2014 establishing a Partnership Instrument for cooperation with third countries (OJ L 77, 15.3.2014, p. 77.)
(16) Council Regulation (Euratom) No 237/2014 of 13 December 2013 establishing an Instrument for Nuclear Safety Cooperation (OJ L 77, 15.3.2014, p. 109)
(17) Regulation (EU) 236/2014 of the European Parliament and of the Council laying down common rules and procedures for the implementation of the Union's instruments for financing external action (OJ L 77, 15.3.2014, p. 95)
(18) Council Regulation (EC, Euratom) No 480/2009 of 25 May 2009 establishing a Guarantee Fund for external actions (OJ L 145, 10.6.2009, p. 10)
(19) Regulation (EU) 2017/1601 of the European Parliament and of the Council of 26 September 2017 establishing the European Fund for Sustainable Development (EFSD), the EFSD Guarantee and the EFSD Guarantee Fund.
(20) Signed in New York on 22 April 2016.
(21) "Addis Ababa Action Agenda of the Third International Conference on Financing for Development", adopted on 16 June 2015 and endorsed by the United Nations General Assembly on 27 July 2015 (A/RES/69/313).
(22) "Shared Vision, Common Action: A Stronger Europe. A global Strategy for the European Union's Foreign and Security Policy", June 2016.
(23) "The New European Consensus on Development 'Our World, our Dignity, Our Future'", Joint statement by the Council and the Representatives of the governments of the Member States meeting within the Council, the European Parliament and the European Commission, 8 June 2017.
(24) "Sendai Framework for Disaster Risk Reduction", adopted on 18 March 2015 and endorsed by the United Nations General Assembly on 3 June 2015 (A/RES/69/283).
(25) Joint communication to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions, "Review of the European Neighbourhood policy", 18 November 2015.
(26) Regulation (EU) No 978/2012 of the European Parliament and of the Council of 25 October 2012 applying a scheme of generalised tariff preferences and repealing Council Regulation (EC) No 732/2008 (OJ L 303, 31.10.2012, p. 1).
(27) COM(2018)0465 Proposal for a Regulation of the European Parliament and of the Council establishing the Instrument for Pre-accession Assistance (IPA III)
(28) Council Regulation (EC) No 1257/96 of 20 June 1996 concerning humanitarian aid (OJ L 163, 2.7.1996, p. 1).
(29) COM(2018)0461 Proposal for a Council Decision on the Association of the Overseas Countries and Territories with the European Union including relations between the European Union on the one hand, and Greenland and the Kingdom of Denmark on the other ('Overseas Association Decision').
(30) COM(2018)0462 Proposal for a Council Regulation establishing a European Instrument for Nuclear Safety complementing the Neighbourhood, Development and International Cooperation Instrument on the basis of the Euratom Treaty.
(31) C(2018)3800 Proposal of the High Representative of the Union for Foreign Affairs and Security Policy to the Council for a Council Decision establishing a European Peace Facility.
(32) COM(2018)0367 Proposal for a Regulation of the European Parliament and of the Council establishing 'Erasmus': the Union programme for education, training, youth and sport and repealing Regulation (EU) 1288/2013
(33) COM(2018)0366 Proposal for a Regulation of the European Parliament and of the Council establishing the Creative Europe programme (2021 to 2027) and repealing Regulation (EU) No 1295/2013.
(34) OJ L 123, 12.5.2016, p. 1.
(35) Regulation (EU) .../... of the European Parliament and of the Council of... on... (OJ...)
(36) OJ C 373, 20.12.2013, p. 1.
(37) Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the Council of 18 July 2018 on the financial rules applicable to the general budget of the Union, amending Regulations (EU) No 1296/2013, (EU) No 1301/2013, (EU) No 1303/2013, (EU) No 1304/2013, (EU) No 1309/2013, (EU) No 1316/2013, (EU) No 223/2014, (EU) No 283/2014, and Decision No 541/2014/EU and repealing Regulation (EU, Euratom) No 966/2012 (OJ L 193, 30.7.2018, p. 1).
(38) Regulation (EU) 2017/1601 of the European Parliament and of the Council of 26 September 2017 establishing the European Fund for Sustainable Development (EFSD), the EFSD Guarantee and the EFSD Guarantee Fund.
(39) Council decision 77/270/EURATOM of 29 March 1977 empowering the Commission to issue Euratom loans for the purpose of contributing to the financing of nuclear power stations (OJ L 88, 6.4.1977, p. 9).
(40) Regulation (EU) .../... of the European Parliament and of the Council of ... on ... (OJ...).
(41) Regulation (EU, Euratom) No 883/2013 of the European Parliament and of the Council of 11 September 2013 concerning investigations conducted by the European Anti-Fraud Office (OLAF) and repealing Regulation (EC) No 1073/1999 of the European Parliament and of the Council and Council Regulation (Euratom) No 1074/1999 (OJ L 248, 18.9.2013, p.1)
(42) Council Regulation (EC, Euratom) No 2988/95 of 18 December 1995 on the protection of the European Communities financial interests (OJ L 312, 23.12.95, p.1).
(43) Council Regulation (Euratom, EC) No 2185/96 of 11 November 1996 concerning on-the-spot checks and inspections carried out by the Commission in order to protect the European Communities' financial interests against fraud and other irregularities (OJ L 292, 15.11.1996, p.2)
(44) OJ L 283, 31.10.2017, p.1.
(45) Directive (EU) 2017/1371 of the European Parliament and of the Council of 5 July 2017 on the fight against fraud to the Union's financial interests by means of criminal law (OJ 198, 28.7.2017, p.29)
(46) Regulation (EU) No 182/2011 of the European Parliament and of the Council of 16 February 2011 laying down the rules and general principles concerning mechanisms for control by Member States of the Commission's exercise of implementing powers (OJ L 55, 28.2.2011, p.13)
(47) Interinstitutional Agreement between the European Parliament, the Council of the European Union and the European Commission on Better Law-Making of 13 April 2016; OJ L 123, 12.5.2016, p. 1–14.
(48) Council Decision 2010/427/EU of 26 July 2010 establishing the organisation and functioning of the European External Action Service (OJ L 201, 3.8.2010, p. 30).
(49) Regulation of the European Parliament and of the Council establishing the Instrument for Pre-accession Assistance (OJ L ).
(50) COM(2018)0374 Proposal for a Regulation of the European Parliament and of the Council on specific provisions for the European territorial cooperation goal (Interreg) supported by the European Regional Development Fund and external financing instruments.
(51) Directive 2011/92/EU of the European Parliament and of the Council of 13 December 2011 on the assessment of the effects of certain public and private projects on the environment (codification) (OJ L 26 28.1.2012. p.1).
(52) Council Directive of 27 June 1985 on the assessment of the effects of certain public and private projects on the environment (OJ L 175, 05.07.1985. p. 0040 – 0048).
(53) OJ L 130, 19.5.2017, p. 1


Instrument for Pre-accession Assistance (IPA III) ***I
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European Parliament legislative resolution of 27 March 2019 on the proposal for a regulation of the European Parliament and of the Council establishing the Instrument for Pre-accession Assistance (IPA III) (COM(2018)0465 – C8-0274/2018 – 2018/0247(COD))
P8_TA(2019)0299A8-0174/2019

(Ordinary legislative procedure: first reading)

The European Parliament,

–  having regard to the Commission proposal to Parliament and the Council (COM(2018)0465),

–  having regard to Article 294(2) and Article 212(2) of the Treaty on the Functioning of the European Union, pursuant to which the Commission submitted the proposal to Parliament (C8‑0274/2018),

–  having regard to Article 294(3) of the Treaty on the Functioning of the European Union,

–  having regard to the opinion of the European Economic and Social Committee of 12 December 2018(1),

–  having regard to the opinion of the Committee of the Regions of 6 December 2018(2),

–  having regard to Rule 59 of its Rules of Procedure,

–  having regard to the report of the Committee on Foreign Affairs and also the opinions of the Committee on International Trade, the Committee on Budgets, the Committee on the Environment, Public Health and Food Safety, the Committee on Regional Development and the Committee on Civil Liberties, Justice and Home Affairs (A8-0174/2019),

1.  Adopts its position at first reading hereinafter set out;

2.  Calls on the Commission to refer the matter to Parliament again if it replaces, substantially amends or intends to substantially amend its proposal;

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

Position of the European Parliament adopted at first reading on 27 March 2019 with a view to the adoption of Regulation (EU) .../… of the European Parliament and of the Council establishing the Instrument for Pre-accession Assistance (IPA III)

P8_TC1-COD(2018)0247


THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the Functioning of the European Union, and in particular Article 212 (2) thereof,

Having regard to the proposal from the European Commission,

After transmission of the draft legislative act to the national parliaments,

Having regard to the opinion of the European Economic and Social Committee(3),

Having regard to the opinion of the Committee of the Regions(4),

Acting in accordance with the ordinary legislative procedure(5),

Whereas:

(1)  Regulation (EU) No 231/2014 of the European Parliament and of the Council(6) expires on 31 December 2020. In order to maintain the Union's effectiveness in external actions, a framework for planning and delivering external assistance should be maintained.

(2)  The objectives objective of an instrument for pre-accession are substantially distinct from the general objectives of Union external action as this instrument aims is to prepare the beneficiaries listed in Annex I (“beneficiaries”) for future membership of the Union and support their accession process. It is therefore essential to have, in line with the general objectives of the Union’s external action, including respect for fundamental rights and principles as well as the protection and promotion of human rights, democracy and the rule of law as laid down in Article 21 of the Treaty on European Union (TEU). While the distinct nature of the accession process warrants a dedicated instrument in support of enlargement, while ensuring its complementarity with the objectives and functioning of this instrument should be consistent with and complementary to the general objectives of Union external action and in particular with the Neighbourhood, Development and International Cooperation Instrument (NDICI). [Am. 1]

(3)  Article 49 of the Treaty on European Union ( TEU ) provides that any European state State which respects the values of respect for human dignity, freedom, democracy, equality, the rule of law and respect for human rights, including the rights of persons belonging to minorities, and commits to promote these values, may apply to become a member of the Union. A European State which has applied to join the Union can become a member only when it has been confirmed that it meets the membership criteria established at the Copenhagen European Council in June 1993 (the ‘Copenhagen criteria’) and provided that the Union has the capacity to integrate the new member. The Copenhagen criteria relate to the stability of institutions guaranteeing democracy, the rule of law, human rights and respect for and protection of minorities, the existence of a functioning market economy as well as the capacity to cope with competitive pressure and market forces within the Union, and the ability to assume not only the rights but also the obligations under the Treaties, including adherence to the aims of political, economic and monetary union Those values are common to Member States in a society in which pluralism, non-discrimination, tolerance, justice, solidarity and equality between women and men prevail. [Am. 2]

(4)  The enlargement process is built on established criteria and fair and rigorous conditionality. Each beneficiary is assessed on the basis of its own merits. The assessment of progress achieved and the identification of shortcomings aim to provide incentives and guidance to the beneficiaries listed in Annex I to pursue the necessary far-reaching reforms. For the prospect of enlargement to become a reality, a firm commitment to the principle of the 'fundamentals first'(7) remains essential. Progression Good neighbourly relations and regional cooperation based on a definitive, inclusive and binding resolution of bilateral disputes are essential elements of the enlargement process and critical for security and stability of the Union as a whole. Progress towards accession depends on each applicant's respect for the Union's values and its capacity to undertake and implement the necessary reforms to align its political, institutional, legal, social, administrative and economic systems with the rules, standards, policies and practices in the Union. The Negotiating Framework sets out requirements against which progress in the accession negotiations with each candidate country is assessed. [Am. 3]

(4a)  Any European State which has applied to join the Union can become a member of the Union only where it has been confirmed that it fully meets the accession criteria established at the Copenhagen European Council in June 1993 (the ‘Copenhagen criteria’) and provided that the Union has the capacity to integrate the new member. The Copenhagen criteria relate to the stability of institutions which guarantee democracy, the rule of law, human rights and respect for and protection of minorities, the existence of a functioning market economy as well as the capacity to cope with competitive pressure and market forces within the Union, and the ability to assume not only the rights but also the obligations under the Treaties, including the pursuit of the aims of political, economic and monetary union. [Am. 4]

(5)  The Enlargement policy of the Union is an investment in integral part of the Union’s external action, contributing to peace, security, prosperity and stability in Europe both within and outside the Union's borders. It provides increased economic and trade opportunities to the mutual benefit of the Union and the aspiring Member States, while respecting the principle of progressive integration to ensure a smooth transformation of the beneficiaries. The prospect of Union membership has a powerful transformative effect, embedding positive democratic, political, economic and societal change. [Am. 5]

(6)  The European Commission reaffirmed the firm, merit-based prospect of EU membership for the Western Balkans in its Communication 'A credible enlargement perspective for and enhanced EU engagement with the Western Balkans'(8). This is a strong message of encouragement for the whole Western Balkans and a sign of the EU's commitment to their European future.

(7)  Assistance should also be provided in compliance with the international agreements concluded by the Union, including with the beneficiaries listed in Annex I. Assistance should mainly focus on assisting the beneficiaries listed in Annex I to strengthen democratic institutions and the rule of law, reform the judiciary and public administration, respect fundamental rights, including those of minorities and promote gender equality, tolerance, social inclusion respect for international labour standards on workers’ rights and non-discrimination of vulnerable groups, including children and people with disabilities. Assistance should also support adherence by the beneficiaries to the key principles and rights as defined in the European Pillar of Social Rights. (9) as well as to the social market economy and convergence towards the social acquis. Assistance should continue to support their efforts to advance regional, macro-regional and cross-border cooperation as well as territorial development, including through implementation of Union macro-regional strategies, with the aim to develop good neighbourly relations and enhance reconciliation. It should also promote sectoral regional co-operation structures and enhance their economic and social development and economic governance, foster economic integration with the Union single market, including customs cooperation, and promote an open and fair trade, underpinning a smart, sustainable and inclusive growth agenda, including through implementation of regional development, cohesion and inclusion, agriculture and rural development, social and employment policies and the development of the digital economy and society, also in line with the flagship initiative Digital Agenda for the Western Balkans. [Am. 6]

(7a)   Taking into consideration the transformatory nature of the reform process during the enlargement process in the candidate countries, the Union should enhance its efforts in prioritising key areas for Union funding, such as institution and security building, and enhance its support to candidate countries when implementing projects with a view of protecting those candidate countries from non-EU influences. [Am. 7]

(7b)   The Union's efforts to support reform progress in candidate countries through IPA funding should be well communicated in candidate countries, as well as in the Member States. The Union, in that regard, should enhance communication and campaign efforts in order to ensure visibility of the IPA funding, as the main EU instrument of peace and stability in enlargement area. [Am. 8]

(7c)   The importance of the facilitation and implementation of the budget is recognised as regards institution building, which will in return help in anticipation of possible security issues, and prevent possible future illegal migratory flows towards the Member States. [Am. 9]

(8)  The Union should provide support to the transition towards accession for the benefit of the beneficiaries listed in Annex I, based on the experience of its Member States. This cooperation should focus in particular on the sharing of experience acquired by the Member States in the reform process.

(9)  Enhanced strategic and operational cooperation between the Union and the beneficiaries listed in Annex I on security and defence sector reform is pivotal to addressing effectively and efficiently security, organised crime and terrorism threats. [Am. 10]

(9a)  Actions under the instrument established by this Regulation should also contribute to assisting the beneficiaries in the progressive alignment with the Common Foreign and Security Policy (CFSP), and the implementation of restrictive measures as well as the Union's broader external policies in international institutions and multilateral fora. The Commission should encourage the beneficiaries to uphold a rules- and values-based global order and cooperate on the promotion of multilateralism and the further strengthening of the international trading system, including WTO reforms. [Am. 11]

(10)  It is essential to further step up Cooperation on migration including border management and control, ensuring access to international protection, sharing relevant information, strengthening the development benefits of migration, facilitating legal and labour migration, enhancing border control and pursuing our effort in the fight against efforts to prevent and discourage irregular migration, and forced displacement, and to fight against trafficking in human beings and migrant people smuggling are an important aspect of cooperation between the Union and the beneficiaries. [Am. 12]

(11)  Strengthening the rule of law, including the independence of the judiciary, fight against corruption, money laundering and organised crime, and good governance, including public administration reform, providing support for human rights defenders, continued alignment on transparency, public procurement, competition, state aid, intellectual property and foreign investment remain key challenges in most of the beneficiaries listed in Annex I and are essential in order for beneficiaries to come closer to the Union and later to prepare to fully assume the obligations of Union membership. In view of the longer-term nature of the reforms pursued in those areas and the need to build up track records, financial assistance under this Regulation should be programmed to address the requirements placed on the beneficiaries listed in Annex I these issues as early as possible. [Am. 13]

(12)  The parliamentary dimension remains fundamental in the accession process. Therefore, in accordance with the principle of participatory democracy, the strengthening of parliamentary capacities, parliamentary oversight, democratic procedures and fair representation in each beneficiary listed in Annex I of the beneficiaries should be encouraged promoted by the Commission. [Am. 14]

(13)  The beneficiaries listed in Annex I need to be better prepared to address global challenges, such as sustainable development and climate change, and align with the Union's efforts to address those issues. Reflecting the importance of tackling climate change in line with the Union's commitments to implement the Paris Agreement and the Sustainable Development Goals (SDGs), this Programme should contribute to mainstream climate action in the Union's policies and to the achievement of an overall target of 25 % of the EU budget expenditures supporting climate objectives. Actions under this Programme are expected should aim to contribute at least 16 % of the overall financial envelope of the Programme to climate objectives, striving to achieve the goal that climate-related spending reaches 30 % of MFF expenditure by 2027. Priority should be given to environmental projects addressing cross-border pollution. Relevant actions will be identified during the Programme's preparation and implementation execution, and the overall contribution from this Programme should be part of relevant evaluations and review processes. [Am. 15]

(14)  Actions under this Instrument should support implementation of the United Nations 2030 Agenda for Sustainable Development, as a universal agenda, to which the EU and its Member States are fully committed and which all beneficiaries listed in Annex I have endorsed.

(15)  This Regulation lays down a financial envelope for its period of application which is to constitute the prime reference amount, within the meaning of [reference to be updated as appropriate according to the new inter-institutional agreement: point 17 of the Interinstitutional Agreement of 2 December 2013 between the European Parliament, the Council and the Commission on budgetary discipline, on cooperation in budgetary matters and on sound financial management(10)], for the European Parliament and the Council during the annual budgetary procedure.

(16)  The Commission and the Member States should ensure compliance, coherence, consistency and complementarity of their external financing assistance, in particular through regular consultations and frequent exchanges of information during the different phases of the assistance cycle. The necessary steps should also be taken to ensure better coordination and complementarity, including through regular consultations, with other donors. The role of Diverse independent civil society organisations and different types and levels of local authorities should play a meaningful role in the process. In line with the principle of inclusive partnership, civil society organisations should be enhanced both in part of both the design, implementation, monitoring and evaluation of the programmes implemented executed through government bodies and as a be direct beneficiary beneficiaries of Union assistance. [Am. 16]

(17)  The priorities for action towards meeting Specific and measurable objectives in the relevant policy areas which will be supported under this Regulation should be defined for each beneficiary, followed up by priorities for action towards meeting these objectives in a programming framework established by the Commission for the duration of the Union multiannual financial by means of delegated acts. The programming framework for the period from 2021 to 2027 should be established in partnership with the beneficiaries listed in Annex I, based on the enlargement agenda and their specific needs, in line with the general and specific objectives defined by this Regulation and the principles of Union external action, taking relevant national strategies and pertaining European Parliament resolutions into due account. That partnership should include, as appropriate, competent authorities, as well as civil society organisations. The Commission should encourage cooperation among the relevant stakeholders and donor co-ordination. The programming framework should be reviewed following the mid-term evaluation. The programming framework should identify the areas to be supported through assistance with an indicative allocation per area of support, including an estimate of climate-related expenditure. [Am. 17]

(18)  It is in the Union's common interest of the Union and the beneficiaries to assist the beneficiaries listed in Annex I in their efforts to reform their political, legal and economic systems with a view to Union membership. Assistance should be managed with a strong focus on results in accordance with a performance-based approach and with significant incentives for more effective and efficient use of funds for those who demonstrate their commitment to reform through efficient implementation of pre-accession assistance and progress towards meeting the membership criteria. Assistance should be allocated in line with the “fair share” principle and clear consequences in cases of serious deterioration or lack of progress in the respect for human dignity, freedom, democracy, equality, the rule of law and human rights. [Am. 18]

(18a)   The Commission should set up clear monitoring and evaluation mechanisms to ensure that the objectives and actions concerning different beneficiaries remain relevant and feasible and to regularly measure progress. To that effect, every objective should be accompanied by one or more performance indicators, assessing the beneficiaries' adoption of reforms and their concrete implementation. [Am. 19]

(19)  The transition from direct management of pre-accession funds by the Commission to indirect management by the beneficiaries listed in Annex I should be progressive and in line with the respective capacities of those beneficiaries. That transition should be reversed or suspended in specific policy or programme areas in the event that the beneficiaries fail to fulfil relevant obligations or to administer the Union funds in accordance with the established rules, principles and objectives. Such a decision should give due consideration to any possible negative economic and social consequences. Assistance should continue to make use of the structures and instruments that have proved their worth in the pre-accession process. [Am. 20]

(20)  The Union should seek the most efficient use of available resources in order to optimise the impact of its external action. That should be achieved, in order to avoid the overlapping with other existing external financing instruments, through coherence, consistency and complementarity among the Union's external financing instruments, as well as the creation of synergies with other Union policies and programmes. This includes, where relevant, coherence and complementarity with macro-financial assistance. [Am. 21]

(21)  In order to maximise the impact of combined interventions to achieve a common objective, this Regulation should be able to contribute to actions under other programmes, as long as the contributions do not cover the same costs.

(21a)   Without prejudice to the budgetary procedure and the provisions on the suspension of aid established in international agreements with beneficiaries, the power to adopt delegated acts in accordance with Article 290 of the Treaty on the Functioning of the European Union (TFEU) should be delegated to the Commission in respect of amending Annex I to this Regulation in order to suspend or partially suspend Union assistance. That power should be used in cases where there is consistent backsliding on one or more of the Copenhagen criteria or where a beneficiary fails to respect the principles of democracy, the rule of law, human rights and fundamental freedoms or violates the commitments taken in the relevant agreements concluded with the Union. Where the Commission finds that the reasons justifying the suspension of assistance no longer apply, it should be empowered to adopt delegated acts to amend Annex I in order to reinstate Union assistance. [Am. 22]

(22)  Funding from this Regulation should be used to finance actions under the international dimension of Erasmus, the implementation of which should be done according to Regulation (EU) .../... (“Erasmus Regulation”)(11).

(23)  Horizontal financial rules adopted by the European Parliament and the Council on the basis of Article 322 TFEU should apply to this Regulation. These rules are laid down in Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the Council(12) (“the Financial Regulation”) and determine in particular the procedure for establishing and implementing the budget through grants, procurement, prizes, indirect implementation, financial assistance, budget support, trust funds, financial instruments and budgetary guarantees, and provide for checks on the responsibility of financial actors. Rules adopted on the basis of Article 322 TFEU also concern the protection of the Union's budget in case of generalised deficiencies as regards the rule of law in Member States and third countries, as the respect for the rule of law is essential for sound financial management and effective EU funding.

(24)  The types of financing and the methods of implementation execution under this Regulation should be chosen on the basis of their ability to achieve the specific objectives of the actions and to deliver results, taking into account, in particular, the costs of controls, the administrative burden, and the expected risk of non-compliance. This should include consideration of the use of lump sums, flat rates and unit costs, as well as financing not linked to costs as referred to in Article 125(1) of the Financial Regulation. [Am. 23]

(25)  The Union should continue to apply common rules for the implementation of the external actions. Rules and procedures for the implementation application of the Union's instruments for financing external action are laid down in Regulation (EU) .../... (“NDICI Regulation”) of the European Parliament and of the Council. Additional detailed provisions should be laid down for addressing the specific situations in particular for cross-border cooperation, agriculture and rural development policy area. [Am. 24]

(26)  External actions are often implemented in a highly volatile environment requiring a continuous and rapid adaptation to the evolving needs of Union partners and to global challenges such as human rights, democracy and good governance, security, defence and stability, climate change and environment and, economic protectionism, irregular migration and forced displacement and its root causes. Reconciling the principle of predictability with the need to react rapidly to new needs consequently means adapting the financial implementation execution of the programmes. To increase the ability of the Union to respond to unforeseen needs, while respecting the principle that the Union budget is set annually, this Regulation should preserve the possibility to apply the flexibilities already allowed by the Financial Regulation for other policies, namely carry-overs and re-commitments of committed funds while adhering to the goals and objectives laid down in this Regulation, to ensure an efficient use of the EU funds both for the EU citizens and the beneficiaries listed in Annex I, thus maximising the EU funds available for the EU external action interventions. Additional forms of flexibility should be allowed, such as reallocation among priorities, phasing projects and over-contracting. [Am. 25]

(27)  The new European Fund for Sustainable Development Plus (EFSD+), building on its predecessor should constitute an integrated financial package supplying financing capacity in forms of grants, budgetary guarantees and other financial instruments worldwide, including to the beneficiaries listed in Annex I. The governance for the operations carried out under this Regulation, should continue to be ensured by the Western Balkans Investment Framework.

(28)  The External Action Guarantee should support the EFSD+ operations and IPA III should contribute to the provisioning needs in respect of the operations to the benefit of the beneficiaries listed in Annex I, including the provisioning and liabilities arising from macro-financial assistance loans.

(29)  It is important to ensure that cross border cooperation programmes are implemented coherently with the framework established in the external actions programmes and the territorial cooperation regulation. Specific co-financing provisions should be established in this Regulation.

(29a)   Cross border cooperation programmes are the most visible programmes of the Instrument of Pre-Accession Assistance, as well as being well-known by citizens. Cross border cooperation programmes could therefore significantly improve the visibility of Union-funded projects in the candidate states; [Am. 26]

(30)  Annual or multi-annual action plans and measures referred to in Article 8 constitute work programmes under the Financial Regulation. Annual or multi-annual action plans consist of a set of measures grouped into one document.

(31)  In accordance with the Financial Regulation, Regulation (EU, Euratom) No 883/2013 of the European Parliament and of the Council(13), Council Regulation (Euratom, EC) No 2988/95(14), Council Regulation (Euratom, EC) No 2185/96(15) and Council Regulation (EU) 2017/1939(16), the financial interests of the Union are to be protected through effective and proportionate measures, including the prevention, detection, correction and investigation of irregularities and fraud, the recovery of funds lost, wrongly paid or incorrectly used and, where appropriate, the imposition of administrative sanctions. In particular, in accordance with Regulation (EU, Euratom) No 883/2013 and Regulation (Euratom, EC) No 2185/96 the European Anti-Fraud Office (OLAF) may carry out administrative investigations, including on-the-spot checks and inspections, with a view to establishing whether there has been fraud, corruption or any other illegal activity affecting the financial interests of the Union. In accordance with Regulation (EU) 2017/1939, the European Public Prosecutor's Office (EPPO) may investigate and prosecute fraud and other criminal offences affecting the financial interests of the Union as provided for in Directive (EU) 2017/1371 of the European Parliament and of the Council(17). In accordance with the Financial Regulation, any person or entity receiving Union funds is to fully cooperate in the protection of the Union’s financial interests, to grant the necessary rights and access to the Commission, OLAF, where applicable the EPPO and the European Court of Auditors (ECA) and to ensure that any third parties involved in the implementation of Union funds grant equivalent rights. Beneficiaries listed in Annex I should also report the irregularities including fraud which have been the subject of a primary administrative or judicial finding, without delay, to the Commission and keep the latter informed of the progress of administrative and legal proceeding. With the objective of alignment to good practices in Member States, this reporting should be done by electronic means, using the Irregularity Management System, established by the Commission.

(31a)   All funding allocations under this Regulation should be carried out in a transparent, effective, accountable, depoliticised and non-discriminatory manner, including by means of an equitable distribution reflecting the needs of the regions and local municipalities. The Commission, the Vice-President/High Representative of the Union for Foreign Affairs and Security Policy (“VP/HR”), and in particular Union delegations should monitor closely that those criteria are met and the principles of transparency, accountability and non-discrimination are respected in the allocation of funds. [Am. 27]

(31b)   The Commission, the VP/HR, and in particular Union delegations and the beneficiaries should enhance the visibility of the Union’s pre-accession assistance in order to communicate the added value of the Union’s support. The recipients of Union funding should acknowledge the origin of the Union’s funding and ensure its proper visibility. IPA should contribute to financing communication actions for promotion of the results of the Union’s assistance to multiple audiences in the beneficiaries. [Am. 28]

(32)  In order to take account of changes in the enlargement policy framework or of significant developments in the beneficiaries listed in Annex I, the power to adopt acts in accordance with Article 290 TFEU should be delegated to the Commission in respect of adapting and updating the thematic priorities for assistance listed in Annexes II and III. It is of particular importance that the Commission carry out appropriate consultations during its preparatory work, including at expert level, and that those consultations be conducted in accordance with the principles laid down in the Interinstitutional Agreement on Better Law-Making of 13 April 2016(18). In particular, to ensure equal participation in the preparation of delegated acts, the European Parliament and the Council receive all documents at the same time as Member States' experts, and their experts systematically have access to meetings of Commission expert groups dealing with the preparation of delegated acts.

(33)  In order to ensure uniform conditions for the implementation of this Regulation in particular on specific conditions and structures for indirect management with the beneficiaries listed in Annex I and on the implementation of rural development assistance, implementing powers should be conferred on the Commission. Those powers should be exercised in accordance with [Regulation (EU) No 182/2011(19) of the European Parliament and of the Council]. When establishing the uniform conditions for implementing this Regulation, the lessons learnt from the management and implementation of past pre-accession assistance should be taken into account. Those uniform conditions should be amended if developments so require. [Am. 29]

(34)  The committee established under this Regulation should be competent also for legal acts and commitments under Regulation (EC) No 1085/2006(20), under Regulation (EU) No 231/2014 as well as for the implementation of Article 3 of Council regulation (EC) No 389/2006(21). [Am. 30]

(34a)   The European Parliament should be fully involved in the design, programming, monitoring and evaluation phases of the instruments in order to guarantee political control and democratic scrutiny and accountability of Union funding in the field of external action. An enhanced dialogue between the institutions should be established in order to ensure that the European Parliament is in a position to exercise political control during the application of this Regulation in a systematic and smooth manner, thereby enhancing both efficiency and legitimacy. [Am. 31]

(35)  In order to allow for the prompt application of the measures provided for in this Regulation, this Regulation should enter into force on the [less than twentieth] day following that of its publication in the Official Journal of the European Union,

HAVE ADOPTED THIS REGULATION:

CHAPTER I

GENERAL PROVISIONS

Article 1

Subject matter

This Regulation establishes the Programme 'Instrument for Pre-accession Assistance' ('IPA III').

It lays down its objectives, the budget for the period 2021-2027, the forms of Union assistance and the rules for providing such assistance.

Article 2

Definitions

For the purposes of this Regulation, the following definitions apply:

(a)  'cross-border cooperation' means cooperation between member states of the EU and beneficiaries listed in Annex I, between two or more beneficiaries listed in Annex I to this Regulation or between beneficiaries listed in that Annex and countries and territories listed in Annex I to the NDICI Regulation as referred to in point (b) of Article 3 (1) of Regulation (EU) .../... (“ETC Regulation”)(22).

(b)  ‘Fair share principle of assistance’ means complementing the performance-based approach with a corrective allocation mechanism, in cases where assistance provided to the beneficiary would otherwise be disproportionately low or high as compared to the other beneficiaries, taking into account the needs of the population affected and the relative progress on reforms related to the opening of accession negotiations or progress therein. [Am. 32]

Article 3

Objectives of IPA III

1.  The general objective of IPA III shall be to support the beneficiaries listed in Annex I in adopting and implementing the political, institutional, legal, administrative, social and economic reforms required by those beneficiaries to comply with Union values and acquis and to progressively align to Union rules, standards, policies and practices with a view to Union membership, thereby contributing to their peace, stability, security and prosperity as well as to the strategic interests of the Union. [Am. 33]

2.  IPA III shall have following specific objectives:

(a)  to strengthen the rule of law, democracy, the respect of human rights, including those of minorities and children, gender equality, fundamental rights and international law, civil society, academic freedom, peace and security as well as improve migration management including border management, the respect for cultural diversity, non-discrimination and tolerance; [Am. 34]

(aa)   to address forced displacement and irregular migration, ensuring that migration takes place in a safe, orderly and regular manner, and safeguarding access to international protection; [Am. 35]

(b)  to reinforce the effectiveness of public administration and support transparency, structural reforms, judicial independence, fight against corruption and good governance at all levels, including in the field of public procurement, state-aid, competition, foreign investments and intellectual property; [Am. 36]

(c)  to shape the rules, standards, policies and practices of the beneficiaries listed in Annex I in alignment to those of the Union including on CFSP, strengthen the rules-based multilateral international order and to reinforce internal and external reconciliation and good neighbourly relations, as well as peace-building and conflict prevention, including through confidence-building and mediation, inclusive and integrated education people to people contacts, freedom of the media and communication; [Am. 37]

(d)  to strengthen economic, and social and territorial development and cohesion including through increased connectivity and regional development, agriculture and rural development and social and employment policies, to reinforce environmental protection, increase resilience to climate change, accelerate the shift towards a low-carbon economy and develop the digital economy and society. reducing poverty and regional imbalances, promoting social protection and inclusion by strengthening state-level regional cooperation structures, small and medium-sized enterprises (SMEs), the capacities of community-based initiatives, supporting investment in rural areas and improving business and investment climate; [Am. 38]

(da)  to reinforce environmental protection, increase resilience to climate change, accelerate the shift towards a low-carbon economy and develop the digital economy and society, thereby creating job opportunities, in particular for the youth; [Am. 39]

(e)  to support territorial and cross-border cooperation including across maritime borders, and enhance trade and economic relations by fully implementing existing agreements with the Union, reducing regional imbalances. [Am. 40]

3.  In accordance with the specific objectives, thematic priorities for providing assistance according to the needs and capacities of the beneficiaries listed in Annex I are set out in Annex II. Thematic priorities for cross-border cooperation between beneficiaries listed in Annex I are set out in Annex III. Each of those thematic priorities may contribute to the attainment of more than one specific objective.

Article 4

Budget

1.  The financial envelope for the implementation of IPA III for the period 2021-2027 shall be EUR 14 500 000 000 13 009 976 000 in 2018 prices (EUR 14 663 401 000 in current prices). [Am. 41]

2.  A set percentage of the amount referred to in paragraph 1 may shall be used for technical and administrative assistance for the implementation execution of the Programme, such as which shall include preparatory, monitoring, control, audit and evaluation activities support for institutional strengthening and administrative capacity-building including corporate information technology systems and any activities related to the preparation of the successor programme for pre-accession assistance, in accordance with Article 20 of [NDICI Regulation]. [Am. 42]

Article 5

Cross-programme provisions

1.  In implementing applying this Regulation, consistency, synergies and complementarities with other areas of Union external action, with other relevant Union policies and programmes, as well as policy coherence for development shall be ensured. [Am. 43]

2.  The NDICI Regulation shall apply to activities implemented executed under this Regulation where referred to in this Regulation. [Am. 44]

3.  IPA III shall contribute to actions established under the Erasmus Regulation . The Erasmus Regulation shall apply to the use of those funds. To that end, the contribution of IPA III shall be included in the single indicative programming document referred to in paragraph 7 of Article 11 of the NDICI Regulation and adopted in accordance with the procedures laid down in that Regulation.

4.  Assistance under IPA III may be provided to the type of actions provided for under the European Regional Development Fund (ERDF) and the Cohesion Fund(23), the European Social Fund Plus(24) and, the European Agricultural Fund for Rural Development(25) and the Justice, Rights and Values Fund, at national level as well as in a cross-border, transnational, interregional or macro-regional context. [Am. 45]

4a.   The Commission shall allocate a percentage of IPA III resources to prepare the beneficiaries listed in Annex I for the participation in the European Structural and Investment Funds (ESIF), in particular in the European Social Fund (ESF). [Am. 46]

5.  The ERDF shall contribute to programmes or measures established for cross–border cooperation between the beneficiaries listed in Annex I and one or more Member States. These programmes and measures shall be adopted by the Commission in accordance with Article 16. The amount of the contribution from IPA-CBC shall be determined pursuant to Article 10 (3) of the ETC Regulation, with a maximum threshold for an IPA III contribution set at 85 %. IPA-Cross Border Cooperation programmes shall be managed in accordance with the ETC Regulation. [Am. 47]

6.  IPA III may contribute to transnational and interregional cooperation programmes or measures that are established and implemented under the ETC Regulation and in which the beneficiaries listed in Annex I to this Regulation participate.

7.  Where appropriate, other Union programmes may contribute to actions established under this Regulation in accordance with Article 8, provided that the contributions do not cover the same costs. This Regulation may also contribute to measures established under other Union programmes, provided that the contributions do not cover the same costs. In such cases, the work programme covering those actions shall establish which set of rules shall be applicable.

8.  In duly justified circumstances and in order to ensure the coherence and effectiveness of Union financing or to foster regional cooperation, the Commission may decide to extend the eligibility of action programmes and measures referred to in Article 8(1) to countries, territories and regions other than those referred in Annex I, where the programme or measure to be implemented applied is of a global, regional or cross-border nature. [Am. 48]

CHAPTER II

STRATEGIC PLANNING

Article 6

Policy framework and general principles

1.  The enlargement policy framework defined by the European Council and the Council, the agreements that establish a legally binding relationship with the beneficiaries listed in Annex I, as well as relevant resolutions of the European Parliament, communications of the Commission or joint Communications of the Commission and the High Representative of the Union for Foreign Affairs and Security Policy, shall constitute the overall comprehensive policy framework for the implementation application of this regulation. The Commission shall ensure coherence between the assistance and the overall enlargement policy framework.

The VP/HR and the Commission shall ensure coordination between the Union’s external action and the enlargement policy within the framework of the policy objectives set out in Article 3.

The Commission shall coordinate programming under this Regulation with appropriate involvement of the EEAS.

The enlargement policy framework shall be the basis on which assistance is provided. [Am. 49]

2.  Programmes and actions under this Regulation shall mainstream climate change, environmental protection, human rights conflict prevention and resolution, migration and forced displacement, security, social and regional cohesion, poverty reduction and gender equality and shall, where applicable, address interlinkages between Sustainable Development Goals(26), to promote integrated actions that can create co-benefits and meet multiple objectives in a coherent way. They shall aim to contribute at least 16 % of the overall financial envelope to climate objectives. [Am. 50]

3.  The Commission and the Member States shall cooperate in ensuring coherence and shall strive to avoid duplication between assistance provided under IPA III and other assistance provided by the Union, the Member States and the European Investment Bank, in line with the established principles for strengthening operational coordination in the field of external assistance, and for the harmonisation of policies and procedures, in particular the international principles on development effectiveness(27) Coordination shall involve regular consultations, frequent exchanges of information during the different phases of the assistance cycle and inclusive meetings aimed at coordinating the assistance and shall constitute a key step in the programming processes of the Union and the Member States. The assistance shall aim at ensuring alignment with the Union strategy for smart, sustainable and inclusive growth, effective and efficient implementation of the funds, arrangements for the partnership principle and an integrated approach to territorial development. [Am. 51]

3a.  The Commission shall act in partnership with the beneficiaries. The partnership shall include, as appropriate, competent national and local authorities, as well as civil society organisations, enabling them to play a meaningful role during the design, implementation and monitoring phases.

The Commission shall encourage coordination among the relevant stakeholders. IPA III assistance shall strengthen the capacities of civil society organisations, including, as appropriate, as direct beneficiaries of assistance. [Am. 52]

4.  The Commission, in liaison with the Member States, shall also take the necessary steps to ensure coordination and complementarity with multilateral and regional organisations and entities, such as international organisations and financial institutions, agencies and non-Union donors.

CHAPTER III

IMPLEMENTATION PROGRAMMING FRAMEWORK AND EXECUTION [Am. 53]

Article 7

IPA programming framework

1.  Assistance under IPA III shall be based on This Regulation shall be supplemented by an IPA programming framework for the delivery establishing further provisions on how of the specific objectives referred to in Article 3 shall be pursued. The IPA programming framework shall be established by the Commission for the duration of the Union's multiannual financial framework by means of delegated acts, in accordance with paragraph 3 of this Article.

The Commission shall submit to the European Parliament the relevant programming documents in due time prior to the start of the programming period. Those documents shall lay down the indicative allocations per thematic window and, where available, per country/region, covering expected results and the choice of assistance arrangements. [Am. 54]

1a.  The European Parliament and the Council shall authorise the annual appropriations within the limits of the multiannual financial framework for the period from 2021 to 2027. [Am. 55]

2.  The IPA programming framework shall take relevant resolutions and positions of the European Parliament and national strategies and sector policies into due account. [Am. 56]

Assistance shall be targeted and adjusted to the specific situation of the beneficiaries listed in Annex I, taking into account further efforts needed to meet the membership criteria as well as the capacities of those beneficiaries. Assistance shall be differentiated in scope and intensity according to needs, commitment to reforms and progress in implementing those reforms.

3.  Without prejudice to paragraph 4, of this Article, the Commission shall adopt the IPA programming framework shall be adopted by the Commission , including the arrangements to enact the “fair share” principle, by means of an implementing act. That implementing act shall be adopted in accordance with the examination procedure of the Committee referred to in Article 16. delegated acts in accordance with Article 14. The IPA programming framework shall expire by 30 June 2025 at the latest. The Commission shall adopt a new IPA programming framework by 30 June 2025, based on the mid-term evaluation being consistent with the other external financing instruments and taking into account relevant resolutions of the European Parliament. The Commission may also review, where necessary, the effective implementation of the IPA programming framework, in particular where there are substantive changes in the policy framework referred to in Article 6 and taking into account relevant resolutions of the European Parliament. [Am. 57]

4.  The programming framework for cross border cooperation with Member States shall be adopted by the Commission in accordance with Article 10 (1) of the ETC Regulation.

5.  The IPA programming framework shall include be based on clear and verifiable performance indicators set out in Annex IV for assessing progress with regard to attainment of the targets set therein., inter alia, progress and results in the areas of:

(a)  democracy, the rule of law and an independent and efficient justice system;

(b)  human rights and fundamental freedoms, including the rights of persons belonging to minorities and vulnerable groups;

(c)  gender equality and women's rights;

(d)  the fight against corruption and organised crime;

(e)  reconciliation, peace-building good neighbourly relations;

(f)  freedom of the media;

(g)  tackling climate change in compliance with the obligations set out in the Paris Agreement.

The Commission shall include progress against those indicators in its annual reports.

The performance-based approach under this Regulation shall be subject to a regular exchange of views in the European Parliament and in the Council. [Am. 123]

Article 7a

Mid-term review and evaluation

1.  The Commission shall adopt a new IPA programming framework based on the mid-term evaluation. No later than 30 June 2024, the Commission shall submit a mid-term evaluation report on the application of this Regulation. The mid-term evaluation report shall cover the period from 1 January 2021 to 31 December 2023 and shall examine the Union contribution to the achievement of the objectives of this Regulation, by means of indicators measuring the results delivered and any findings and conclusions concerning the impact of this Regulation.

The European Parliament may provide input to that evaluation. The Commission and the EEAS shall organise a consultation with key stakeholders and beneficiaries, including civil society organisations. The Commission and EEAS shall give particular attention to ensure that the most marginalised are represented.

The Commission shall also evaluate the impact and effectiveness of its actions per area of intervention, and the effectiveness of programming, by means of external evaluations. The Commission and the EEAS shall take into account proposals and views of the European Parliament and the Council on independent external evaluations. The interim evaluation shall assess how the Union performed on targets established by this Regulation.

2.  The mid-term evaluation report shall also address efficiency, the added value, the functioning of the simplified and streamlined external financing architecture, internal and external coherence, and the continued relevance of the objectives of this Regulation, the complementarity and synergies between the actions funded, the contribution of the measures to consistent Union external action, and the degree to which the public in recipient countries are aware of Union financial support, where appropriate.

3.  The mid-term evaluation report shall be undertaken for the specific purpose of improving the application of Union funding. It shall inform decisions on the renewal, modification or suspension of the types of actions implemented under this Regulation.

4.  The mid-term evaluation report shall also contain consolidated information from relevant annual reports on all funding governed by this Regulation, including external assigned revenues and contributions to trust funds offering a breakdown of spending by beneficiary country, use of financial instruments, commitments and payments.

5.  The Commission shall communicate the conclusions of the evaluations, accompanied by its observations, to the European Parliament, to the Council and to Member States. The results shall feed into programme design and resource allocation.

6.  The Commission shall associate all relevant stakeholders, including civil society organisations, in the evaluation process of the Union's funding provided under this Regulation, and may, where appropriate, seek to undertake joint evaluations with the Member States with close involvement of the beneficiaries.

7.  The Commission shall submit the mid-term evaluation report referred to in this Article to the European Parliament and to the Council, accompanied, if appropriate, by legislative proposals setting out necessary amendments to this Regulation.

8.  At the end of the period of application of this Regulation, but no later than three years after the end of the period specified in Article 1, the Commission shall carry out a final evaluation of the Regulation on the same terms as the mid-term evaluation referred to in this Article. [Am. 124]

Article 7b

Suspension of assistance

1.  Where a beneficiary fails to respect the principle of democracy, the rule of law, good governance, respect for human rights and fundamental freedoms, or nuclear safety standards, or violates the commitments taken in the relevant agreements concluded with the Union or consistently backslides on one or more of the Copenhagen criteria, the Commission shall be empowered, in accordance with Article 14, to adopt delegated acts to amend Annex I to this Regulation in order to suspend or partially suspend Union assistance. In the event of a partial suspension, the programmes for which the suspension applies shall be indicated.

2.  Where the Commission finds that the reasons justifying the suspension of assistance no longer apply, it shall be empowered to adopt delegated acts, in accordance with Article 14, to amend Annex I in order to reinstate Union assistance.

3.  In cases of partial suspension, Union assistance shall primarily be used to support civil society organisations and non-state actors for measures aimed at promoting human rights and fundamental freedoms and supporting democratisation and dialogue processes in partner countries.

4.  The Commission shall take due account of relevant European Parliament resolutions in its decision-making. [Am. 125]

Article 7c

Governance

A horizontal steering group composed of all relevant Commission and EEAS services and chaired by the VP/HR or a representative of that office shall be responsible for the steering, coordination and management of this instrument throughout the management cycle in order to ensure consistency, efficiency, transparency and accountability of all Union external financing. The VP/HR shall ensure overall political coordination of the Union’s external action. Throughout the whole cycle of programming, planning and application of the instrument, the VP/HR and the EEAS shall work with the relevant members and services of the Commission, identified on the basis of the nature and objectives of the action foreseen, building upon their expertise. The VP/HR, the EEAS and the Commission shall prepare all proposals for decisions in accordance with the Commission’s procedures and shall submit them for adoption.

The European Parliament shall be fully involved in the design, programming, monitoring and evaluation phases of the external financing instruments in order to guarantee political control and democratic scrutiny and accountability of Union funding in the field of external action. [Am. 126]

Article 8

Implementing Executing measures and methods [Am. 62]

1.  Assistance under IPA III shall be implemented executed in direct management or in indirect management in accordance with the Financial Regulation through annual or multi-annual action plans and measures as referred to in Chapter III of Title II of [NDICI Regulation]. Chapter III of Title II of [NDICI Regulation] shall apply to this Regulation with the exception of paragraph 1 of Article 24 [eligible persons and entities] Chapter III a. [Am. 63]

1a.  Indirect management may be reversed if the beneficiary is unable or unwilling to administer the awarded funds in accordance with the established rules, principles and objectives under this Regulation. In the event of a beneficiary’s failure to observe the principles of democracy, the rule of law and respect for human rights and fundamental freedoms or in the event of violation of the commitments taken in the relevant agreements concluded with the Union, the Commission may, in specific policy areas or programmes, revert from indirect management with that beneficiary to indirect management by one or more entrusted entities other than a beneficiary or to direct management. [Am. 64]

1b.  The Commission shall hold a dialogue with the European Parliament, and take into account the European Parliament’s views on areas in which the latter is running its own assistance programmes, such as capacity-building and election observation. [Am. 65]

2.  Under this Regulation, action plans may be adopted for a period of up to seven years.

2a.  The Commission shall keep the European Parliament fully involved on issues related to the planning and implementation of measures pursuant to this Article, including any envisaged substantial changes or allocations. [Am. 66]

2b.  Disbursement of the general or sector budget support shall be conditional upon satisfactory progress being made towards achieving the objectives agreed with a beneficiary.

The Commission shall apply the budget support conditionality criteria set out in the Article 23(4) of the NDICI Regulation. It shall take steps to reduce or suspend Union funding through budget support in cases of systemic irregularities in the management and control systems or unsatisfactory progress being made in achieving the objectives agreed with the beneficiary.

The reintroduction of assistance by the Commission following the suspension referred to in this Article shall be accompanied by a targeted assistance to national audit authorities. [Am. 67]

Chapter IIIa

Execution [Am. 68]

Article 8a

Action plans and measures

1.  The Commission shall adopt annual or multiannual action plans or measures. The measures may take the form of individual measures, special measures, support measures or exceptional assistance measures. Action plans and measures shall specify for each action the objectives pursued, the expected results and main activities, the methods of application, the budget and any associated support expenditures.

2.  Action plans shall be based on programming documents, except for cases referred to in paragraphs 3 and 4.

When necessary, an action may be adopted as an individual measure before or after the adoption of action plans. Individual measures shall be based on programming documents, except for cases referred to in paragraph 3 and in other duly justified cases.

In the event of unforeseen needs or circumstances, and when funding is not possible from more appropriate sources, the Commission is empowered to adopt delegated acts in accordance with Article 34 of the NDICI Regulation laying down special measures not based on the programming documents.

3.  Annual or multiannual action plans and individual measures may be used to execute rapid response actions referred to in Article 4(4)(b) of the NDICI Regulation.

4.  The Commission may adopt exceptional assistance measures for rapid response actions as referred to in Article 4(4)(a) of the NDICI Regulation.

5.  Measures taken under Article 19 (3) and (4) may have a duration of up to 18 months, which may be extended twice by a further period of up to six months, up to a total maximum duration of 30 months, in the event of objective and unforeseen obstacles to execution, provided that there is no increase in the financial amount of the measure.

In cases of protracted crisis and conflict, the Commission may adopt a second exceptional assistance measure of a duration of up to 18 months. In duly justified cases, further measures may be adopted where the continuity of the Union’s action under this paragraph is essential and cannot be ensured by other means. [Am. 69]

Article 8b

Support measures

1.  Union financing may cover expenditure to support the execution of the Instrument and the achievement of its objectives, including administrative support associated with the preparation, follow-up, monitoring, control, audit and evaluation activities necessary for such execution, as well as expenditure at headquarters and Union delegations for the administrative support needed for the programme, and to manage operations financed under this Regulation, including information and communication actions, and corporate information technology systems.

2.  When support expenditure is not included in the action plans or measures referred to in Article 8c, the Commission shall adopt, where applicable, support measures. Union financing under support measures may cover:

(a)  studies, meetings, information, awareness-raising, training, preparation and exchange of lessons learnt and best practices, publication activities and any other administrative or technical assistance expenditure necessary for the programming and management of actions, including remunerated external experts;

(b)  research and innovation activities and studies on relevant issues and the dissemination thereof;

(c)  expenditure related to the provision of information and communication actions, including the development of communication strategies and corporate communication and visibility of the political priorities of the Union. [Am. 70]

Article 8c

Adoption of action plans and measures

1.  The Commission shall adopt action plans and measures by means of a Commission decision in accordance with the Financial Regulation.

2.  The Commission shall take account of the relevant policy approach of the Council and the European Parliament for the planning and subsequent application of such action plans and measures, in the interests of consistency of the Union's external action.

The Commission shall immediately inform the European Parliament about the planning of action plans and measures pursuant to this Article, including the financial amounts envisaged, and shall also inform the European Parliament when making substantial changes or extensions to that assistance. As soon as possible following the adoption or substantial modification of a measure, and in any case within one month thereof, the Commission shall report to the European Parliament and to the Council and give an overview of the nature and the rationale of the measure adopted, its duration, budget and its context, including the complementarity of that measure with other ongoing and planned Union assistance. For exceptional assistance measures, the Commission shall also indicate whether to what extent and how it will ensure the continuity of the policy executed through the exceptional assistance by medium- and long-term assistance under this Regulation.

3.  Before adopting action plans and measures not based on programming documents pursuant to Article 8a(2), other than for cases referred to in Article 8a (3) and (4), the Commission shall adopt a delegated act in accordance with Article 14 in order to supplement this Regulation by setting out the specific objectives to be pursued, the results expected, the instruments to be used, the main activities and the indicative financial allocations of these action plans and measures.

4.  Appropriate human rights, social and environmental screening, including for climate change and biodiversity impacts, shall be undertaken at the level of actions, in accordance with the applicable legislative acts of the Union, including Directive 2011/92/EU(28) of the European Parliament and of the Council and Council Directive 85/337/EEC(29), comprising, where applicable, an environmental impact assessment for environmentally sensitive actions, in particular for major new infrastructure.

Additionally, ex-ante human rights, gender, social and labour impact assessments, as well as conflict analysis and risk assessment shall be conducted.

Where relevant, human rights, social and strategic environmental assessments shall be used in the execution of sectoral programmes. The Commission shall ensure the involvement of interested stakeholders in these assessments and public access to the results of such assessments. [Am. 127]

Article 8d

Methods of cooperation

1.  Financing under this Instrument shall be implemented by the Commission, as provided for by the Financial Regulation, either directly by the Commission itself, by Union delegations and by executive agencies, or indirectly through any of the entities listed in Article 62 (1) c) of the Financial Regulation.

2.  Financing under this Instrument may also be provided through contributions to international, regional or national funds, such as those established or managed by the EIB, by Member States, by partner countries and regions or by international organisations, or other donors.

3.  The entities listed in Article 62(1)(c) of the Financial Regulation and in Article 29(1) of the NDICI Regulation shall annually fulfil their reporting obligations under Article 155 of the Financial Regulation. The reporting requirements for any of these entities are laid down in the framework partnership agreement, the contribution agreement, the agreement on budgetary guarantees or the financing agreement.

4.  Actions financed under this Instrument may be implemented by means of parallel or joint co-financing.

5.  In the case of parallel co-financing, an action is split into a number of clearly identifiable components which are each financed by the different partners providing co-financing in such a way that the end-use of the financing can always be identified.

6.  In the case of joint co-financing, the total cost of an action is shared between the partners providing the co-financing and the resources are pooled in such a way that it is no longer possible to identify the source of financing for any given activity undertaken as part of the action.

7.  Cooperation between the Union and its partners may take the form, inter alia, of:

(a)  triangular arrangements whereby the Union coordinates with third countries its assistance funding to a partner country or region;

(b)  administrative cooperation measures such as twinning between public institutions, local authorities, national public bodies or private law entities entrusted with public service tasks of a Member State and those of a partner country or region, as well as cooperation measures involving public sector experts dispatched from the Member States and their regional and local authorities;

(c)  contributions to the necessary costs of setting up and administering a public-private partnership including support of broad participation by setting up independent third party CSO body to assess and monitor public-private partnership set-ups;

(d)  sector policy support programmes whereby the Union provides support to a partner country's sector programme;

(e)  contributions to the cost of the countries' participation in Union programmes and actions implemented by Union agencies and bodies, as well as bodies or persons entrusted with implementation of specific actions in the Common Foreign and Security Policy pursuant to Title V TEU;

(f)  interest rate subsidies. [Am. 72]

Article 8e

Forms of Union funding and methods of application

1.  The Union funding may be provided through the types of financing envisaged by the Financial Regulation and in particular:

(a)  grants;

(b)  procurement contracts for services, supplies or works;

(c)  budget support;

(d)  contributions to trust funds set up by the Commission, in accordance with Article 234 of the Financial Regulation;

(e)  financial instruments;

(f)  budgetary guarantees;

(g)  blending;

(h)  debt relief in the context of internationally agreed debt relief programme;

(i)  financial assistance;

(j)  remunerated external experts.

2.  When working with stakeholders of partner countries, the Commission shall take into account their specificities, including their needs and the relevant context, when defining the financing modalities, the type of contribution, the award modalities and the administrative provisions for the management of grants, with a view to reaching and best responding to the widest possible range of such stakeholders. That assessment shall take into account the conditions for a meaningful participation and involvement of all stakeholders, in particular local civil society. Specific modalities shall be encouraged in accordance with the Financial Regulation, such as partnership agreements, authorisations of financial support to third parties, direct award or eligibility-restricted calls for proposals, or lump sums, unit costs and flat-rate financing as well as financing not linked to costs as envisaged in Article 125(1) of the Financial Regulation. Those different modalities shall ensure transparency, traceability and innovation. Cooperation between local and international NGOs shall be encouraged in order to bolster local civil society’s capacities with a view to achieving its full participation in development programmes.

3.  In addition of the cases referred to in Article 195 of the Financial Regulation, the direct award procedure may be used for;

(a)  low-value grants to human rights defenders and to mechanisms for the protection of human rights defenders at risk, to finance urgent protection actions, where appropriate without the need for co-financing, as well as to mediators and other civil society actors involved in crisis and armed conflict related dialogue, conflict resolution, reconciliation and peace-building;

(b)  grants, where appropriate without the need for co-financing, to finance actions in the most difficult conditions where the publication of a call for proposals would be inappropriate including situations where there is a serious lack of fundamental freedoms, threats to democratic institutions, escalation of crisis, armed conflict where human security is most at risk or where human rights organisations and defenders, mediators and other civil society actors involved in crisis and armed conflict related dialogue, reconciliation and peace-building operate under the most difficult conditions. Such grants shall not exceed EUR 1 000 000 and shall have a duration of up to 18 months, which may be extended by a further 12 months in the event of objective and unforeseen obstacles to their application;

(c)  grants to the Office of the UN High Commissioner for Human Rights as well as to Global Campus, the European Inter-University Centre for Human Rights and Democratisation, providing a European Master’s Degree in Human Rights and Democratisation, and its associated network of universities delivering human rights postgraduate diplomas, including scholarships to students, researchers, teachers, and human rights defenders from third countries.

(d)  Small projects as described in Article 23a of the NDICI Regulation.

Budget support as referred to in point (c) of paragraph 1, including through sector reform performance contracts, shall be based on country ownership, mutual accountability and shared commitments to universal values, democracy, human rights, gender equality, social inclusion and human development and the rule of law, and aims at strengthening partnerships between the Union and partner countries. It shall include reinforced policy dialogue, capacity development, and improved governance, complementing partners' efforts to collect more and spend better in order to support sustainable and inclusive socio-economic development which benefits all, decent job creation, with particular attention to young people, the reduction of inequalities and poverty eradication with due regard to local economies, environmental and social rights.

Any decision to provide budget support shall be based on budget support policies agreed by the Union, a clear set of eligibility criteria and a careful assessment of the risks and benefits. One of the key determinants of that decision shall be an assessment of the commitment, record and progress of partner countries with regard to democracy, human rights and the rule of law.

4.  Budget support shall be differentiated in such a way as to respond better to the political, economic and social context of the partner country, taking into account situations of fragility.

When providing budget support in accordance with Article 236 of the Financial Regulation, the Commission shall clearly define and monitor criteria for budget support conditionality, including progress in reforms and transparency, and shall support the development of parliamentary control, national audit capacities, CSO participation in monitoring and increased transparency and public access to information and development of strong public procurement systems that support local economic development and local businesses.

5.  Disbursement of the budget support shall be based on indicators demonstrating satisfactory progress being made towards achieving the objectives agreed with the partner country.

6.  Financial instruments under this Regulation may take forms such as loans, guarantees, equity or quasi-equity, investments or participations, and risk-sharing instruments, whenever possible and in accordance with the principles laid down in Article 209(1) of the Financial Regulation under the lead of the EIB, a multilateral European finance institution, such as the European Bank for Reconstruction and Development, or a bilateral European finance institution, such as bilateral development banks, possibly pooled with additional other forms of financial support, both from Member States and third parties.

Contributions to Union financial instruments under this Regulation may be made by Member States as well as any entity referred to in Article 62(1)(c) of the Financial Regulation.

7.  Those financial instruments may be grouped into facilities for application and reporting purposes

8.  The Commission and the EEAS shall not enter into new or renewed operations with entities incorporated or established in jurisdictions defined under the relevant Union policy as non-cooperative, or that are identified as high risk third countries pursuant to Article 9(2) of Directive(EU) 2015/849 of the European Parliament and of the Council(30), or that do not effectively comply with Union or internationally agreed tax standards on transparency and exchange of information.

9.  The Union's funding shall not generate or activate the collection of specific taxes, duties or charges.

10.  Taxes, duties and charges imposed by partner countries may be eligible for financing under this Regulation. [Am. 73]

Article 8f

Carry-overs, annual instalments, commitment appropriations, re-payments and revenue generated by financial instruments

1.  In addition to Article 12(2) of the Financial Regulation, unused commitment and payment appropriations under this Regulation shall be automatically carried over and may be committed up to 31 December of the following financial year. The carried-over amount shall be used first in the following financial year.

The Commission shall submit to the European Parliament and to the Council information on appropriations which were automatically carried over, including the amounts involved, in line with Article 12(6) of the Financial Regulation.

2.  In addition to the rules laid down in Article 15 of the Financial Regulation on making appropriations available again, commitment appropriations corresponding to the amount of decommitments made as a result of total or partial non implementation of an action under this Regulation shall be made available again to the benefit of the budget line of origin.

References to Article 15 of the Financial Regulation in Article 12(1)(b) of the Regulation laying down the multi annual financial framework shall be understood as including a reference to this paragraph for the purpose of this Regulation.

3.  Budgetary commitments for actions extending over more than one financial year may be broken down over several years into annual instalments, in line with Article 112(2) of the Financial Regulation.

The third subparagraph of Article 114(2) of the Financial Regulation shall not apply to these multiannual actions. The Commission shall automatically de-commit any portion of a budgetary commitment for an action that by 31 December of the fifth year following that of the budgetary commitment has not been used for the purpose of pre-financing or making interim payments or for which no certified statement of expenditure or any payment request has been submitted.

Paragraph 2 of this Article shall also apply to annual instalments.

4.  By way of derogation from Article 209(3) of the Financial Regulation repayments and revenues generated by a financial instrument shall be assigned to the budget line of origin as internal assigned revenue after deduction of management costs and fees. Every five years, the Commission shall examine the contribution made to the achievement of Union objectives, and the effectiveness, of existing financial instruments. [Am. 74]

Article 9

Cross border cooperation

1.  Up to 3 % of the financial envelope shall be indicatively allocated to cross-border cooperation programmes between the beneficiaries listed in Annex I and the Member States, in line with their needs and priorities.

2.  The Union co-financing rate at the level of each priority shall not be higher than 85 % of the eligible expenditure of a cross-border cooperation programme. For technical assistance the Union co-financing rate shall be 100 %.

3.  The level of pre-financing for cross-border cooperation with member states shall be determined in the work programme, in accordance with needs of the beneficiaries listed in Annex I and may exceed the percentage referred to in Article 49 of ETC Regulation.

4.  Where cross border cooperation programmes are discontinued in accordance with Article 12 of the ETC Regulation, support from this Regulation to the discontinued programme that remains available may be used to finance any other actions eligible under this Regulation. In such a case, if there are no eligible actions to be financed in the current year, appropriations may be carried over to the following year. [Am. 75]

CHAPTER IV

ELIGIBILITY AND OTHER SPECIFIC PROVISIONS

Article 10

Eligibility for funding under IPA III

1.  Tenderers, applicants and candidates from the following countries shall be eligible for funding under IPA III:

(a)  Member States, beneficiaries listed in Annex I to this Regulation, contracting parties to the Agreement on the European Economic Area and countries covered by the Annex I to the NDICI Regulation, and

(b)  countries for which reciprocal access to external assistance is established by the Commission. Reciprocal access may be granted, for a limited period of at least one year, whenever a country grants eligibility on equal terms to entities from the Union and from countries eligible under this Regulation. The Commission shall decide on the reciprocal access after consultation of the recipient country or countries concerned.

CHAPTER V

EFSD+ AND BUDGETARY GUARANTEES

Article 11

Financial instruments and guarantee for external actions

1.  The beneficiaries listed in Annex I shall be eligible to the European Fund for Sustainable Development Plus (EFSD+) and to External Action Guarantee as provided for in Chapter IV of Title II of the NDICI Regulation. To this end IPA III shall contribute to provisioning related to the guarantee for external actions referred to in Article 26 of the NDICI Regulation proportionally to the investments carried out to the benefit of the beneficiaries listed in Annex I to this Regulation.

CHAPTER VI

MONITORING AND, REPORTING, EVALUATION AND COMMUNICATION [Am. 76]

Article 12

Monitoring, audit, evaluation and protection of the Union's financial interests

1.  Chapter V of Title II of the NDICI Regulation in relation to monitoring, reporting and evaluation shall apply to this Regulation.

2.  Indicators to monitor implementation execution and progress of the IPA III towards the achievement of the specific objectives set out in Article 3 are set in Annex IV to this Regulation. [Am. 77]

3.  For cross-border cooperation with Member States, the indicators shall be those referred in Article 33 of the ETC Regulation.

4.  In addition to the indicators referred to in Annex IV, the enlargement reports and the Commission's assessments of the Economic Reform Programmes shall be taken into account in the results framework of IPA III assistance. [Am. 78]

4a.   The Commission shall submit and present the interim and final evaluation reports referred to in Article 32 of the NDICI Regulation to the European Parliament and the Council. Those reports shall be made public by the Commission. [Am. 79]

5.  In addition to Article 129 of the Financial Regulation on the protection of the financial interests of the Union, under indirect management, beneficiaries listed in Annex I shall report the irregularities including fraud which have been the subject of a primary administrative or judicial finding, without delay, to the Commission and keep the latter informed of the progress of administrative and legal proceeding. Reporting shall be done by electronic means, using the Irregularity Management System, established by the Commission. The Commission shall support the development in the beneficiaries of parliamentary control and audit capacities and increased transparency and public access to information. The Commission, the VP/HR and in particular Union delegations in the beneficiaries shall ensure that all funding allocations under indirect management are carried out in a transparent, depoliticised and non-partial manner, including by equitable distribution, reflecting the needs of the regions and local municipalities. [Am. 80]

CHAPTER VII

FINAL PROVISIONS

Article 13

Delegation of power

The Commission shall be empowered to adopt delegated acts in accordance with Article 14 to amend Annexes II, III and IV to this Regulation.

Article 14

Exercise of the delegation

1.  The power to adopt delegated acts is conferred on the Commission subject to the conditions laid down in this Article.

2.  The power to adopt delegated acts as referred to in Article 13 7(3), Article 7a, Articles 7b (1) and (2), Article 8c (3), and Articles 13 and 15 shall be conferred on the Commission. [Am. 128]

3.  The delegation of power referred to in Article 13 may be revoked at any time by the European Parliament or by the Council. A decision to revoke shall put an end to the delegation of the power specified in that decision. It shall take effect the day following the publication of the decision in the Official Journal of the European Union or at a later date specified therein. It shall not affect the validity of any delegated acts already in force.

4.  As soon as it adopts a delegated act, the Commission shall notify it simultaneously to the European Parliament and to the Council.

5.  A delegated act adopted pursuant to Article 13 shall enter into force only if no objection has been expressed either by the European Parliament or the Council within a period of two months of notification of that act to the European Parliament and the Council or if, before the expiry of that period, the European Parliament and the Council have both informed the Commission that they will not object. That period shall be extended by two months at the initiative of the European Parliament or of the Council.

Article 14a

Democratic Accountability

1.  In order to enhance dialogue between the institutions and services of the Union, in particular the European Parliament, the Commission and the EEAS, foster the overall coherence of all External Financing Instruments, and to ensure greater transparency and accountability, as well as the expediency in the adoption of acts and measures by the Commission, the European Parliament may invite the Commission and the EEAS to appear before it to discuss the strategic orientations and guidelines for the programming under this Regulation. That dialogue may take place prior to the adoption of delegated acts and of the draft annual budget by the Commission or, at the request of the European Parliament, the Commission or the EEAS, on an ad hoc basis in view of major political developments.

2.  Where a dialogue referred to in paragraph 1 is due to take place, the Commission and the EEAS shall present to the European Parliament all relevant documents in relation to that dialogue. Where the dialogue is related to the annual budget, consolidated information on all action plans and measures adopted or planned in accordance with Article 8 c , information on cooperation per country, region and thematic area, and the use of rapid response actions and the External Action Guarantee shall be provided.

3.  The Commission and the EEAS shall take the utmost account of the position expressed by the European Parliament. In the event that the Commission or the EEAS do not take the European Parliament's positions into account, they shall provide due justification.

4.  The Commission and the EEAS, in particular through the steering group pursuant to Article 7 c, shall be responsible for keeping the European Parliament informed about the state of this Regulation’s application, in particular about ongoing measures, actions and results. [Am. 82]

Article 15

Adoption of further implementing rules [Am. 83]

1.  Specific rules establishing uniform conditions for implementing this Regulation in particular in relation to the structures to be set up in preparation for accession and to rural development assistance, shall be adopted in accordance with the examination procedure referred to in Article 16 by means of delegated acts. [Am. 84]

2.  Where reference is made to this paragraph, Article 5 of The Commission shall adopt action plans and measures by decision in accordance with the Financial Regulation (EU) No. 182/2011 shall apply. [Am. 85]

Article 16

Committee

1.  The Commission shall be assisted by a committee (the ‘Instrument for Pre-accession Assistance Committee’). That committee shall be a committee within the meaning of [Regulation (EU) No 182/2011].

2.  Where the opinion of the committee is to be obtained by a written procedure, the procedure shall be terminated without result when, within the time limit for delivery of the opinion, the chair of the committee so decides or a simple majority of committee members so requests.

3.  An observer from the EIB shall take part in the Committee's proceedings with regard to questions concerning the EIB.

4.  The IPA III Committee shall assist the Commission and shall be competent also for legal acts and commitments under Regulation (EC) No 1085/2006, Regulation 231/2014 and the implementation of Article 3 of Regulation (EC) No 389/2006.

5.  The IPA III Committee shall not be competent for the contribution to Erasmus+ as specified in Article 5(3). [Am. 86]

Article 17

Information, communication, visibility and publicity [Am. 87]

1.  Articles 36 and 37 of [Regulation NDICI] shall apply When providing financial assistance under this Regulation, the Commission, the VP/HR and in particular the Union delegations in the beneficiaries shall take all necessary measures to ensure the visibility of the Union's financial support, including monitoring recipients' compliance with those requirements. IPA-financed actions shall be subject to the requirements set out in the Communication and Visibility Manual for EU External Actions. The Commission shall adopt guidance for Union-funded projects on visibility and communication actions for each beneficiary. [Am. 88]

1a.  The Commission shall take measures to strengthen strategic communication and public diplomacy for communicating the values of the Union and highlighting the added value of the Union’s support. [Am. 89]

1b.  The recipients of Union funding shall acknowledge the origin of the Union funding and ensure its proper visibility by:

(a)  providing a statement highlighting the support received from the Union in a visible manner on documents and communication material relating to the implementation of the funds, including on an official website, where such a website exists; and

(b)  promoting the actions and their results by providing coherent, effective and proportionate targeted information to multiple audiences, including the media and the public.

The Commission shall implement information and communication actions relating to this Regulation, as well as the actions set out by it and the results achieved. Financial resources allocated to this Regulation shall also contribute to the corporate communication of the political priorities of the Union, insofar as those priorities are directly related to the objectives referred to in Article 3 and in Annexes II and III. [Am. 90]

Article 18

Transitional provisions

1.  This Regulation shall not affect the continuation or modification of the actions concerned, until their closure, under Regulation 231/2014 (IPA II) and Regulation (EC) No 1085/2006 (IPA) which shall continue to apply to the actions concerned until their closure. Chapter III of Title II of the NDICI Regulation, formerly under Regulation 236/2014, shall apply to these actions with the exception of paragraph 1 of Article 24.

2.  The financial envelope for IPA III may also cover technical and administrative assistance expenses necessary to ensure the transition between IPA III and the measures adopted under its predecessor, IPA II.

3.  If necessary, appropriations may be entered in the budget beyond 2027 to cover the expenses provided for in Article 4(2), to enable the management of actions not completed.

Article 19

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 2021 until 31 December 2027. [Am. 91]

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

ANNEX I

Albania

Bosnia and Herzegovina

Iceland

Kosovo(31)

Montenegro

Serbia

Turkey

The former Yugoslav Republic of North Macedonia [Am. 129]

ANNEX II

Thematic priorities for assistance

Assistance may, as appropriate, address the following thematic priorities:

(a)  Establishing and promoting from an early stage the proper functioning of the institutions necessary in order to secure the rule of law. Interventions in this area shall aim at: separation of powers, establishing independent, accountable and efficient judicial systems, including transparent and merit-based recruitment and promoting judicial cooperation, evaluation and promotion systems and effective disciplinary procedures in cases of wrongdoing; ensuring the establishment of robust adequate systems to protect the borders, manage migration flows and provide asylum to those in need; developing effective tools to prevent and fight organised crime, trafficking in human beings, migrants smuggling, drug trafficking, money laundering/financing of terrorism and corruption; promoting and protecting human rights, including rights of the child, gender equality, rights of persons belonging to minorities including Roma as well as lesbian, gay, bisexual, transgender and intersex persons fundamental freedoms, including freedom of the media and data protection; [Am. 92]

(b)  Reforming public administrations in line with the Principles of Public Administration. Interventions shall aim at: strengthening public administration reform frameworks; improving strategic planning and inclusive and evidence-based policy and legislative development; enhancing professionalisation and de-politicisation of public service by embedding meritocratic principles; promoting transparency and accountability; improving quality and delivery of services, including adequate administrative procedures and the use of citizen centred eGovernment; strengthening public financial management and the production of reliable statistics;

(c)  Strengthening economic governance: Interventions shall aim at supporting participation in the economic reform programme (ERP) process and systematic cooperation with international financial institutions on fundamentals of economic policy and strengthening of multilateral economic institutions. Enhancing the capacity to strengthen macroeconomic stability, social cohesion and supporting progress towards sustainable development and becoming a functioning market economy with the capacity to cope with competitive pressures and market forces within the Union; [Am. 93]

(d)  Strengthening the Union and its partners' capacity to prevent conflict, build peace good neighbourly relations and address pre-and post-crisis including through early warning and conflict-sensitive risk analysis; promoting people to people networking, reconciliation, accountability, international justice peace-building and confidence-building measures, including setting up the Regional commission for the establishment of facts about war crimes and other serious violations of human rights committed in the former Yugoslavia (RECOM), as well as supporting capacity building in support of security and development (CBSD) actions, strengthening the capabilities of cyber defence and strategic communication to foster systematic uncovering of disinformation; [Am. 94]

(e)  Strengthening the capacities, independence and plurality of civil society organisations and social partners' organisations, including professional associations, in beneficiaries listed in Annex I and encouraging networking at all levels among Union-based organisations and those of beneficiaries listed in Annex I, enabling them to engage in an effective dialogue with public and private actors. Assistance shall endeavour to be accessible to a variety of organisations in beneficiaries that is as wide as possible;[Am. 95]

(f)  Promoting the alignment of partner countries’ rules, standards, policies and practices to those of the Union, including CFSP, public procurement and state aid rules; [Am. 96]

(g)  Strengthening access to and quality of education, training and lifelong learning at all levels, and offering support to cultural and creative sectors and sport. Interventions in this area shall aim at: promoting equal access to quality inclusive and community-based early childhood education and care, primary and secondary education, improving the provision of basic skills; increasing educational attainment levels, reducing early school-leaving and reinforcing teachers’ training; empowering children and youth and enabling them to reach their full potential. Developing vocational education and training (VET) systems and promoting work-based learning systems to facilitate the transition to the labour market; improving the quality and relevance of higher education; encouraging alumni related activities; enhancing access to lifelong learning and physical activity and supporting investment in education and training and sport infrastructure particularly with a view to reducing territorial disparities and fostering non-segregated education and including through the use of digital technologies; [Am. 97]

(h)  Fostering quality employment and access to the labour market. Interventions in this area shall aim at: tackling high unemployment and inactivity by supporting sustainable labour market integration in particular of young people (especially those not in employment, education or training (NEET)), women, long-term unemployed and all under-represented groups. Measures shall stimulate quality job creation and support the effective enforcement of labour rules and internationally agreed standards across the entire territory including by fostering adherence to the key principles and rights as referred to in the European Pillar of Social Rights. Other key areas of intervention shall be to support gender equality, promoting employability and productivity, the adaptation of workers and enterprises to change, the establishment of a sustainable social dialogue and the modernisation and strengthening of labour market institutions such as public employment services and labour inspectorates; [Am. 98]

(i)  Promoting social protection and inclusion and combating poverty. Interventions in this area shall aim at modernising social protection systems to provide effective, efficient, and adequate protection throughout all stages of a person’s life, fostering social inclusion, promoting equal opportunities and addressing inequalities and poverty, and promoting the transition from institutional to family and community based care. Interventions in this area shall also focus on: integrating marginalised communities such as the Roma; combating discrimination based on sex, racial or ethnic origin, religion or belief, disability, age or sexual orientation; enhancing access to affordable, sustainable and high quality family and community based services, such as inclusive and non-segregated early childhood education and care, housing, healthcare and essential social services and long term care, including through the modernisation of social protection systems. Actions that contribute to any form of segregation or social exclusion shall not be supported; [Am. 99]

(j)  Promoting smart, sustainable, inclusive, safe transport and removing bottlenecks in key network infrastructures, by investing in projects with high EU value-added. The investments should be prioritised according to their relevance to TEN-T connections with the EU, cross-border links, job creation, contribution to sustainable mobility, reduced emissions, environmental impact, safe mobility, in synergy with the reforms promoted by the Transport Community Treaty; [Am. 100]

(k)  Improving the private-sector environment and competitiveness of enterprises, in particular SMEs, including smart specialisation, as key drivers of growth, job creation and cohesion. Priority shall be given to sustainable projects which improve the business environment; [Am. 101]

(l)  Improving access to digital technologies and services and strengthening research, technological development and innovation by investing in digital connectivity, digital trust and security, digital skills and entrepreneurship as well as research infrastructure and enabling environment and promoting networking and collaboration;

(m)  Contributing to the security and safety of food and water supply and the maintenance of diversified and viable farming systems in vibrant rural communities and the countryside; [Am. 102]

(n)  Protecting and improving the quality of the environment, addressing environmental degradation and halting biodiversity loss, promoting the conservation and sustainable management of terrestrial and marine ecosystems and renewable natural resources, promoting resource efficiency, sustainable consumption and production and supporting the transition to green and circular economies, contributing to the reduction of greenhouse gas emissions, increasing resilience to climate change and promoting climate action governance and information and energy efficiency. IPA III shall promote policies to support the shift towards a resource-efficient, safe and sustainable low-carbon economy and strengthen disaster resilience as well as disaster prevention, preparedness and response. It shall also promote a high level of nuclear safety, radiation protection, and the application of efficient and effective safeguards of nuclear material in third countries as well as the establishment of frameworks and methodologies for the application of efficient and effective safeguards for nuclear material;

(o)  Promoting the highest nuclear safety standards, including nuclear safety culture, emergency preparedness, responsible and safe management of spent fuel and radioactive waste, decommissioning and remediation of former nuclear sites and installations; radiation protection and the accountancy and control of nuclear materials;

(p)  Increasing the ability of the agri-food and fisheries sectors to cope with competitive pressure and market forces as well as to progressively align with the Union rules and standards, with a view to raising the capacity to exports to the Union market, while pursuing economic, social and environmental goals in balanced territorial development of rural and coastal areas; [Am. 103]

(pa)   Promoting activities and improving long-term strategies and policies aimed at preventing and countering radicalisation and violent extremism. [Am. 104]

ANNEX III

Thematic priorities for assistance for cross-border cooperation

Assistance for cross-border cooperation may, as appropriate, address the following thematic priorities:

(a)  promoting employment, labour mobility and social and cultural inclusion across borders through, inter alia: integrating cross-border labour markets, including cross-border mobility; joint local employment initiatives; information and advisory services and joint training; gender equality; equal opportunities; integration of immigrants' communities and vulnerable groups; investment in public employment services; and supporting investment in public health and as well as the transition to family- and community-based social services; [Am. 105]

(b)  protecting the environment and promoting climate change adaptation and mitigation, risk prevention and management through, inter alia: joint actions for environmental protection; promoting sustainable use of natural resources, coordinated maritime spatial planning, resource efficiency and circular economy, renewable energy sources and the shift towards a safe and sustainable low-carbon, green economy; promoting investment to address specific risks, ensuring disaster resilience and disaster prevention, preparedness and response;

(c)  promoting sustainable transport and improving public infrastructures by, inter alia, reducing isolation through improved access to transport, digital networks and services and investing in cross-border water, waste and energy systems and facilities;

(d)  promoting the digital economy and society by inter alia the deployment of digital connectivity, the development of eGovernment services, digital trust and security as well as digital skills and entrepreneurship;

(da)   promoting the removal of unnecessary barriers to trade, including bureaucratic hurdles, tariffs and non-tariffs barriers; [Am. 106]

(e)  encouraging tourism, sport and cultural and natural heritage; [Am. 107]

(f)  investing in youth, sport, education and skills through, inter alia, ensuring skills and qualifications recognition, developing and implementing joint education, vocational training, training schemes and infrastructure supporting joint youth activities; [Am. 108]

(g)  promoting local and regional governance and, including cross-border cooperation between administrations with a view to fostering reconciliation and peace-building, enhancing the planning and administrative capacity of local and regional authorities; [Am. 109]

(ga)   investing in the capacity-building of civil society organisations; [Am. 110]

(gb)  promoting cross-border cooperation between administrations with a view to fostering reconciliation and peace-building, including setting up the Regional commission for the establishment of facts about war crimes and other serious violations of human rights committed in the former Yugoslavia (RECOM); [Am. 111]

(h)  enhancing competitiveness, the business environment and the development of small and medium-sized enterprises, trade and investment through, inter alia, promotion and support to entrepreneurship, in particular small and medium-sized enterprises, and development of local cross-border markets and internationalisation;

(i)  strengthening research, technological development, innovation and digital technologies through, inter alia, promoting the sharing of human resources and facilities for research and technology development;

(ia)   improving cross-border police and judicial cooperation and information exchange to facilitate the investigation and prosecution of cross-border organised crime and linked cases of economic and financial crime and corruption, trafficking and smuggling. [Am. 112]

ANNEX IV

List of Key Performance Indicators

The following list of key performance indicators and their annual evolution shall be used to help measure the Union’s contribution to the achievement of its specific objectives and the progress made by the beneficiaries: [Am. 113]

1.  Composite indicator(32) on the readiness of enlargement countries on fundamental areas of the political accession criteria (including Democracy, Rule of Law (Judiciary, Fight against corruption and Fight against organised crime) and Human Rights) (source European Commission);

1a.  Composite indicator on partners´ efforts related to reconciliation, peace-building, good neighbourly relations and international obligations, gender equality and women's rights; [Am. 114]

1b.  Absence of violence indicator in conjunction with reductions in drivers of conflict (e.g. political or economic exclusion) against a baseline assessment; [Am. 115]

1c.  The share of the beneficiaries’ citizens that think they are well informed about the Union's assistance under this Regulation (source: European Commission); [Am. 116]

2.  Readiness of enlargement countries on public administration reform (source European Commission);

3.  Composite indicator on the readiness of candidate countries and potential candidates to the EU acquis (source European Commission);

3a.  The rate and annual evolution of the alignment with the CFSP decisions and measures (source EEAS); [Am. 117]

4.  Composite indicator on the readiness of candidate countries and potential candidates on fundamental areas of the economic criteria (functioning market economy and competitiveness) (source European Commission);

5.  Public social security expenditure (percentage of GDP) (source, as indicated by ILO ) or, health expenditure, income inequality, poverty rate, Eemployment Rrate (source: and unemployment rate, as indicated by official national statistics); [Am. 118]

5a.  Changes in the GINI coefficient of a beneficiary over time; [Am. 119]

6.  Digital gap between the beneficiaries and the EU average (source: European Commission DESI index);

7.  Distance to frontier (Doing Business) score (source WB);

8.  Energy intensity measured in terms of primary energy and GDP (source EUROSTAT);

9.  Greenhouse gas emissions reduced or avoided (Ktons CO2eq) with EU support;

10.  Number of cross-border cooperation programmes concluded and implemented among IPA beneficiaries and IPA/EU MS (source, as indicated by the European Commission );[Am. 120]

10a.  The number of new organisations participating in actions and programmes over time;[Am. 121]

Indicators will, where relevant, be sex disaggregated at minimum age and gender level. [Am. 122]

(1) OJ C 110, 22.3.2019, p. 156.
(2) OJ C 86, 7.3.2019, p. 8.
(3)OJ C 110, 22.3.2019, p. 156.
(4)OJ C 86, 7.3.2019, p. 8.
(5) Position of the European Parliament of 27 March 2019.
(6)Regulation (EU) No 231/2014 of the European Parliament and of the Council of 11 March 2014 establishing an Instrument for Pre-accession Assistance (IPA II) (OJ L 77, 15.3.2014, p. 11).
(7)The 'fundamentals first' approach links rule of law and fundamental rights with the two other crucial areas of the accession process: economic governance – strengthened focus on economic development and improved competitiveness – and the strengthening of democratic institutions and public administration reform. Each of the three fundamentals is of crucial importance for the reform processes in the candidate countries and potential candidates and addresses key concerns of the citizens.
(8)COM(2018)0065
(9)European Pillar of Social Rights solemnly proclaimed by the European Parliament, the Council and the Commission at the Gothenburg Social Summit for Fair Jobs and Growth, Gothenburg 17 November 2017.
(10)OJ C 373, 20.12.2013, p. 1.
(11)Regulation (EU) .../... of the European Parliament and of the Council of... (OJ ...).
(12) Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the Council of 18 July 2018 on the financial rules applicable to the general budget of the Union, amending Regulations (EU) No 1296/2013, (EU) No 1301/2013, (EU) No 1303/2013, (EU) No 1304/2013, (EU) No 1309/2013, (EU) No 1316/2013, (EU) No 223/2014, (EU) No 283/2014, and Decision No 541/2014/EU and repealing Regulation (EU, Euratom) No 966/2012 (OJ L 193, 30.7.2018, p. 1).
(13)Regulation (EU, Euratom) No 883/2013 of the European Parliament and of the Council of 11 September 2013 concerning investigations conducted by the European Anti-Fraud Office (OLAF) and repealing Regulation (EC) No 1073/1999 of the European Parliament and of the Council and Council Regulation (Euratom) No 1074/1999,(OJ L 248, 18.9.2013, p. 1.
(14)Council Regulation (EC, Euratom) No 2988/95 of 18 December 1995 on the protection of the European Communities financial interests (OJ L 312, 23.12.1995, p.1).
(15)Council Regulation (Euratom, EC) No 2185/96 of 11 November 1996 concerning on-the-spot checks and inspections carried out by the Commission in order to protect the European Communities' financial interests against fraud and other irregularities (OJ L 292, 15.11.96 , p. 2).
(16)Council Regulation (EU) 2017/1939 of 12 October 2017 implementing enhanced cooperation on the establishment of the European Public Prosecutor’s Office (‘the EPPO’) (OJ L 283, 31.10.2017, p. 1).
(17)Directive (EU) 2017/1371 of the European Parliament and of the Council of 5 July 2017 on the fight against fraud to the Union's financial interests by means of criminal law (OJ L 198, 28.7.2017, p. 29).
(18) Interinstitutional Agreement between the European Parliament, the Council of the European Union and the European Commission on Better Law-Making (OJ L 123, 12.5.2016, p. 1).
(19)Regulation (EU) No 182/2011 of the European Parliament and of the Council of 16 February 2011 laying down the rules and general principles concerning mechanisms for control by Member States of the Commission's exercise of implementing powers (OJ L 55, 28.2.2011, p. 13).
(20)Council Regulation (EC) No 1085/2006 of 17 July 2006 establishing an Instrument for Pre-Accession Assistance (IPA) (OJ L 210, 31.7.2006, p. 82).
(21)Council Regulation (EC) No 389/2006 of 27 February 2006 establishing an instrument of financial support for encouraging the economic development of the Turkish Cypriot community and amending Regulation (EC) No 2667/2000 on the European Agency for Reconstruction (OJ L 65, 7.3.2006, p. 5).
(22)COM(2018)0374 - Proposal for a Regulation of the European Parliament and of the Council on specific provisions for the European territorial cooperation goal (Interreg) supported by the European Regional Development Fund and external financing instruments
(23)COM(2018)0372 Proposal for a Regulation of the European Parliament and of the Council on the European Regional Development Fund and on the Cohesion Fund.
(24)COM(2018)0382 Proposal of the European Parliament and of the Council on the European Social Fund Plus (ESF+)
(25)COM(2018)0392 Proposal for a Regulation of the European Parliament and of the Council establishing rules on support for strategic plans to be drawn up by Member States under the Common agricultural policy (CAP Strategic Plans) and financed by the European Agricultural Guarantee Fund (EAGF) and by the European Agricultural Fund for Rural Development (EAFRD) and repealing Regulation (EU) No 1305/2013 of the European Parliament and of the Council and Regulation (EU) No 1307/2013 of the European Parliament and of the Council.
(26)https://ec.europa.eu/europeaid/policies/sustainable-development-goals_en
(27)https://ec.europa.eu/europeaid/policies/eu-approach-aid-effectiveness_en
(28)Directive 2011/92/EU of the European Parliament and of the Council of 13 December 2011 on the assessment of the effects of certain public and private projects on the environment (codification) (OJ L 26, 28.1.2012, p. 1).
(29)Council Directive 85/337/EEC of 27 June 1985 on the assessment of the effects of certain public and private projects on the environment (OJ L 175, 5.07.1985, p. 40).
(30) Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, amending Regulation (EU) No 648/2012 of the European Parliament and of the Council, and repealing Directive 2005/60/EC of the European Parliament and of the Council and Commission Directive 2006/70/EC (OJ L 141, 5.6.2015, p. 73–117).
(31)*This designation is without prejudice to positions on status, and is in line with UNSCR 1244/1999 and the ICJ Opinion on the Kosovo declaration of independence.
(32)The three composite indicators are elaborated by the European Commission on the basis of the reports on Enlargement, which also draw from multiple, independent sources.


Framework for the recovery and resolution of central counterparties ***I
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Resolution
Consolidated text
European Parliament legislative resolution of 27 March 2019 on the proposal for a regulation of the European Parliament and of the Council on a framework for the recovery and resolution of central counterparties and amending Regulations (EU) No 1095/2010, (EU) No 648/2012, and (EU) 2015/2365 (COM(2016)0856 – C8-0484/2016 – 2016/0365(COD))
P8_TA(2019)0300A8-0015/2018

(Ordinary legislative procedure: first reading)

The European Parliament,

–  having regard to the Commission proposal to Parliament and the Council (COM(2016)0856),

–  having regard to Article 294(2) and Article 114 of the Treaty on the Functioning of the European Union, pursuant to which the Commission submitted the proposal to Parliament (C8‑0484/2016),

–  having regard to Article 294(3) of the Treaty on the Functioning of the European Union,

–  having regard to the reasoned opinions submitted, within the framework of Protocol No 2 on the application of the principles of subsidiarity and proportionality, by the Italian Senate, the Spanish Parliament and the Romanian Senate asserting that the draft legislative act does not comply with the principle of subsidiarity,

–  having regard to the opinion of the European Central Bank of 20 September 2017(1),

–  having regard to the opinion of the European Economic and Social committee of 29 March 2017(2)

–  having regard to Rule 59 of its Rules of Procedure,

–  having regard to the report of the Committee on Economic and Monetary Affairs (A8-0015/2018),

1.  Adopts its position at first reading hereinafter set out;

2.  Calls on the Commission to refer the matter to Parliament again if it replaces, substantially amends or intends to substantially amend its proposal;

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

Position of the European Parliament adopted at first reading on 27 March 2019 with a view to the adoption of Regulation (EU) 2019/… of the European Parliament and of the Council on a framework for the recovery and resolution of central counterparties and amending Regulations (EU) No 1095/2010, (EU) No 648/2012, and (EU) 2015/2365

P8_TC1-COD(2016)0365


(Text with EEA relevance)

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the Functioning of the European Union, and in particular Article 114 thereof,

Having regard to the proposal from the European Commission,(3)

After transmission of the draft legislative act to the national Parliaments,

Having regard to the opinion of the European Economic and Social Committee,(4)

Having regard to the opinion of the European Central Bank,(5)

Acting in accordance with the ordinary legislative procedure,

Whereas:

(1)  Financial markets are pivotal for the functioning of modern economies. The more integrated they are, the greater the potential for efficient allocation of economic resources will be, potentially benefitting economic performance. However, in order to improve the functioning of the single market in financial services, it is important to have procedures in place to deal with market failures and to ensure that if a financial institution or a financial market infrastructure that is active in this market faces financial distress or is at the point of failure, such an event does not de-stabilise the entire financial market and damage growth across the wider economy. Central counterparties (CCPs) are key components of financial markets, stepping in between participants to act as the buyer to every seller and the seller to every buyer, and playing a central role in processing financial transactions and managing exposures to diverse risks inherent in those transactions. CCPs centralise the handling of counterparties' transactions and positions, and honour the obligations created by the transactions and receive adequate collateral from their members as margin and as contributions to default funds.

(2)  Central counterparties (CCPs) are key components of global financial markets, stepping in between participants to act as the buyer to every seller and the seller to every buyer, and playing a central role in processing financial transactions and managing exposures to diverse risks inherent in those transactions. CCPs centralise the handling of counterparties' transactions and positions, and honour the obligations created by the transactions and require adequate collateral from their members as margin and as contributions to default funds.

(3)  The integration of Union financial markets has meant that CCPs have evolved from primarily serving domestic needs and markets to constituting critical nodes in Union financial markets more widely. CCPs authorised in the Union today clear several product classes, from listed and over-the-counter (OTC) financial and commodity derivatives to cash equities, bonds and other products such as repos. They provide their services across national borders to a broad range of financial and other institutions across the Union. While some CCPs authorised in the Union remain focussed on domestic markets, they are all systemically important in at least their home markets.

(4)  As a significant amount of the financial risk of the Union financial system is processed by and concentrated in CCPs on behalf of clearing members and their clients, effective regulation and robust supervision of CCPs is essential. In force since August 2012, Regulation (EU) No 648/2012 of the European Parliament and of the Council(6) requires CCPs to observe high prudential, organisational and conduct of business standards. Competent authorities are tasked with the full oversight of their activities, working together within supervisory colleges which group together relevant authorities for the specific tasks allocated to them. In accordance with commitments entered into by G20 leaders since the financial crisis, Regulation (EU) No 648/2012 also requires standardised OTC derivatives to be centrally cleared by a CCP. As the obligation to centrally clear OTC derivatives comes into effect, the volume and range of business done by CCPs is likely to increase which may, in turn, provide additional challenges for the CCPs' risk management strategies.

(5)  Regulation (EU) No 648/2012 has contributed to the increased resilience of CCPs and of wider financial markets against the broad range of risks processed and concentrated in CCPs. However, no system of rules and practices can prevent existing resources from being inadequate in managing the risks incurred by the CCP, including one or more defaults by clearing members. Faced with a scenario of severe distress or impending failure, financial institutions should in principle remain subject to normal insolvency proceedings. However, as the financial crisis has shown, in particular during a period of prolonged economic instability and uncertainty, such proceedings can disrupt functions critical to the economy, jeopardising financial stability. Normal corporate insolvency procedures may not always ensure sufficient speed of intervention or adequately prioritise the continuation of the critical functions of financial institutions for the sake of preserving financial stability. In order to prevent these negative consequences of normal insolvency proceedings, it is necessary to create a special resolution framework for CCPs.

(6)  The crisis also highlighted the lack of adequate tools to preserve the critical functions provided by failing financial institutions. It further demonstrated the lack of frameworks to enable cooperation and coordination amongst authorities, in particular those located in different Member States or jurisdictions, to ensure the implementation of swift and decisive action. Without such tools and lack of cooperation and coordination frameworks, Member States were compelled to save financial institutions using taxpayers' money in order to stem contagion and reduce panic. While CCPs were not direct recipients of public financial support in the crisis, they were indirect beneficiaries of the rescue measures undertaken in relation to banks and were protected from the effects which banks failing on their obligations would otherwise have had on them. A recovery and resolution framework for CCPs is therefore necessary to prevent reliance on taxpayers' money in the event of their disorderly failure. Such a framework should also address the possibility of CCPs entering into resolution for reasons other than the default of one or several of their clearing members.

(7)  The objective of a credible recovery and resolution framework is to ensure, to the greatest extent possible, that CCPs set out measures to recover from financial distress, to maintain the critical functions of a CCP which is failing or likely to fail while winding down the remaining activities through normal insolvency proceedings, and to preserve financial stability while minimising the cost of a CCP failure on end clients and taxpayers. The recovery and resolution framework further bolsters CCPs' and authorities' preparedness to mitigate financial stress and provide authorities with further insight into CCPs' preparations for stress scenarios. It also provides authorities with powers to prepare for the potential resolution of a CCP and deal with the declining health of a CCP in a coordinated manner, thus contributing to the smooth functioning of financial markets.

(8)  Currently, there are no harmonised provisions for the recovery and resolution of CCPs across the Union. Some Member States have already enacted legislative changes that require CCPs to draw up recovery plans and that introduce mechanisms to resolve failing CCPs. Furthermore, there are considerable substantive and procedural differences between Member States on the laws, regulations and administrative provisions which govern the insolvency of CCPs. The absence of common conditions, powers and processes for recovery and resolution of CCPs is likely to constitute a barrier to the smooth operation of the internal market and hinder cooperation between national authorities when dealing with the failure of a CCP and applying appropriate loss allocation mechanisms on its members, both in the Union and globally. This is particularly true where different approaches mean that national authorities do not have the same level of control or the same ability to resolve CCPs. Those differences in recovery and resolution regimes may affect CCPs and their members differently across Member States, potentially creating competitive distortions across the internal market. The absence of common rules and tools for how distress or failure in a CCP would be handled can affect participants' choice to clear and CCPs' choice of their place of establishment, thereby preventing CCPs from fully benefiting from their fundamental freedoms within the single market. In turn, this could discourage participants from accessing CCPs across borders in the internal market and hinder further integration in Europe’s capital markets. Common recovery and resolution rules in all Member States are therefore necessary to ensure that CCPs are not limited in exercising their internal market freedoms by the financial capacity of Member States and their authorities to manage their failure.

(9)  The review of the regulatory framework applicable to banks and other financial institutions which has taken place in the wake of the crisis, and in particular the strengthening of banks’ capital and liquidity buffers, better tools for macro-prudential policies and comprehensive rules on the recovery and resolution of banks, have reduced the likelihood of future crises and enhanced the resilience of all financial institutions and market infrastructures, including CCPs, to economic stress, whether caused by systemic disturbances or by events specific to individual institutions. Since 1 January 2015, a recovery and resolution regime for banks has applied in all Member States pursuant to Directive 2014/59/EU of the European Parliament and of the Council(7).

(10)  Building on the approach for bank recovery and resolution, competent authorities and resolution authorities should be prepared and have adequate recovery and resolution tools at their disposal to handle situations involving CCP failures. However, due to their different functions and business models, the risks inherent in banks and CCPs are different. Specific tools and powers are therefore needed for CCP failure scenarios caused both by the failure of the CCP's clearing members or as a result of non-default events.

(11)  The use of a Regulation is necessary in order to complement and build on the approach established by Regulation (EU) No 648/2012, which provides for uniform prudential requirements applicable to CCPs. Setting recovery and resolution requirements in a Directive could create inconsistencies by the adoption of potentially different national laws in respect of an area otherwise governed by directly applicable Union law and increasingly characterised by the cross-border provision of CCPs' services. It is therefore appropriate to also adopt uniform and directly applicable rules on recovery and resolution of CCPs.

(12)  In order to ensure consistency with existing Union legislation in the area of financial services, as well as the greatest possible level of financial stability across the Union, the recovery and resolution regime should apply to all CCPs subject to the prudential requirements laid down in Regulation (EU) No 648/2012, regardless of whether they have a bank licence. While there may be differences in the risk profile associated with alternative corporate structures, this Regulation treats CCPs as independent entities under any group or market structure and ensures that a CCP's recovery and resolution plan is free-standing, irrespective of the structure of the CCP's group. This relates in particular to the requirements to hold sufficient financial resources at an entity level to manage a default or non-default situation.

(13)  In order to ensure that resolution actions are taken efficiently and effectively, and in line with resolution objectives, Member States should appoint public administrative authorities or authorities entrusted with public administrative powers to perform functions and tasks in relation to resolution. Member States should also ensure that appropriate resources are allocated to those resolution authorities. Where a Member State designates the authority responsible for the prudential supervision of CCPs as a resolution authority, the independence of the decision-making process should be ensured and all necessary arrangements should be put in place to separate the supervisory and resolution functions to avoid any conflicts of interest and risk of regulatory forbearance.

(14)  In light of the consequences that the failure of a CCP and the subsequent actions may have on the financial system and the economy of a Member State, as well as the possible ultimate need to use public funds as a last resort to resolve a crisis, the Ministries of Finance or other relevant ministries in the Member States should be closely involved, at an early stage, in the process of recovery and resolution.

(15)  As CCPs often provide services across the Union, effective recovery and resolution requires cooperation among competent authorities and resolution authorities within supervisory and resolution colleges, notably at the preparatory stages of recovery and resolution. That includes the assessment of recovery plans developed by the CCP, the assessment of resolution plans prepared by the resolution authority of the CCP, and addressing any impediments to resolvability.

(16)  Resolution of CCPs should strike the balance between the need, on the one hand, for procedures that take into account the urgency of the situation and allow for efficient, fair and timely solutions and, on the other, the necessity to protect financial stability in all the Member States where the CCP provides services. The authorities whose areas of competence would be affected by the failure of a CCP should share their views in the resolution college to achieve these objectives. Similarly, in order to ensure a regular exchange of views and coordination with relevant third countries authorities, these should be invited to participate in resolution colleges as observers where necessary. Authorities should always take into account the impact of their decisions on the financial stability in the Member States where the CCP’s operations are critical or important for local financial markets, including where clearing members are located and where linked trading venues and financial market infrastructures are established.

(16a)  In light of the cross-border global nature of certain CCP operations, decisions of resolution authorities can have economic and fiscal effects in other jurisdictions. To the extent reasonably possible, such cross-border implications should be borne in mind in recovery and resolution situations, whilst also taking into account the sovereignty of fiscal authorities in other jurisdictions.

(17)  In order to prepare the decisions of ESMA in relation to the tasks allocated to it and to ensure the comprehensive involvement of EBA and its members in the preparation of these decisions, ESMA should create an internal Resolution Committee and should invite relevant EBA competent authorities to participate as observers.

(18)  In order to address the potential failure of a CCP in an effective and proportionate manner, authorities should take into account a number of factors when exercising their recovery and resolution powers such as the nature of the CCP's business, legal and organisational structure, risk profile, size, legal status and interconnectedness to the financial system. The authorities should also take account of whether its failure and subsequent winding up under normal insolvency proceedings would be likely to have a significant negative effect on financial markets, on other financial institutions, or on the wider economy.

(19)  In order to deal in an efficient manner with failing CCPs, authorities should have the power to impose preparatory measures on CCPs. A minimum standard should be established as regards the contents and information to be included in recovery plans to ensure that all CCPs in the Union have sufficiently detailed plans for recovery should they face financial distress. Such plans should contemplate an appropriate range of scenarios envisaging both systemic stress and stress specific to the CCP. The scenarios should contemplate situations of stress that would be more extreme than those used for the purposes of regular stress testing under Chapter XII of Commission Delegated Regulation (EU) No 153/2013, while remaining plausible, such as the failure of more than two clearing members to which the CCP has the largest exposures and one or several other CCPs. The recovery plan should form part of the operating rules of the CCP agreed contractually with clearing members. Those operating rules should further contain provisions to ensure the enforceability of recovery measures outlined in the plan in all scenarios. Recovery plans should not assume access to public financial support or expose taxpayers to the risk of loss.

(19a)  Recovery plans should ensure proper incentives for CCPs, clearing members and clients not to let the situation deteriorate further and to incentivise cooperative behaviour. In order for that incentive structure to be credible, deviations from the recovery plan should be subject to approval by the competent authority.

(20)  CCPs should prepare and regularly update their recovery plans. ▌The recovery phase in this context should start when there is a significant deterioration of the CCP's financial situation or risk of breach of its prudential requirements under Regulation (EU) 648/2012. This should be indicated with relation to a framework of qualitative or quantitative indicators included in the recovery plan.

(20a)  Recovery plans should ensure that the sequencing of the use of recovery tools properly balances the allocation of losses between CCPs, clearing members and their clients. As a general principle, losses should be distributed between CCPs, clearing members, and their clients as a function of their ability to control the risks. This is in order to create sound incentives ex-ante and to ensure a fair allocation of losses and on that basis loss allocation also for non-default losses should be proportional to the level of responsibility of each stakeholder involved. Recovery plans should ensure that the CCP's capital is relied upon to bear first losses in default cases and even more so in non-default cases. Substantial loss absorption by clearing members should be foreseen before any tools are used that allocate losses to clients.

(21)  The CCP should submit its recovery plan to competent authorities and the supervisory college, established under Regulation (EU) No 648/2012, for a complete assessment, to be reached by joint decision of the college. The assessment should include whether the plan is comprehensive and whether it could feasibly restore the viability of the CCP, in a timely manner, including in periods of severe financial stress.

(22)  Recovery plans should comprehensively set out the actions that the CCP would take to address any unmatched outstanding obligations, uncovered loss, liquidity shortfall, or capital inadequacy, as well as the actions to replenish any depleted pre-funded financial resources and liquidity arrangements in order to restore the CCP’s viability and its continuing ability to meet its requirements for authorisation and must include sufficient loss absorption capacity to this end. The tools envisaged should be comprehensive. Each tool should be reliable, timely, and underpinned by a sound legal basis. They should create appropriate incentives for the CCP’s shareholders, members and their clients to control the risk they bring to or incur in the system, monitor the risk-taking and risk-management activities of the CCP, and participate in the default management process.

(22a)  Recovery plans should explicitly set out actions to be taken by the CCP in case of cyber-attacks where there is a potential effect of leading to a significant deterioration of their financial situation or a risk of breaching their prudential requirements under Regulation (EU) No 648/2012.

(23)  CCPs should ensure that the plans are non-discriminatory and balanced in terms of their impacts and the incentives they create. They should not disadvantage clearing members or clients in a disproportionate way. In particular, in accordance with Regulation (EU) No 648/2012 CCPs should ensure that their clearing members have limited exposures toward the CCP. CCPs should ensure that all relevant stakeholders are involved in the drawing-up of the recovery plan through their involvement in the CCP's risk committee, as the case may be, and by being appropriately consulted. Since opinions may be expected to differ among stakeholders, CCPs should establish clear processes to manage the diversity of stakeholders' views as well as any conflict of interest between those stakeholders and the CCP.

(23a)  CCPs should ensure that clients of non-defaulting clearing members are appropriately recompensed should their assets be used during the recovery process.

(24)  In view of the global nature of the markets served by CCPs, it is necessary to ensure the ability of a CCP to apply the recovery options, where necessary, to contracts or assets governed by the law of a third country or to entities based in third countries. The CCP’s operating rules should therefore include contractual provisions ensuring this ability.

(25)  Where a CCP does not present an adequate recovery plan, competent authorities should be able to require the CCP to take measures necessary to redress the material deficiencies of the plan in order to strengthen the business of the CCP and ensure that the CCP can restore its capital or match its book in case of failure. That power should allow competent authorities to take preventive action to the extent that it is necessary to address any deficiencies and therefore to meet the objectives of financial stability.

(25a)  Where a CCP in recovery has applied position and loss allocation tools, which go beyond the waterfall in Regulation (EU) No 648/2012, on non-defaulting clearing members and their clients and has not entered into resolution as a result, the competent authority should be able, once a matched book has been restored, either to require the CCP to recompense the participants for their loss through cash payments or, where appropriate, to require the CCP to issue instruments of ownership in future profits of the CCP.

(26)  Resolution planning is an essential component of effective resolution. The plans should be drawn up by the resolution authority of the CCP and jointly agreed by the relevant authorities of the resolution college. Authorities should have all the information necessary to identify and ensure the continuance of critical functions. The operating rules of the CCP that are agreed contractually with clearing members should contain provisions to ensure the enforceability of resolution measures by resolution authorities, including a resolution cash call.

(27)  Resolution authorities, on the basis of the assessment of resolvability, should have the power to require changes to the legal structure and organisation of CCPs directly or indirectly through the competent authority, to take measures which are necessary and proportionate to reduce or remove material impediments to the use of resolution tools and ensure the resolvability of the entities concerned.

(28)  Resolution plans and resolvability assessments constitute areas where day-to-day supervisory considerations are outweighed by the need to expedite and ensure swift restructuring actions in order to secure a CCP’s critical functions and safeguard financial stability. In the event of disagreement between the different members of the resolution college on decisions to be taken with regard to the CCP’s resolution plan, the assessment of the CCP’s resolvability and the decision to remove any impediments thereto, ESMA should play a mediation role in accordance with Article 19 of Regulation (EU) No 1095/2010. Such binding mediation by ESMA should nonetheless be prepared for its consideration by an ESMA internal committee, in view of the competences of ESMA members to ensure financial stability and to oversee clearing members in several Member States. Certain competent authorities under the EBA Regulation should be invited to participate as observers to that ESMA internal committee in view of the fact that such authorities carry out similar tasks under Directive 2014/59/EU. Such binding mediation should not prevent non-binding mediation in accordance with Article 31 of Regulation (EU) No 1095/2010 in other cases.

(29)  ▌Depending on the structure of the group to which the CCP belongs, it can be necessary that the recovery plan of the CCP sets out the conditions under which the provision of voluntarily agreed contractual or other binding relations such as parental guarantees or control and profit and loss transfer agreements or other forms of operational support from a parent undertaking or another group-entity to a CCP within the same group would be triggered. Transparency on such arrangements would mitigate risks to the liquidity and solvency of the group entity providing support to a CCP facing financial distress. Any change to such arrangements should be considered to be a material change for the purpose of reviewing the recovery plan.

(30)  Given the sensitivity of the information contained in the recovery and resolution plans, those plans should be subject to appropriate confidentiality provisions.

(31)  Competent authorities should transmit the recovery plans and any changes thereto to the relevant resolution authorities, and the latter should transmit the resolution plans and any changes thereto to competent authorities, thus permanently keeping every relevant authority fully informed.

(32)  In order to preserve financial stability, it is necessary that competent authorities are able to remedy the deterioration of a CCP's financial and economic situation before that CCP reaches a point at which authorities have no other alternative but to resolve it or to direct the CCP to change course where its actions could be detrimental for overall financial stability. Therefore, competent authorities should be granted early intervention powers to avoid or minimise adverse effects on financial stability or in the interests of clients that could result from the CCP’s implementation of certain measures. The early intervention powers should be conferred on competent authorities in addition to their powers provided for in the national law of Member States or under Regulation (EU) No 648/2012 for circumstances other than those considered to be early intervention. Early intervention rights shall include the power to restrict or prohibit any remuneration of equity and instruments treated as equity to the fullest extent possible without triggering outright default, including dividend payments and buybacks by the CCP and it may restrict, prohibit or freeze any payments of variable remuneration as per Directive 2013/36/EU and EBA Guidelines EBA/GL/2015/22, discretionary pension benefits or severance packages to management.

(33)  During the recovery and early intervention phases, shareholders should retain their rights in full. They lose such rights once the CCP has been put under resolution. Any remuneration of equity and instruments treated as equity, including dividend payments and buybacks by the CCP, should be restricted or prohibited, to the extent possible, in recovery.

(34)  The resolution framework should provide for timely entry into resolution before a CCP is insolvent. A CCP should be considered to be failing or likely to fail when it infringes or is likely in the near future to infringe the requirements for continuing authorisation, when its recovery has failed to restore its viability, when the assets of the CCP are or are likely in the near future to be less than its liabilities, when the CCP is or is likely in the near future to be unable to pay its debts as they fall due, or when the CCP requires public financial support. However, the fact that a CCP does not comply with all the requirements for authorisation should not justify by itself the entry into resolution. In order to allow for timely entry into resolution, a decision taken by a resolution authority to accelerate transition from recovery to resolution may only be challenged on substantive grounds on the basis that this decision was arbitrary and unreasonable at the time of the decision, based on the information then readily available.

(35)  The provision for emergency liquidity assistance from a central bank – where such a facility is available – should not be a condition that demonstrates that a CCP is or will be, in the near future, unable to pay its liabilities as they fall due. In order to preserve financial stability, in particular in the case of a systemic liquidity shortage, State guarantees on liquidity facilities provided by central banks or State guarantees of newly issued liabilities to remedy a serious disturbance in the economy of a Member State should not trigger the resolution framework provided that a number of conditions are met.

(36)  Where a CCP meets the conditions for resolution, the resolution authority of the CCP should have at its disposal a harmonised set of resolution tools and powers. Their exercise should be subject to common conditions, objectives, and general principles. The use of additional tools and powers by resolution authorities should be consistent with the resolution principles and objectives. In particular, the use of such tools or powers should not impinge on the effective resolution of cross-border groups. In view of the objective to prevent as far as possible the use of public funds and considering the difficulty in predicting the exact nature of a severe crisis in which the resolution authority would have to take action, no resolution tools should be excluded ex-ante. To address moral hazard and protect taxpayers more effectively, competent authorities should lay down clear and comprehensive measures in advance for recovering those funds from clearing participants to the extent possible.

(37)  The prime objectives of resolution should be to ensure the continuity of critical functions, to avoid adverse effects on financial stability, and to protect public funds ▌.

(38)  The critical functions of a failing CCP should be maintained, albeit re-structured with changes to the management where appropriate, through the use of resolution tools as a going concern with the use, to the largest extent possible, of private funds. This objective could be achieved either through the sale of the CCP to or its merger with a solvent third party, or by restructuring or writing down the contracts and liabilities of the CCP via the allocation of losses and the transfer of positions from the defaulting member to non-defaulting members, or by effecting a recapitalisation of the CCP through writing down its shares or writing down and converting its debt to equity. In line with the objective of maintaining the critical functions of the CCP and prior to taking the actions described above, the resolution authority should consider enforcing any existing and outstanding contractual obligations of the CCP, including in particular any contractual obligations by clearing members to meet cash calls or to take on positions of defaulting clearing members, whether through an auction or other agreed means in the CCP's operating rules, as well as any existing and outstanding contractual obligation committing parties other than clearing members to any forms of financial support. Contractual obligations should be enforced by the resolution authority in line with the way in which they would be called in under normal insolvency proceedings.

(39)  Rapid and decisive action is necessary to sustain market confidence and minimise contagion. Once the conditions for resolution have been met, the resolution authority of the CCP should not delay in taking appropriate and coordinated resolution action in the public interest. The failure of a CCP can occur under circumstances requiring an immediate reaction by the relevant resolution authority. That authority should therefore be allowed to take resolution action notwithstanding the exercise of recovery measures by the CCP or without imposing an obligation to first use the early intervention powers.

(40)  When taking resolution actions, the resolution authority of the CCP should take into account and follow the measures provided for in the resolution plans developed within the resolution college, unless the resolution authority considers, taking into account circumstances of the case, that resolution objectives will be achieved more effectively by taking actions which are not provided for in the resolution plans. The resolution authority should promptly inform the resolution college of the resolution actions they plan to undertake, in particular where such action deviates from the plan.

(41)  Interference with property rights should be proportionate to the financial stability risk. Resolution tools should therefore be applied only to those CCPs that meet the conditions for resolution, specifically where it is necessary to pursue the objective of financial stability in the public interest. Given that resolution tools and powers may disrupt the rights of shareholders, clearing members, their clients and wider creditors, resolution action should be taken only where necessary in the public interest and any interference with those rights should be compatible with the Charter. In particular, where creditors within the same class are treated differently in the context of resolution action, such distinctions should be justified in the public interest and proportionate to the risks being addressed and should be neither directly nor indirectly discriminatory on the grounds of nationality.

(42)  Affected shareholders, clearing members and creditors should not incur losses greater than those which they would have incurred if the resolution authority would not have taken resolution action in relation to the CCP and they would instead have been subject to possible outstanding obligations pursuant to the CCP's recovery plan or other arrangements in its operating rules or the CCP had been wound up in normal insolvency proceedings. In the event of a partial transfer of assets of a CCP under resolution to a private purchaser or to a bridge CCP, the residual part of the CCP under resolution should be wound up under normal insolvency proceedings.

(43)  For the purpose of protecting the right of shareholders, creditors, clearing members and their clients, clear obligations should be laid down concerning the valuation of the assets and liabilities of the CCP and the valuation of the treatment that those parties would have received if the resolution authority would not have taken resolution action. It should be possible to commence a valuation already during the recovery phase. Before any resolution action is taken, a fair and realistic valuation of the assets and liabilities of the CCP should be carried out including the price at which any termination of contracts in the CCP would be undertaken which should take into account market volatility and liquidity at the time of the resolution. Such a valuation should be subject to a right of appeal only together with the resolution decision. In addition, in certain cases, an ex-post comparison between the treatment that shareholders creditors, clearing members and their clients, have actually been afforded and the treatment they would have received if the resolution authority had not taken resolution action in relation to the CCP and if they had instead been subject to possible outstanding obligations pursuant to the CCP's recovery plan or other arrangements in its operating rules or under normal insolvency proceedings, properly taking into account any plausible adverse effects of systemic instability and market turmoil, should be carried out after resolution tools have been used. Where shareholders creditors, clearing members and their clients, have received, in payment of, or compensation for, their claims, less than the amount that they would have received if the resolution authority had not taken resolution action in relation to the CCP and if they had instead been possible outstanding obligations pursuant to the CCP's recovery plan or other arrangements in its operating rules or under normal insolvency proceedings, properly taking into account any plausible adverse effects of systemic instability and market turmoil, they should in certain cases be entitled to the payment of the difference. The calculation of the amount that they would have received should not assume provision of public financial support. As opposed to the valuation prior to the resolution action, it should be possible to challenge that comparison separately from the resolution decision. Member States should be free to decide on the procedure as to how to pay any difference of treatment that has been determined to shareholders, creditors, clearing members and their clients.

(44)  To ensure an effective resolution, the valuation process should determine as accurately as possible any losses that need to be allocated for the CCP to re-establish a matched book of outstanding positions and to meet ongoing payment obligations. The valuation of assets and liabilities of failing CCP should be based on fair, prudent and realistic assumptions at the moment when the resolution tools are used. The value of liabilities should not, however, be affected in the valuation by the financial state of the CCP. It should be possible, for reasons of urgency, that resolution authorities make a rapid valuation of the assets or the liabilities of a failing CCP. That valuation should be provisional and should apply until an independent valuation is carried out.

(45)  Upon entry into resolution, the resolution authority should ensure that any outstanding contractual obligations of the CCP, of clearing members and of other counterparties set out in the operating rules of the CCP, including outstanding recovery measures, are honoured except where the exercise of another resolution power or tool is more appropriate to mitigate adverse effects for financial stability or to secure the critical functions of the CCP in a timely manner. Losses should be absorbed by regulatory capital instruments and should be allocated to shareholders up to their capacity either through the cancellation or transfer of instruments of ownership or through severe dilution, taking into account any losses that are to be absorbed by the enforcement of any outstanding obligation towards the CCP. Where those instruments are not sufficient, resolution authorities should have the power to write down unsecured debt and unsecured liabilities, to the extent necessary, without jeopardising broader financial stability, in accordance with their ranking under applicable national insolvency law.

(46)  In case the exercise by the CCP of its recovery measures has not succeeded in stemming losses, restoring it to a balanced position in terms of having a matched book of outstanding positions or replenishing pre-funded resources comprehensively, or where the resolution authority has determined that the exercise of these actions by the CCP would be detrimental for financial stability, the exercise of loss and position allocation powers by the authority should be aimed at allocating the outstanding losses, ensuring the return of the CCP to a balanced position and replenishing the required pre-funded resources either through the continued exercise of the tools in the CCP’s operating rules or through other actions.

(47)  Resolution authorities should also ensure that the costs of the resolution of the CCP are minimised and that creditors of the same class are treated in an equitable manner. Where creditors within the same class are treated differently in the context of resolution action, those distinctions should be justified in the public interest and should be neither directly nor indirectly discriminatory on the basis of nationality or any other ground.

(48)  The recovery and resolution tools should be used to the fullest extent possible before any public sector injection of capital or equivalent public financial support to a CCP. The use of public financial support to assist in the resolution of failing institutions should comply with the relevant State aid provisions and should be treated as a tool of absolute last resort.

(49)  An effective resolution regime should minimise the costs of the resolution of a failing CCP borne by the taxpayers. It should ensure that CCPs can be resolved without jeopardising financial stability. The loss and position allocation tools should achieve that objective by ensuring that shareholders and counterparties who are among the creditors of the failing CCP suffer appropriate losses and bear an appropriate part of the costs arising from the failure of the CCP. The loss and position allocation tools should therefore give shareholders and counterparties of CCPs a stronger incentive to monitor the health of a CCP during normal circumstances in accordance with the recommendations of the Financial Stability Board21 .

(50)  In order to ensure that resolution authorities have the necessary flexibility to allocate losses and positions to counterparties in a range of circumstances, it is appropriate that those authorities are able to firstly apply the loss and position allocation tools both where the objective is to maintain the critical clearing services within CCP under resolution and subsequently, should this be necessary, transfer such critical services to a bridge CCP or a third party leaving the residual part of the CCP to cease operation and be wound up.

(51)  Where the loss and position allocation tools are applied with the objective of restoring the viability of the failing CCP to enable it to continue to operate as a going concern, the resolution should be accompanied by replacement of management, ▌and a subsequent restructuring of the CCP and its activities in a way that addresses the reasons for its failure. That restructuring should be achieved through the implementation of a business reorganisation plan ▌.

(52)  The loss and position allocation tools should be exercised with a view to re-matching the CCP’s book, stemming any further losses and obtaining additional resources to help recapitalise the CCP and replenish its prefunded resources. In order to ensure that they are effective and achieve their objective, they should be able to apply to as wide a range as possible of contracts giving rise to unsecured liabilities or creating an unmatched book for the failing CCP. They should provide for the possibility to auction defaulters’ positions among remaining clearing members, haircut outgoing variation margin payments to such members and their clients, exercise any outstanding cash calls set out in recovery plans, exercise additional resolution cash calls specifically earmarked for the resolution authority in the CCP operating rules and write-down of capital and debt instruments issued by the CCP or other unsecured liabilities and a conversion of any debt instruments into shares. If deemed necessary to achieve the resolution objectives in a timely manner, whilst minimising risks to financial stability and avoiding the use of public funds, the resolution authorities should be able to partially or fully tear up the contracts of defaulted clearing members, of product lines and of the CCP.

(53)  With due respect for the impact on financial stability and as a last resort, resolution authorities should consider only partially including some contracts from loss allocation in a number of circumstances. Where those tools are exercised only partially, the level of loss or exposure applied to other contracts may be modified subject to the "no creditor worse off principle" being respected.

(54)  Where the resolution tools have been used to transfer the critical functions or viable business of a CCP to a sound entity such as a private sector purchaser or bridge CCP, the residual part of the CCP should be liquidated within an appropriate time frame having regard to any need for the failing CCP to provide services or support to enable the purchaser or bridge CCP to carry out the activities or provide the services acquired by virtue of that transfer.

(55)  The sale of business tool should enable authorities to sell the CCP or parts of its business to one or more purchasers without the consent of shareholders. When applying the sale of business tool, authorities should make arrangements for the marketing of that CCP or part of its business in an open, transparent and non-discriminatory process, while aiming to maximise, as far as possible, the sale price.

(56)  Any net proceeds from the transfer of assets or liabilities of the CCP under resolution when applying the sale of business tool should benefit the entity left in the winding up proceedings. Any net proceeds from the transfer of instruments of ownership issued by the CCP under resolution when applying the sale of business tool should benefit the shareholders. Proceeds should be calculated net of the costs arisen from the failure of the CCP and from the resolution process.

(57)  In order to perform the sale of business in a timely manner and protect financial stability, the assessment of the buyer of a qualifying holding should be carried out in a timely manner that does not delay the application of the sale of business tool

(58)  Information concerning the marketing of a failing CCP and the negotiations with potential acquirers prior to the application of the sale-of-business tool is likely to be of systemic importance. In order to ensure financial stability, it is important that the disclosure to the public of such information required by Regulation (EU) No 596/2014 of the European Parliament and of the Council(8) may be delayed for the time necessary to plan and structure the resolution of the CCP in accordance with delays permitted under the market abuse regime.

(59)  As a CCP which is wholly or partially owned by one or more public authorities or controlled by the resolution authority, a bridge CCP should have as its main purpose ensuring that essential financial services continue to be provided to the clearing members and clients of the CCP that had been placed under resolution and that essential financial activities continue to be performed. The bridge CCP should be operated as a viable going concern entity and be put back on the market when conditions are appropriate or wound up if not longer viable.

(60)  Should all other options be practically unavailable or be demonstrably insufficient to safeguard financial stability, government participation in the shape of equity support or temporary public ownership should be possible, in accordance with applicable rules on State aid, including a restructuring of the operations of the CCP, and enable the deployed funds to be recouped over time from the clearing participants, which benefit from the financial support. The use of government stabilisation tools is notwithstanding the role of any central banks in providing liquidity to the financial system even in times of stress, that is subject to their discretion, and should not be assumed likely to occur. It should be temporary in nature. Therefore, comprehensive and credible arrangements enabling the recoupment over an appropriate period of time of the public funds provided should be established.

(61)  To ensure the ability of a resolution authority to apply the loss and position allocation tools to contracts with entities based in third countries, recognition of that possibility should be included in the operating rules of the CCP.

(62)  Resolution authorities should have all the necessary legal powers that, in different combinations, could be exercised when using the resolution tools. They should include the power to transfer instruments of ownership, assets, rights, obligations or liabilities of a failing CCP to another entity such as another CCP or a bridge CCP, the power to write down or cancel instruments of ownership, or write down or convert liabilities of a failing CCP, the power to write down variation margin, the power to enforce any outstanding obligations of third parties in relation to the CCP including recovery and resolution cash calls including those set out in the CCP's operating rules and position allocations, the power to tear up contracts of the CCP partially and fully, the power to replace the management and the power to impose a temporary moratorium on the payment of claims. The CCP and the members of its board and senior management should remain liable, subject to Member State law, under civil or criminal law for their responsibility for the failure of the CCP.

(63)  The resolution framework should include procedural requirements to ensure that resolution actions are properly notified and made public. However, as information obtained by resolution authorities and their professional advisers during the resolution process is likely to be sensitive, before the resolution decision is made public, it should be subject to an effective confidentiality regime. The fact that information on the contents and details of recovery and resolution plans and the result of any assessment of those plans may have far‑reaching effects, in particular on the undertakings concerned, must be taken into account. Any information provided in respect of a decision before it is taken, be it on whether the conditions for resolution are satisfied, on the use of a specific tool or of any action during the proceedings, must be presumed to have effects on the public and private interests concerned by the action. However, information that the resolution authority is examining a specific CCP could be enough for there to be negative effects on that CCP. It is therefore necessary to ensure that there are appropriate mechanisms for maintaining the confidentiality of such information, such as the content and details of recovery and resolution plans and the result of any assessment carried out in that context.

(64)  Resolution authorities should have ancillary powers to ensure the effectiveness of the transfer of instruments of ownership or debt instruments and assets, rights and liabilities. Subject to the safeguards, those powers should include the power to remove third parties rights from the transferred instruments or assets and the power to enforce contracts and to provide for the continuity of arrangements vis-à-vis the recipient of the transferred assets and instruments of ownership. However, the rights of employees to terminate a contract of employment should not be affected. The right of a party to terminate a contract with a CCP under resolution, or a group entity thereof, for reasons other than the resolution of the failing CCP should not be affected either. Resolution authorities should have the ancillary power to require the residual CCP that is being wound up under normal insolvency proceedings to provide services that are necessary to enable the CCP to which assets, contracts or instruments of ownership have been transferred by virtue of the application of the sale of business tool or the bridge CCP tool to operate its business.

(65)  In accordance with Article 47 of the Charter, the parties concerned have a right to due process and to an effective remedy against the measures affecting them. Therefore, the decisions taken by the resolution authorities should be subject to a right of appeal on substantive grounds if the decision was arbitrary and unreasonable at the time it was taken, given the information then readily available.

(66)  Resolution action taken by national resolution authorities may require economic assessments and a large margin of discretion. The national resolution authorities are specifically equipped with the expertise needed for making those assessments and for determining the appropriate use of the margin of discretion. Therefore, it is important to ensure that the economic assessments made by national resolution authorities in that context are used as a basis by national courts when reviewing the crisis management measures concerned.

(67)  In order to cover situations of extreme urgency, and since the suspension of any decision of the resolution authorities might impede the continuity of critical functions, it is necessary to provide that the lodging of any appeal should not result in automatic suspension of the effects of the challenged decision and that the decision of the resolution authority should be immediately enforceable.

(68)  In addition, where necessary in order to protect third parties who have acquired assets, contracts, rights and liabilities of the CCP under resolution in good faith by virtue of the exercise of the resolution powers by the authorities and to ensure the stability of the financial markets, a right of appeal should not affect any subsequent administrative act or transaction concluded on the basis of an annulled decision. In such cases, remedies for a wrongful decision should therefore be limited to the award of compensation for the damages suffered by the affected persons.

(69)  Given that resolution action may be required to be taken urgently due to serious financial stability risks in the Member State and the Union, any procedure under national law relating to the application for ex-ante judicial approval of a crisis management measure and the court's consideration of such an application should be swift. This is without prejudice to the right that interested parties might have in making an application to the court to set aside the decision for a limited period after the resolution authority has taken the crisis management measure.

(70)  It is in the interest of an efficient resolution, and in order to avoid conflicts of jurisdiction, that no normal insolvency proceedings for the failing CCP be opened or continued whilst the resolution authority is exercising its resolution powers or using the resolution tools, except at the initiative of, or with the consent of, the resolution authority. It is useful and necessary to suspend, for a limited period, certain contractual obligations so that the resolution authority has time to put into practice the resolution tools. This should not, however, apply to obligations of a failing CCP towards systems designated under Directive 98/26/EC of the European Parliament and of the Council23, including other central counterparties and central banks. Directive 98/26/EC reduces the risk associated with participation in payment and securities settlement systems, in particular by reducing disruption in the event of the insolvency of a participant in such a system. To ensure that those protections apply appropriately in crisis situations, whilst maintaining appropriate certainty for operators of payment and securities systems and other market participants, a crisis prevention measure or a resolution action should not be deemed to be insolvency proceedings within the meaning of Directive 98/26/EC, provided that the substantive obligations under the contract continue to be performed. However, the operation of a system designated under or the right to collateral security guaranteed by Directive 98/26/EC should not be undermined.

(71)  In order to ensure that resolution authorities, when transferring assets and liabilities to a private sector purchaser or bridge CCP, have an adequate period to identify contracts that need to be transferred, it might be appropriate to impose proportionate restrictions on counterparties' rights to close out, accelerate or otherwise terminate financial contracts before the transfer is made. Such a restriction would be necessary to allow authorities to obtain a true picture of the balance sheet of the failing CCP, without the changes in value and scope that extensive exercise of termination rights would entail. In order to interfere with the contractual rights of counterparties to the minimum extent necessary, the restriction on termination rights should apply only in relation to the crisis prevention measure or resolution action, including the occurrence of any event directly linked to the application of such a measure, and rights to terminate arising from any other default, including failure to pay or deliver margin, should remain.

(72)  In order to preserve legitimate capital market arrangements in the event of a transfer of some, but not all, of the assets, contracts, rights and liabilities of a failing CCP, it is appropriate to include safeguards to prevent the splitting of linked liabilities, rights and contracts, as appropriate. Such a restriction on selected practices in relation to linked contracts and related collateral should extend to contracts with the same counterparty covered by security arrangements, title transfer financial collateral arrangements, set-off arrangements, close out netting agreements, and structured finance arrangements. Where the safeguard applies, resolution authorities should seek to transfer all linked contracts within a protected arrangement, or leave them all with the residual failing CCP. Those safeguards should ensure that the regulatory capital treatment of exposures covered by a netting agreement for the purposes of Directive 2013/36/EU is affected to a minimum degree.

(73)  EU CCPs provide services to clearing members and clients located in third countries and third country CCPs provide services to clearing members and clients located in the EU. Effective resolution of internationally active CCPs requires cooperation between, Member States and third-country authorities. For that purpose ESMA should provide guidance on the relevant content of cooperation arrangements to be concluded with authorities of third countries. Those cooperation arrangements should ensure effective planning, decision-making and coordination in respect of internationally active CCPs. National resolution authorities should recognise and enforce third-country resolution proceedings in certain circumstances. Cooperation should also take place with regard to subsidiaries of Union or third-country CCPs and their clearing members and clients.

(74)  In order to ensure consistent harmonisation and adequate protection for market participants across the Union, the Commission should adopt draft regulatory technical standards developed by ESMA by means of delegated acts pursuant to Article 290 TFEU, in accordance with Articles 10 to 14 of Regulation (EU) No 1095/2010 to specify the content of the written arrangements and procedures for the functioning of the resolution colleges, the contents of resolution plans and elements relevant to the conduct of valuations.

(75)  The Commission should be able to suspend any clearing obligation established pursuant to Article 5 of Regulation (EU) No 648/2012, following a request from the resolution authority of a CCP in resolution or the competent authority of a clearing member of a CCP in resolution, and following a non-binding opinion by ESMA, for specific classes of OTC derivatives which are cleared by a CCP which is in resolution. The decision to suspend should be adopted only if it is necessary to preserve financial stability and market confidence, in particular to avoid contagion effects and to prevent counterparties and investors having high and uncertain risk exposures to a CCP. In order to adopt its decision, the Commission should take into account the resolution objectives and the criteria stated in Regulation (EU) No 648/2012 for subjecting OTC derivatives to the clearing obligation regarding those OTC derivatives for which the suspension is requested. The suspension should be of a temporary nature with a possibility of renewal. Likewise, the role of the CCP's risk committee, as set out on Article 28 of Regulation (EU) No 648/2012, should be enhanced to further encourage the CCP to manage its risks prudently and improve its resilience. Members of the risk committee should be able to inform the competent authority when the CCP does not follow the risk committee's advice, and representatives of clearing members and clients on the risk committee should be able to use information provided to monitor their exposures to the CCP, in accordance with confidentiality safeguards. Finally, resolution authorities of CCPs should also have access to all necessary information in trade repositories. Regulation (EU) No 648/2012 and Regulation (EU) 2365/2015 of the European Parliament and of the Council(9) should therefore be amended accordingly.

(76)  In order to ensure that resolution authorities of CCPs are represented in all relevant fora, and to ensure that the ESMA benefits from all expertise necessary to carry out the tasks related to the recovery and resolution of CCPs, Regulation (EU) No 1095/2010 should be amended in order to include national CCP resolution authorities in the concept of competent authorities established by that Regulation.

(77)  In order to prepare the decisions of ESMA in relation to the tasks allocated to it involving the development of draft technical standards on ex ante and ex-post valuations and on resolution colleges and plans, and of guidelines on the conditions for resolution, and on binding mediation, and to ensure the comprehensive involvement of EBA and its members in the preparation of these decisions, ESMA should create an internal Resolution Committee where relevant EBA competent authorities shall be invited to participate as observers.

(78)  This Regulation respects the fundamental rights and observes the rights, freedoms and principles recognised in particular by the Charter, and, in particular, the right to property, the right to an effective remedy and to a fair trial and the right of defence.

(79)  When taking decisions or actions under this Regulation, competent authorities and resolution authorities should always have due regard to the impact of their decisions and actions on financial stability in other jurisdictions and on the economic situation in other jurisdictions and should give consideration to the significance of any clearing member for the financial sector and the economy of the jurisdictions where such a clearing member is established.

(80)  Since the objective of this Regulation, namely the harmonisation of the rules and processes for the resolution of CCPs, cannot be sufficiently achieved by the Member States, but can rather, by reason of the effects of a failure of any CCPs in the whole Union, be better achieved at Union level, the Union may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty on European Union. In accordance with the principle of proportionality, as set out in that Article, this Regulation does not go beyond what is necessary in order to achieve that objective.

(81)  In order avoid inconsistencies between the provisions relating to the recovery and resolution of CCPs and the legal framework governing the recovery and resolution of credit institutions and investment firms, it is appropriate to defer the application of this Regulation until the date from which Member States are to apply the measures transposing [PO: Please insert reference to the Directive amending Directive 2014/59/EU].

HAVE ADOPTED THIS REGULATION:

TITLE I

SUBJECT MATTER AND DEFINITIONS

Article 1

Subject matter

This Regulation lays down rules and procedures relating to the recovery and resolution of central counterparties (CCPs) authorised in accordance with Regulation (EU) No 648/2012 and rules relating to the arrangements with third countries in the field of recovery and resolution of CCPs.

Article 2

Definitions

For the purposes of this Regulation the following definitions apply:

(1)  'CCP' means a CCP as defined in point (1) of Article 2 of Regulation (EU) No 648/2012;

(2)  'resolution college' means the college established pursuant to Article 4;

(3)  'resolution authority' means an authority designated ▌in accordance with Article 3;

(4)  'resolution tool' means a resolution tool referred to in Article 27(1);

(5)  'resolution power' means a power referred to in Article 48;

(6)  'resolution objectives' means the resolution objectives laid down in Article 21;

(7)  'competent authority' means an authority designated ▌ in accordance with Article 22 of Regulation (EU) No 648/2012;

(7a)  ‘default event’ means a scenario in which one or more clearing members fail to honour their financial obligations to the CCP;

(7b)  ‘non-default’ means a scenario in which losses are incurred by a CCP for any reason other than a default of a clearing member, such as business, custody, investment, legal or operational failures or fraud, including failures resulting from cyber-attacks, or uncovered liquidity shortfalls;

(8)  'resolution plan' means a resolution plan for a CCP drawn up in accordance with Article 13;

(9)  'resolution action' means the application of a resolution tool, or the exercise of one or more resolution powers once the conditions for resolution set out in Article 22 are met;

(10)  'clearing member' means a clearing member as defined in point 14 of Article 2 of Regulation (EU) No 648/2012;

(11)  'parent undertaking' means a parent undertaking as defined in point (15)(a) of Article 4(1) of Regulation (EU) No 575/2013;

(12)  'third-country CCP' means a CCP, the head office of which is established in a third country;

(13)  'set-off arrangement' means an arrangement under which two or more claims or obligations owed between the CCP under resolution and a counterparty can be set off against each other;

(14)  'financial market infrastructure' (FMI) means a central counterparty, a central securities depository, a trade repository, a payment system or another system defined and designated by a Member State under Article 2(a) of Directive 98/26/EC;

(15)  'client' means a client as defined in point 15 of Article 2 of Regulation (EU) No 648/2012;

(15a)  'O-SII' means other systemically important institutions as referred to in Article 131(3) of Directive 2013/36/EU;

(16)  'interoperable CCP' means a CCP which has entered into an interoperability arrangement pursuant to Title V of Regulation (EU) No 648/2012;

(18)  'recovery plan' means a recovery plan drawn up and maintained by a CCP in accordance with Article 9;

(19)  'board' means the administrative or supervisory board, or both, set up pursuant to national company law in accordance with Article 27(2) of Regulation (EU) No 648/2012;

(20)  'supervisory college' means the college referred to in Article 18(1) of Regulation (EU) No 648/2012 with the participation of the Single Resolution Board (SRB);

(21)  'capital' means capital as defined in point 25 of Article 2 of Regulation (EU) No 648/2012;

(22)  'default waterfall' means default waterfall in accordance with Article 45 of Regulation (EU) No 648/2012;

(23)  'critical functions' means activities, services or operations provided to third parties external to the CCP the discontinuance of which is likely to lead to the disruption of services that are essential to the real economy or to disrupt financial stability in one or more Member States due to the size, market share, external and internal interconnectedness, complexity or cross-border activities of a CCP or group, with particular regard to the substitutability of those activities, services or operations;

(24)  'group' means a group as defined in point 16 of Article 2 of Regulation (EU) No 648/2012;

(25)  'linked FMI' means an interoperable CCP or another FMI or a CCP with which the CCP has contractual arrangements;

(26)  ' ▌public financial support' means State aid within the meaning of Article 107(1) TFEU, or any other public financial support at supra-national level, which, if provided for at national level, would constitute State aid, that is provided in order to preserve or restore the viability, liquidity or solvency of a CCP or of a group of which such a CCP forms part;

(27)  'financial contracts' means contracts and agreements as set out in point 100 of Article 2(1) of Directive 2014/59/EU;

(28)  'normal insolvency proceedings' means collective insolvency proceedings which entail the partial or total divestment of a debtor and the appointment of a liquidator or an administrator normally applicable to CCPs under national law and either specific to those institutions or generally applicable to any natural or legal person;

(29)  'instruments of ownership' means shares, other instruments that confer ownership, instruments that are convertible into or give the right to acquire shares or other instruments of ownership, and instruments representing interests in shares or other instruments of ownership;

(30)  'designated national macroprudential authority' means the authority entrusted with the conduct of macroprudential policy referred to in Recommendation B1 of the Recommendation of the European Systemic Risk Board (ESRB) of 22 December 2011 on the macroprudential mandate of national authorities (ESRB/2011/3);

(31)  'default fund' means a default fund held by a CCP in accordance with Article 42 of Regulation (EU) No 648/2012;

(32)  'pre-funded resources' means resources which are held by and freely available to the relevant legal person;

(33)  'senior management' means the person or persons who effectively direct the business of the CCP, and the executive member or members of the board;

(34)  'trade repository' means a trade repository as defined in point 2 of Article 2 of Regulation (EU) No 648/2012 or in point 1 of Article 3 of Regulation (EU) 2015/2365 of the European Parliament and of the Council(10);

(35)  'Union State aid framework' means the framework established by Articles 107, 108 and 109 of the Treaty on the Functioning of the European Union (TFEU) and regulations and all Union acts, including guidelines, communications and notices, made or adopted pursuant to Article 108(4) or Article 109 TFEU;

(36)  'debt instruments' means bonds or other forms of unsecured transferable debt, instruments creating or acknowledging a debt, and instruments giving rights to acquire debt instruments;

(37)  'resolution cash call' means a request for cash resources to be provided by clearing members to the CCP, additional to prefunded resources, based on statutory powers available to a resolution authority in accordance with Article 31 and as laid out in the operating rules of the CCP;

(38)  'recovery cash calls' means requests for cash resources to be provided by clearing members to the CCP, additional to prefunded resources, based on contractual arrangements laid out in the operating rules of the CCP;

(39)  'transfer powers' means the powers specified in points (c) or (d) of Article 48(1) to transfer shares, other instruments of ownership, debt instruments, assets, rights, obligations or liabilities, or any combination of those items from a CCP under resolution to a recipient;

(40)  'derivative' means a derivative as defined in point 5 of Article 2 of Regulation (EU) No 648/2012;

(41)  'netting arrangement' means an arrangement under which a number of claims or obligations can be converted into a single net claim, including close-out netting arrangements under which, on the occurrence of an enforcement event (however or wherever defined) the obligations of the parties are accelerated so as to become immediately due or are terminated, and in either case are converted into or replaced by a single net claim, including 'close-out netting provisions' as defined in point (n)(i) of Article 2(1) of Directive 2002/47/EC of the European Parliament and of the Council(11) and 'netting' as defined in point (k) of Article 2 of Directive 98/26/EC;

(42)  'crisis prevention measure' means the exercise of powers to require a CCP to take measures to remedy deficiencies in its recovery plan under Article 10(8) and (9), the exercise of powers to address or remove impediments to resolvability under Article 17, or the application of an early intervention measure under Article 19;

(43)  'termination right' means a right to terminate a contract, a right to accelerate, close out, set-off or net obligations or any similar provision that suspends, modifies or extinguishes an obligation of a party to the contract or a provision that prevents an obligation under the contract from arising that would otherwise arise;

(44)  'title transfer financial collateral arrangement' means a title transfer financial collateral arrangement as defined in point (b) of Article 2(1) of Directive 2002/47/EC;

(45)  ‘covered bond’ means an instrument as referred to in Article 52(4) of Directive 2009/65/EC of the European Parliament and of the Council(12);

(46)  'third-country resolution proceedings' means an action under the law of a third country to manage the failure of a third-country CCP that is comparable, in terms of objectives and anticipated results, to resolution actions under this Regulation;

(47)  'relevant national authorities' means the resolution authorities, competent authorities or competent ministries designated in accordance with this Regulation or pursuant to Article 3 of Directive 2014/59/EU or other authorities in Member States with powers in relation to assets, rights, obligations or liabilities of third-country CCPs providing clearing services in their jurisdiction;

(48)  'relevant third-country authority' means a third-country authority responsible for carrying out functions comparable to those of resolution authorities or competent authorities pursuant to this Regulation.

TITLE II

AUTHORITIES, RESOLUTION COLLEGE AND PROCEDURES

Section I

Resolution authorities, resolution colleges and involvement of European Supervisory Authorities

Article 3

Designation of resolution authorities and competent ministries

1.  Member States where a CCP is established shall and Member States where no CCP is established may designate one resolution authority that is empowered to apply the resolution tools and exercise the resolution powers as set out in this Regulation.

Resolution authorities shall be national central banks, competent ministries, public administrative authorities or other authorities entrusted with public administrative powers.

2.  Resolution authorities shall have the expertise, resources and operational capacity to apply resolution measures and exercise their powers with the speed and flexibility that are necessary to achieve the resolution objectives.

3.  Where a resolution authority designated pursuant to paragraph 1 is entrusted with other functions, the effective operational independence, including separate staff, reporting lines and of the decision making process of that resolution authority, in particular from the competent authority designated under Article 22 of Regulation (EU) No 648/2012 and the competent and resolution authorities of the clearing members referred to in point (c) of Article 18(2) of that Regulation shall be ensured and all necessary arrangements shall be established and demonstrated to the satisfaction of ESMA in order to avoid conflicts of interest between the functions entrusted to the resolution authority pursuant to this Regulation and all other functions entrusted to that authority.

The requirements expressed in the first paragraph shall not preclude either that reporting lines converge at the highest level of an organisation that subsumes different authorities or that, staff may, under predefined conditions, be seconded from one authority to another to meet temporarily high workloads.

4.  ▌The resolution authority shall adopt and make public the internal rules ensuring the structural separation referred to in the first subparagraph, including rules regarding professional secrecy and information exchanges between the different functional areas.

5.  Each Member State shall designate a single ministry which is responsible for exercising the functions entrusted to the competent ministry pursuant to this Regulation.

6.  ▌The resolution authority shall inform the competent ministry in a timely manner of the decisions taken pursuant to this Regulation.

7.  Where the decisions referred to in paragraph 6 have a direct fiscal impact ▌, the resolution authority shall obtain the necessary approval as stipulated by ▌ law.

8.  Member States shall notify the Commission and the European Securities and Markets Authority (ESMA) of the resolution authorities designated pursuant to paragraph 1.

9.  ▌

10.  ESMA shall publish a list of the resolution authorities and the contact authorities notified pursuant to paragraph 8.

Article 4

Resolution colleges

1.  The resolution authority of the CCP shall establish, manage and chair a resolution college to carry out the tasks referred to in Articles 13, 16 and 17 and ensure cooperation and coordination with third-country resolution authorities.

Resolution colleges shall provide a framework for resolution authorities and other relevant authorities to perform the following tasks:

(a)  exchange information relevant for the development of resolution plans, for assessing the CCP’s interconnectedness and that of its participants, along with other central banks of interest, for the application of preparatory and preventative measures and for resolution;

(b)  assess resolution plans pursuant to Article 13;

(c)  assess the resolvability of CCPs pursuant to Article 16;

(d)  identify, address and remove impediments to the resolvability of CCPs pursuant to Article 17;

(e)  coordinate public communication of resolution strategies and schemes;

(ea)  exchange recovery and resolution plans of clearing members and assess potential impact and interconnectedness with the CCP;

2.  The following shall be members of the resolution college:

(a)  the resolution authority of the CCP;

(b)  the competent authority of the CCP;

(c)  the competent authorities and the resolution authorities of the clearing members referred to in point (c) of Article 18(2) of Regulation (EU) No 648/2012;

(d)  the competent authorities referred to in point (d) of Article 18(2) of Regulation (EU) No 648/2012;

(e)  the competent authorities and the resolution authorities of the CCPs referred to in point (e) of Article 18(2) of Regulation (EU) No 648/2012;

(f)  the competent authorities referred to in point (f) of Article 18(2) of Regulation (EU) No 648/2012;

(g)  the members of the ESCB referred to in point (g) of Article 18(2) of Regulation (EU) No 648/2012;

(h)  the central banks of issue referred to in point (h) of Article 18(2) of Regulation (EU) No 648/2012;

(i)  the competent authority of the parent undertaking, where Article 11(1) applies;

(ia)  the competent authorities charged with supervision of O-SIIs referred to in Article 131 (3) of Directive 2013/36/EU;

(j)  the competent ministry, where the resolution authority referred to in point (a) is not the competent ministry;

(k)  ESMA;

(l)  the European Banking Authority (EBA).

3.  ESMA, EBA and the competent authorities charged with the supervision of O-SIIs shall not have voting rights in resolution colleges.

4.  The competent and resolution authorities of clearing members established in third countries and the competent and resolution authorities of third-country CCPs with which the CCP has established interoperability arrangements may be invited to participate in the resolution college as observers. Their attendance shall be conditional on those authorities being subject to confidentiality requirements equivalent, in the opinion of the chair of the resolution college, to those laid down in Article 71.

The participation of third country authorities in the resolution college may be limited to the discussion of select cross-border enforcement issues, which may include the following:

(a)  effective and coordinated enforcement of resolution actions, in particular in accordance with Articles 53 and 75;

(b)  identifying and removing possible impediments to effective resolution action that may stem from divergent laws governing collateral, netting and set-off arrangements and different recovery and resolution powers or strategies;

(c)  identifying and coordinating any need for new licensing, recognition or authorisation requirements, considering the need for resolution actions to be carried out in a timely fashion;

(d)  the possible suspension of any clearing obligation for the relevant asset classes affected by the resolution of the CCP pursuant to Article 6a of Regulation (EU) No 648/2012 or to any equivalent provision under the national law of the third country concerned;

(e)  the possible influence of different time-zones on the applicable close of business hours regarding the end of trading.

5.  The chair of the resolution college shall be responsible for the following tasks:

(a)  establishing written arrangements and procedures for the functioning of the resolution college, after consulting the other members of the resolution college;

(b)  coordinating all activities of the resolution college;

(c)  convening and chairing all meetings of the resolution college;

(d)  keeping all members of the resolution college fully informed in advance of the organisation of meetings, of the main issues to be discussed in those meetings and of the items to be considered for the purposes of those discussions;

(e)  deciding whether and which third-country authorities are invited to attend particular meetings of the resolution college in accordance with paragraph 4;

(f)  coordinating the timely exchange of all relevant information between members of the resolution college;

(g)  keeping all members of the resolution college informed, in a timely manner, of the decisions and outcomes of those meetings;

(ga)  making sure the college members exchange all relevant information in a timely manner for the exercise of their tasks under this Regulation.

6.  In order to ensure the consistent and coherent functioning of resolution colleges across the Union, ESMA shall develop draft regulatory technical standards in order to specify the content of the written arrangements and procedures for the functioning of the resolution colleges referred to in paragraph 1.

For the purposes of preparing the regulatory standards referred to in the first subparagraph, ESMA shall take into account the relevant provisions of the Commission Delegated Regulation (EU) No 876/2013(13), of Section 1 of Chapter 6 of Commission Delegated Regulation (EU) XXX/2016 supplementing Directive 2014/59/EU with regard to regulatory technical standards adopted on the basis of Article 88(7) of Directive 2014/59/EU(14).

ESMA shall submit those draft regulatory technical standards to the Commission by [PO: insert date 12 months after the date of entry into force of this Regulation].

Power is delegated to the Commission to adopt the regulatory technical standards referred to in paragraph 6 in accordance with the procedure laid down in Articles 10 to 14 of Regulation (EU) No 1095/2010.

Article 5

ESMA Resolution Committee

1.  ESMA shall create a resolution committee pursuant to Article 41 of Regulation (EU) No 1095/2010 for the purpose of preparing the decisions entrusted to ESMA in this Regulation, except for the decisions to be adopted pursuant to Article 12 of this Regulation.

The resolution committee shall also promote the development and coordination of resolution plans and design strategies for the resolution of failing CCPs.

2.  The resolution committee shall be composed of the authorities designated pursuant to Article 3(1) of this Regulation.

Authorities referred to in points (i) and (iv) of Article 4(2) of Regulation (EU) No 1093/2010 and the competent authorities charged with supervision of O-SIIs shall be invited to participate in the resolution committee as observers.

2a.  ESMA shall assess CCP recovery and resolution arrangements across the Union in terms of their aggregate effect on Union financial stability through regular stress-testing and crisis simulation exercises with respect to potential system-wide stress events. In exercising this role, ESMA shall ensure consistency with the assessments of the resilience of individual CCPs carried out pursuant to Chapter XII of Commission Delegated Regulation (EU) No 153/2013 with regard to the frequency and design of the tests and shall cooperate closely with the supervisory colleges established in accordance with Article 18 of Regulation (EU) No 648/2012, the ESRB and competent authorities designated under Article 4 of Directive 2013/36/EU, including the ECB in carrying out its tasks within a single supervisory mechanism under Regulation (EU) No 1024/2013 and any national competent authorities tasked with the supervision of CCPs. In areas where these arrangements are found to be wanting as a result of these comprehensive stress tests, the responsible institution or institutions will have to address the shortcomings and resubmit their arrangements for another round of stress tests within 6 months of the previous stress tests.

3.  For the purposes of this Regulation, ESMA shall cooperate with the European Insurance and Occupational Pensions Authority (EIOPA) and EBA within the framework of the Joint Committee of the European Supervisory Authorities established in Article 54 of Regulation (EU) No 1093/2010, Article 54 of Regulation (EU) No 1094/2010 and Article 54 of Regulation (EU) No 1095/2010.

4.  For the purposes of this Regulation, ESMA shall ensure structural separation between the resolution committee and other functions referred to in Regulation (EU) No 1095/2010.

Article 6

Cooperation between authorities

1.  Competent authorities and resolution authorities and ESMA shall cooperate closely in the preparation, planning and, to the extent possible, in the application of resolution decisions. In particular, the resolution authority and other relevant authorities, including ESMA, the resolution authorities designated in accordance with Article 3 of Directive 2014/59/EU and competent authorities and authorities of linked FMIs, should cooperate and communicate effectively in recovery to enable the resolution authority to act in a timely manner.

2.  Competent authorities and resolution authorities shall cooperate with ESMA for the purposes of this Regulation in accordance with Regulation (EU) No 1095/2010.

Competent authorities and resolution authorities shall, without delay, provide ESMA with all the information necessary to carry out its duties in accordance with Article 35 of Regulation (EU) No 1095/2010.

Section II

Decision-making and procedures

Article 7

General principles regarding decision-making

Competent authorities, resolution authorities and ESMA shall take account of all the following principles and aspects when making decisions and taking action pursuant to this Regulation:

(a)  that the effectiveness and proportionality of any decision or action in relation to an individual CCP is ensured, taking into account at least the following factors:

i)  the ownership, legal and organisational structure of the CCP, including whether it is part of a larger group of FMIs or other financial institutions;

ii)  the nature, size and complexity of the CCP's business;

iii)  the nature and diversity of the CCP's clearing membership structure including clearing members, their clients and other counterparties to which those clearing members and clients provide clearing services under that CCP, where those can be identified easily and without undue delay;

▌v) the CCP's interconnectedness with other financial market infrastructures, other financial institutions and with the financial system in general;

va)  whether the CCP clears any OTC derivative contract pertaining to a class of OTC derivatives that has been declared subject to the clearing obligation in accordance with Article 5(2) of Regulation (EU) No. 648/2012;

vb)  the availability of other CCPs that could credibly and feasibly act as a substitute for the critical functions of the CCP;

vi)  the actual or potential consequences of the infringements referred to in Articles 19(1) and 22(2).

(b)  that the imperatives of efficacy of decision-making and of keeping costs as low as possible while preventing market disruption when taking early intervention measures or resolution action are observed in order to avoid the use of public funds;

(c)  that decisions are made and action is taken in a timely manner and with due urgency when required;

(d)  that resolution authorities, competent authorities and other authorities cooperate with each other to ensure that decisions are made and action is taken in a coordinated and efficient manner;

(e)  that the roles and responsibilities of relevant authorities within each Member State are defined clearly;

(f)  that due consideration is given to the interests of the Member States where the CCP provides services and where its clearing members, their clients, and any interoperable CCPs are established, and in particular the impact of any decision or action or inaction on the financial stability or fiscal resources of those Member States and the Union as a whole;

(g)  that due consideration is given to the objectives of balancing the interests of the various clearing members, their clients, wider creditors and stakeholders of the CCP in the Member States involved and of avoiding unfairly prejudicing or unfairly protecting the interests of particular actors in some Member States, including avoiding unfair burden allocation across Member States;

(ga)  that public financial support is avoided to the greatest extent possible and used only as a last resort and under conditions set out in Article 45, and that no expectation of public financial support is created;

(h)  that any obligation under this Regulation to consult an authority before any decision or action is taken implies at least an obligation to consult on those elements of the proposed decision or action which have or which are likely to have:

(i)  an effect on the clearing members, clients or linked FMIs;

(ii)  an impact on the financial stability of the Member State where the clearing members, clients or linked FMIs are established or located;

(i)  that resolution plans referred to in Article 13 are complied with, unless deviation from those plans is necessary in order to better achieve the resolution objectives;

(j)  that transparency is ensured towards the relevant authorities wherever possible, in particular where a proposed decision or action is likely to have implications on the financial stability or fiscal resources, and towards any other jurisdiction, or other parties where reasonably possible.

(k)  that they coordinate and cooperate as closely as possible, also with the goal to lower the overall cost of resolution;

(l)  that negative economic and social effects of any decision in all the Member States and third countries where the CCP provides services, including negative impacts on financial stability, are mitigated.

Article 8

Information exchange

1.  Resolution authorities, competent authorities and ESMA shall, on their own initiative or on request, provide each other in a timely manner with all the information relevant for the exercise of their tasks under this Regulation.

2.  Resolution authorities shall only divulge confidential information provided by a third-country authority where that authority has given its prior written consent.

Resolution authorities shall provide the competent ministry with all information relating to decisions or measures that require notification, consultation or consent of that ministry.

TITLE III

PREPARATION

CHAPTER I

Recovery and resolution planning

Section 1

Recovery planning

Article 9

Recovery plans

1.  CCPs shall draw up and maintain a comprehensive and effective recovery plan providing for measures to be taken in the case of both default and non-default events and combinations of both in order to restore their financial position without any public financial support in order to enable them to continue to provide clearing services following a significant deterioration of their financial situation or a risk of breaching their prudential requirements under Regulation (EU) No 648/2012.

1a.  The recovery plan shall clearly distinguish, in particular wherever practicable by way of separate sections, between scenarios based on:

(a)  default events;

(b)  non-default events;

The recovery plan shall include arrangements on how the provisions foreseen for scenarios under points (a) and (b) are to be combined in the case that both scenarios occur at the same time.

2.  The recovery plan shall include a framework of indicators, based on the risk profile on the CCP, that identify the circumstances under which measures in the recovery plan are to be taken, taking into account different scenarios. The indicators may be of either a qualitative or a quantitative nature relating to the financial position of the CCP.

CCPs shall put in place appropriate arrangements, including close cooperation between the relevant authorities, for the regular monitoring of the indicators. CCPs shall report to ESMA and competent authorities on the outcome of this monitoring.

2a.  ESMA shall, in cooperation with the ESRB, by ... [one year after the entry into force of this Regulation], issue guidelines in accordance with Article 16 of Regulation (EU) No 1095/2010 to specify the minimum list of qualitative and quantitative indicators referred to in the first subparagraph of paragraph 2 of this Article.

3.  CCPs shall include provisions in their operating rules outlining the procedures to be followed by them where, in order to achieve the goals of the recovery process, they propose to:

(a)  take measures provided for in their recovery plan despite the fact that the relevant indicators have not been met; or

(b)  refrain from taking measures provided for in their recovery plan despite the fact that the relevant indicators have been met.

3a.  Any measure to be taken pursuant to paragraph 3 shall require the approval of the competent authority

4.  ▌ Where a CCP intends to activate its recovery plan, it shall inform the competent authority and ESMA of the nature and magnitude of the problems it has identified, setting out all relevant circumstances and indicating the recovery measures or other measures it intends to take to address the situation.

Where the competent authority considers that a recovery measure that the CCP intends to take may cause significant adverse effects to the financial system, is unlikely to be effective or may disproportionately affect the clients of the clearing members, it may after informing ESMA require the CCP to refrain from taking that measure.

5.  The competent authority shall promptly inform the resolution authority of any notification received in accordance with the first subparagraph of paragraph 4 and any subsequent instruction by the competent authority in accordance with the second subparagraph of paragraph 4.

Where the competent authority is informed in accordance with the first subparagraph of paragraph 4, it shall restrict or prohibit any remuneration of equity and instruments treated as equity to the fullest extent possible without triggering outright default, including dividend payments and buybacks by the CCP and it may restrict, prohibit or freeze any payments of variable remuneration pursuant to Directive 2013/36/EU and EBA Guidelines EBA/GL/2015/22, discretionary pension benefits or severence packages to management.

6.  CCPs shall review and update, where necessary, their recovery plans at least annually and after any change to their legal or organisational structure or business or financial situation which could have a material effect on those plans or otherwise necessitate a change to the plans. Competent authorities may require CCPs to update their recovery plans more frequently.

7.  Recovery plans shall:

(a)  not assume any access to or receipt of public financial support, central bank emergency liquidity assistance or central bank emergency liquidity assistance provided under non-standard collateralisation, tenor and interest rate terms;

(b)  consider the interests of all stakeholders that are likely to be affected by that plan, specifically in relation to clearing members and their clients, both direct and indirect; and

(c)  ensure that clearing members do not have unlimited exposures toward the CCP.

7a.  Recovery tools shall allow to:

(a)  address losses from non-default events;

(b)  address losses from default events;

(c)  re-establish a matched book following a default event;

(d)  address uncovered liquidity shortfalls; and

(e)  replenish the financial resources of the CCP, including its own funds, to a level sufficient in order for the CCP to meet its obligations under Regulation (EU) No 648/2012 and to support the continued and timely operation of the critical functions of the CCP.

7b.  Recovery plans shall contemplate a range of extreme scenarios, including the default of clearing members beyond the largest two and of other CCPs, relevant to the CCP’s specific conditions, including its product mix, business model and liquidity and risk governance framework. That range of scenarios shall include both system-wide stress events and stress events specific to the CCP, taking into account the potential impact of domestic and cross-border contagion in crises, as well as simultaneous crises in several significant markets.

7c.  ESMA shall, in cooperation with the ESRB, by ... [12 months after the date of entry into force of this Regulation] issue guidelines in accordance with Article 16 of Regulation (EU) No 1095/2010 further specifying the range of scenarios to be considered for the purposes of paragraph 1. In issuing such guidelines, ESMA shall have regard, where appropriate, to the relevant international work carried out in the area of CCP supervisory stress testing and of CCP recovery. It shall seek to take advantage, where achievable, of synergies between supervisory stress testing and recovery scenarios modelling.

7d.  Where the CCP is part of a group and contractual parental support agreements, including the financing of the CCP’s capital requirements determined in accordance with Article 16 of Regulation (EU) No 648/2012 through instruments of ownership issued by its parent undertaking form part of the recovery plan, the recovery plan shall contemplate scenarios in which those agreements cannot be honoured.

7e.  The recovery plan shall include the following items:

(a)  a summary of the key elements of the plan and a summary of overall recovery capacity;

(b)  a summary of the material changes to the CCP since the most recently filed recovery plan;

(c)  a communication and disclosure plan outlining how the CCP intends to manage any potentially negative market reactions while acting in as transparent a manner as possible;

(d)  a comprehensive range of capital, loss allocation and liquidity actions required to maintain or restore the viability and financial position of the CCP including to restore its matched book and capital, and replenish pre-funded resources which are necessary for the CCP to maintain its viability as a going concern and to continue providing its critical services in accordance with Article 1(2) of Commission Delegated Regulation (EU) No 152/2013 and Articles 32(2) and 32(3) of Commission Delegated Regulation (EU) No 153/2013;

(e)  appropriate conditions and procedures to ensure the timely implementation of recovery actions, as well as a wide range of recovery options, including an estimation of the timeframe for executing each material aspect of the plan;

(f)  a detailed description of any material impediment to the effective and timely execution of the plan, including consideration of the impact on clearing members and clients including in cases where clearing members are likely to take measures in accordance with their recovery plans as referred to in Articles 5 and 7 of Directive 2014/59/EU, and where appropriate on the rest of the group;

(g)  identification of critical functions;

(h)  a detailed description of the processes for determining the value and marketability of the core business lines, operations and assets of the CCP;

(i)  a detailed description of how recovery planning is integrated into the corporate governance structure of the CCP, how it forms part of the operating rules of the CCP agreed to by clearing members, as well as the policies and procedures governing the approval of the recovery plan and identification of the persons in the organisation responsible for preparing and implementing the plan;

(j)  arrangements and measures incentivising non-defaulting clearing members to bid competitively in auctions of a defaulted members’ positions;

(k)  arrangements and measures to ensure that the CCP has adequate access to contingency funding sources, including potential liquidity sources, an assessment of available collateral and an assessment of the possibility to transfer resources or liquidity across business lines, to ensure that it can continue to carry out its operations and meet its obligations as they fall due;

(l)  arrangements and measures:

(i)  to reduce risk;

(ii)  to restructure contracts, rights, assets and liabilities including:

a)  to partially or fully terminate contracts

b)  to reduce the value of any gains payable by the CCP to non-defaulting clearing members and their clients

(iii)  to restructure business lines;

(iv)  necessary to maintain continuous access to financial markets infrastructures;

(v)  necessary to maintain the continuous functioning of the CCP's operational processes, including infrastructure and IT services;

(vi)  a description of management actions or strategies to restore financial soundness and the anticipated financial effect of those actions or strategies;

(vii)  preparatory measures that the CCP has taken or plans to take in order to facilitate the implementation of the recovery plan, including those necessary to enable the timely recapitalisation of the CCP, restoring its matched book and replenishment of its pre-funded resources, as well as to ensure its enforceability across borders; this shall include arrangements for non-defaulting clearing members to make a minimum contribution in cash to the CCP up to an amount equivalent to their contribution to the CCP's default fund.

(viii)  a framework of indicators which identifies the points at which appropriate actions referred to in the plan may be taken.

(ix)  where applicable, an analysis of how and when the CCP may apply, in the conditions addressed in the plan, for the use of central bank facilities and identify those assets that would be expected to qualify as collateral under the terms of the central bank facility;

(x)  taking into account the provisions of Article 49(1) of Regulation (EU) 648/2012, a range of extreme scenarios of stress relevant to the CCP's specific conditions, including system-wide events and stress specific to the legal entity and any group to which it belongs and specific stress to the individual clearing members of the CCP or, where appropriate, a linked FMI;

(xi)  taking into account the provisions of Article 34 and Article 49(1) of Regulation (EU) 648/2012, scenarios caused both by the stress or default of one or more of its members and by other reasons including losses from the CCP’s investment activities or from operational problems (including severe external threats to a CCP’s operations due to an external disruption, shock or cyber-related incident);

7f.  Following a default event, a CCP shall use an additional amount of dedicated own resources equivalent to the amount required to be used in accordance with Article 45(4) of Regulation (EU) 648/2012, prior to the use of the tools referred to in paragraph 7e(l) of this Article. Where the competent authority deems the risks leading to the loss to have been under the control of the CCP, it may require the CCP to use a higher amount of dedicated own resources to be defined by the competent authority.

7g.  Following a non-default event, a CCP shall use dedicated own resources equivalent to three times the amount required to be used in accordance with Article 45(4) of Regulation (EU) 648/2012, prior to the use of the tools referred to in paragraph 7e(l) of this Article and, to maintain a strictly incentivised process, CCPs shall not use the default fund and the default waterfall. Where the competent authority deems the risks leading up to the loss to have been outside the control of the CCP, it may allow the CCP to use a lower amount of dedicated own resources to be defined by the competent authority.

7h.  A CCP shall, in agreement with the competent authority, use the tools referred to in paragraph 7e (l)(ii) only after cash calls of a minimum amount equivalent to the CCP’s default fund have been carried out under the conditions referred to in paragraph 7e(l)(vii).

7i.  Competent authorities may require CCPs to include additional information in their recovery plans.

8.  The board of the CCP shall assess, taking into account the advice of the risk committee in accordance with Article 28(3) of Regulation (EU) No 648/2012, and approve the recovery plan before submitting it to the competent authority and to ESMA.

9.  Recovery plans shall be considered as part of the operating rules of CCPs and CCPs and their clearing members in the case of provisions related to their clients shall ensure that the measures set out in the recovery plans are enforceable at all times.

9a.  CCPs shall make the items listed at points (a) to (g) of paragraph 7e publicly available. The items listed at points (h) to (l) of that paragraph should be publicly available to the extent there is public interest in transparency of these items. Clearing members shall ensure that any provisions affecting their clients are adequately communicated to them.

9b.  National insolvency law rules relating to the voidability or unenforceability of legal acts detrimental to creditors shall not apply to measures taken by a CCP in accordance with its recovery plan established under this Regulation.

Article 10

Assessment of recovery plans

1.  CCPs ▌ shall submit their recovery plans to the competent authority ▌.

2.  The competent authority shall transmit each plan to the supervisory college and to the resolution authority without undue delay.

Within six months of the submission of each plan, and in coordination with the supervisory college in accordance with the procedure in Article 12, the competent authority shall review the recovery plan and assess the extent to which it satisfies the requirements set out in Article 9.

3.  When assessing the recovery plan, the competent authority shall consult the ESRB and take into consideration the CCP's capital structure, its default waterfall, the level of complexity of the organisational structure and the risk profile of the CCP, including in terms of financial, operational and cyber risks, the substitutability of its activities, and the impact that the implementation of the recovery plan would have on clearing members, their clients, financial markets served by the CCP and on the financial system as a whole The competent authority shall take into due consideration whether the recovery plan will ensure appropriate incentives for the CCP’s owners and clearing members and their clients to control the amount of risk that they bring to or incur in the system. The competent authority shall encourage monitoring of the CCP’s risk-taking and risk management activities, and encourage as full participation as possible in the CCP’s default management process.

3a.  When assessing the recovery plan, the competent authority shall only take parental support agreements into consideration as valid parts of the recovery plan where those agreements are contractually binding.

4.  The resolution authority shall examine the recovery plan in order to identify any measures which may adversely impact the resolvability of the CCP. Where any such matters are identified, the resolution authority shall bring them to the attention of the competent authority and make recommendations to the competent authority on ways to address the adverse impact of those measures on the resolvability of the CCP.

5.  Where the competent authority decides not to act on the recommendations of the resolution authority pursuant to paragraph 4, it shall justify that decision in full to the resolution authority.

6.  Where the competent authority agrees with the recommendations of the resolution authority, or otherwise considers that there are material deficiencies in the recovery plan or material impediments to its implementation, it shall notify the CCP or its parent undertaking and shall give the CCP the opportunity to submit its views.

7.  The competent authority, taking into account the CCP's views, may require the CCP or the parent undertaking to submit, within two months, extendable by one month with the competent authority's approval, a revised plan demonstrating how those deficiencies or impediments are addressed. The revised plan shall be assessed in accordance with the second subparagraph of paragraph 2.

8.  Where the competent authority considers that the deficiencies and impediments have not been adequately addressed by the revised plan, or where the CCP or parent undertaking has not submitted a revised plan, it shall require the CCP or the parent undertaking to make specific changes to the plan.

9.  Where it is not possible to adequately remedy the deficiencies or impediments through specific changes to the plan, the competent authority shall require the CCP or the parent undertaking to identify within a reasonable timeframe any changes to be made to its business in order to address the deficiencies in or impediments to the implementation of the recovery plan.

Where the CCP or parent undertaking fails to identify such changes within the timeframe set by the competent authority, or where the competent authority considers that the actions proposed would not adequately address the deficiencies or impediments to the implementation of the recovery plan, or improve the resolvability of the CCP, the competent authority shall require the CCP or parent undertaking, within a reasonable period of time specified by the competent authority, to take any of the following measures, taking into account the seriousness of the deficiencies and impediments, the effect of the measures on the CCP’s business and the ability of the CCP to remain in compliance with Regulation (EU) No 648/2012:

(a)  to reduce the risk profile of the CCP;

(b)  to enhance the CCP's ability to be recapitalised in a timely manner to meet its prudential requirements;

(c)  to review the CCP's strategy and structure;

(d)  to make changes to the default waterfall, recovery measures and other loss allocation arrangements so as to improve resolvability and the resilience of critical functions;

(e)  to make changes to the governance structure of the CCP.

10.  The request referred to in the second subparagraph of paragraph 9 shall be reasoned and be notified in writing to the CCP.

10a.  ESMA shall develop draft regulatory technical standards specifying the minimum criteria that the competent authority is to assess for the purposes of the assessment of paragraph 2 of this Article and of Article 11(1).

ESMA shall submit those draft regulatory technical standards to the Commission by ... [12 months after the entry into force of this regulation].

Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1095/2010.

Article 11

Recovery plans for CCPs that belong to a group

1.  Where the parent undertaking of the group to which a CCP belongs is an institution as defined in point 23 of Article 2(1) of Directive 2014/59/EU or an entity referred to in point (c) or (d) of Article 1(1) of that Directive, the competent authority, as referred to in point 21 of Article 2(1) of that Directive, shall require the parent undertaking to submit a recovery plan for the group in accordance with that Directive. That competent authority shall submit the recovery plan for the group to the competent authority of the CCP.

Where the parent undertaking of the group to which a CCP belongs is not an institution or entity referred to in the first subparagraph and where necessary in order to assess all elements of Section A of the Annex, competent authorities may ▌in accordance with the procedure laid down in Article 10 of this Regulation, require the CCP to submit a plan for the recovery of the CCP taking into account all relevant elements related to the group structure. Such a request shall be reasoned and shall be notified in writing to the CCP and its parent undertaking.

2.  Where the parent undertaking submits the recovery plan in accordance with the first subparagraph of paragraph 1, the provisions on the recovery of the CCP shall constitute a distinct part of that recovery plan and shall comply with the requirements of this Regulation and the CCP may not be required to prepare an individual recovery plan.

3.  The competent authority of the CCP shall assess in accordance with Article 10 the provisions on the recovery of the CCP, and, where relevant, shall consult the competent authority of the group.

Article 12

Coordination procedure for recovery plans

1.  The supervisory college shall reach a joint decision on all of the following issues:

(a)  the review and assessment of the recovery plan;

(b)  the application of the measures referred to in Article 9(6), (7), (8) and (9);

(c)  whether a recovery plan is to be drawn up by parent undertakings in accordance with Article 11(1).

2.  The college shall reach a joint decision on the issues referred to in points (a) and (b) within four months of the date of the transmission of the recovery plan by the competent authority.

The college shall reach a joint decision on the issue referred to in point (c) within four months of the date that the competent authority decides to request the parent undertaking to prepare a group plan.

ESMA may, at the request of a competent authority within the supervisory college, assist the supervisory college in reaching a joint decision in accordance with Article 31(c) of Regulation (EU) No 1095/2010.

3.  Where, after four months from the date of transmission of the recovery plan, the supervisory college has failed to reach a joint decision on the issues referred to in points (a) and (b) of paragraph 1, the competent authority of the CCP shall make its own decision.

The competent authority of the CCP shall make the decision referred to in the first subparagraph taking into account the views of the other college members expressed during the four-month period. The competent authority of the CCP shall notify in writing that decision to the CCP, to its parent undertaking, where relevant, and to the other members of the supervisory college.

4.  Where, by the end of that four-month period, any group of members of the supervisory college representing a simple majority of the members of this college, has referred to ESMA in accordance with Article 19 of Regulation (EU) No 1095/2010 a matter in relation to the assessment of recovery plans and implementation of the measures pursuant to points (a), (b) and (d) of Article 10(9) of this Regulation, the competent authority of the CCP shall await the decision taken by ESMA in accordance with Article 19(3) of Regulation (EU) No 1095/2010 and decide in accordance with the decision of ESMA.

5.  The four-month period shall be deemed to be the conciliation phase within the meaning of Regulation (EU) No 1095/2010. ESMA shall take its decision within one month from the referral of the matter to it. The matter shall not be referred to ESMA after the end of the four month time period or after a joint decision has been reached. In the absence of an ESMA decision within one month, the decision of the competent authority of the CCP shall apply.

Section 2

Resolution Planning

Article 13

Resolution plans

1.  The resolution authority of the CCP shall, after consultation with the competent authority and ESMA and in coordination with the resolution college, in accordance with the procedure set out in Article 15, draw up a resolution plan for each CCP.

2.  The resolution plan shall provide for the resolution actions that the resolution authority may take where the CCP meets the conditions for resolution referred to in Article 22.

3.  The resolution plan shall take into consideration at least the following:

(a)  the CCP's failure due to:

i.   default events;

ii.   non-default events;

iii.  broader financial instability or system wide events;

(b)  the impact that the implementation of the resolution plan would have on clearing members and their clients including where clearing members are likely to be subject to recovery measures or resolution actions in accordance with Directive 2014/59/EU, on any linked FMIs, financial markets served by the CCP and the financial system as a whole;

(c)  the manner and the circumstances under which a CCP may apply for the use of central bank facilities and the identification of the assets that would be expected to qualify as collateral.

4.  The resolution plan shall not assume any of the following:

(a)  public financial support;

(b)  central bank emergency liquidity assistance;

(c)  central bank liquidity assistance provided under non-standard collateralisation, tenor and interest rate terms.

4a.  The resolution plan shall make prudent assumptions regarding the financial resources available as resolution tools that may be required to achieve the resolution objectives and the resources that it expects to be available in accordance with the CCPs rules and arrangements at the time of entering into resolution. Those prudent assumptions shall be based on the findings of latest stress tests carried out in accordance with Article 5(2a) and still be valid in scenarios of extreme market conditions compounded by the recovery or resolution of one or more other CCPs, including the default of one or several additional clearing members beyond the two clearing members to which the CCP has the largest exposures.

5.  Resolution authorities shall review resolution plans and where appropriate update them, at least annually and in any case after changes to the legal or organisational structure of the CCP, its business or financial situation or any other change that materially affects the effectiveness of the plan.

The CCPs and the competent authorities shall promptly inform the resolution authorities of any such change.

5a.  The resolution plan shall clearly distinguish, in particular wherever practicable by way of separate sections, between scenarios based on the circumstances referred to in, respectively, points i), ii) and iii) of point a) of paragraph 3.

6.  The resolution plan shall specify the circumstances and different scenarios for using the resolution tools and exercising the resolution powers. The resolution plan shall include the following, quantified whenever appropriate and possible:

(a)  a summary of the key elements of the plan differentiating between default events, non-default events and a combination of the two;

(b)  a summary of the material changes to the CCP that have occurred since the resolution plan was last updated;

(c)  a demonstration of how the CCP's critical functions could be legally and economically separated, to the extent necessary, from its other functions so as to ensure their continuity upon entry into all possible forms of resolution, including failure, of the CCP;

(d)  an estimation of the timeframe for carrying out each material aspect of the plan, including for replenishing the CCP’s financial resources;

(e)  a detailed description of the assessment of resolvability carried out in accordance with Article 16;

(f)  a description of any measures required pursuant to Article 17 to address or remove impediments to resolvability identified as a result of the assessment carried out in accordance with Article 16;

(g)  a description of the processes for determining the value and marketability of the critical functions and assets of the CCP;

(h)  a detailed description of the arrangements for ensuring that the information required pursuant to Article 14 is up to date and available to the resolution authorities at all times;

(i)  an explanation as to how resolution actions could be financed without the assumption of the elements referred to in paragraph 4;

(j)  a detailed description of the different resolution strategies that could be applied according to the different possible scenarios and their related timeframes;

(k)  a description of critical interdependencies between the CCP and other market participants, including intragroup interdependencies, interoperability arrangements and links with other FMIs, together with the ways of addressing such interdependencies;

(l)  a description of the different options to ensure:

i.  access to payments and clearing services and other infrastructures;

ii.  timely settlement of obligations due to clearing members and their clients and any linked FMIs;

iii.  access of clearing members and their clients to securities or cash accounts provided by the CCP and securities or cash collateral posted to and held by the CCP that is owed to such participants on a transparent and non-discriminatory basis;

iv.  continuity in the operations of links between the CCP and other FMIs;

v.  the portability of the assets and positions of the clients and indirect clients of clearing members, as set out in Article 39 of Regulation (EU) No 648/2012.;

vi.  preservation of the licenses, authorisations, recognitions and legal designations of a CCP where necessary for the continued performance of the CCP's critical functions including its recognition for the purposes of the application of the relevant settlement finality rules and the participation in or links with other FMIs;

(la)  a description of the approach that the resolution authority plans to follow in order to determine the scope and value of any contracts to be terminated in accordance with Article 29;

(m)  an analysis of the impact of the plan on the employees of the CCP, including an assessment of any associated costs, and a description of envisaged procedures to consult with staff during the resolution process, taking into account any national rules and systems for dialogue with social partners;

(n)  a plan for communicating with the media and the public so as to be as transparent as possible;

(o)  a description of essential operations and systems for maintaining the continuous functioning of the CCP’s operational processes.

(oa)  a description of the arrangements for exchanging information within the resolution college prior to and during resolution, in line with the written arrangements and procedures for the functioning of the resolution colleges referred to in paragraph 1 of Article 4.

The information referred to in point (a) of paragraph 6 shall be disclosed to the CCP concerned. The CCP may express its opinion in writing on the resolution plan to the resolution authority. That opinion shall be included in the plan.

7.  Resolution authorities may require CCPs to provide them with detailed records of the contracts referred to in Article 29 of Regulation (EU) No 648/2012 to which it is a party. Resolution authorities may specify a time limit to provide those records and may specify different time limits for different types of contracts.

7a.  The Resolution Authority of the CCP shall cooperate closely with the Resolution Authorities of the CCP’s Clearing Member’s with the aim of ensuring that there are no impediments to resolution.

8.  ESMA, after consulting with the ESRB and taking into account the relevant provisions of Commission Delegated Regulation (EU) XXX/2016 supplementing Directive 2014/59/EU with regard to regulatory technical standards adopted on the basis of Article 10(9) of Directive 2014/59EU, and respecting the principle of proportionality shall develop draft regulatory technical standards further specifying the contents of the Resolution Plan in accordance with paragraph 6.

When developing the draft regulatory technical standards, ESMA shall take into due consideration the level of differentiation between national legal frameworks, in particular in the area of insolvency law, across the Union, as well the differing sizes and nature of CCPs established in the Union.

ESMA shall submit those draft regulatory technical standards to the Commission by [PO: please, insert date: twelve months from the date of entry into force of this Regulation].

Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with the procedure laid down in Articles 10 to 14 of Regulation (EU) No 1095/2010.

Article 14

CCPs' duty to cooperate and provide information

CCPs shall cooperate as necessary in the drawing up of resolution plans and provide the resolution authorities, either directly or through the competent authority, with all the information necessary to draw up and implement those plans, including the information and analysis specified in Section B of the Annex.

Competent authorities shall provide resolution authorities with any information referred to in the first subparagraph which is already available to them.

A CCP shall exchange information on a timely manner with competent authorities and ESMA in order to facilitate the assessment of the risk profiles of the CCP and the interconnectedness with other financial market infrastructures, other financial institutions and with the financial system in general as defined in Articles 9 and 10 of this Regulation.

Article 15

Coordination procedure for resolution plans

1.  The resolution college shall reach a joint decision regarding the resolution plan and any changes thereto within a period of four months of the date of the transmission of that plan by the resolution authority as referred to in paragraph 2.

2.  The resolution authority shall transmit to the resolution college a draft resolution plan, the information provided in accordance with Article 14 and any additional information relevant to the resolution college.

The resolution authority shall ensure that ESMA is provided with all the information that is relevant to its role in accordance with this Article.

3.  The resolution authority may decide to involve third country authorities in the drawing up and review of the resolution plan, provided that they meet the confidentiality requirements laid down in Article 71 and are from jurisdictions in which any of the following entities are established:

i.  the CCP's parent undertaking, where applicable;

ii.  clearing members to which the CCP has significant exposure;

iii.  the CCP's subsidiaries, where applicable;

iv.  other providers of critical services to the CCP;

iva.  a CCP with interoperable arrangements with the CCP.

4.  ESMA may, at the request of a resolution authority, assist the resolution college in reaching a joint decision in accordance with Article 31(c) of Regulation (EU) No 1095/2010.

5.  Where, after four months from the date of transmission of the resolution plan, the resolution college has failed to reach a joint decision, the resolution authority shall make its own decision on the resolution plan. The resolution authority shall make its decision taking into account the views of the other resolution college members expressed during the four-month period. The resolution authority shall notify in writing the decision to the CCP, to its parent undertaking where relevant, and to the other members of the resolution college.

6.  Where, by the end of that four-month period, any group of members of the supervisory college representing a simple majority of the members of this college, has referred to ESMA in accordance with Article 19 of Regulation (EU) No 1095/2010 a matter in relation to the resolution plan, the resolution authority of the CCP shall await any decision that ESMA may take in accordance with Article 19(3) of that Regulation and take its decision in accordance with the decision of ESMA.

The four-month time period shall be deemed to be the conciliation phase within the meaning of Regulation (EU) No 1095/2010. ESMA shall take its decision within one month from the referral of the matter to it. The matter shall not be referred to ESMA after the end of the four month time period or after a joint decision has been reached. In the absence of an ESMA decision within one month, the decision of the resolution authority shall apply.

7.  Where a joint decision is taken pursuant to paragraph 1 and any resolution authority considers under paragraph 6 that the subject matter of the disagreement impinges on the fiscal responsibilities of its Member State, the resolution authority of the CCP shall initiate a reassessment of the resolution plan.

CHAPTER II

Resolvability

Article 16

Assessment of resolvability

1.  The resolution authority, in cooperation with the resolution college in accordance with Article 17, shall assess the extent to which a CCP is resolvable without assuming any of the following:

(a)  ▌ public financial support;

(b)  central bank emergency liquidity assistance;

(c)  central bank liquidity assistance provided under non-standard collateralisation, tenor and interest rate terms.

2.  A CCP shall be deemed resolvable where the resolution authority considers it feasible and credible to either liquidate it under normal insolvency proceedings or to resolve it using the resolution tools and exercising the resolution powers while ensuring the continuity of the CCP's critical functions and avoiding any use of public funds and to the maximum extent possible any significant adverse effect on the financial system.

The adverse effects referred to in the first subparagraph shall include broader financial instability or system wide events in any Member State.

The resolution authority shall notify ESMA in a timely manner where it considers a CCP not to be resolvable.

3.  Upon request by the resolution authority, a CCP shall demonstrate that:

(a)  there are no impediments to the reduction of the value of instruments of ownership following the exercise of resolution powers, regardless of whether outstanding contractual arrangements or other measures in the CCP's recovery plan have been fully exhausted;

(b)  the contracts of the CCP with clearing members or third parties do not enable those clearing members or third parties to successfully challenge the exercise of resolution powers by a resolution authority or otherwise avoid being subject to those powers.

4.  For the purposes of the assessment of resolvability referred to in paragraph 1, the resolution authority shall, as relevant, examine the matters specified in Section C of the Annex.

4a.  ESMA shall adopt guidelines to promote the convergence of supervisory and resolution practices regarding the application of section C of the Annex by ... [18 months after the entry into force of this Regulation].

5.  The resolution authority in cooperation with the resolution college shall make the resolvability assessment at the same time as drawing up and updating the resolution plan in accordance with Article 13.

Article 17

Addressing or removing impediments to resolvability

1.  Where, following the assessment in Article 16 and after consulting the resolution college, the resolution authority concludes that there are substantive impediments to the resolvability of a CCP, the resolution authority, in cooperation with the competent authority, shall prepare and submit a report to the CCP and to the resolution college.

The report referred to in the first subparagraph shall analyse the ▌ impediments to the effective use of the resolution tools and the exercise of the resolution powers in relation to the CCP, consider their impact on the business model of the CCP and recommend targeted measures to remove those ▌where possible.

2.  The requirement for resolution colleges to reach a joint decision on resolution plans laid down in Article 15 shall be suspended following the submission of the report referred to in paragraph 1 until the measures to remove the substantive impediments to resolvability have been accepted by the resolution authority pursuant to paragraph 3 of this Article or alternative measures have been decided pursuant to paragraph 4 of this Article.

3.  Within four months of the date of receipt of the report submitted in accordance with paragraph 1, the CCP shall propose to the resolution authority possible measures to address or remove the substantive impediments identified in the report. The resolution authority shall communicate to the resolution college any measure proposed by the CCP. The resolution authority and resolution college shall assess, in accordance with point (b) of Article 18(1), whether those measures effectively address or remove those impediments.

4.  Where the resolution authority, taking into account the opinion of the resolution college, concludes that the measures proposed by a CCP in accordance with paragraph 3 would not effectively reduce or remove the impediments identified in the report, the resolution authority shall identify alternative measures which it shall communicate to the resolution college for joint decision in accordance with Article 18.

The alternative measures referred to in the first subparagraph shall take into account the following:

(a)  the threat to financial stability of those impediments to the resolvability of a CCP;

(b)  the effect of the alternative measures on the particular CCP, its clearing members and their clients, any linked FMI and the internal market;

(ba)  the effects on the provision of integrated clearing services for different products and portfolio margining across asset classes.

For the purposes of point (b) of the second subparagraph, the resolution authority shall consult the competent authority, the supervisory college and the resolution college and, where appropriate, the ESRB.

5.  The resolution authority shall, in accordance with Article 18, notify the CCP in writing, either directly or indirectly through the competent authority, of the alternative measures to take in order to achieve the objective of removing impediments to resolvability. The resolution authority shall justify why the measures proposed by the CCP would not be able to remove the impediments to resolvability and how the alternative measures would be effective in doing so.

6.  The CCP shall propose within one month a plan of how it intends to implement the alternative measures within the period of time established by the resolution authority.

7.  Only for the purposes of paragraph 4, the resolution authority in coordination with the competent authority may:

(a)  require the CCP to revise or draw up service agreements, whether intra-group or with third parties, to cover the provision of critical functions;

(b)  require the CCP to limit its maximum individual and aggregate uncovered exposures;

(c)  require the CCP to make changes to how it collects and holds margin pursuant to Article 41 of Regulation (EU) No 648/2012;

(d)  require the CCP to make changes to the composition and number of its default funds referred to in Article 42 of Regulation (EU) No 648/2012;

(e)  impose on the CCP specific or regular additional information requirements;

(f)  require the CCP to divest itself of specific assets;

(g)  require the CCP to limit or cease specific existing or proposed activities;

(h)  require the CCP to make changes to its recovery plan, operating rules and other contractual arrangements;

(i)  restrict or prevent the development of new or existing business lines or provision of new or existing services;

(j)  require changes to legal or operational structures of the CCP or any group entity directly or indirectly under its control to ensure that critical functions may be legally and operationally separated from other functions through the application of resolutions tools;

(k)  require the CCP to set up a parent financial holding company in a Member State or a Union parent financial holding company;

(l)  require the CCP ▌ to issue liabilities that can be written down and converted or to set aside other resources to increase the capacity for loss absorption, recapitalisation and the replenishment of pre-funded resources;

(m)  require the CCP ▌ to take other steps to enable capital, other liabilities and contracts to be able to absorb losses, to recapitalise the CCP or to replenish pre-funded resources. Actions considered may include in particular attempting to renegotiate any liability the CCP has issued or to revise contractual terms, with a view to ensuring that any decision of the resolution authority to write down, convert or restructure that liability, instrument or contract would be effected under the law of the jurisdiction governing that liability or instrument;

(n)  ▌

(na)  restrict or suspend interoperability links of the CCP where such a restriction or suspension is necessary in order to prevent the adverse effect that the application of the recovery tools and the exercise of the resolution powers could have on interoperable CCPs.

Article 18

Coordination procedure to address or remove impediments to resolvability

1.  The resolution college shall reach a joint decision regarding:

(a)  the identification of the material impediments to resolvability pursuant to Article 16(1);

(b)  the assessment of the measures proposed by the CCP pursuant to Article 17(3), as necessary;

(c)  the alternative measures required pursuant to Article 17(4).

2.  The joint decision on the identification of material impediments to resolvability referred to in point (a) of paragraph 1 shall be adopted within four months of the submission of the report referred to in Article 17(1) to the resolution college.

The joint decision referred to in points (b) and (c) of paragraph 1 shall be adopted within four months of submission of the CCP's proposed measures to remove impediments to resolvability.

The joint decisions referred to in paragraph 1 shall be reasoned and notified in writing by the resolution authority to the CCP and, where relevant, its parent undertaking.

ESMA may, at the request of the resolution authority, assist the resolution college in reaching a joint decision in accordance with Article 31(c) of Regulation (EU) No 1095/2010.

3.  Where, after four months from the date of transmission of the report provided for in Article 17(1), the resolution college has failed to adopt a joint decision, the resolution authority shall take its own decision on the appropriate measures to be taken in accordance with Article 17(5). The resolution authority shall take its decision having taken into account the views of the other resolution college members expressed during the four-month period.

The resolution authority shall notify the decision to the CCP, to its parent undertaking where relevant, and to the other members of the resolution college in writing.

4.  Where, by the end of that four-month period, any group of members of the supervisory college representing a simple majority of the members of this college, has referred to ESMA in accordance with Article 19 of Regulation (EU) No 1095/2010 a matter referred to in points (j), (k) or (n) of Article 17(7), the resolution authority of the CCP shall defer its decision and await any decision that ESMA may take in accordance with Article 19(3) of that Regulation. In that case, the resolution authority shall take its decision in accordance with the decision of ESMA.

The four-month time period shall be deemed to be the conciliation phase within the meaning of Regulation (EU) No 1095/2010. ESMA shall take its decision within one month from the referral of the matter to it. The matter shall not be referred to ESMA after the end of the four month time period or after a joint decision has been reached. In the absence of an ESMA decision within one month, the decision of the resolution authority shall apply.

TITLE IV

EARLY INTERVENTION

Article 19

Early intervention measures

1.  Where a CCP infringes or is likely to infringe the prudential requirements of Regulation (EU) No 648/2012, or poses a risk to the financial stability of the global financial system, the Union financial system, or parts of either thereof, or where the competent authority has determined that there are other indications of developments that could affect the operations of the CCP, in particular, its ability to provide clearing services, the competent authority may:

(a)  require the CCP to update the recovery plan in accordance with Article 9, where the circumstances that required early intervention are different from the assumptions set out in the initial recovery plan;

(b)  require the CCP to implement one or more of the arrangements or measures set out in the recovery plan within a specific timeframe. Where the plan is updated pursuant to point (a), those arrangements or measures shall include any updated arrangements or measures;

(c)  require the CCP to identify the causes of the infringement or likely infringement as mentioned in paragraph 1 and draw up an action programme, including suitable measures and timeframes;

(d)  require the CCP to convene a meeting of its shareholders or, if the CCP fails to comply with that requirement, convene the meeting itself. In both cases the competent authority shall set the agenda, including the decisions to be considered for adoption by the shareholders;

(e)  require one or more members of the board or senior management to be removed or replaced where any of those persons is found unfit to perform their duties pursuant to Article 27 of Regulation (EU) No 648/2012;

(f)  require changes to the business strategy of the CCP;

(g)  require changes to the legal or operational structures of the CCP;

(h)  provide the resolution authority with all the information necessary to update the CCP's resolution plan in order to prepare for the possible resolution of the CCP and the valuation of its assets and liabilities in accordance with Article 24, including any information required through on-site inspections;

(i)  require, where necessary and in accordance with paragraph 4, the implementation of the CCP's recovery measures;

(j)  require the CCP to abstain from the implementation of certain recovery measures where the competent authority has determined that the implementation of those measures may have an adverse effect on financial stability or unduly harm the interests of clients;

(k)  require the CCP to replenish its financial resources in a timely manner;

(ka)  exceptionally and on a one-off basis allow clients of clearing members to participate directly in auctions, while waiving prudential requirements pursuant to Chapter 3 of Title IV of Regulation (EU) 648/2012 other than margin requirements as set out in Article 41 of Regulation (EU) 648/2012 for those clients. The clients’ clearing members shall inform clients comprehensively about the auction and facilitate the bidding process for clients. Required margin payments by the clients shall be passed through a non-defaulting clearing member;

(kb)  restrict or prohibit any remuneration of equity and instruments treated as equity to the fullest extent possible without triggering outright default, including dividend payments and buybacks by the CCP, and it may restrict, prohibit or freeze any payments of variable remuneration under Directive 2013/36/EU and EBA Guidelines EBA/GL/2015/22, of discretionary pension benefits or of severance packages to management.

2.  For each of those measures, the competent authority shall set an appropriate deadline and evaluate the effectiveness of those measures once they have been taken.

2a.  National insolvency law rules relating to the voidability or unenforceability of legal acts detrimental to creditors shall not apply to early intervention measures taken by the competent authority in accordance with this Regulation.

3.  The competent authority may only apply the measures in points (a) to (k) of paragraph 1 after taking account of the impact of those measures in other Member States where the CCP operates or provides services, in particular where the CCP’s operations are critical or important for local financial markets, including the places in which clearing members linked trading venues and FMIs are established.

4.  The competent authority may only apply the measure in point (i) of paragraph 1 where that measure is in the public interest and is necessary to achieve any of the following objectives:

(a)  maintain the financial stability of the Union;

(b)  maintain the continuity of the critical functions of the CCP on a transparent and non-discriminatory basis;

(c)  maintain and enhance the financial resilience of the CCP.

The competent authority shall not apply the measure in point (i) of paragraph 1 in relation to measures involving the transfer of property, rights or liabilities of another CCP.

5.  Where a CCP has initiated its default waterfall in accordance with Article 45 of Regulation (EU) No 648/2012, it shall inform the competent authority and the resolution authority without undue delay and explain whether that event reflects weaknesses or problems of that CCP.

6.  Where the conditions referred to in paragraph 1 are met, the competent authority shall notify ESMA and the resolution authority and consult the supervisory college.

Following those notifications and the consultation of the supervisory college, the competent authority shall decide whether to apply any of the measures provided for in paragraph 1. The competent authority shall notify the decision on the measures to be taken to the supervisory college, the resolution authority and ESMA.

7.  The resolution authority, following the notification of the first subparagraph of paragraph 6, may require the CCP to contact potential purchasers in order to prepare for its resolution, subject to the conditions laid down in Article 41 and the confidentiality provisions laid down in Article 71 as well as to the framework on market soundings laid down in Article 11 of Regulation (EU) No 596/2014 and in relevant delegated and implementing legislation.

Article 20

Removal of senior management and board

Where there is a significant deterioration in the financial situation of a CCP, or the CCP infringes its legal requirements, including its operating rules, and other measures taken in accordance with Article 19 are not sufficient to reverse that situation, competent authorities may require total or partial removal of the senior management or board of the CCP.

The appointment of the new senior management or board shall be done in accordance with Article 27 of Regulation (EU) No 648/2012 and be subject to the approval or consent of the competent authority.

Title IVa

Recoupment of losses

Article 20a

Issuance of instruments of ownerships in future profits to clearing members and clients that have suffered losses

1.  Where a CCP in Recovery, caused by a non-default event has applied the arrangements and measures to reduce the value of any gains payable by the CCP to non-defaulting clearing members and their clients set out in its recovery plan pursuant to point (l)(ii)(b) of Article 9(7b) which go beyond the default waterfall set out in Article 45 of Regulation (EU) 648/2012, on non-defaulting clearing members and their clients, and has not entered Resolution as a result, the Competent Authority of the CCP may, once a matched book has been restored, require the CCP to recompense the participants for their loss, either through cash payments or, where appropriate, may require the CCP to issue instruments of ownership in future profits of the CCP.

The value of instruments of ownership in future profits of the CCP issued to each affected non-defaulting clearing member, which must be passed on to clients in a suitable form, shall be proportionate to its loss and shall be based on a valuation conducted in accordance with Article 24(3). These instruments of ownership shall entitle the possessor to receive payments from the CCP on an annual basis until the loss has been recouped in full up to an appropriate maximum number of years from the date of issuance. An appropriate maximum share of the CCP’s annual profits shall be used towards payments relating to these instruments of ownership.

2.  This Article does not diminish the responsibility of clearing members to take losses which go beyond the default waterfall.

3.  ESMA shall develop draft regulatory technical standards to specify the order in which recompense must be paid, the appropriate maximum number of years and the appropriate maximum share of the CCP's annual profits referred to in the second subparagraph of paragraph 1.

ESMA shall submit those draft regulatory technical standards to the Commission by [XXX after entry into force of this Regulation].

The Commission is empowered to supplement this Regulation by adopting the regulatory technical standards referred to in this paragraph in accordance with Articles 10 to 14 of Regulation (EU) No 1095/2010.

TITLE V

RESOLUTION

CHAPTER I

Objectives, conditions and general principles

Article 21

Resolution objectives

1.  When using the resolution tools and exercising the resolution powers, the resolution authority shall have regard to all the following resolution objectives and shall balance them as appropriate to the nature and circumstances of each case:

(a)  to ensure the continuity of the CCP's critical functions, in particular:

(i)  the timely settlement of the CCP's obligations to its clearing members and their clients;

(ii)  continuous access of clearing members to securities or cash accounts provided by the CCP and securities or cash collateral held by the CCP on behalf of those clearing members;

(b)  to ensure the continuity of the links with other FMIs which, if disrupted, would have a material negative impact on financial stability or the timely completion of payment, clearing, settlement and record-keeping functions;

(c)  to avoid a significant adverse effect on the financial system, in particular by preventing contagion of financial distress to the CCP’s clearing members, their clients or to the wider financial system, including other FMIs, and by maintaining market and public confidence;

(d)  to protect public funds by minimising reliance on public financial support and potential losses for taxpayers;

(e)  to minimise the cost of resolution on all affected stakeholders and avoid destruction of the CCP's value, unless such destruction is necessary to achieve the resolution objectives.

2.  The board and senior management of a CCP under resolution shall provide the resolution authority with all necessary assistance for the achievement of the resolution objectives.

Article 22

Conditions for resolution

1.  The resolution authority shall take a resolution action in relation to a CCP provided that all of the following conditions are met:

(a)  the CCP is failing or is likely to fail as determined by any of the following:

i)  the competent authority, after consulting the resolution authority;

ii)  the resolution authority after consulting the competent authority, where the resolution authority has the necessary tools for reaching that conclusion;

(b)  there is no reasonable prospect that any alternative private sector measures or supervisory action, including early intervention measures taken, would prevent the failure of the CCP within a reasonable timeframe, having regard to all relevant circumstances; and

(c)  a resolution action is necessary in the public interest to achieve the resolution objectives where implementing the CCP’s contractual loss-allocation arrangements or, where such arrangements are not comprehensive and winding down the CCP under normal insolvency proceedings would not meet those objectives to the same extent.

For the purposes of point (a)(ii), the competent authority shall provide the resolution authority without delay and on its own initiative with any information that may give an indication that the CCP is failing or likely to fail. The competent authority shall also provide the resolution authority, upon request with any other information needed in order to perform its assessment.

2.  For the purposes of point (a) of paragraph 1, a CCP shall be deemed to be failing or likely to fail where one or more of the following circumstances apply:

(a)  the CCP infringes, or is likely to infringe, its authorisation requirements in a way that would justify the withdrawal of its authorisation pursuant to Article 20 of Regulation (EU) No 648/2012;

(b)  the CCP is unable, or is likely to be unable, to provide a critical function;

(c)  the CCP is unable, or is likely to be unable, to restore its viability through the implementation of its recovery measures;

(d)  the CCP is unable, or is likely to be unable, to pay its debts or other liabilities as they fall due;

(e)  the CCP requires ▌ public financial support.

For the purposes of point (e) a measure shall not be considered to be public financial support where all of the following conditions are met:

i)  it takes the form of a State guarantee to back liquidity facilities provided by a central bank according to the central bank's conditions, or the form of a State guarantee of newly issued liabilities;

ia)  none of the circumstances referred to in points (a), (b), (c) or (d) of this paragraph is present at the time the public financial support is granted

ib)  the State guarantees referred to in point (i) are required to remedy a serious disturbance in the economy of a Member State and preserve financial stability

ii)  the State guarantees referred to in point (i) are confined to solvent CCPs, conditional on final approval under the Union State aid framework, are of a precautionary and temporary nature, proportionate to remedy the consequences of the serious disturbance referred to in paragraph ib) and are not used to offset losses that the CCP has incurred or is likely to incur in the future;

3.  The resolution authority may also take a resolution action where it considers that the CCP applies or intends to apply recovery measures which could prevent the CCP's failure but cause significant adverse effects to the financial system.

3a.  The decision taken by a resolution authority deeming a CCP failing or likely to may only be challenged on the basis that this decision was arbitrary and unreasonable at the time of the decision, based on the information then readily available.

4.  ESMA shall adopt guidelines to promote the convergence of supervisory and resolution practices regarding the application of the circumstances under which a CCP is deemed to be failing or likely to fail by [PO, please insert date 12 months from entry into force of this Regulation], if and where appropriate taking into consideration the differing sizes and nature of CCPs established in the Union.

When adopting those guidelines, ESMA shall take into account the guidelines issued in accordance with Article 32(6) of Directive 2014/59/EU.

Article 23

General principles regarding resolution

The resolution authority shall take all appropriate measures to use the resolution tools referred to in Article 27 and exercise the resolution powers referred to in Article 48 in accordance with the following principles:

(a)  all contractual obligations and other arrangements in the CCP's recovery plan are enforced ▌, to the extent that they have not been exhausted before entry into resolution, unless, in extreme circumstances, the resolution authority determines that the use of resolution tools or the exercise of resolution powers is more appropriate to achieve the resolution objectives in a timely manner;

(b)  the shareholders of the CCP under resolution bear first losses following the enforcement of all obligations and arrangements referred to in point (a) in accordance with that point;

(c)  creditors of the CCP under resolution bear losses after the shareholders in accordance with the order of priority of their claims under normal insolvency proceedings, save as expressly provided otherwise in this Regulation;

(d)  the CCP's creditors of the same class are treated in an equitable manner;

(e)  none of the CCP's shareholders, creditors and clearing members or their clients incur higher losses than they would have incurred in accordance with Article 60;

(f)  the board and senior management of the CCP under resolution are replaced, except where the resolution authority considers that the retention of the board and senior management, in whole or in part, is necessary for the achievement of the resolution objectives;

(g)  resolution authorities inform and consult employee representatives in accordance with their national laws or practice;

(h)  where a CCP is part of a group, resolution authorities take account of the impact on other group entities and on the group as a whole.

CHAPTER II

Valuation

Article 24

Objectives of valuation

1.  Resolution authorities shall ensure that any resolution action is taken on the basis of a valuation ensuring a fair, prudent and realistic assessment of the assets, liabilities, rights and obligations of the CCP.

2.  Before the resolution authority places a CCP under resolution, it shall ensure that a first valuation is carried out to determine whether the conditions for resolution under Article 22(1) are met.

3.  After the resolution authority has decided to place a CCP under resolution, it shall ensure that a second valuation is carried out to:

(a)  inform the decision on the appropriate resolution action to be taken;

(b)  ensure that any losses on the assets and rights of the CCP are fully recognised at the moment the resolution tools are used;

(c)  inform the decision on the extent of the cancellation or dilution of instruments of ownership and the decision on the value and number of instruments of ownership issued or transferred as a result of the exercise of resolution powers;

(d)  inform the decision on the extent of the write down or conversion of any unsecured liabilities, including debt instruments;

(e)  where the loss and position allocation tools are used, inform the decision on the extent of losses to be applied against affected creditors’ claims, outstanding obligations or positions in relation to the CCP and on the extent and necessity of a resolution cash call;

(f)  where the bridge CCP tool is used, inform the decision on the assets, liabilities, rights and obligations or instruments of ownership that may be transferred to the bridge CCP and the decision on the value of any consideration that may be paid to the CCP under resolution or, where relevant, to the holders of the instruments of ownership;

(g)  where the sale of business tool is used, inform the decision on the assets, liabilities, rights and obligations or instruments of ownership that may be transferred to the third party purchaser and to inform the resolution authority’s understanding of what constitutes commercial terms for the purposes of Article 40;

(ga)  the price of any termination of contracts by the resolution authority shall be based, insofar as possible, upon a fair market price determined on the basis of the CCP’s rules and arrangements, and only substituted for another price discovery method if deemed essential by the resolution authority.

For the purposes of point (d), the valuation shall take into account any losses that would be absorbed by the enforcement of any outstanding obligations of the clearing members or other third parties owed to the CCP and the level of conversion to be applied to debt instruments.

4.  The valuations referred to in paragraphs 2 and 3 may be subject to an appeal in accordance with Article 72 only together with the decision to use a resolution tool or to exercise a resolution power.

Article 25

Requirements for valuation

1.  The resolution authority shall ensure that the valuations referred to in Article 24 are carried out:

(a)  by a person independent from any public authority and from the CCP;

(b)  by the resolution authority, where those valuations cannot be carried out by a person as referred to in point (a).

2.  The valuations referred to in Article 24 shall be considered definitive where they are carried out by the person referred to in point (a) of paragraph 1 and all the requirements laid down in this Article are fulfilled.

3.  Without prejudice to the Union State aid framework, where applicable, a definitive valuation shall be based on prudent assumptions and shall not assume any potential provision of ▌ public financial support, any central bank emergency liquidity assistance or any central bank liquidity assistance provided under non-standard collateralisation, tenor and interest rate terms to the CCP from the point in time at which resolution action is taken. The valuation shall also take account of the potential recovery of any reasonable expenses incurred by the CCP under resolution in accordance with Article 27(9).

4.  A definitive valuation shall be supplemented by the following information held by the CCP:

(a)  an updated balance sheet and a report on the financial position of the CCP, including the remaining available prefunded resources and outstanding financial commitments;

(b)  the records of cleared contracts as referred to in Article 29 of Regulation (EU) No 648/2012;

(c)  any information on the market and accounting values of its assets, liabilities and positions, including relevant claims and outstanding obligations owed or due to the CCP.

5.  A definitive valuation shall indicate the subdivision of the creditors in classes in accordance with their priority levels under the applicable insolvency law. It shall also include an estimate of the treatment that each class of shareholders and creditors would have been expected to receive in application of the principle specified in point (e) of Article 23.

The estimate referred to in the first subparagraph shall not prejudice the valuation referred to in Article 61.

6.  ESMA, taking into account any regulatory technical standards drafted in accordance with Article 36(14) and (15) of Directive 2014/59/EU, shall develop draft regulatory technical standards to specify:

(a)  the circumstances in which a person is deemed to be independent from both the resolution authority and from the CCP for the purposes of paragraph 1 of this Article;

(b)  the methodology for assessing the value of the assets and liabilities of the CCP;

(c)  the separation of the valuations under Articles 24 and 61.

ESMA shall submit those draft regulatory technical standards to the Commission by [PO: insert date: within 12 months of the entry into force of this Regulation].

Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with the procedure laid down in Articles 10 to 14 of Regulation (EU) No 1095/2010.

Article 26

Provisional valuation

1.  The valuations referred to in Article 24 that do not meet the requirements laid down in Article 25(2) shall be considered to be provisional valuations.

Provisional valuations shall include a buffer for additional losses and an appropriate justification for that buffer.

2.  Where resolution authorities take resolution action on the basis of a provisional valuation, they shall ensure that a definitive valuation is carried out as soon as practicable.

The resolution authority shall ensure that the definitive valuation referred to in the first subparagraph:

(a)  allows for full recognition of any losses of the CCP in its books;

(b)  informs a decision to write back creditors’ claims or to increase the value of the consideration paid, in accordance with paragraph 3.

3.  Where the definitive valuation’s estimate of the net asset value of the CCP is higher than the provisional valuation’s estimate of the net asset value of the CCP, the resolution authority may:

(a)  increase the value of the claims of affected creditors which have been written down or restructured;

(b)  require a bridge CCP to make a further payment of consideration in respect of the assets, liabilities, rights and obligations to the CCP under resolution or, as the case may be, in respect of the instruments of ownership to the owners of those instruments.

4.  ESMA, taking into account any regulatory technical standards drafted in accordance with Article 36(15) of Directive 2014/59/EU, shall develop draft regulatory technical standards to specify, for the purposes of paragraph 1 of this Article, the methodology for calculating the buffer for additional losses to be included in provisional valuations.

ESMA shall submit those draft regulatory technical standards to the Commission by [PO: insert date: within 12 months of the entry into force of this Regulation].

Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with the procedure laid down in Articles 10 to 14 of Regulation (EU) No 1095/2010.

CHAPTER III

Resolution tools

Section 1

General principles

Article 27

General provisions on resolution tools

1.  Resolution authorities shall take resolution actions referred to in Article 21 by using any of the following resolution tools individually or in any combination:

(a)  the position and loss allocation tools;

(b)  the write-down and conversion tool;

(c)  the sale of business tool;

(d)  the bridge CCP tool;

(e)  any other resolution tool consistent with Articles 21 and 23.

2.  In the event of a systemic crisis, the resolution authority may also provide ▌public financial support by using government stabilisation tools in accordance with Articles 45, 46 and 47 on the condition of prior and final approval under the Union State aid framework and of the design of comprehensive and credible arrangements for the recovery of the funds provided over an appropriate period of time.

3.  Prior to the use of the tools referred to in paragraph 1, the resolution authority shall enforce:

(a)  any existing and outstanding rights of the CCP, including any contractual obligations by clearing members to meet cash calls, to provide additional resources to the CCP, or to take on positions of defaulting clearing members, whether through an auction or other agreed means in the CCP's operating rules;

(b)  any existing and outstanding contractual obligation committing parties other than clearing members to any forms of financial support.

The resolution authority may partially enforce the contractual obligations referred to in points (a) and (b) where it is not possible to enforce those contractual obligations in full within a reasonable timeframe.

4.  By way of derogation from paragraph 3, the resolution authority may refrain from enforcing the relevant existing and outstanding obligations either partially or in full to avoid significant adverse effects on the financial system or widespread contagion, or where the use of the tools referred to in paragraph 1 is more appropriate in order to achieve the resolution objectives in a timely manner.

▌6. Where the use of a resolution tool other than the write-down and conversion tool results in losses being borne by clearing members, the resolution authority shall exercise the power to write down and convert any instruments of ownership and debt instruments or other unsecured liabilities immediately before or together with the use of the resolution tool.

7.  Where only the resolution tools referred to in point (c) and (d) of paragraph 1 are used, and only part of the assets, rights, obligations or liabilities of the CCP under resolution are transferred in accordance with Articles 40 and 42, the residual part of that CCP shall be wound up in accordance with normal insolvency proceedings.

8.  National insolvency law rules relating to the voidability or unenforceability of legal acts detrimental to creditors shall not apply to transfers of assets, rights, obligations or liabilities from a CCP in relation to which resolution tools or government financial stabilisation tools are used.

9.  The resolution authority shall recover over an appropriate period of time any reasonable expenses, including an appropriate risk premium, incurred in connection with the use of the resolution tools or powers or in connection with the use of the government financial stabilisation tools in any of the following ways:

(a)  from the CCP under resolution, as a preferred creditor;

(b)  from any consideration paid by the purchaser where the sale of business tool has been used;

(c)  from any proceeds generated as a result of the termination of the bridge CCP, as a preferred creditor;

(ca)  from any clearing member, to the extent that a clearing member does not incur greater losses than it would have incurred if the resolution authority would not have taken resolution action in relation to the CCP and they would instead have been subject to possible outstanding obligations pursuant to the CCP's recovery plan or other arrangements in its operating rules or the CCP had been wound up under normal insolvency proceedings;

(cb)  from any revenues from the use of the government stabilisation tools, including the proceeds from the sale of the instruments of ownership referred to in Article 46 and from the sale of a CCP subject to temporary public ownership as referred to in Article 47.

9a.  In determining the amounts to be recouped pursuant to the previous paragraph, the resolution authority shall take into account the amount that the clients and members of the CCP would otherwise have been required to contribute, both under the CCP rules and arrangements and in resolution, had public support not been granted by the authorities.

10.  When using the resolution tools, resolution authorities shall ensure, on the basis of a valuation that complies with Article 25, the full allocation of losses, the restoration of matched book, the replenishment of the prefunded resources of the CCP or the bridge CCP, and the recapitalisation of the CCP or the bridge CCP.

Article 27a

The possibility to compensate CCP participants shall not apply to their contractually committed losses in the default management or recovery phases.

Section 2

Position allocation and Loss allocation tools

Article 28

Objective and scope of the position and loss allocation tools

1.  Resolution authorities shall use the position allocation tool in accordance with Article 29 and the loss allocation tools in accordance with Articles 30 and 31.

2.  The tools referred to in paragraph 1 may be used in respect of all contracts relating to clearing services and the collateral related to those services posted to the CCP.

3.  Resolution authorities shall use the position allocation tool referred to in Article 29 in order to rematch the book of the CCP or bridge CCP where relevant.

Resolution authorities shall use the loss allocation tools referred to in Articles 30 and 31 for any of the following purposes:

(a)  to cover the losses of the CCP assessed in accordance with Article 27(10);

(b)  to restore the ability of the CCP to meet payment obligations as they fall due;

(ba)  to facilitate the restoration of a matched book;

(c)  to facilitate restoration of a matched book by providing the CCP with funds to meet an auction bid which enables the CCP to allocate the defaulter's positions or to make payments on the contracts terminated pursuant to Article 29;

(d)  to achieve the outcome referred to in points (a), (b) and (c) in relation to a bridge CCP;

(e)  to support the transfer of the CCP’s business by way of the sale of business tool to a solvent third party.

Article 29

Termination of contracts – partial or full

1.  The resolution authority may terminate certain or all of the following contracts :

(a)  the contracts of the clearing member in default;

(b)  the contracts of the affected clearing service or asset class;

(c)  the contracts of the CCP in resolution.

1a.  When using the power under paragraph 1, the resolution authority shall terminate contracts referred to under points (a), (b) and (c) of that paragraph in a similar way, without discriminating between counterparties to those contracts, with the exception of those contractual obligations that cannot be enforced in a reasonable timeframe.

2.  The resolution authority may only terminate the contracts referred to in point (a) of paragraph 1 where the transfer of the assets and positions resulting from those contracts has not taken place within the meaning of Article 48(5) and (6) of Regulation (EU) No 648/2012.

3.  The resolution authority shall give notice to all relevant clearing members of the date on which any contract referred to in paragraph 1 is terminated.

4.  Prior to the termination of any of the contracts referred to in paragraph 1, the resolution authority shall take the following steps:

(a)  require the CCP under resolution to value each contract and update the account balances of each clearing member;

(b)  determine the net amount payable by or to each clearing member, taking account of any due but unpaid variation margin, including variation margin due as a result of the contract valuations referred to in point (a);

(c)  notify each clearing member of the determined net amounts and collect them accordingly.

Once the contract has been terminated, the resolution authority shall notify, in a timely manner, the competent authority of any client designated as an O-SII whose contract has been terminated.

4a.  The price of any termination of contracts by the resolution authority under this article shall be based upon a fair market price determined on the basis of the CCP’s rules and arrangements, or, should the use of such alternative method be deemed necessary by the resolution authority, determined using any other appropriate price discovery method.

5.  Where a non-defaulting clearing member is unable to pay the net amount determined in accordance with paragraph 4, the resolution authority may require the CCP to place the non-defaulting clearing member in default and use its initial margin and default fund contribution in accordance with Article 45 of Regulation (EU) No 648/2012.

6.  Where the resolution authority has terminated one or more contracts of the types referred to in points (a), (b) and (c) of paragraph 1, it shall temporarily prevent the CCP from clearing any new contract of the same type as the one terminated.

The resolution authority may allow the CCP to resume the clearing of those types of contracts only where the following conditions are met:

(a)  the CCP complies with the requirements of Regulation (EU) No 648/2012;

(b)  the resolution authority issues and publishes a notice to that effect using the means referred to in Article 70(3).

Article 30

Reduction of the value of any gains payable by the CCP to non-defaulting clearing members and their clients

1.  The resolution authority may reduce the value amount of the CCP's payment obligations to non-defaulting clearing members and their clients where those obligations arise from gains due in accordance with the CCP's processes for paying variation margin or an economically equivalent payment. Clearing members shall inform their clients without delay about the use of the resolution tool and the way in which such use affects them.

2.  The resolution authority shall calculate any reduction in payment obligations referred to in paragraph 1 using an equitable allocation mechanism determined in the valuation conducted in accordance with Article 24(3) and communicated to the clearing members as soon as the resolution tool is used. The total net gains to be reduced for each clearing member shall be proportional to the amounts due from the CCP.

3.  The reduction in the value of gains payable shall take effect and shall be immediately binding on the CCP and affected clearing members from the moment at which the resolution authority takes the resolution action.

3a.  Any use of the powers referred to in this article that affect the positions of a client designated as an O-SII shall be notified to the competent authority of that client in a timely manner.

4.  A non-defaulting clearing member shall not have any claim in any subsequent proceedings against the CCP, or its successor entity, arising from the reduction in payment obligations referred to in paragraph 1.

5.  Where a resolution authority reduces only in part the value of gains payable, the residual outstanding payable amount shall still be owed to the non-defaulting clearing member.

5a.  The CCP shall include in its operating rules reference to the power to reduce payment obligations referred to in paragraph 1 in addition to any similar arrangements provided for in those operating rules at the recovery stage. The CCP shall ensure that contractual arrangements are concluded to allow the Resolution Authority to exercise its powers under this article.

Article 31

Resolution cash call

1.  The resolution authority may require non-defaulting clearing members to make contributions in cash to the CCP. The amount of those cash contributions shall be determined by the resolution authority so as to best achieve the resolution objectives referred to in Article 21(1).

Where the CCP operates multiple default funds, the amount of the contribution in cash referred to in the first subparagraph shall refer to the clearing member's contribution to the default fund or default funds of the affected clearing service or asset class.

The resolution authority may exercise the resolution cash call regardless of whether all contractual obligations requiring cash contributions from non-defaulting clearing members have been exhausted.

The resolution authority shall determine the amount of each non-defaulting clearing member's cash contribution in proportion to the clearing member's contribution to the default fund.

2.  If a non-defaulting clearing member does not pay the required amount, the resolution authority may require the CCP to place that clearing member in default and use the clearing member's initial margin and default fund contribution in accordance with Article 45 of Regulation (EU) No 648/2012.

2a.  The CCP shall include reference to the resolution cash call in addition to the recovery cash calls in its operating rules and ensure that contractual arrangements are concluded to allow the resolution authority to exercise its powers under this Article.

2b.  The resolution authority shall define the amount of the resolution cash call to be included in the operating rules, which shall at the minimum be equivalent to the clearing member’s contribution to the default fund.

2c.  The resolution authority shall define the amount of the resolution cash call to be included in the operating rules.

Section 3

Write down and conversion of instruments of ownership and debt instruments or other unsecured liabilities

Article 32

Requirement to write down and convert instruments of ownership and debt instruments or other unsecured liabilities

1.  The resolution authority shall use the write-down and conversion tool in accordance with Article 33 in respect of instruments of ownership and debt instruments issued by the CCP in resolution or other unsecured liabilities in order to absorb losses, recapitalise that CCP or a bridge CCP, or to support the use of the sale of business tool.

▌2. Based on the valuation carried out in accordance with Article 24(3), the resolution authority shall determine the following:

(a)  the amount by which the instruments of ownership and debt instruments or other unsecured liabilities must be written down taking into account any losses that are to be absorbed by the enforcement of any outstanding obligations of the clearing members or other third parties owed to the CCP;

(b)  the amount by which debt instruments or other unsecured liabilities must be converted into instruments of ownership in order to restore the prudential requirements of the CCP or the bridge CCP.

Article 33

Provisions governing the write-down or conversion of instruments of ownership and debt instruments or other unsecured liabilities

1.  The resolution authority shall use the write-down and conversion tool in accordance with the priority of claims applicable under normal insolvency proceedings.

2.  Prior to reducing or converting the principal amount of debt instruments or other unsecured liabilities, the resolution authority shall reduce the notional value of instruments of ownership in proportion to the losses and up to their full value, where necessary.

Where, in accordance with the valuation carried out pursuant to Article 24(3), the CCP maintains a positive net value after the reduction of the value of instruments of ownership, the resolution authority shall cancel or dilute, as the case may be, those instruments of ownership.

3.  The resolution authority shall reduce, convert, or both, the principal amount of debt instruments or other unsecured liabilities to the extent required to achieve the resolution objectives, and up to the full value of those instruments or liabilities, where necessary.

4.  The resolution authority shall not use the write-down and conversion tools in respect of the following liabilities:

(a)  liabilities to employees, in relation to accrued salary, pension benefits or other fixed remuneration, except for the variable component of remuneration that is not regulated by a collective bargaining agreement;

(b)  liabilities to commercial or trade creditors arising from the provision to the CCP of goods or services that are critical to the daily functioning of its operations, including IT services, utilities and the rental, servicing and upkeep of premises;

(c)  liabilities to tax and social security authorities, provided that those liabilities are preferred liabilities under the applicable insolvency law;

(d)  liabilities owed to systems or operators of systems designated according to Directive 98/26/EC.

5.  Where the notional amount of an instrument of ownership or the principal amount of a debt instrument or other unsecured liabilities is reduced, the following conditions shall apply:

(a)  that reduction shall be permanent;

(b)  the holder of the instrument shall have no claim in connection with that reduction, except for any liability already accrued, any liability for damages that may arise as a result of an appeal challenging the legality of that reduction and any claim based on instruments of ownership issued or transferred pursuant to paragraph 6;

(c)  where that reduction is only partial, the agreement that created the original liability shall continue to apply in respect of the residual amount subject to any necessary amendments of the terms of that agreement due to the reduction.

Point (a) shall not prevent resolution authorities from applying a write-up mechanism to reimburse holders of debt instruments or other unsecured liabilities and then holders of instruments of ownership, where the level of write-down based on the provisional valuation is found to exceed required amounts when assessed against the definitive valuation referred to in Article 26(2).

6.  Where converting debt instruments or other unsecured liabilities pursuant to paragraph 3, the resolution authority may require CCPs or their parent undertakings to issue or to transfer instruments of ownership to the holders of the debt instruments or other unsecured liabilities.

7.  The resolution authority shall only convert debt instruments or other unsecured liabilities pursuant to paragraph 3 where the following conditions are met:

(a)  the resolution authority has obtained the agreement of the competent authority of the parent undertaking where the parent undertaking is required to issue the instruments of ownership;

(b)  the instruments of ownership are issued prior to any issuance of instruments of ownership by the CCP for the purposes of provision of own funds by the State or a government entity;

(c)  the conversion rate represents appropriate compensation to the affected debt holders, in line with their treatment under normal insolvency proceedings.

Following any conversion of debt instruments or other unsecured liabilities to instruments of ownership, the latter shall be subscribed or transferred without delay after the conversion.

8.  For the purposes of paragraph 7, the resolution authority shall ensure, in the context of the development and maintenance of the CCP's resolution plan and as part of the powers to remove impediments to the resolvability of the CCP, that the CCP may issue at all times the necessary number of instruments of ownership.

Article 34

Effect of write-down and conversion

The resolution authority shall complete or require the completion of all the administrative and procedural tasks necessary to give effect to the use of the write-down and conversion tool, including:

(a)  the amendment of all relevant registers;

(b)  the delisting or removal from trading of instruments of ownership or debt instruments;

(c)  the listing or admission to trading of new instruments of ownership;

(d)  the relisting or readmission of any debt instruments which have been written down, without the requirement for the issuing of a prospectus in accordance with Directive 2003/71/EC of the European Parliament and of the Council(15).

Article 35

Removal of procedural obstacles for write-down and conversion

Where the second subparagraph of Article 32(1) is applied, the competent authority shall require CCPs, or their parent undertakings, to maintain at all times a sufficient amount of instruments of ownership to ensure that those CCPs or their parent undertakings may issue sufficient new instruments of ownership and that the issuance of or conversion into instruments of ownership could be carried out effectively.

The resolution authority shall use the write down and conversion tool regardless of any provisions in the CCP's instruments of incorporation or statutes, including with respect to pre-emption rights for shareholders or requirements for the consent of shareholders to an increase of capital.

Article 36

Submission of a business reorganisation plan

1.  CCPs shall, within one month after the use of the tools referred to in Article 32, conduct a review of the causes of its failure and submit it to the resolution authority alongside a business reorganisation plan in accordance with Article 37. Where the Union State aid framework is applicable, that plan shall be compatible with the restructuring plan that the CCP is required to submit to the Commission in accordance with that framework.

Where necessary for achieving the resolution objectives, the resolution authority may extend the period referred to in the first subparagraph up to a maximum of two months.

2.  Where a restructuring plan is required to be notified within the Union State aid framework, the submission of the business reorganisation plan shall be without prejudice to the deadline laid down by the Union State aid framework for the submission of that restructuring plan.

3.  The resolution authority shall submit the review and business reorganisation plan, and any revision thereof in accordance with Article 38, to the competent authority and to the resolution college.

Article 37

Content of the business reorganisation plan

1.  The business reorganisation plan referred to in Article 36 shall set out measures aiming to restore the long-term viability of the CCP or parts of its business within a reasonable timeframe. Those measures shall be based on realistic assumptions as to the economic and financial market conditions under which the CCP will operate.

The business reorganisation plan shall take account of the current and potential states of the financial markets and reflect best-case and worst-case assumptions, including a combination of events to identify the CCP's main vulnerabilities. Assumptions shall be compared with appropriate sector-wide benchmarks.

2.  The business reorganisation plan shall include at least the following elements:

(a)  a detailed analysis of the factors and circumstances that caused the CCP to fail or to be likely to fail;

(b)  a description of the measures to be adopted to restore the CCP's long-term viability;

(c)  a timetable for the implementation of those measures.

3.  Measures aiming to restore the long-term viability of a CCP may include:

(a)  the reorganisation and restructuring of the activities of the CCP;

(b)  changes to the CCP's operational systems and infrastructure;

(c)  the sale of assets or of business lines.

3a.  In the case where the Union State Aid framework is applied in accordance with Article 36(1) and (2), the resolution authority, the competent authority and the Commission should coordinate the assessment of the measures provided to restore the CCP's long-term viability, any request for a resubmission of an amended plan by the CCP and the final adoption of the business reorganisation or restructuring plan.

3b.  ESMA shall by ... [18 months after the entry into force of this Regulation] issue guidelines in accordance with Article 16 of Regulation (EU) No 1095/2010 to specify further the minimum elements that should be included in a business reorganisation plan pursuant to paragraph 2.

3c.  Taking into account, where appropriate, experience acquired in the application of the guidelines referred to in paragraph 3a, ESMA may develop draft regulatory technical standards to specify further the minimum elements that should be included in a business reorganisation plan pursuant to paragraph 2.

Power is conferred on the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1095/2010.

Article 38

Assessment and adoption of the business reorganisation plan

1.  Within one month of the submission of the business reorganisation plan by the CCP pursuant to Article 36(1), the resolution authority and the competent authority shall assess whether the measures provided for in that plan would reliably restore the long-term viability of the CCP.

Where the resolution authority and the competent authority are satisfied that the plan would restore the CCP's long-term viability, the resolution authority shall approve the plan.

2.  Where the resolution authority and the competent authority are not satisfied that the measures provided for in the plan would restore the CCP's long-term viability, the resolution authority shall notify the CCP of their concerns and require it to resubmit an amended plan addressing those concerns within two weeks of the notification.

3.  The resolution authority and the competent authority shall assess the resubmitted plan and shall notify the CCP within one week of the reception of that plan whether the concerns are appropriately addressed or whether further amendments are required.

3a.  ESMA shall by ... [18 months after the entry into force of this Regulation] issue guidelines in accordance with Article 16 of Regulation (EU) No 1095/2010 to specify further the minimum criteria that a business reorganisation plan is to fulfil for approval by the resolution authority pursuant to paragraph 1.

3b.  Taking into account, where appropriate, experience acquired in the application of the guidelines referred to in paragraph 3a, ESMA may develop draft regulatory technical standards to specify further the minimum criteria that a business reorganisation plan is to fulfil for approval by the resolution authority pursuant to paragraph 1s.

Power is conferred on the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1095/2010.

Article 39

Implementation and monitoring of the business reorganisation plan

1.  The CCP shall implement the business reorganisation plan and shall submit a report to the resolution authority and the competent authority as requested and, at least, every six months on its progress in implementing the plan.

2.  The resolution authority, in agreement with the competent authority, may require the CCP to revise the plan where necessary to achieve the aim referred to in 37(1).

The CCP shall submit the revision referred to in the first subparagraph to the resolution authority for assessment in accordance with Article 38(3). The resolution authority, in the event that the Union State aid framework applies, shall coordinate this assessment with the Commission.

Section 4

The sale of business tool

Article 40

The sale of business tool

1.  The resolution authority may transfer the following to a purchaser that is not a bridge CCP:

(a)  instruments of ownership issued by a CCP under resolution;

(b)  any assets, rights, obligations or liabilities of a CCP under resolution.

The transfer referred to in the first subparagraph shall take place without obtaining the consent of the shareholders of the CCP or any third party other than the purchaser and without complying with any procedural requirements under company or securities law other than those provided for in Article 41.

2.  A transfer made pursuant to paragraph 1 shall be made on commercial terms, having regard to the circumstances, and in accordance with the Union State aid framework.

For the purposes of the first subparagraph, the resolution authority shall take all reasonable steps to obtain commercial terms that conform to the valuation conducted under Article 24(3).

3.  Unless otherwise provided for in this Regulation, any consideration paid by the purchaser shall benefit:

(a)  the owners of the instruments of ownership where the sale of business has been effected by transferring instruments of ownership issued by the CCP from the holders of those instruments to the purchaser;

(b)  the CCP, where the sale of business has been effected by transferring some or all of the assets or liabilities of the CCP to the purchaser;

(c)  any non-defaulting clearing members that have suffered losses prior to resolution.

The allocation of any consideration paid by the purchaser shall be carried out in accordance with the CCP's default waterfall as set out in Articles 43 and 45 of Regulation (EU) No 648/2012 and the priority of claims under normal insolvency proceedings.

4.  The resolution authority may exercise the transfer power referred to in paragraph 1 more than once in order to make supplemental transfers of instruments of ownership issued by the CCP or, as the case may be, the CCP's assets, rights, obligations, or liabilities.

5.  The resolution authority may, with the consent of the purchaser, transfer the assets, rights, obligations or liabilities that had been transferred to the purchaser back to the CCP, or the instruments of ownership back to their original owners.

Where the resolution authority uses the transfer power referred to in the first subparagraph, the CCP or original owners shall take back any such assets, rights, obligations or liabilities, or instruments of ownership.

6.  Any transfer made pursuant to in paragraph 1 shall take place irrespective of whether the purchaser is authorised to provide the services and carry out the activities resulting from the acquisition.

Where the purchaser is not authorised to provide the services and carry out the activities resulting from the acquisition, the resolution authority, in consultation with the competent authority, shall conduct an appropriate due diligence of the purchaser and ensure that the purchaser applies for authorisation as soon as practicable and, at the latest, within one month of the use of the sale of business tool. The competent authority shall ensure that any such application for authorisation is considered in an expedited manner.

7.  Where the transfer of instruments of ownership referred to in paragraph 1 results in the acquisition of or increase in a qualifying holding referred to in Article 31(2) of Regulation (EU) No 648/2012, the competent authority shall carry out the assessment referred to in that Article within a period of time that neither delays the application of the sale of business tool nor prevents the resolution action from achieving the relevant resolution objectives.

8.  Where the competent authority has not completed the assessment referred to in paragraph 7 by the date on which the transfer of instruments of ownership takes effect, the following shall apply:

(a)  the transfer of instruments of ownership shall have immediate legal effect from the date on which they are transferred;

(b)  during the assessment period and during any divestment period provided for in point (f), the purchaser’s voting rights attached to those instruments of ownership shall be suspended and vested solely in the resolution authority, which shall have no obligation to exercise them and shall not be liable for exercising or refraining from exercising them;

(c)  during the assessment period and during any divestment period provided for in point (f), any penalties or measures for infringing the requirements for acquisitions or disposals of qualifying holdings envisaged in Article 12 of Regulation (EU) No 648/2012 shall not apply to that transfer;

(d)  the competent authority shall notify the resolution authority and the purchaser in writing of the result of its assessment in accordance with Article 32 of Regulation (EU) No 648/2012 promptly after completing its assessment;

(e)  where the competent authority does not oppose the transfer, the voting rights attached to those instruments of ownership shall be deemed to be fully vested in the purchaser as from the notification referred to in point (d);

(f)  where the competent authority opposes the transfer of instruments of ownership, point (b) shall continue to apply and the resolution authority may, having taken into account market conditions, establish a divestment period within which the purchaser shall divest such instruments of ownership.

9.  For the purposes of exercising its right to provide services in accordance with Regulation (EU) No 648/2012, the purchaser shall be considered to be a continuation of the CCP under resolution, and may continue to exercise any such right that was exercised by the CCP under resolution in respect of the assets, rights, obligations or liabilities transferred.

10.  The purchaser referred to in paragraph 1 shall not be prevented from exercising the CCP's rights of membership and accessing the payment and settlement systems or any other financial market infrastructure provided that the purchaser meets the criteria for membership or participation in those systems or infrastructures.

Where the purchaser does not meet the criteria referred to in the first subparagraph, the purchaser may continue to exercise the CCP's rights of membership and accessing those systems and infrastructures subject to approval by the resolution authority. Such approval shall be granted only for a period of time not exceeding 12 months.

11.  For a period of 12 months, the purchaser shall not be denied access to payment and settlement systems or any other financial market infrastructure on the ground that the purchaser does not possess a rating from a credit rating agency, or that that rating is below the rating levels required to be granted access to those systems or infrastructures.

12.  Unless otherwise provided for in this Regulation, shareholders, creditors, clearing members and clients of the CCP under resolution and other third parties whose assets, rights, obligations or liabilities are not transferred shall have no rights over, or in relation to, the assets, rights, obligations or liabilities transferred.

Article 41

Sale of business tool: procedural requirements

1.  Where using the sale of business tool in relation to a CCP, the resolution authority shall advertise the availability, or make arrangements for the marketing, of the assets, rights, obligations, liabilities, or the instruments of ownership intended to be transferred. Pools of rights, assets, obligations and liabilities may be marketed separately.

2.  Without prejudice to the Union State aid framework, where applicable, the marketing referred to in paragraph 1 shall be carried out in accordance with the following criteria:

(a)  it shall be as transparent as possible and shall not materially misrepresent the assets, rights, obligations, liabilities, or instruments of ownership of the CCP, having regard to the circumstances and in particular the need to maintain financial stability;

(b)  it shall not unduly favour or discriminate between potential purchasers;

(c)  it shall be free from any conflict of interest;

(d)  it shall take account of the need to effect a rapid resolution action;

(e)  it shall aim at maximising, as far as possible, the sale price for the instruments of ownership, assets, rights, obligations or liabilities involved.

The criteria referred to in the first subparagraph shall not prevent the resolution authority from soliciting particular potential purchasers.

3.  By way of derogation from paragraph 1, the resolution authority may market the assets, rights, obligations, liabilities or the instruments of ownership without complying with the criteria referred to in paragraph 2 where compliance with those criteria would be likely to undermine one or more of the resolution objectives.

Section 5

The bridge CCP tool

Article 42

Bridge CCP tool

1.  The resolution authority may transfer to a bridge CCP the following:

(a)  the instruments of ownership issued by a CCP under resolution;

(b)  any assets, rights, obligations or liabilities of the CCP under resolution.

The transfer referred to in the first subparagraph may take place without obtaining the consent of the shareholders of the CCP under resolution or any third party other than the bridge CCP and without complying with any procedural requirements under company or securities law other than those provided for in Article 43.

2.  The bridge CCP shall be a legal person that meets all of the following requirements:

(a)  it is controlled by the resolution authority and it is wholly or partially owned by one or more public authorities which may include the resolution authority;

(b)  it is created for the purpose of receiving and holding some or all of the instruments of ownership issued by a CCP under resolution or some or all of the assets, rights, obligations and liabilities of the CCP with a view to maintaining the critical functions of the CCP and subsequently selling the CCP.

3.  When applying the bridge CCP tool, the resolution authority shall ensure that the total value of liabilities and obligations transferred to the bridge CCP does not exceed the total value of the rights and assets transferred from the CCP under resolution.

4.  Unless otherwise provided for in this Regulation, any consideration paid by the bridge CCP shall benefit:

(a)  the owners of the instruments of ownership, where the transfer to the bridge CCP has been effected by transferring instruments of ownership issued by the CCP under resolution from the holders of those instruments to the bridge CCP;

(b)  the CCP under resolution, where the transfer to the bridge CCP has been effected by transferring some or all of the assets or liabilities of that CCP to the bridge CCP.

5.  The resolution authority may exercise the transfer power referred to in paragraph 1 more than once in order to make supplemental transfers of instruments of ownership issued by a CCP or of its assets, rights, obligations or liabilities.

6.  The resolution authority may transfer the rights, obligations, assets or liabilities that had been transferred to the bridge CCP back to the CCP under resolution, or the instruments of ownership back to their original owners where that transfer is expressly provided for in the instrument by which the transfer referred to in paragraph 1 is made.

Where the resolution authority uses the transfer power referred to in the first subparagraph, the CCP under resolution or original owners shall be obliged to take back any such assets, rights, obligations or liabilities, or instruments of ownership, provided that the conditions in the first subparagraph of this paragraph or in paragraph 7 are met.

7.  Where the specific instruments of ownership, assets, rights, obligations or liabilities do not fall within the classes of, or meet the conditions for transfer of, instruments of ownership, assets, rights, obligations or liabilities specified in the instrument by which the transfer was made, the resolution authority may transfer them from the bridge CCP back to the CCP under resolution or the original owners.

8.  A transfer referred to in paragraphs 6 and 7 may be made at any time, and shall comply with any other conditions stated in the instrument by which the transfer was made for the relevant purpose.

9.  The resolution authority may transfer instruments of ownership or assets, rights, obligations or liabilities from the bridge CCP to a third party.

10.  For the purposes of exercising its right to provide services in accordance with Regulation (EU) No 648/2012, a bridge CCP shall be considered to be a continuation of the CCP under resolution and may continue to exercise any such right that was exercised by the CCP under resolution in respect of the assets, rights, obligations or liabilities transferred.

For any other purposes, resolution authorities may require that a bridge CCP be considered to be a continuation of the CCP under resolution, and be able to continue to exercise any right that was exercised by the CCP under resolution in respect of the assets, rights, obligations or liabilities transferred.

11.  The bridge CCP shall not be prevented from exercising the rights of membership and accessing payment and settlement systems and other FMIs of the CCP under resolution, provided that it meets the criteria for membership and participation in those systems and infrastructures.

Where the bridge CCP does not meet the criteria referred to in the first subparagraph, the bridge CCP may continue to exercise the CCP's rights of membership and accessing those systems and infrastructures for a period of time specified by the resolution authority. That period of time shall not exceed 12 months.

12.  The bridge CCP shall not be denied access to payment and settlement systems or any other FMI on the ground that the bridge CCP does not possess a rating from a credit rating agency, or that that rating is below the rating levels required to be granted access to those systems or infrastructures.

13.  Shareholders or creditors of the CCP under resolution and other third parties whose assets, rights, obligations or liabilities are not transferred to the bridge CCP, shall have no claims over or in relation to the assets, rights, obligations or liabilities transferred to the bridge CCP, or against its board or senior management.

14.  The bridge CCP shall have no duty or responsibility to shareholders or creditors of the CCP under resolution, and the board or senior management of the bridge CCP shall have no liability to those shareholders or creditors for acts and omissions in the discharge of their duties, unless the act or omission is due to gross negligence or serious misconduct in accordance with applicable national law.

Article 43

Bridge CCP: procedural requirements

1.  The bridge CCP shall comply with all of the following requirements:

(a)  the bridge CCP shall seek the approval of the resolution authority for all of the following:

(i)  the rules of incorporation of the bridge CCP;

(ii)  the members of the bridge CCP's board, where those members are not directly appointed by the resolution authority;

(iii)  the responsibilities and remuneration of the members of the bridge CCP's board, where the remuneration and the responsibilities are not determined by the resolution authority;

(iv)  the strategy and risk profile of the bridge CCP;

(b)  the bridge CCP shall take over the authorisations of the CCP under resolution to provide the services or carry out the activities resulting from the transfer referred to in Article 42(1) in accordance with Regulation (EU) No 648/2012.

Where the bridge CCP is not authorised as required pursuant to point (b) of paragraph 1, the resolution authority shall seek the approval of the competent authority for carrying out the transfer referred to in Article 42(1). Where the competent authority approves that transfer, it shall indicate the period for which the bridge CCP's obligation to comply with the requirements of Regulation (EU) No 648/2012 is waived.

The prudential requirements under Chapter 3 of Title IV of Regulation (EU) No 648/2012 shall only be waived for a period of a maximum of three months, while all other provisions of Regulation (EU) No 648/2012 can be waived for a period of a maximum of 12 months.

2.  Subject to any restrictions imposed in accordance with Union or national competition rules, the management of the bridge CCP shall operate the bridge CCP with the objective of maintaining access by stakeholders to the bridge CCP's critical functions and selling the bridge CCP or any of its assets, rights, obligations and liabilities to one or more private sector purchasers. That sale shall take place when market conditions are appropriate, and within the period specified in paragraphs 5 and, where applicable, 6 of this Article.

3.  The resolution authority shall terminate the bridge CCP in any of the following cases:

(a)  the resolution objectives are fulfilled;

(b)  the bridge CCP merges with another entity;

(c)  the bridge CCP ceases to meet the requirements laid down in Article 42(2);

(d)  the bridge CCP or substantially all of its assets, rights, obligations or liabilities have been sold in accordance with paragraph 4;

(e)  the period specified in paragraph 5 expires;

(f)  the contracts cleared by the bridge CCP have been settled, have expired or have been closed out and the CCP's rights and obligations relating to those contracts are thereby completely discharged.

4.  Before selling the bridge CCP or its assets, rights, obligations or liabilities, the resolution authority shall advertise the availability of the elements intended to be sold, and shall ensure that they are marketed openly and transparently, and that they are not materially misrepresented.

The resolution authority shall carry out the sale referred to in the first subparagraph on commercial terms and shall not unduly favour or discriminate between potential purchasers.

5.  The resolution authority shall terminate the operation of a bridge CCP two years after the date on which the last transfer from the CCP under resolution is made.

Where the resolution authority terminates the operation of a bridge CCP, it shall request the competent authority to withdraw the bridge CCP's authorisation.

6.  The resolution authority may extend the period referred to in paragraph 5 for one or more additional one-year periods where the extension is necessary to terminate the bridge CCP as referred to in points (a) to (d) of paragraph 3.

The decision to extend the period referred to in paragraph 5 shall be reasoned and shall contain a detailed assessment of the bridge CCP's situation in relation to relevant market conditions and market outlook.

7.  Where a bridge CCP is terminated in the circumstances referred to in point (d) or (e) of paragraph 3, the bridge CCP shall be wound up under normal insolvency proceedings.

Unless otherwise provided for in this Regulation, any proceeds generated as a result of the termination of the bridge CCP shall benefit its shareholders.

Where a bridge CCP is used for the purpose of transferring assets and liabilities of more than one CCP under resolution, the proceeds referred to in the second subparagraph shall be attributed by reference to the assets and liabilities transferred from each of the CCPs under resolution.

Section 6

Additional financing arrangements

Article 44

Alternative funding means

The resolution authority may enter into contracts to borrow or obtain other forms of financial support, including from pre-funded resources available in any non-depleted default funds in the CCP under resolution, where necessary to ensure the effective use of the resolution tools.

Section 7

Government Stabilisation Tools

Article 45

Government financial stabilisation tools

1.  The resolution authority may use the government stabilisation tools in accordance with Articles 46 and 47 for the purpose of resolving a CCP only where the following conditions are met:

(a)  the financial support is necessary to meet the resolution objectives;

(b)  the financial support is used as a last resort after having assessed and exploited the other resolution tools to the maximum extent practicable whilst maintaining financial stability, as determined by the competent ministry or the government after consulting the resolution authority;

(c)  the financial support complies with the Union State aid framework;

(ca)  the financial support is used for a limited period of time;

(d)  ▌

(da)  the resolution authority has, in advance, defined comprehensive and credible arrangements for recovering, over a suitable period of time, the public funds deployed from participants benefitting from the public support, unless such funds have been already recovered through the sale to a private purchaser pursuant to either Article 46(3) or Article 47(2).

2.  To give effect to the government financial stabilisation tools, competent ministries or governments shall have the relevant resolution powers specified in Articles 48 to 59, and shall ensure that Articles 52, 54 and 70 are complied with.

3.  Government financial stabilisation tools shall be deemed to be used as a last resort for the purposes of point (b) of paragraph 1, where, at least, any of the following conditions are met:

(a)  the competent ministry or government and the resolution authority, after consulting the central bank and the competent authority, determine that the use of the resolution tools would not suffice to avoid a significant adverse effect on the financial system;

(b)  the competent ministry or government and the resolution authority determine that the use of the resolution tools would not suffice to protect the public interest, where extraordinary liquidity assistance from the central bank has previously been given to the CCP;

(c)  in respect of the temporary public ownership tool, the competent ministry or government, after consulting the competent authority and the resolution authority, determines that the use of the resolution tools would not suffice to protect the public interest, where public equity support through the equity support tool has previously been given to the CCP.

Article 46

Public equity support tool

1.  Public financial support may be provided for the recapitalisation of a CCP in exchange for instruments of ownership.

2.  CCPs subject to the public equity support tool shall be managed on a commercial and professional basis.

3.  The instruments of ownership referred to in paragraph 1 shall be sold to a private purchaser as soon as commercial and financial circumstances allow.

Article 47

Temporary public ownership tool

1.  A CCP may be taken into temporary public ownership by means of one or more transfer orders of instruments of ownership executed by a Member State to a transferee which is either of the following:

(a)  a nominee of the Member State;

(b)  a company wholly owned by the Member State.

2.  CCPs subject to the temporary public ownership tool shall be managed on a commercial and professional basis and shall be sold to a private purchaser as soon as commercial and financial circumstances allow, also considering the possibility to recover the cost of resolution.

CHAPTER IV

Resolution powers

Article 48

General powers

1.  The resolution authority shall have all the powers necessary to use the resolution tools effectively, including all the following powers:

(a)  the power to require any person to provide the resolution authority with any information it requires to decide upon and prepare a resolution action, including updates and additional information to that provided in the resolution plan or required through on-site inspections;

(b)  the power to take control of a CCP under resolution and exercise all the rights and powers conferred upon holders of instruments of ownership and the CCP's board;

(ba)  the power to modify or amend the operating rules of the CCP, including as regards its terms of participation, where such changes are necessary to remove impediments to resolvability;

(bb)  the power to refrain from enforcing certain contractual obligations under the CCP’s rules and arrangements or otherwise depart from the CCP’s rules and arrangements where necessary to achieve the resolution objectives and to avoid significant adverse effects on the financial system;

(c)  the power to transfer instruments of ownership issued by a CCP under resolution;

(d)  the power to transfer to another entity, with its consent, the CCP's rights, assets, obligations or liabilities;

(e)  the power to reduce, including to reduce to zero, the principal amount of or outstanding amount due in respect of debt instruments or other unsecured liabilities of a CCP under resolution;

(f)  the power to convert debt instruments or other unsecured liabilities of a CCP under resolution into instruments of ownership of that CCP or of a bridge CCP to which assets, rights, obligations or liabilities of the CCP under resolution have been transferred;

(g)  the power to cancel debt instruments issued by a CCP under resolution;

(h)  the power to reduce, including to reduce to zero, the nominal amount of instruments of ownership of a CCP under resolution and to cancel such instruments of ownership;

(i)  the power to require a CCP under resolution ▌to issue new instruments of ownership, including preference shares and contingent convertible instruments;

(j)  with regards to debt instruments and other liabilities of the CCP, the power to amend or alter their maturity, amend the amount of interest payable, or amend the date on which interest becomes payable, including by suspending payment for a temporary period;

(k)  the power to close out and terminate financial contracts;

(l)  the power to remove or replace the board and senior management of a CCP under resolution;

(m)  the power to require the competent authority to assess the buyer of a qualifying holding in a timely manner by way of derogation from the time-limits laid down in Article 31 of Regulation (EU) No 648/2012;

(n)  the power to reduce, including to reduce to zero, the amount of variation margin due to a clearing member of a CCP under resolution, or to a client of that clearing member, subject to the conditions set out in Article 30;

(o)  the power to transfer open positions and any related assets, including relevant title transfer and security financial collateral arrangements, set-off arrangements, and netting arrangements, from the account of a defaulting clearing member to a non-defaulting clearing member in a manner consistent with Article 48 of Regulation (EU) No 648/2012;

(p)  the power to enforce any existing and outstanding contractual obligations of the participants of the CCP under resolution;

(q)  the power to enforce any existing and outstanding obligations of the parent undertaking of the CCP under resolution including to provide the CCP with financial support by way of guarantees or credit lines;

(r)  the power to require clearing members to provide further contributions in cash.

Resolution authorities may exercise the powers referred to in the first subparagraph individually or in any combination.

2.  Unless otherwise provided for in this Regulation and the Union State aid framework, the resolution authority shall not be subject to any of the following requirements where it exercises the powers referred to in paragraph 1:

(a)  requirement to obtain approval or consent from any public or private person;

(b)  requirements relating to the transfer of financial instruments, rights, obligations, assets or liabilities of a CCP under resolution or a bridge CCP;

(c)  requirement to notify any public or private person;

(d)  requirement to publish any notice or prospectus;

(e)  requirement to file or register any document with any other authority.

Article 49

Ancillary powers

1.  Where a power referred to in Article 48(1) is exercised, the resolution authority may also exercise any of the following ancillary powers:

(a)  subject to Article 65, provide for a transfer to take effect free from any liability or encumbrance affecting the financial instruments, rights, obligations, assets or liabilities transferred;

(b)  remove rights to acquire further instruments of ownership;

(c)  require the relevant authority to discontinue or suspend the admission to trading on a regulated market, or the official listing, of any financial instruments issued by the CCP pursuant to Directive 2001/34/EC of the European Parliament and of the Council(16);

(d)  provide for the purchaser or bridge CCP, pursuant to Articles 40 and 42 respectively, to be treated as if it were the CCP under resolution, for the purposes of any rights or obligations of, or actions taken by, the CCP under resolution, including any rights or obligations relating to participation in a market infrastructure;

(e)  require the CCP under resolution or the purchaser or bridge CCP, where relevant, to provide the other with information and assistance;

(f)  provide for the clearing member which is a recipient of any positions allocated to it by way of the powers in points (o) and (p) of Article 48(1) to assume any rights or obligations relating to participation in the CCP in relation to those positions;

(g)  cancel or modify the terms of a contract to which the CCP under resolution is a party or substitute the purchaser or bridge CCP, in place of the CCP under resolution, as a party;

(h)  modify or amend the operating rules of the CCP under resolution ▌;

(i)  transfer the membership of a clearing member from the CCP under resolution to a purchaser of the CCP or a bridge CCP.

Any right of compensation provided for in this Regulation shall not be considered to be a liability or an encumbrance for the purposes of point (a) of the first subparagraph.

2.  The resolution authority may provide for continuity arrangements necessary to ensure that the resolution action is effective and that the business transferred may be operated by the purchaser or bridge CCP. Those continuity arrangements may include:

(a)  the continuity of contracts entered into by the CCP under resolution, in order for the purchaser or bridge CCP to assume the rights and liabilities of the CCP under resolution relating to any financial instrument, right, obligation, asset or liability that has been transferred and to replace the CCP under resolution, expressly or implicitly, in all relevant contractual documents;

(b)  the replacement of the CCP under resolution by the purchaser or bridge CCP in any legal proceedings relating to any financial instrument, right, obligation, asset or liability that has been transferred.

3.  The powers provided for in point (d) of paragraph 1 and point (b) of paragraph 2 shall not affect:

(a)  the right of an employee of the CCP to terminate a contract of employment;

(b)  subject to Articles 55, 56 and 57, the exercise of contractual rights of a party to a contract , including the right to terminate, where provided for in the terms of the contract, due to an act or omission by the CCP prior to the transfer, or by the purchaser or bridge CCP after the transfer.

Article 50

Special management

1.  The resolution authority may appoint one or more special managers to replace the board of a CCP under resolution. The special manager shall be of sufficiently good repute and shall have adequate expertise in financial services, risk management and clearing services in accordance with the second subparagraph of Article 27(2) of Regulation (EU) No 648/2012.

2.  The special manager shall have all the powers of the shareholders and the board of the CCP. The special manager may only exercise those powers under the control of the resolution authority. The resolution authority may limit the actions of the special manager or require prior consent for certain acts.

The resolution authority shall make public the appointment referred to in paragraph 1 and the terms and conditions attached to that appointment.

3.  The special manager shall be appointed for no more than one year. The resolution authority may renew that period where necessary to achieve the resolution objectives.

4.  The special manager shall take all the measures necessary to promote the resolution objectives and implement resolution actions taken by the resolution authority. In case of inconsistency or conflict, that statutory duty shall override any other duty of management in accordance with the statutes of the CCP or national law.

5.  The special manager shall draw up reports for the appointing resolution authority at regular intervals set by the resolution authority and at the beginning and the end of the mandate. Those reports shall describe in detail the financial situation of the CCP and state the reasons for the measures taken.

6.  The resolution authority may remove the special manager at any time. It shall in any case remove the special manager in the following cases:

(a)  where the special manager is failing to perform its duties in accordance with the terms and conditions set out by the resolution authority;

(b)  where the objectives of resolution would be better achieved by removing or replacing that special manager;

(c)  where the conditions for the appointment are no longer fulfilled.

7.  Where national insolvency law provides for the appointment of an insolvency management, the special manager appointed pursuant to paragraph 1 may also be appointed as insolvency manager or vice versa.

Article 51

Power to require the provision of services and facilities

1.  The resolution authority may require a CCP under resolution, or any of its group entities or clearing members, to provide any services or facilities that are necessary to enable a purchaser or bridge CCP to operate effectively the business transferred to it.

The first subparagraph shall apply regardless of whether an entity in the same group as the CCP or one of the CCP's clearing members has entered into normal insolvency proceedings or is itself under resolution.

2.  The resolution authority may enforce obligations imposed, pursuant to paragraph 1, by resolution authorities in other Member States where those powers are exercised in relation to entities belonging to the same group as the CCP under resolution, or of the clearing members of that CCP.

3.  The services and facilities referred to in paragraph 1 shall not include any form of financial support.

4.  The services and facilities provided pursuant to paragraph 1 shall be provided:

(a)  on the same commercial terms on which they were provided to the CCP immediately before the resolution action was taken, where an agreement for those purposes exists;

(b)  on reasonable commercial terms, where there is no agreement for those purposes or where that agreement has expired.

Article 52

Power to enforce resolution actions or crisis prevention measures by other Member States

1.  Where instruments of ownership, assets, rights, obligations or liabilities of a CCP under resolution are located in, or governed by the law of a Member State other than the Member State of the resolution authority, any transfer or resolution action in respect of those instruments, assets, rights, obligations or liabilities shall have effect in accordance with the law of that other Member State.

2.  The resolution authority of a Member State shall be provided with all necessary assistance by the authorities of other relevant Member States to ensure that any instruments of ownership, assets, rights, obligations or liabilities are transferred to the purchaser or bridge CCP or any other resolution action becomes effective in accordance with the applicable national law.

3.  Shareholders, creditors and third parties that are affected by the transfer of instruments of ownership, assets, rights, obligations or liabilities referred to in paragraph 1 shall not be entitled to prevent, challenge, or set aside that transfer under the law of the Member State that governs that transfer.

4.  Where the resolution authority of a Member State uses the resolution tools referred to in Articles 28 or 32, and the contracts, liabilities, instruments of ownership or debt instruments of the CCP under resolution include instruments, contracts or liabilities that are governed by the law of another Member State, or liabilities owed to creditors and contracts in respect of clearing members or their clients located in that other Member State, the relevant authorities in that other Member State shall ensure that any action resulting from those resolution tools takes effect.

For the purposes of the first subparagraph, shareholders, creditors and clearing members or their clients affected by those resolution tools shall not be entitled to challenge the reduction of the principal or payable amount of the instrument or liability or its conversion or restructuring.

5.  The following rights and safeguards shall be determined in accordance with the law of the Member State of the resolution authority:

(a)  the right for shareholders, creditors and third parties to appeal pursuant to Article 72 against the transfer of instruments of ownership, assets, rights, obligations or liabilities referred to in paragraph 1 of this Article;

(b)  the right for affected creditors to appeal pursuant to Article 72 against the reduction of the principal or payable amount or the conversion or restructuring of an instrument, liability or contract covered by paragraph 4 of this Article;

(c)  the safeguards for partial transfers, as referred to in Chapter V, in relation to assets, rights, obligations or liabilities referred to in paragraph 1 of this Article.

Article 53

Power in respect of assets, contracts, rights, liabilities, obligations and instruments of ownership of persons located in or governed by the law of third countries

1.  Where a resolution action concerns assets or contracts of persons located in a third country or instruments of ownership, rights, obligations or liabilities governed by the law of a third country, the resolution authority may require that:

(a)  the CCP under resolution and the recipient of those assets, contracts, instruments of ownership, rights, obligations or liabilities take all necessary steps to ensure that the action becomes effective;

(b)  the CCP under resolution holds the instruments of ownership, assets or rights or discharges the liabilities or obligations on behalf of the recipient until the action becomes effective;

(c)  the reasonable expenses of the recipient properly incurred in carrying out any action required under points (a) and (b) of this paragraph are reimbursed in any of the ways referred to in Article 27(9).

2.  For the purposes of paragraph 1, the resolution authority may require the CCP to ensure the inclusion of a provision in its contracts and other agreements with clearing members and holders of instruments of ownership and debt instruments or other liabilities located in or governed by the law of third countries by which they agree to be bound by any action in respect of their assets, contracts, rights, obligations and liabilities taken by the resolution authority, including the application of Articles 55, 56 and 57. The resolution authority may require the CCP to provide it with a legal opinion relating to the legal enforceability and effectiveness of such provisions.

3.  Where the resolution action referred to in paragraph 1 does not become effective, that action shall be void in relation to the instruments of ownership, assets, rights, obligations or liabilities concerned.

Article 54

Exclusion of certain contractual terms in early intervention and resolution

1.  A crisis prevention measure or a resolution action taken in accordance with this Regulation, or any event directly linked to the application of that action, shall not be deemed an enforcement or insolvency event within the meaning of Directive 2002/47/EC and Directive 98/26/EC provided that the substantive obligations under the contract, including payment and delivery obligations and the provision of collateral, continue to be performed.

For the purposes of the first subparagraph, third-country resolution proceedings recognised pursuant to Article 75, or otherwise where the resolution authority so decides, shall be considered a resolution action taken in accordance with this Regulation.

2.  A crisis prevention measure or a resolution action referred to in paragraph 1 shall not be used to:

(a)  exercise any termination, suspension, modification, netting or set-off rights, including in relation to a contract entered into by any entity of the group to which the CCP belongs which includes cross-default provisions or obligations which are guaranteed or otherwise supported by any group entity;

(b)  obtain possession, exercise control or enforce any security over any property of the CCP concerned or any group entity in relation to a contract which includes cross-default provisions;

(c)  affect any contractual rights of the CCP concerned or any group entity in relation to a contract which includes cross-default provisions.

Article 55

Power to suspend certain obligations

1.  The resolution authority may suspend any payment or delivery obligations of both counterparties to any contract entered into by a CCP under resolution from the publication of the notice of suspension in accordance with Article 70 until the end of the working day which follows that publication.

For the purposes of the first subparagraph, the end of the working day shall mean midnight in the Member State of the resolution authority.

2.  Where a payment or delivery obligation would have been due during the suspension period, the payment or delivery obligation shall be due immediately upon expiry of the suspension period.

3.  The resolution authority shall not exercise the power referred to in paragraph 1 to payment and delivery obligations owed to systems or operators of systems designated for the purposes of Directive 98/26/EC, including other central counterparties, and central banks.

Article 56

Power to restrict the enforcement of security interests

1.  The resolution authority may prevent secured creditors of a CCP under resolution from enforcing security interests in relation to any assets of that CCP under resolution from the publication of the notice of the restriction in accordance with Article 70 until the end of the working day which follows that publication.

For the purposes of the first subparagraph, the end of the working day shall mean midnight in the Member State of the resolution authority.

2.  The resolution authority shall not exercise the power referred to in paragraph 1 in relation to any security interest of systems or operators of systems designated for the purposes of Directive 98/26/EC, including other central counterparties, and central banks over assets pledged or provided by way of margin or collateral by the CCP under resolution.

Article 57

Power to temporarily suspend termination rights

1.  The resolution authority may suspend the termination rights of any party to a contract with a CCP under resolution from the publication of the notice of the termination in accordance with Article 70 until the end of the working day which follows that publication, provided that the payment and delivery obligations and the provision of collateral continue to be performed.

For the purposes of the first subparagraph, the end of the working day shall mean midnight in the Member State of the resolution.

2.  The resolution authority shall not exercise the power referred to in paragraph 1 in relation to systems or operators of systems designated for the purposes of Directive 98/26/EC, including other central counterparties and central banks.

3.  A party to a contract may exercise a termination right under that contract before the end of the period referred to in paragraph 1 where that party receives notice from the resolution authority that the rights and liabilities covered by the contract shall not be:

(a)  transferred to another entity;

(b)  subject to write-down, conversion, or the use of a resolution tool to allocate losses or positions.

4.  Where the notice referred to in paragraph 3 has not been given, termination rights may be exercised on the expiry of the period of suspension, subject to Article 54, as follows:

(a)  where the rights and liabilities covered by the contract have been transferred to another entity, a counterparty may exercise termination rights in accordance with the terms of that contract only if the recipient entity causes the enforcement event to occur or continue;

(b)  where the rights and liabilities covered by the contract remain with the CCP, termination rights apply in accordance with the conditions for termination as set out in the contract between the CCP and the relevant counterparty only if the enforcement event occurs or continues after the expiry of the suspension period.

Article 58

Power to exercise control over the CCP

1.  The resolution authority may exercise control over the CCP under resolution to:

(a)  manage the activities and services of the CCP, exercising the powers of its shareholders and board and to consult the risk committee;

(b)  manage and dispose of the assets and property of the CCP under resolution.

The control referred to in the first subparagraph may be exercised directly by the resolution authority or indirectly by a person or persons appointed by the resolution authority.

2.  Where the resolution authority exercises control over the CCP, the resolution authority shall not be deemed to be a shadow director or de facto director under national law.

Article 59

Exercise of powers by the resolution authorities

Subject to Article 72, resolution authorities shall take resolution actions through executive order in accordance with national administrative competences and procedures.

CHAPTER V

Safeguards

Article 60

No Creditor Worse Off principle

Where the resolution authority uses one or more resolution tools, it should aim to ensure that shareholders, creditors, clearing members and their clients do not incur greater losses than they would have incurred had the resolution authority not taken resolution action in relation to the CCP at the time the resolution authority considered that the conditions for resolution pursuant to Article 22(1) were met and had instead been subject to all possible outstanding obligations pursuant to the CCP's recovery plan and all other contractual arrangements in its operating rules for either a default or a non-default event and the CCP is a gone concern with no residual franchise value and wound up under normal insolvency proceedings, properly taking into account any plausible adverse effects of systemic instability and market turmoil.

(a)  ▌

(b)  ▌

Plausible adverse effects of systemic instability and market turmoil referred to in the first subparagraph shall not be taken into account as long as the regulatory technical standards referred to in paragraph 5 of Article 61 does not allow for their valuation.

Once the regulatory technical standards referred to in paragraph 5 of Article 61 have entered into force, the resolution authorities shall take into account plausible adverse effects of systemic instability and market turmoil for the purpose of the first subparagraph.

Article 61

Valuation for the application of the No Creditor Worse Off principle

1.   For the purpose of informing stakeholders exposed to the CCP, the CCP shall produce an estimate of how losses would affect each category of creditor under extreme but plausible scenarios for a default and non-default event leading to the insolvency of the CCP and shall be updated annually.

This estimate shall fully reflect the contractual arrangements governing the CCP's loss waterfall and be consistent with the margining and stress testing methodology used to fulfil the CCP's obligations under Regulation (EU) No 648/2012.

1a.  For the purposes of assessing compliance with the no creditor worse off principle as laid down in Article 60, the resolution authority shall ensure that a valuation is carried out by an independent person as soon as possible after the resolution actions have been effected.

2.  The valuation referred to in paragraph 1 shall include:

(a)  the treatment that shareholders, creditors and clearing members or their clients would have received had the resolution authority not taken resolution action in relation to the CCP the resolution authority considered that the conditions for resolution pursuant to Article 22(1) were met, and they had instead been subject to the enforcement of possible outstanding obligations pursuant to the CCP's recovery plan and other arrangements in its operating rules and the CCP had been wound up under normal insolvency proceedings as a gone concern with no residual franchise value, properly taking into account any plausible adverse effects of systemic instability and market turmoil,

(b)  the actual treatment that shareholders, creditors and clearing members or their clients have received, in the resolution of the CCP;

(c)  whether there is any difference between the treatment referred to in point (a) and the treatment referred to in point (b).

3.  For the purposes of calculating the treatments referred to in paragraph 2(a), the valuation referred to in paragraph 1 shall disregard any provision of extraordinary public financial support to the CCP under resolution and the CCP’s own pricing methodology shall be disregarded should this methodology fail to reflect the effective market conditions.

4.  The valuation referred to in paragraph 1 shall be distinct from the valuation carried out under Article 24(3).

5.  ESMA, taking into account any regulatory technical standards developed in accordance with Article 74(4) of Directive 2014/59/EU, shall develop draft regulatory technical standards specifying the methodology for carrying out the valuation referred to in paragraph 1, including, if or when technically possible, the valuation of plausible adverse effects of systemic instability and market turmoil.

ESMA shall submit those draft regulatory standards to the Commission by [PO please insert the date 12 months from entry into force of the Regulation].

Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with the procedure laid down in Articles 10 to 14 of Regulation (EU) No 1095/2010.

Article 62

Safeguard for shareholders, creditors and clearing members and clients of clearing members

Where, in accordance with the valuation carried out under Article 61, any shareholder, creditor, clearing member or client of a clearing member has incurred greater losses than it would have incurred if the resolution authority would not have taken resolution action in relation to the CCP and they would instead have been subject to possible outstanding obligations pursuant to the CCP's recovery plan or other arrangements in its operating rules or the CCP had been wound up under normal insolvency proceedings, that shareholder, creditor or clearing participant shall be entitled to the payment of the difference.

Article 62a

Recoupment of payments

The resolution authority shall recover any reasonable expenses incurred in connection with a payment as referred to in Article 62 in any of the following ways:

(a)  from the CCP under resolution, as a preferred creditor;

(b)  from any consideration paid by the purchaser where the sale of business tool has been used;

(c)  from any proceeds generated as a result of the termination of the bridge CCP, as a preferred creditor;

(d)  from any clearing member, to the extent that a clearing member does not incur greater losses than it would have incurred if the resolution authority would not have taken resolution action in relation to the CCP and they would instead have been subject to possible outstanding obligations pursuant to the CCP's recovery plan or other arrangements in its operating rules or the CCP had been wound up under normal insolvency proceedings.

Article 63

Safeguard for counterparties in partial transfers

The protections provided for in Articles 64, 65 and 66 shall apply in the following circumstances:

(a)  where the resolution authority transfers some but not all of the assets, rights, obligations or liabilities of a CCP under resolution, or a bridge CCP, to a purchaser;

(b)  where the resolution authority exercises the powers referred to in point (g) of Article 49(1).

Article 64

Protection for financial collateral, set off and netting agreements

The resolution authority shall ensure that the use of a resolution tool does not result in transferring some, but not all, of the rights and liabilities under a title transfer financial collateral arrangement, a set-off arrangement or a netting arrangement between a CCP under resolution and other parties to the arrangements, or in modifying or terminating the rights and liabilities under those arrangements through the use of ancillary powers.

The arrangements referred to in the first subparagraph shall include any arrangement to which the parties are entitled to set-off or net those rights and liabilities.

Article 65

Protection for security arrangements

Without prejudice to the use of position allocation tools in Article 29, the resolution authority shall ensure that the use of a resolution tool does not result in any of the following with respect to security arrangements between a CCP under resolution and other parties to those arrangements:

(a)  the transfer of assets against which the liability is secured unless that liability and benefit of the security are also transferred;

(b)  the transfer of a secured liability unless the benefit of the security is also transferred;

(c)  the transfer of the benefit of the security unless the secured liability is also transferred;

(d)  the modification or termination of a security arrangement through the use of ancillary powers, if the effect of that modification or termination is that the liability ceases to be secured.

Article 66

Protection for structured finance arrangements and covered bonds

The resolution authority shall ensure that the use of a resolution tool does not result in any of the following with respect to structured finance arrangements, including covered bonds:

(a)  the transfer of some, but not all, of the assets, rights and liabilities which constitute or form part of a structured finance arrangement to which the CCP under resolution is a party;

(b)  the termination or modification through the use of ancillary powers of the assets, rights and liabilities which constitute or form part of a structured finance arrangement to which the CCP under resolution is a party.

For the purposes of the first subparagraph, structured finance arrangements shall include securitisations and instruments used for hedging purposes which form an integral part of the cover pool and which according to national law are secured in a way similar to the covered bonds, which involve the granting and holding of security by a party to the arrangement or a trustee, agent or nominee.

Article 67

Partial transfers: protection of trading, clearing and settlement systems

1.  The resolution authority shall ensure that the use of a resolution tool does not affect the operation of systems and rules of systems covered by Directive 98/26/EC, where the resolution authority:

(a)  transfers some but not all of the assets, rights, obligations or liabilities of a CCP under resolution to a purchaser;

(b)  cancels or amends the terms of a contract to which the CCP under resolution is a party or to substitute a purchaser or bridge CCP as a party.

2.  For the purposes of paragraph 1, the resolution authority shall ensure that the use of a resolution tools does not result in any of the following outcomes:

(a)  revoking a transfer order in accordance with Article 5 of Directive 98/26/EC;

(b)  affecting the enforceability of transfer orders and netting as required by Articles 3 and 5 of Directive 98/26/EC;

(c)  affecting the use of funds, securities or credit facilities as required by Article 4 of Directive 98/26/EC;

(d)  affecting the protection of collateral security as required by Article 9 of Directive 98/26/EC.

CHAPTER VI

Procedural obligations

Article 68

Notification requirements

1.  The CCP shall notify the competent authority where it considers that it is failing or likely to fail as referred to in Article 22(2).

2.  The competent authority shall inform the resolution authority of any notifications received under paragraph 1, and of any recovery or other measures in accordance with Title IV that the competent authority requires the CCP to take.

The competent authority shall inform the resolution authority of any emergency situation referred to in Article 24 of Regulation (EU) No 648/2012 relating to a CCP and of any notification received in accordance with Article 48 of that Regulation.

3.  Where a competent authority or resolution authority determines that the conditions referred to in points (a) and (b) of Article 22(1) are met in relation to a CCP, it shall notify the following authorities in a timely manner:

(a)  the competent authority or resolution authority for that CCP;

(b)  the competent authority for the parent undertaking of the CCP;

(b a)  the supervisory college for that CCP;

(bb)  the resolution college for that CCP;

(c)  the central bank;

(d)  the competent ministry;

(e)  the ESRB and the designated national macro-prudential authority.

Article 69

Decision of the resolution authority

1.  After a notification from the competent authority pursuant to Article 68(3), the resolution authority shall determine whether any resolution action is needed.

2.  The decision whether or not to take resolution action in relation to a CCP shall contain information on the following:

(a)  the resolution authority's assessment of whether the CCP meets the conditions for resolution;

(b)  any action that the resolution authority intends to take, including the decision to apply for winding up, the appointment of an administrator or any other measure under applicable normal insolvency proceedings or, subject to point (e) of Article 27(1), under national law.

Article 70

Procedural obligations of resolution authorities

1.  As soon as practicable after taking a resolution action, the resolution authority shall notify all of the following:

(a)  the CCP under resolution;

(b)  the resolution college;

(c)  the designated national macroprudential authority and the ESRB;

(d)  the Commission, the European Central Bank, and EIOPA;

(e)  the operators of the systems covered by Directive 98/26/EC in which the CCP under resolution participates.

2.  The notification referred to in paragraph 1 shall include a copy of any order or instrument by which the relevant action is taken and indicate the date from which the resolution action is effective.

The notification to the resolution college pursuant to point (b) of paragraph (1) shall also indicate whether the resolution action deviates from the resolution plan and provide reasons for any such deviation.

3.  A copy of the order or instrument by which the resolution action is taken, or a notice summarising the effects of the resolution action and, if applicable, the terms and period of suspension or restriction referred to in Articles 55, 56 and 57, shall be published at all of the following:

(a)  the website of the resolution authority;

(b)  the website of the competent authority, if different from the resolution authority, and the website of ESMA;

(c)  the website of the CCP under resolution;

(d)  where the instruments of ownership or debt instruments of the CCP under resolution are admitted to trading on a regulated market, the means used for the disclosure of regulated information concerning the CCP under resolution in accordance with Article 21(1) of Directive 2004/109/EC of the European Parliament and of the Council(17).

4.  Where the instruments of ownership or debt instruments are not admitted to trading on a regulated market, the resolution authority shall ensure that the documents providing proof of the order referred to in paragraph 3 are sent to the holders of the instruments of ownership and creditors of the CCP under resolution that are known through the registers or databases of the CCP under resolution which are available to the resolution authority.

Article 71

Confidentiality

1.  The requirements of professional secrecy shall be binding in respect of the following persons:

(a)  resolution authorities;

(b)  competent authorities, ESMA and EBA;

(c)  competent ministries;

(d)  special managers or temporary administrators appointed under this Regulation;

(e)  potential acquirers that are contacted by the competent authorities or solicited by the resolution authorities, irrespective of whether that contact or solicitation was made as preparation for the use of the sale of business tool, and irrespective of whether the solicitation resulted in an acquisition;

(f)  auditors, accountants, legal and professional advisors, valuers and other experts directly or indirectly engaged by the resolution authorities, competent authorities, competent ministries or by the potential acquirers referred to in point (e);

(g)  central banks and other authorities involved in the resolution process;

(h)  a bridge CCP;

(i)  any other persons who provide or have provided services directly or indirectly, permanently or occasionally, to persons referred to in points (a) to (k);

(j)  the senior management and members of the board of the CCP, and employees of the bodies or entities referred to in points (a) to (k) before, during and after their appointment;

(k)  all other members of the resolution college not referred to in points (a), (b), (c) and (g).

2.  With a view to ensuring that the confidentiality requirements laid down in paragraphs 1 and 3 are complied with, the persons referred to in points (a), (b), (c), (g), (h) and (k) of paragraph 1 shall ensure that there are internal rules in place, including rules to secure secrecy of information between persons directly involved in the resolution process.

3.  The persons referred to in paragraph 1 shall be prohibited from disclosing confidential information received during the course of their professional activities or from a competent authority or resolution authority in connection with their functions under this Regulation, to any person or authority unless it is in the exercise of their functions under this Regulation or in summary or aggregate form such that individual CCPs cannot be identified or with the express and prior consent of the authority or the CCP which provided the information.

Before disclosing any type of information, the persons referred to in paragraph 1 shall assess the effects that the disclosure may have on the public interest as regards financial, monetary or economic policy, on the commercial interests of natural and legal persons, on the purpose of inspections, on investigations and on audits.

The procedure for checking the effects of disclosing information shall include a specific assessment of the effects of any disclosure of the contents and details of recovery and resolution plans as referred to in Articles 9 and 13 and the result of any assessment carried out under Articles 10 and 16.

Any person or entity referred to in paragraph 1 shall be subject to civil liability in the event of an infringement of this Article, in accordance with national law.

4.  By way of derogation from paragraph 3, the persons referred to in paragraph 1 may exchange confidential information with any of the following provided that confidentiality agreements are in place for the purposes of that exchange:

(a)  any other person where necessary for the purposes of planning or carrying out a resolution action;

(b)  parliamentary enquiry committees in their Member State, courts of auditors in their Member State and other entities in charge of enquiries in their Member State;

(c)  national authorities responsible for overseeing payment systems, the authorities responsible for normal insolvency proceedings, the authorities entrusted with the public duty of supervising other financial sector entities, the authorities responsible for the supervision of financial markets and insurance undertakings and inspectors acting on their behalf, the authorities responsible for maintaining the stability of the financial system in Member States through the use of macroprudential rules, the authorities responsible for protecting the stability of the financial system, and persons charged carrying out statutory audits.

5.  This Article shall not prevent:

(a)  employees and experts of the bodies or entities referred to in points (a) to (g) and in point (k) of paragraph 1 from sharing information among themselves within each body or entity;

(b)  resolution authorities and competent authorities, including their employees and experts, from sharing information with each other and with other Union resolution authorities, other Union competent authorities, competent ministries, central banks, authorities responsible for normal insolvency proceedings, authorities responsible for maintaining the stability of the financial system in Member States through the use of macroprudential rules, persons charged with carrying out statutory audits of accounts, EBA, ESMA, or, subject to Article 78, third-country authorities that carry out equivalent functions to resolution authorities, or, subject to strict confidentiality requirements, to a potential acquirer for the purposes of planning or carrying out a resolution action.

6.  This Article shall be without prejudice to national law concerning the disclosure of information for the purpose of legal proceedings in criminal or civil cases.

CHAPTER VII

Right of appeal and exclusion of other actions

Article 72

Ex-ante judicial approval and rights of appeal

1.  ▌

2.  All persons affected by a decision to take a crisis prevention measure or a decision to exercise any power, other than a resolution action, shall have the right of appeal against that decision.

3.  All persons affected by a decision to take a resolution action shall have the right of appeal against that decision.

4.  The right of appeal referred to in paragraph 3 shall be subject to the following conditions:

(a)  the decision of the resolution authority shall be immediately enforceable and it shall give rise to a rebuttable presumption that a suspension of its enforcement would be against the public interest;

(b)  the procedure relating to the appeal shall be expeditious;

(c)  the court shall use the economic assessments of the facts carried out by the resolution authority as a basis for its own assessment.

4a.  A decision of the Resolution Authority to take a Resolution action, a crisis prevention measure or a decision to exercise any power, other than a Resolution action, shall be annulled on substantive grounds only if it was arbitrary and unreasonable at the time of the decision, based on the information then readily available.

4b.  The lodging of an appeal shall not entail any automatic suspension of the effects of the challenged decision.

5.  Where necessary to protect the interests of third parties acting in good faith who have acquired instruments of ownership, assets, rights, obligations or liabilities of a CCP under resolution by virtue of a resolution action, the annulment of a decision of a resolution authority shall not affect any subsequent administrative acts or transactions concluded by the resolution authority concerned which were based on the annulled decision.

For the purposes of the first subparagraph, the remedies available to the applicant where a decision of the resolution authority is annulled shall be limited to compensation for the loss suffered as a result of that decision.

Article 73

Restrictions on other proceedings

1.  Normal insolvency proceedings shall not be commenced in relation to a CCP except at the initiative of the resolution authority or with its consent in accordance with paragraph 3.

2.  Competent authorities and resolution authorities shall be notified without delay of any application for the opening of normal insolvency proceedings in relation to a CCP, irrespective of whether the CCP is under resolution or a decision has been made public in accordance with Article 70(3).

3.  The authorities responsible for normal insolvency proceedings may only commence those proceedings after the resolution authority has notified them of its decision not to take any resolution action in relation to the CCP or where no notification has been received within seven days of the notification referred to in paragraph 2.

Where necessary for the effective use of the resolution tools and powers, resolution authorities may request the court to apply a stay for an appropriate period of time in accordance with the objective pursued, on any judicial action or proceeding in which a CCP under resolution is or may become a party.

TITLE VI

RELATIONS WITH THIRD COUNTRIES

Article 74

Agreements with third countries

1.  In accordance with Article 218 TFEU, the Commission may submit to the Council recommendations for the negotiation of agreements with one or more third countries regarding the means of cooperation between the resolution authorities and the relevant third country authorities in connection with recovery and resolution planning in relation to CCPs and third country CCPs, with regard to the following situations:

(a)  where a third country CCP provides services or has subsidiaries in one or more Member States;

(b)  where a CCP established in a Member State provides services or has one or more subsidiaries in a third country;

(ba)  where a significant number of clearing members of a CCP are established in that third country;

(bb)  where a third country CCP has a significant number of clearing members that are established in the Union.

2.  The agreements referred to in paragraph 1 shall, in particular, seek to ensure the establishment of processes and arrangements for cooperation in carrying out the tasks and exercising the powers indicated in Article 77, including the exchange of information necessary for those purposes.

Article 75

Recognition and enforcement of third-country resolution proceedings

1.  This Article shall apply in respect of third-country resolution proceedings unless and until an international agreement as referred to in Article 74(1) enters into force with the relevant third country. It shall also apply following the entry into force of an international agreement as referred to in Article 74(1) with the relevant third country to the extent that recognition and enforcement of third-country resolution proceedings is not governed by that agreement.

2.  Relevant national authorities shall recognise third-country resolution proceedings relating to a third-country CCP in any of the following cases:

(a)  the third-country CCP provides services in or has subsidiaries established in one or more Member States;

(b)  the third-country CCP has assets, rights, obligations or liabilities located in one or more Member States or are governed by the law of those Member States.

Relevant national authorities shall ensure the enforcement of the recognised third-country resolution proceedings in accordance with their national law.

3.  The relevant national authorities shall at least have the power to do the following:

(a)  exercise the resolution powers in relation to the following:

(i)  assets of a third-country CCP that are located in their Member State or governed by the law of their Member State;

(ii)  rights or liabilities of a third-country CCP that are booked in their Member State or governed by the law of their Member State, or where claims in relation to such rights and liabilities are enforceable in their Member State;

(b)  perfect, including to require another person to take action to perfect, a transfer of instruments of ownership in a subsidiary established in the designating Member State;

(c)  exercise the powers in Article 55, 56 and 57 in relation to the rights of any party to a contract with an entity referred to in paragraph 2 of this Article, where such powers are necessary in order to enforce third-country resolution proceedings;

(d)  render unenforceable any right to terminate, liquidate or accelerate contracts, or affect the contractual rights, of entities referred to in paragraph 2 and other group entities, where such a right arises from resolution action taken in respect of the third‑country CCP, whether by the third-country resolution authority itself or otherwise pursuant to legal or regulatory requirements as to resolution arrangements in that country, provided that the substantive obligations under the contract, including payment and delivery obligations, and provision of collateral, continue to be performed.

4.  The recognition and enforcement of third-country resolution proceedings shall be without prejudice to any normal insolvency proceedings under national law applicable.

Article 76

Right to refuse recognition or enforcement of third-country resolution proceedings

By way of derogation from Article 75(2), the relevant national authorities may refuse to recognise or to enforce third-country resolution proceedings in any of the following cases:

(a)  the third-country resolution proceedings would have adverse effects on financial stability in their Member State;

(b)  creditors or clearing members or their clients of those clearing members located in their Member State would not receive the same treatment as third-country creditors or clearing members or their clients of those clearing members with similar legal rights under the third-country home resolution proceedings;

(c)  recognition or enforcement of the third-country resolution proceedings would have material fiscal implications for their Member State;

(d)  the recognition or enforcement would be contrary to national law.

Article 77

Cooperation with third-country authorities

1.  This Article shall apply in respect of cooperation with a third country unless and until an international agreement as referred to in Article 74(1) enters into force with the relevant third country. It shall also apply following the entry into force of an international agreement provided for in Article 74(1) with the relevant third country to the extent that the subject matter of this Article is not governed by that agreement.

2.  Competent authorities or resolution authorities, where appropriate, shall conclude cooperation arrangements with the following relevant third-country authorities, taking into account existing cooperation arrangements established pursuant to Article 25(7) of Regulation (EU) No 648/2012:

(a)  where a third country CCP provides services or has subsidiaries in one or more Member States, the relevant authorities of the third country where the CCP is established;

(b)  where a CCP provides services in or has one or more third-country subsidiaries, the relevant authorities of the third countries where those services are provided or where the subsidiaries are established.

3.  The cooperation arrangements referred to in paragraph 2 shall establish processes and arrangements between the participating authorities for sharing the necessary information for and cooperating in carrying out the following tasks and exercising the following powers in relation to CCPs referred to in points (a) and (b) of paragraph 2 or groups including such CCPs:

(a)  the development of resolution plans in accordance with Article 13 and similar requirements under the law of the relevant third countries;

(b)  the assessment of the resolvability of such institutions and groups, in accordance with Article 16 and similar requirements under the law of the relevant third countries;

(c)  the application of powers to address or remove impediments to resolvability pursuant to Article 17 and any similar powers under the law of the relevant third countries;

(d)  the application of early intervention measures pursuant to Article 19 and similar powers under the law of the relevant third countries;

(e)  the use of resolution tools and exercise of resolution powers and similar powers conferred upon the relevant third-country authorities.

4.  Cooperation arrangements concluded between resolution authorities and competent authorities of Member States and third countries pursuant to paragraph 2 may include provisions on the following matters:

(a)  the exchange of information necessary for the preparation and maintenance of resolution plans;

(b)  consultation and cooperation in the development of resolution plans, including principles for the exercise of powers under Article 75 and similar powers under the law of the relevant third countries;

(c)  the exchange of information necessary for the use of resolution tools and exercise of resolution powers and similar powers under the law of the relevant third countries;

(d)  early warning to or consultation of parties to the cooperation arrangement before taking any significant action under this Regulation or relevant third-country law affecting the CCP or group to which the arrangement relates;

(e)  the coordination of public communication in the case of joint resolution actions;

(f)  procedures and arrangements for the exchange of information and cooperation under points (a) to (e), including, where appropriate, through the establishment and operation of crisis management groups.

In order to ensure the common, uniform and consistent application of paragraph 3, ESMA shall issue guidelines on the types and content of the provisions referred to in paragraph 4 by [PO please insert the date 18 months from entry into force of the Regulation].

5.  Resolution authorities and competent authorities shall notify ESMA of any cooperation agreements that they have concluded in accordance with this Article.

Article 78

Exchange of confidential information

1.  Resolution authorities, competent authorities, competent ministries and, where applicable, other relevant national authorities shall exchange confidential information, including recovery plans, with relevant third-country authorities only if the following conditions are met:

(a)  those third-country authorities are subject to requirements and standards of professional secrecy at least considered to be equivalent, in the opinion of all the authorities concerned, to those imposed by Article 71;

(b)  the information is necessary for the performance by the relevant third-country authorities of their functions under national law that are comparable to those under this Regulation and is not used for any other purposes.

2.  In so far as the exchange of information relates to personal data, the handling and transmission of such personal data to third-country authorities shall be governed by the applicable Union and national data protection law.

3.  Where confidential information originates in another Member State, resolution authorities, competent authorities and competent ministries shall not disclose that information to relevant third-country authorities unless the following conditions are met:

(a)  the relevant authority of the Member State where the information originated agrees to that disclosure;

(b)  the information is disclosed only for the purposes permitted by the authority referred to in point (a).

4.  For the purposes of this Article, information is deemed to be confidential if it is subject to confidentiality requirements under Union law.

Article 78a

Administrative penalties and other administrative measures

1.  Without prejudice to the right of Member States to provide for and impose criminal penalties, Member States shall lay down rules on administrative penalties and other administrative measures applicable where the provisions of this Regulation have not been complied with, and shall take all measures necessary to ensure that they are implemented. Where Member States decide not to lay down rules for administrative penalties for infringements which are subject to national criminal law they shall communicate to the Commission the relevant criminal law provisions. The administrative penalties and other administrative measures shall be effective, proportionate and dissuasive.

2.  Member States shall ensure that, where obligations referred to in the first paragraph apply to CCPs, clearing members of CCPs or parent undertakings, in the event of an infringement, administrative penalties can be applied, subject to the conditions laid down in national law, to the members of the board of the CCP and to other natural persons who under national law are responsible for the infringement.

3.  The powers to impose administrative penalties provided for in this Regulation shall be attributed to resolution authorities or, where different, to competent authorities, depending on the type of infringement. Resolution authorities and competent authorities shall have all information-gathering and investigatory powers that are necessary for the exercise of their respective functions. In the exercise of their powers to impose penalties, resolution authorities and competent authorities shall cooperate closely to ensure that administrative penalties or other administrative measures produce the desired results and coordinate their action when dealing with cross-border cases.

4.  Resolution authorities and competent authorities shall exercise their administrative powers to impose penalties in accordance with this Regulation and national law in any of the following ways:

(a)  directly;

(b)  in collaboration with other authorities;

(c)  under their responsibility by delegation to such authorities;

(d)  by application to the competent judicial authorities.

Article 78b

Specific provisions

1.  Member States shall ensure that their laws, regulations and administrative provisions provide for penalties and other administrative measures at least in respect of the following situations:

(a)  failure to draw up, maintain and update recovery plans infringing Article 9;

(b)  failure to provide all the information necessary for the development of resolution plans, infringing Article 14;

(c)  failure of the board of the CCP to notify the competent authority when the CCP is failing or likely to fail, infringing Article 68(1).

2.  Member States shall ensure that, in the cases referred to in paragraph 1, the administrative penalties and other administrative measures that can be applied include at least the following:

(a)  a public statement which indicates the natural person, institution, Union parent undertaking, CCP, or other legal person responsible and the nature of the infringement;

(b)  an order requiring the natural or legal person responsible to cease the conduct and to desist from a repetition of that conduct;

(c)  a temporary ban against the members of the senior management of the CCP or any other natural person, who is held responsible, to exercise functions in CCPs;

(d)  in the case of a legal person, administrative fines of up to 10 % of the total annual net turnover of that legal person in the preceding business year. Where the legal person is a subsidiary of a parent undertaking, the relevant turnover shall be the turnover resulting from the consolidated accounts of the ultimate parent undertaking in the preceding business year;

(e)  in the case of a natural person, administrative fines of up to EUR 5 000 000, or in the Member States where the Euro is not the official currency, the corresponding value in the national currency on [date of entry into force of the Regulation];

(f)  administrative fines of up to twice the amount of the benefit derived from the infringement where that benefit can be determined.

Article 78c

Publication of administrative penalties

1.  Member States shall ensure that resolution authorities and competent authorities publish on their official website at least any administrative penalties imposed by them for infringing the provisions laid down in this Regulation where such penalties have not been the subject of an appeal or where the right of appeal has been exhausted. Such publication shall be made without undue delay after the natural or legal person is informed of that penalty including information on the type and nature of the infringement and the identity of the natural or legal person on whom the penalty is imposed.

Where Member States permit publication of penalties against which there is an appeal, resolution authorities and competent authorities shall, without undue delay, publish on their official websites information on the status of that appeal and the outcome thereof.

2.  Resolution authorities and competent authorities shall publish the penalties imposed by them on an anonymous basis, in a manner which is in accordance with national law, in any of the following circumstances:

(a)  where the penalty is imposed on a natural person and publication of personal data is shown to be disproportionate by an obligatory prior assessment of the proportionality of such publication;

(b)  where publication would jeopardise the stability of financial markets or an ongoing criminal investigation;

(c)  where publication would cause, insofar as it can be determined, disproportionate damage to the CCP or natural persons involved.

Alternatively, in such cases, the publication of the data in question may be postponed for a reasonable period of time, if it is foreseeable that the reasons for anonymous publication will cease to exist within that period.

3.  Resolution authorities and competent authorities shall ensure that any publication in accordance with this Article shall remain on their official website for a period of at least five years. Personal data contained in the publication shall only be kept on the official website of the resolution authority or the competent authority for the period which is necessary in accordance with applicable data protection rules.

4.  By ... [PO: insert date: 18 months after the entry into force of this Regulation], ESMA shall submit a report to the Commission on the publication by Member States, on an anonymous basis as provided for under paragraph 2, of penalties for non-compliance with the provisions laid down in this Regulation and in particular whether there have been significant divergences between Member States in that respect. That report shall also address any significant divergences in the duration of publication of penalties under national law for Member States for publication of penalties.

Article 78d

Maintenance of central database by ESMA

1.  Subject to the professional secrecy requirements referred to in Article 71, resolution authorities and competent authorities shall inform ESMA of all administrative penalties imposed by them under Article 78a for infringements of the provisions laid down in this Article and of the status of that appeal and outcome thereof.

2.  ESMA shall maintain a central database of penalties reported to it solely for the purpose of exchange of information between resolution authorities which shall be accessible to resolution authorities only and shall be updated on the basis of the information provided by resolution authorities.

3.  ESMA shall maintain a central database of penalties reported to it solely for the purpose of exchange of information between competent authorities which shall be accessible to competent authorities only and shall be updated on the basis of the information provided by competent authorities.

4.  ESMA shall maintain a webpage with links to each resolution authority’s publication of penalties and each competent authority’s publication of penalties under Article 78c and indicate the period for which each Member State publishes penalties.

Article 78e

Effective application of penalties and exercise of powers to impose penalties by competent authorities and resolution authorities

Member States shall ensure that, when determining the type of administrative penalties or other administrative measures and the level of administrative fines, the competent authorities and resolution authorities take into account all relevant circumstances, including where appropriate:

(a)  the gravity and the duration of the infringement;

(b)  the degree of responsibility of the natural or legal person responsible;

(c)  the financial strength of the natural or legal person responsible, for example, as indicated by the total turnover of the responsible legal person or the annual income of the responsible natural person;

(d)  the amount of profits gained or losses avoided by the natural or legal person responsible, insofar as they can be determined;

(e)  the losses for third parties caused by the infringement, insofar as they can be determined;

(f)  the level of cooperation of the natural or legal person responsible with the competent authority and the resolution authority;

(g)  previous infringements by the natural or legal person responsible;

(h)  any potential systemic consequences of the infringement.

TITLE VII

AMENDMENTS TO REGULATIONS (EU) NO 1095/2010, (EU) NO 648/2012, AND (EU) 2015/2365

Article 79

Amendments to Regulation (EU) No 1095/2010

Regulation (EU) No 1095/2010 is amended as follows:

(22)  in Article 4, in paragraph 3, the following point (iv) is added:"

'(iv) with regard to Regulation (EU) No [on CCP recovery and resolution], a resolution authority as defined in point 3 of Article 2(1) of Regulation (EU) No [on CCP recovery and resolution].';

"

(23)  in Article 40, in paragraph 5, the following subparagraph is added:"

‘For the purpose of acting within the scope of Regulation (EU) [on CCP recovery and resolution], the member of the Board of Supervisors referred to in point (b) of paragraph 1 may, where appropriate, be accompanied by a representative from the resolution authority in each Member State, who shall be non-voting.’.

"

Article 80

Amendments to Regulation (EU) No 648/2012

Regulation (EU) No 648/2012 is amended as follows:

(1)  The following Article 6a is inserted:"

'Article 6a

Suspension of the clearing obligation in resolution

1.  Where a CCP meets the conditions under Article 22 of Regulation (EU) [on CCP recovery and resolution], the resolution authority of the CCP designated under Article 3(1) of that Regulation ▌ may request the Commission to temporarily suspend the clearing obligation laid down in Article 4(1) for specific classes of OTC derivatives where the following conditions are met:

   (a) the CCP in resolution is authorised under Article 14 to clear the specific classes of OTC derivatives subject to clearing pursuant to Article 4(1) for which the suspension is requested;
   (b) the suspension of the clearing obligation laid down in Article 4 for those specific classes of OTC derivatives is necessary to avoid a serious threat to financial stability in the Union in connection with the resolution of the CCP, in particular where all of the following criteria are met:
   (i) there are adverse events or developments which constitute a serious threat to financial stability;
   (ii) the measure is necessary to address the threat and will not have a detrimental effect on financial stability including possible procyclical effects which is disproportionate to its benefits.
   (iia) no alternative CCPs are available to offer the clearing service to the clearing participants of the CCP in resolution, or clearing members and clients are not operationally and technically able to meet within a reasonable timeframe all legal or operational requirements of those alternative CCPs.

The request referred to in the first subparagraph shall be accompanied by evidence that the conditions laid down in points (a) and (b) of the first subparagraph are fulfilled.

The resolution authority referred to in the first subparagraph shall notify its reasoned request to ESMA and the ESRB at the same time that the request is notified to the Commission.

2.  ESMA shall, within 24 hours of notification of the request referred to in paragraph 1, and after consultation of the ESRB, issue an opinion on the intended suspension taking into account the necessity to avoid a serious threat to financial stability in the Union, the resolution objectives laid down in Article 21 of Regulation (EU) [on CCP recovery and resolution] and the criteria set out in paragraphs 4 and 5 of Article 5 of this Regulation.

3.  The opinion referred to in paragraph 2 shall not be made public.

4.  The Commission shall, within 48 hours of the request referred to in paragraph 1 and in accordance with paragraph 6 adopt a decision suspending temporarily the clearing obligation for specific classes of OTC derivatives or rejecting the requested suspension.

5.  The Commission's decision shall be communicated to the authority that requested the suspension and to ESMA and shall be published on the Commission's website. Where the Commission decides to suspend a clearing obligation, this shall be published on the public register referred to in Article 6.

6.  The Commission may decide to temporarily suspend the clearing obligation referred to in paragraph 1 for the specific class of OTC derivatives provided that the conditions in point (a) and (b) of paragraph 1 are fulfilled. In adopting such a decision, the Commission shall take into account the opinion issued by ESMA referred to in paragraph 2, the resolution objectives referred to in Article 21 of Regulation (EU) [on CCP recovery and resolution], the criteria set out in paragraphs 4 and 5 of Article 5 regarding those OTC derivative classes and the necessity of the suspension to avoid a serious threat to financial stability.

7.  The suspension of a clearing obligation pursuant to paragraph 4 shall be valid for an initial period not exceeding one month from the date of its publication in the Official Journal of the European Union.

8.  The Commission may, after consulting the Resolution Authority, ESMA and the ESRB, renew the suspension referred to in paragraph 7 for one or more periods not cumulatively exceeding six months from the end of the initial suspension period where the grounds for the suspension continue to apply.

9.  Where the suspension is not renewed by the end of the initial period or by the end of any subsequent renewal period it shall automatically expire.

10.  The Commission shall notify ESMA of its intention to renew the suspension of the clearing obligation.

ESMA shall, within 48 hours of notification by the Commission of its intention to renew the suspension of the clearing obligation, issue an opinion on the renewal of the suspension taking into account the necessity to avoid a serious threat to financial stability in the Union, the resolution objectives laid down in Article 21 of Regulation (EU) [on CCP recovery and resolution] and the criteria set out in paragraphs 4 and 5 of Article 5 of this Regulation.';

"

(2)  In Article 28, paragraph 3 is replaced by the following:"

'3. The risk committee shall advise the board on any arrangements that may impact the risk management of the CCP, such as a significant change in its risk model, the default procedures, the criteria for accepting clearing members, the clearing of new classes of instruments, or the outsourcing of functions. The risk committee shall inform the board in a timely manner of any new risk affecting the resilience of the CCP. The advice of the risk committee is not required for the daily operations of the CCP. Reasonable efforts shall be made to consult the risk committee on developments impacting the risk management of the CCP in emergency situations, including on developments relevant to clearing members' exposures to the CCP and interdependencies with other CCPs' without prejudice to the limitations to the exchange of information laid out in competition law.

"

(3)  In Article 28, paragraph 5 is replaced by the following:"

'5. A CCP shall promptly inform the competent authority and the risk committee of any decision in which the board decides not to follow the advice of the risk committee and explain such decision. The risk committee or any member of the risk committee may inform the competent authority of any areas in which it considers that the advice of the risk committee has not been followed.';

"

(4)  in Article 38, the following paragraph 6 is added:"

'The clearing members of the CCP shall clearly inform their existing and potential clients of the specific potential losses or other costs that they may bear a result of the application of the default management process and loss allocation arrangements laid out in the CCPs operating rules, including the type of compensation they may receive, taking into account Article 48(7)of Regulation (EU) No 648/2012. Clients shall be provided with sufficient information to ensure that they understand the worst-case losses or other costs they could face should the CCP undertake recovery measures.';

"

(5)  in Article 81, in paragraph 3, the following point (q) is added:"

'(q) the resolution authorities designated under Article 3 of Regulation (EU) No [on CCP recovery and resolution].'.

"

Article 81

Amendment to Regulation (EU) 2015/2365

In Article 12, in paragraph 2, the following point (n) is added:"

'(n) the resolution authorities designated under Article 3 of Regulation (EU) [on CCP recovery and resolution].'.

"

TITLE VIII

FINAL PROVISIONS

Article 82

Review

At the latest by ...[two years following the date of entry into force of this Regulation] and sooner if appropriate in the light of other legislation adopted, ESMA shall assess the staffing and resources needs arising from the assumption of its powers and duties in accordance with this Regulation and submit a report to the European Parliament, the Council and the Commission.

By ...[three years following the date of entry into force of this Regulation or upon adoption of other relevant legislation], the Commission shall review this Regulation and its implementation and shall assess the effectiveness of the governance arrangements for the recovery and resolution of CCPs in the Union and submit a report thereon to the European Parliament and to the Council.

This report shall in particular:

(a)  assess whether establishing a single resolution authority for Union CCPs would be beneficial, timely and consistent with the developments regarding the supervisory architecture for CCPs in the Union and with the state of integration of such supervisory architecture; and

(b)  review the Union institutions, bodies and agencies that could take up the duties of a single resolution authority for Union CCPs and assess their suitability.

If a single supervisor for Union CCPs has been established by the time of this report or if the report concludes that the supervisory architecture for Union CCPs is sufficiently integrated for a single resolution authority for CCPs to be consistent with it, the Commission shall present a proposal to amend this Regulation in order to create a single resolution authority for CCPs or, as the case may be, in order to entrust the resolution of Union CCPs to any suitable Union institution, body or agency.

Article 83

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 [PO: Please insert the date set out in the second subparagraph of Article 9(1) of the Directive amending Directive 2014/59/EU ].

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

ANNEX

SECTION A

Requirements for recovery plans

1.  The recovery plan shall:

(1)  not assume any access to or receipt of extraordinary public financial support;

(2)  consider the interests of all stakeholders that are likely to be affected by that plan;

(3)  ensure that clearing members do not have unlimited exposures toward the CCP.

The CCP shall develop adequate mechanisms to involve linked FMIs and stakeholders which would bear losses, incur costs or contribute to cover liquidity shortfalls in the event that the recovery plan was implemented in the process of drawing-up of that plan.

SECTION B

Information that resolution authorities may request CCPs to provide for the purposes of drawing up and maintaining resolution plans

Resolution authorities may request institutions to provide for the purposes of drawing up and maintaining resolution plans at least the following information:

(2)  a detailed description of the CCP's organisational structure including a list of all legal persons;

(3)  identification of the direct holders and the percentage of voting and non-voting rights of each legal person;

(4)  the location, jurisdiction of incorporation, licensing and key management associated with each legal person;

(5)  a mapping of the CCP's critical operations and core business lines including balance sheet details of such operations and business lines, by reference to legal persons;

(6)  a detailed description of the components of the CCP's and all its legal entities' business activities, separating, at a minimum by types of services and respective amounts of cleared volumes, open interest, initial margin, variation margin flows, default funds and any associated assessment rights or other recovery actions pertaining to such business lines;

(7)  details of capital and debt instruments issued by the CCP and its legal entities;

(8)  an identification of from whom the CCP has received collateral and in what form (title transfer or security interest), and to whom it has pledged collateral and in what form and the person that holds the collateral, and in both cases the jurisdiction in which the collateral is located;

(9)  a description of the off balance sheet exposures of the CCP and its legal entities, including a mapping to its critical operations and core business lines;

(10)  the material hedges of the CCP including a mapping to legal persons;

(11)  identification of the relative exposures and importance of clearing members of the CCP as well as an analysis of the impact of the failure of major clearing members on the CCP;

(12)  each system on which the CCP conducts a material number or value amount of trades, including a mapping to the CCP’s legal persons, critical operations and core business lines;

(13)  each payment, clearing or settlement system of which the CCP is directly or indirectly a member, including a mapping to the CCP's legal persons, critical operations and core business lines;

(14)  a detailed inventory and description of the key management information systems, including those for risk management, accounting and financial and regulatory reporting used by the CCP including a mapping to the CCP's legal persons, critical operations and core business lines;

(15)  an identification of the owners of the systems identified in point (13), service level agreements related thereto, and any software and systems or licenses, including a mapping to their legal entities, critical operations and core business lines;

(16)  an identification and mapping of the legal persons and the interconnections and interdependencies among the different legal persons such as:

–  common or shared personnel, facilities and systems;

–  capital, funding or liquidity arrangements;

–  existing or contingent credit exposures;

–  cross guarantee agreements, cross-collateral arrangements, cross-default provisions and cross-affiliate netting arrangements;

–  risks transfers and back-to-back trading arrangements; service level agreements;

(17)  the competent and resolution authority for each legal person, if different to those designated under Article 22 of Regulation (EU) No 648/2012 and under Article 3 of this Regulation;

(18)  the member of the board responsible for providing the information necessary to prepare the resolution plan of the CCP as well as those responsible, if different, for the different legal persons, critical operations and core business lines;

(19)  a description of the arrangements that the CCP has in place to ensure that, in the event of resolution, the resolution authority will have all the necessary information, as determined by the resolution authority, for applying the resolution tools and powers;

(20)  all the agreements entered into by the CCP and their legal entities with third parties the termination of which may be triggered by a decision of the authorities to apply a resolution tool and whether the consequences of termination may affect the application of the resolution tool;

(21)  a description of possible liquidity sources for supporting resolution;

(22)  information on asset encumbrance, liquid assets, off-balance sheet activities, hedging strategies and booking practices.

SECTION C

Matters that the resolution authority is to consider when assessing the resolvability of a CCP

When assessing the resolvability of a CCP, the resolution authority shall consider the following:

(23)  the extent to which the CCP is able to map core business lines and critical operations to legal persons;

(24)  the extent to which legal and corporate structures are aligned with core business lines and critical operations;

(25)  the extent to which there are arrangements in place to provide for essential staff, infrastructure, funding, liquidity and capital to support and maintain the core business lines and the critical operations;

(26)  the extent to which the service agreements that the CCP maintains are fully enforceable in the event of resolution of the CCP;

(27)  the extent to which the governance structure of the CCP is adequate for managing and ensuring compliance with the CCP's internal policies with respect to its service level agreements;

(28)  the extent to which the CCP has a process for transitioning the services provided under service level agreements to third parties in the event of the separation of critical functions or of core business lines;

(29)  the extent to which there are contingency plans and measures in place to ensure continuity in access to payment and settlement systems;

(30)  the adequacy of the management information systems in ensuring that the resolution authorities are able to gather accurate and complete information regarding the core business lines and critical operations so as to facilitate rapid decision making;

(31)  the capacity of the management information systems to provide the information essential for the effective resolution of the CCP at all times even under rapidly changing conditions;

(32)  the extent to which the CCP has tested its management information systems under stress scenarios as defined by the resolution authority;

(33)  the extent to which the CCP can ensure the continuity of its management information systems both for the affected CCP and the new CCP in the case that the critical operations and core business lines are separated from the rest of the operations and business lines;

(34)  where the CCP benefits or is exposed to any intra-group guarantees, the extent to which those guarantees are provided at market conditions and the risk management systems concerning those guarantees are robust;

(35)  where the CCP engages in back-to-back transactions, the extent to which those transactions are performed at market conditions and the risk management systems concerning those transactions practices are robust;

(36)  the extent to which the use of any intra-group guarantees or back-to-back booking transactions increases contagion across the group;

(37)  the extent to which the legal structure of the CCP inhibits the application of the resolution tools as a result of the number of legal persons, the complexity of the group structure or the difficulty in aligning business lines to group entities;

(38)  the extent to which the resolution of the CCP could have a negative impact on another part of its group, where applicable;

(39)  the existence and robustness of service level agreements;

(40)  whether third-country authorities have the resolution tools necessary to support resolution actions by Union resolution authorities, and the scope for coordinated action between Union and third-country authorities;

(41)  the feasibility of using resolution tools in such a way which meets the resolution objectives, given the tools available and the CCP's structure;

(42)  any specific requirements needed to issue new instruments of ownership as referred to in Article 33(1);

(43)  the arrangements and means through which resolution could be hampered in the cases of CCP that have clearing members or collateral arrangements established in different jurisdictions;

(44)  the credibility of using resolution tools in such a way which meets the resolution objectives, given possible impacts on clearing participants, other counterparties and employees and possible actions that third-country authorities may take;

(45)  the extent to which the impact of the CCP's resolution on the financial system and on financial market's confidence can be adequately evaluated;

(46)  the extent to which the resolution of the CCP could have a significant direct or indirect adverse effect on the financial system, market confidence or the economy;

(47)  the extent to which contagion to other CCPs or to the financial markets could be contained through the application of the resolution tools and powers;

(48)  the extent to which the resolution of the CCP could have a significant effect on the operation of payment and settlement systems.

(1) OJ C 372, 1.11.2017, p. 6.
(2) OJ C 209, 30.6.2017, p. 28.
(3) OJ C , , p. .
(4) OJ C 209, 30.6.2017, p. 28.
(5) OJ C 372, 1.11.2017, p. 6.
(6) Regulation (EU) No 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC derivatives, central counterparties and trade repositories (OJ L 201, 27.7.2012, p. 1).
(7) Directive 2014/59/EU of the European Parliament and of the Council of 15 May 2014 establishing a framework for the recovery and resolution of credit institutions and investment firms and amending Council Directive 82/891/EEC, and Directives 2001/24/EC, 2002/47/EC, 2004/25/EC, 2005/56/EC, 2007/36/EC, 2011/35/EU, 2012/30/EU and 2013/36/EU, and Regulations (EU) No 1093/2010 and (EU) No 648/2012, of the European Parliament and of the Council (OJ L 173, 12.6.2014, p. 190).
(8) Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC (OJ L 173, 12.6.2014, p. 1).
(9) Regulation (EU) 2015/2365 of the European Parliament and of the Council of 25 November 2015 on transparency of securities financing transactions and of reuse and amending Regulation (EU) No 648/2012 (OJ L 337, 23.12.2015, p. 1).
(10) Regulation (EU) 2015/2365 of the European Parliament and of the Council of 25 November 2015 on transparency of securities financing transactions and of reuse and amending Regulation (EU) No 648/2012 (OJ L 337, 23.12.2015, p. 1).
(11) Directive 2002/47/EC of the European Parliament and of the Council of 6 June 2002 on financial collateral arrangements (OJ L 168, 27.6.2002, p. 43).
(12) Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) (OJ L 302, 17.11.2009, p. 32)
(13) Commission Delegated Regulation (EU) No 876/2013 of 28 May 2013 supplementing Regulation (EU) No 648/2012 of the European Parliament and of the Council with regard to regulatory technical standards on colleges for central counterparties (OJ L 244, 13.9.2013, p. 19)
(14) Commission Delegated Regulation (EU) … of 23.3.2016 supplementing Directive 2014/59/EU of the European Parliament and of the Council with regard to regulatory technical standards specifying the content of recovery plans, resolution plans and group resolution plans, the minimum criteria that the competent authority is to assess as regards recovery plans and group recovery plans, the conditions for group financial support, the requirements for independent valuers, the contractual recognition of write-down and conversion powers, the procedures and contents of notification requirements and of notice of suspension and the operational functioning of the resolution colleges, C(2016)1691 [Note to Publication Office – Please introduce number of Delegated Regulation]
(15) Directive 2003/71/EC of the European Parliament and of the Council of 4 November 2003 on the prospectus to be published when securities are offered to the public or admitted to trading and amending Directive 2001/34/EC (OJ L 345, 31.12.2003, p. 64).
(16) Directive 2001/34/EC of the European Parliament and of the Council of 28 May 2001 on the admission of securities to official stock exchange listing and on information to be published on those securities (OJ L 184, 6.7.2001, p. 1).
(17) Directive 2004/109/EC of the European Parliament and of the Council of 15 December 2004 on the harmonisation of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market and amending Directive 2001/34/EC (OJ L 390, 31.12.2004, p. 38).


European Crowdfunding Service Providers (ECSP) for business ***I
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Resolution
Consolidated text
European Parliament legislative resolution of 27 March 2019 on the proposal for a regulation of the European Parliament and of the Council on European Crowdfunding Service Providers (ECSP) for Business (COM(2018)0113 – C8-0103/2018 – 2018/0048(COD))
P8_TA(2019)0301A8-0364/2018

(Ordinary legislative procedure: first reading)

The European Parliament,

–  having regard to the Commission proposal to Parliament and the Council (COM(2018)0113),

–  having regard to Article 294(2) and Article 114 of the Treaty on the Functioning of the European Union, pursuant to which the Commission submitted the proposal to Parliament (C8-0103/2018),

–  having regard to Article 294(3) of the Treaty on the Functioning of the European Union,

–  having regard to the opinion of the European Economic and Social Committee of 11 July 2018(1),

–  having regard to Rule 59 of its Rules of Procedure,

–  having regard to the report of the Committee on Economic and Monetary Affairs (A8-0364/2018),

1.  Adopts its position at first reading hereinafter set out;

2.  Calls on the Commission to refer the matter to Parliament again if it replaces, substantially amends or intends to substantially amend its proposal;

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

Position of the European Parliament adopted at first reading on 27 March 2019 with a view to the adoption of Regulation (EU) 2019/… of the European Parliament and of the Council on European Crowdfunding Service Providers (ECSP) for Business

P8_TC1-COD(2018)0048


(Text with EEA relevance)

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the Functioning of the European Union, and in particular Article 114 thereof,

Having regard to the proposal from the European Commission,

After transmission of the draft legislative act to the national parliaments,

Having regard to the opinion of the European Central Bank,(2)

Having regard to the opinion of the European Economic and Social Committee,(3)

Acting in accordance with the ordinary legislative procedure,

Whereas:

(1)  Crowdfunding is increasingly an established form of alternative finance for start-ups, as well as for small and medium enterprises (SMEs) at an early stage of company growth, typically relying on small investments. Crowdfunding represents an increasingly important type of intermediation where a crowdfunding service provider operates a digital platform open to the public in order to match or facilitate the matching of prospective investors or lenders with businesses that seek funding, irrespective of whether that funding leads to a loan agreement, to an equity stake or to another transferable security based stake, without the crowdfunding service provider taking on own risk. It is therefore appropriate to include in the scope of this Regulation both lending-based crowdfunding and investment-based crowdfunding▌.

(2)  Crowdfunding can contribute to provide access to finance for SMEs and▌ complete the Capital Markets Union (CMU). Lack of access to finance for such firms constitutes a problem even in Member States where access to bank finance has remained stable throughout the financial crisis. Crowdfunding has emerged as an established practice of funding a project or business, typically by a large number of people or organisations, through online platforms on which private individuals, organisations and businesses, including business start-ups, raise relatively small amounts of money.

(3)  The provision of crowdfunding services generally relies on three types of actors: the project owner, that proposes the project or the business loans to be funded, investors who fund the proposed project, generally by limited investments or loans, and an intermediating organisation in the form of a service provider that brings together project owners and investors or lenders through an online platform.

(4)  In addition to providing an alternative source of financing, including venture capital, crowdfunding can offer other benefits to firms. It can provide concept and idea validation to the project or business, give access to a large number of people providing the entrepreneur with insights and information and be a marketing tool. ▌

(5)  Several Member States have already introduced domestic bespoke regimes on crowdfunding. Those regimes are tailored to the characteristics and needs of local markets and investors. As a result, the existing national rules diverge as regards the conditions of operation of crowdfunding platforms, the scope of permitted activities and the licencing requirements.

(6)  The differences between the existing national rules are such as to obstruct the cross-border provision of crowdfunding services and thus have a direct effect on the functioning of the internal market in such services. In particular, the fact that the legal framework is fragmented along national borders creates substantial legal compliance costs for retail investors who often face difficulties which are disproportional to the size of their investment in determining the rules applicable to cross-border crowdfunding services. Therefore, such investors are often discouraged from investing cross-border via crowdfunding platforms. For the same reasons crowdfunding service providers operating such platforms are discouraged from offering their services in a Member State other than the one in which they are established. As a result, crowdfunding activities have remained hitherto largely national to the detriment of a Union-wide crowdfunding market, thus depriving businesses of access to crowdfunding services, especially in cases where a business operates in a Member State lacking access to crowd because of its comparatively smaller population.

(7)  In order to foster cross border crowdfunding activities and to facilitate the exercise of the freedom to provide and receive such services in the internal market for crowdfunding providers it is therefore necessary to address the existing obstacles to the proper functioning of the internal market in crowdfunding services. Providing for a single set of rules on the provision of crowdfunding services giving crowdfunding service providers the option to apply for a single Union-wide authorisation to exercise their activity under those rules is a suitable first step for fostering cross border crowdfunding activities and thus enhance the operation of the Single Market.

(8)  By addressing the obstacles to the functioning of the internal market in crowdfunding services, this Regulation aims to foster cross-border business funding. Crowdfunding services in relation to lending to consumers, as defined in Article 3(a) of Directive 2008/48/EC of the European Parliament and of the Council(4), should therefore not fall within the scope of this Regulation.

(9)  In order to avoid that the same activity is subject to different authorisations within the Union, crowdfunding service provided by persons that have been authorised under Directive 2014/65/EU of the European Parliament and of the Council(5) or provided in accordance with national law should be excluded from the scope of this Regulation.

(10)  In relation to lending-based crowdfunding, the facilitation of granting of loans, including services such as presenting crowdfunding offers to clients or rating the creditworthiness of project owners, should accommodate different business models enabling a loan agreement to be concluded through a crowdfunding platform between one or more clients and one or more project owners.

(11)  In relation to investment-based crowdfunding, the transferability of a security is an important safeguard for investors to be able to exit their investment since it provides them with the legal possibility to dispose of their interest on the capital markets. This Regulation therefore only covers and permits investment-based crowdfunding services in relation to transferable securities. Financial instruments other than transferable securities should however be excluded from the scope of this Regulation because those securities entail risks for investors that cannot be properly managed within this legal framework.

(11a)  The characteristics of initial coin offerings (ICOs) differ considerably from crowdfunding regulated in this Regulation. Among others, ICOs typically do not use intermediaries, such as crowdfunding platforms, and often raise funds in excess of EUR 1 000 000. The inclusion of ICOs in this Regulation would not tackle the problems associated with ICOs as a whole.

(12)  Given the risks associated with crowdfunding investments, it is appropriate, in the interest of the effective protection of investors and of the provision of a mechanism of market discipline, to impose a threshold for a maximum consideration for each crowdfunding offer. That threshold should be set at EUR 8 000 000, which is the maximum threshold up to which Member States are able to exempt offers of securities to the public from the obligation to publish a prospectus in accordance with Regulation (EU) 2017/1129 of the European Parliament and of the Council(6). Notwithstanding the high standard of investor protection needed, that threshold should be set in accordance with practices on national markets to make the Union platform attractive for cross-border business funding.

(12a)  This Regulation lays down the content of a key investment information sheet to be supplied to potential investors for every crowdfunding offer. As the key investment information sheet is designed to be tailored to the specific features of a crowdfunding offer and the information needs of investors, it should replace the prospectus required by Regulation (EU) 2017/1129 when securities are offered to the public. Crowdfunding offers under this Regulation should therefore be excluded from the scope of Regulation (EU) 2017/1129 and that Regulation should be amended accordingly.

(13)  To avoid regulatory arbitrage and to ensure the effective supervision of crowdfunding service providers, crowdfunding service providers should be prohibited from accepting deposits or other repayable funds from the public, unless they are authorised as a credit institution in accordance with Article 8 of Directive 2013/36/EU of the European Parliament and of the Council(7).

(14)  In order to achieve that purpose, crowdfunding service providers should be given the option to apply for a single Union-wide authorisation and to exercise their activity in accordance with those uniform requirements. However, to preserve the broad availability of crowdfunding offers targeted solely at national markets, where crowdfunding service providers choose to provide their services under the applicable national law, they should remain able to do so. Accordingly, the uniform requirements laid down in this Regulation should be optional and therefore not apply to such crowdfunding service providers choosing to remain active on national basis only.

(15)  In order to maintain a high standard of investor protection, to reduce the risks associated with crowdfunding and to ensure fair treatment of all clients, crowdfunding service providers should have in place a policy designed to ensure that projects are selected in a professional, fair and transparent way and that crowdfunding services are provided in the same manner.

(15a)  For the same reasons, crowdfunding service providers that use ICOs on their platform should be excluded from this Regulation. To achieve efficient regulation on the emerging ICO technology, the Commission could in future propose a comprehensive Union-level legislative framework based on a thorough impact assessment.

(15b)  Alternative investment instruments, such as ICOs, have potential in funding SMEs, innovative start-ups and scale-ups, can accelerate technology transfer, and can be an essential part of the capital markets union. The Commission should assess the need to propose a separate, Union legislative framework for ICOs. Increased legal certainty across the board could be instrumental in increasing investor and consumer protection and reducing risks stemming from asymmetric information, fraudulent behaviour and illegal activities.

(16)  In order to improve the service to their clients, who can be prospective or actual investor or project owner, crowdfunding service providers should be able to exercise discretion on behalf of clients with respect to the parameters of the clients' orders, provided that they take all necessary steps to obtain the best possible result for their clients and that they disclose the exact method and parameters of the discretion. In order to ensure that prospective investors are offered investment opportunities on a neutral basis, crowdfunding service providers should not pay or accept any remuneration, discount or non-monetary benefit for routing investors' orders to a particular offer provided on their platform or to a particular offer provided on a third party platform.

(17)  This Regulation aims to facilitate direct investment and to avoid creating regulatory arbitrage opportunities for financial intermediaries regulated under other Union legislation, in particular Union rules governing asset managers. The use of legal structures, including special purpose vehicles, to interpose between the crowdfunding project or business and investors, should therefore be strictly regulated and permitted only to eligible counterparties or elective professional investors as defined in Directive 2014/65/EU.

(18)  Ensuring an effective system of governance is essential for the proper management of risk and for preventing any conflict of interest. Crowdfunding service providers should therefore have governance arrangements that ensure effective and prudent management and their management should be of good repute and have adequate knowledge and experience. Crowdfunding service providers should also establish procedures to receive and handle complaints from clients.

(19)  Crowdfunding service providers should operate as neutral intermediaries between clients on their crowdfunding platform. In order to prevent conflicts of interests, certain requirements should be laid down with respect to crowdfunding service providers and managers and employees, or any person directly or indirectly controlling them. Unless financial interests in projects or offers are disclosed in advance on their website, crowdfunding service providers should be prevented from having any financial participation in the crowdfunding offers on their crowdfunding platforms. That will allow crowdfunding service providers to align their interests with the interests of the investors. Furthermore, shareholders holding 20 % or more of share capital or voting rights, and managers▌, or any person directly▌ controlling crowdfunding platforms, should not act as clients, in relation to the crowdfunding services offered on that crowdfunding platform.

(20)  In the interest of an efficient and smooth provision of crowdfunding services, crowdfunding service providers should be allowed to entrust any operational function, in whole or in part, to other service providers provided that the outsourcing does not impair materially the quality of crowdfunding services providers' internal controls and effective supervision. Crowdfunding service providers should however remain fully responsible for compliance with this Regulation.

(21)  The holding of clients' funds and the provision of payment services require an authorisation as a payment service provider in accordance with Directive (EU) 2015/2366 of the European Parliament and of the Council(8). That mandatory authorisation requirement cannot be satisfied by an authorisation as a crowdfunding service provider. Therefore, it is appropriate to clarify that where a crowdfunding service provider carries out such payment services in connection with its crowdfunding services, it needs to be authorised also as a payment institution in accordance with Directive (EU) 2015/2366. In order to enable a proper supervision of such activities, the national competent authority should be informed about whether the crowdfunding service provider intends to carry out payment services itself with the appropriate authorisation, or whether such services will be outsourced to an authorised third party.

(22)  The growth and smooth functioning of cross-border crowdfunding services requires a sufficient scale and public confidence in those services. It is therefore necessary to lay down uniform, proportionate and directly applicable requirements for authorisation and a single point of supervision.

(23)  A high level of investor confidence contributes to the growth of crowdfunding services. Requirements for crowdfunding services should therefore facilitate cross-border provision of those services, reduce operational risks and ensure a high degree of transparency and investor protection.

(24)  Crowdfunding services can be exposed to money laundering and terrorist financing risks, as underlined in the Commission's Report on the assessment of the risks of money laundering and terrorist financing affecting the internal market and relating to cross-border situations(9). Safeguards should therefore be envisaged when meeting conditions for authorisation, assessing the good repute of the management, providing payment services only through licensed entities subject to anti-money laundering and terrorist financing requirements. With a view to further ensuring financial stability by preventing risks of money laundering and terrorism financing, and taking into account the maximum threshold of funds that can be raised by a crowdfunding offer in accordance with this Regulation, the Commission should assess the necessity and proportionality of subjecting crowdfunding service providers, authorised under this Regulation to some or all of the obligations for compliance with the national provisions implementing Directive (EU) 2015/849 in respect of money laundering or terrorism financing and adding such crowdfunding service providers to the list of obliged entities for the purposes of Directive (EU) 2015/849.

(25)  To enable crowdfunding service providers to operate cross-border without facing divergent rules and thereby facilitating the funding of projects across the Union by investors from different Member States, Member States should not be allowed to impose additional requirements on crowdfunding service providers that are authorised under this Regulation.

(26)  The authorisation process should enable the national competent authority to be informed about the services that the prospective crowdfunding service providers intend to provide and the crowdfunding platforms that they intend to operate, to assess the quality of their management, and to assess the internal organisation and procedures set up by the prospective crowdfunding service providers to ensure compliance with the requirements set out in this Regulation.

(27)  To facilitate transparency for retail investors as regards the provision of crowdfunding services, ESMA should establish a public and up-to-date register of all crowdfunding services providers authorised and operating crowdfunding platforms in the Union in accordance with this Regulation.

(28)  The authorisation should be withdrawn where the conditions for its issuance are no longer met. In particular, the national competent authority should be able to assess whether the good repute of the management has been affected or whether the internal procedures and systems have seriously failed. To enable the national competent authority to assess whether the authorisation as a crowdfunding service provider should be withdrawn, the national competent authority should be informed whenever a crowdfunding service provider, or a third party acting on its behalf, has lost its authorisation as a payment institution, or has been found to be in breach of Directive (EU) 2015/849 of the European Parliament and of the Council(10).

(29)  In order for prospective investors to have a clear understanding of the nature, risks, costs and charges of crowdfunding services, crowdfunding service providers should provide their clients with clear and disaggregated information.

(30)  Investments in products marketed on crowdfunding platforms are not comparable to traditional investments products or savings products and should not be marketed as such. However, to ensure that prospective investors understand the level of risk associated with crowdfunding investments, crowdfunding service providers is mandatory to run an entry knowledge test of their prospective investors to establish their understanding of the investment. Crowdfunding service providers should explicitly warn prospective investors whenever the crowdfunding services provided are deemed as inappropriate for them.

(31)  In order to enable investors to make an informed investment decision, crowdfunding service providers should provide prospective investors with a key investment information sheet. The key investment information sheet should warn prospective investors that the investing environment they have entered into entails risks and is covered neither by the deposit compensation scheme, nor by the investor compensation guarantees.

(32)  The key investment information sheet should also take into account the specific features and risks associated with early stage companies, and focus on material information about the project owners, the investors' rights and fees, and the type of securities offered and loan agreements. Because the project owner concerned is in the best position to provide that information, the key investment information sheet should be drawn up by that project owner. However, since crowdfunding service providers are responsible for informing their prospective investors, they are responsible for the completeness of the key investment information sheet▌.

(33)  To ensure seamless and expedient access to capital markets for start-ups and SMEs, to reduce their costs of financing and to avoid delays and costs for crowdfunding service providers, the key investment information document should not be approved by a competent authority.

(34)  To avoid unnecessary costs and administrative burden on the cross-border