EUROPEAN COMMUNITIES INVESTMENT PARTNERS
Draft Regulation regarding the closure and liquidation of projects
adopted by the Commission under Council Regulation No. 213/96 on
the implementation of the EC Investment Partners financial
instrument for the countries of Latin America, Asia, the
Mediterranean region and South Africa.
||Article 179(1); co-decision; qualified majority voting
|Basis of consideration:
||Minister's letter of 24 October 2000
|Previous Committee Report:
||HC 23-xiii (1999-2000), paragraph 11 (5 April 2000); and HC 23-xix (1999-2000), paragraph 3 (24 May 2000)
|Discussed in Council:
||10 November 2000|
8.1 The financial instrument known as the
European Community Investment Partners (ECIP) was established
in 1988 to assist European industry wishing to set up in Asia,
Latin America, the Mediterranean and, subsequently, South Africa
by encouraging the creation of joint ventures between European
and local partners.
8.2 The Commission intends to introduce
a substantially revised and improved ECIP, after carrying out
a reassessment of the programme. This was covered by a Regulation
which expired on 31 December 1999. The proposal considered here
extends the funding to the end of 2001.
8.3 In her Explanatory Memorandum of 13
March, which we considered on 5 April, the Secretary of State
for International Development (the Rt. Hon. Clare Short) drew
our attention to the Commission's intention in the new Regulation
not to honour commitments in cases where the Commission had given
preliminary approval but there was no formal contract. We put
a number of questions to her, to which she gave us a preliminary
response in a letter dated 17 May, which we considered on 24 May.
8.4 The Minister said that the Commission
had still not made any provision for the companies which did not
have contracts. The UK had expressed its concern at this situation
and the Presidency had asked the Commission to look again at the
issue. The Minister said that the Commission's legal service had
said that it would be illegal to make provision for them. She
undertook to inform us of the outcome, when the legal issues had
been resolved, and of the course of action she intended to take.
She said that the Regulation, which the Government supported in
principle, was likely to make very slow progress.
The Minister's letter
8.5 On 24 October, the Minister wrote to
say that the Presidency had pushed forward with work on the ECIP
Interim Regulation while the House was in recess and the Government
believed that the measure would be agreed at COREPER on 25 October.
The Department has since informed us that a Common Position was
agreed on it at the 10 November Development Council. The Minister
regrets that she was unable to consult the Committee before she
felt it necessary to lift the Scrutiny Reserve, but she hopes
that we will agree that all the issues which caused us concern
have been fully considered. She then responds to the concerns
8.6 The Minister says:
"I have now received
advice which supports the Commission's view that it does not,
at present, have legal authority to reimburse or enter into a
contract with the affected companies. The Commission's legal basis
for entering into ECIP contracts, and disbursing money in connection
with these, was the last ECIP Regulation (No. 213/96), which expired
at the end of last year. It does not therefore have the authority
to effect new financing decisions.
"I am also informed that the proposed Interim
Regulation (No. 6047/00) could, in principle, cover provisions
authorising the Commission to reimburse companies who had already
spent money in the expectation of a contract. However, drafting
such a power would be extremely difficult, not least because it
would be difficult for the Commission to sift between those companies
which did have a legitimate expectation of a contract, and those
which did not.
"We have discussed the position with other Member
States at a series of meetings of the Development Co-operation
Working Party (DCWP). Some concern with regards to the pipeline
applicants was expressed by the other Member States, but there
was no indication that they would actually block the Regulation
and the Presidency therefore decided to push for agreement during
October. The position of other Member States was probably influenced
by the fact that Commission officials will not start work on a
successor for ECIP until the Interim Regulation has been adopted
by the Council.
"I therefore concluded that the legal arguments
were against making provision for the pipeline applicants in the
Interim Regulation, and that there was no prospect of the UK blocking
the Regulation. Given the Presidency's strong pressure to reach
agreement in October, I decided to lift the UK's reserve.
"It is my understanding that most, if not all,
affected companies have either found alternative funding, abandoned
their projects, or gone bankrupt. However my legal advisers have
informed me that Article 288 imposes an obligation on the EC to
make good any damage caused by its institutions (e.g. the Commission)
or its servants in the performance of their duties, in accordance
with the general principles common to the laws of the Member States,
such as fairness and legitimate expectation. It is therefore possible
that the affected companies will be able to seek compensation
through the European Court of Justice, and I will ensure that
they are aware of this".
8.7 We thank the Minister and accept
that she was not in a position to consult us before the proposal
was put to COREPER. We note the legal advice that she received
and the view taken by the other Member States and understand her
8.8 We are, nevertheless, concerned that
the Commission allowed such a situation to arise and we ask the
Government to seek to ensure that the Commission does not in future
make apparent commitments which may not in practice be honoured.