Legal provisions of COM(2024)426 - Ukraine Loan Cooperation Mechanism and providing exceptional macro-financial assistance to Ukraine - Main contents
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| dossier | COM(2024)426 - Ukraine Loan Cooperation Mechanism and providing exceptional macro-financial assistance to Ukraine. |
|---|---|
| document | COM(2024)426  |
| date | October 24, 2024 |
CHAPTER I
GENERAL PROVISIONS
Article 1
Subject matter
This Regulation establishes the Ukraine Loan Cooperation Mechanism (the ‘Mechanism’) and makes available to Ukraine exceptional macro-financial assistance in the form of a loan (the ‘MFA Loan’) with a view to supporting Ukraine in covering its financing needs.
Article 2
Definitions
For the purposes of this Regulation, the following definitions apply:
| (1) | ‘Union support’ means the MFA Loan and non-repayable financial support available under the Mechanism; |
| (2) | ‘bilateral loan’ means a loan given directly or indirectly by a third country as a bilateral lender to the benefit of Ukraine; |
| (3) | ‘eligible bilateral loan’ means a bilateral loan approved as eligible under the Mechanism by the Commission; |
| (4) | ‘MFA Loan’ means the exceptional financial support made available by the Union to Ukraine in the form of a loan under Chapter III; |
| (5) | ‘MFA Loan Agreement’ means the loan agreement signed by the Commission, on behalf of the Union, and Ukraine under Chapter III; |
| (6) | ‘other related costs’ means any costs or fees due under the MFA Loan and the respective bilateral loan. |
CHAPTER II
UKRAINE LOAN COOPERATION MECHANISM
Article 3
Purpose
The purpose of the Mechanism shall be to provide Ukraine with non-repayable financial support with a view to assisting Ukraine to repay the MFA Loan and eligible bilateral loans. To achieve that purpose, the Mechanism shall receive resources and disburse them on a regular basis to Ukraine to cover the principal, interest and any other related costs of the MFA Loan and eligible bilateral loans. In its operations, the Mechanism shall ensure equal access both for bilateral lenders and for the Union.
Article 4
Financing
1. The Mechanism shall be endowed with resources made available by:
| (a) | amounts transferred in accordance with Annex XLI to Regulation (EU) No 833/2014, which shall constitute external assigned revenue in accordance with Article 21(5) of the Financial Regulation; and |
| (b) | amounts received as financial contributions from Member States, third countries or other sources; such contributions shall constitute external assigned revenue in accordance with Article 21(2), points (a), (d) and (e), respectively, of the Financial Regulation. |
2. For all contributions referred to in paragraph 1, point (b), of this Article a contribution agreement shall be concluded between the Commission, on behalf of the Union, and the contributor. The contribution agreement shall contain, in particular, provisions concerning the payment conditions. The Commission shall inform the European Parliament and the Council simultaneously and without delay of the concluded contribution agreements.
Article 5
Available support
1. The non-repayable financial support under the Mechanism shall be available under the conditions set out in Articles 6, 7 and 8 to assist Ukraine to repay the principal, interest and any other related costs of:
| (a) | the MFA Loan; and |
| (b) | eligible bilateral loans. |
2. The non-repayable financial support under the Mechanism shall be allocated to assist Ukraine to repay the MFA Loan and eligible bilateral loans referred to in paragraph 1 in proportion to the principal of each loan expressed in euro against the sum of the principal of the MFA Loan and all eligible bilateral loans expressed in euro. Once the MFA Loan or an eligible bilateral loan has been fully repaid by Ukraine, including interest and any other related costs, such allocation shall be adjusted so that any future resources under the Mechanism are allocated to remaining loans in proportion to the principal of each loan expressed in euro against the sum of the principal of all remaining loans expressed in euro.
3. The Commission shall adopt a decision establishing the allocation provided for in paragraph 2 of this Article between the MFA Loan and eligible bilateral loans. The Commission shall use the principal of each eligible bilateral loan expressed in euro as referred to in Article 6(5), point (b). The Commission shall without delay amend that decision to include each bilateral loan upon the entry into force of that loan. The Commission may amend that decision to proportionally reduce the allocation to a bilateral loan should that bilateral loan not be fully disbursed by 31 December 2027.
4. The overall amount of the principal of the MFA Loan and eligible bilateral loans referred to in paragraph 1 shall not exceed EUR 45 billion.
5. The non-repayable financial support under the Mechanism shall be carried out in euro.
6. All payments shall be subject to the availability of the resources referred to in Article 4(1).
7. The Union shall not assume any liability for the repayment of eligible bilateral loans.
Article 6
Commission implementing decision on the eligibility of the bilateral loans
1. If Ukraine wishes to request support under the Mechanism to assist it to repay a bilateral loan, it shall submit the text of the relevant bilateral loan agreement to the Commission by 1 June 2025.
2. The Commission shall without delay assess the eligibility of bilateral loans under the Mechanism in accordance with the following criteria:
| (a) | the bilateral loan agreement was not signed before 20 September 2024; |
| (b) | the counterparty to the bilateral loan is acting under the auspices of the G7 ‘Extraordinary Revenue Acceleration Loans for Ukraine’ initiative; and |
| (c) | the bilateral loan is to be fully disbursed to the benefit of Ukraine before 31 December 2027; such disbursements may be linked to the completion of policy conditions. |
For the purposes of the assessment, the Commission may seek additional information from Ukraine.
3. A suspensive condition in a bilateral loan agreement that provides that such agreement does not enter into force before the approval by the Commission of the eligibility of the bilateral loan or before the entry into force of the agreement for the implementation of the Mechanism referred to in Article 7 shall not prevent a positive assessment by the Commission of the bilateral loan.
4. The Commission shall approve the eligibility of a bilateral loan by means of an implementing decision.
5. The Commission implementing decision referred to in paragraph 4 of this Article shall set out:
| (a) | the bilateral lender; |
| (b) | the principal of the bilateral loan expressed in euro; to the extent necessary, the principal of the bilateral loan shall also be expressed in the currency of the respective bilateral loan, where the conversion rate for the bilateral loan to euro shall be the daily euro exchange rate published in the C series of the Official Journal of the European Union on 20 September 2024; and |
| (c) | the justification for the positive assessment of the bilateral loan. |
6. The sum of the principals of all bilateral loans approved by the Commission in accordance with this Article and the MFA Loan shall not exceed the amount laid down in Article 5(4).
7. The Commission may repeal the implementing decision referred to in paragraph 4 of this Article if the relevant bilateral loan agreement does not enter into force by 30 June 2025.
8. In the case of a negative assessment of the bilateral loan, the Commission shall communicate that assessment to Ukraine, giving reasons for its assessment.
Article 7
Agreement for the implementation of the Mechanism
1. Non-repayable financial support under the Mechanism referred to in Article 5 shall only be granted to Ukraine after the Commission has concluded an agreement for the implementation of the Ukraine Loan Cooperation Mechanism with Ukraine (the ‘ULCM Agreement’).
2. The ULCM Agreement shall contain in particular the following elements:
| (a) | the obligation of Ukraine to use the non-repayable financial support under the Mechanism for the repayment of the principal, interest and any other related costs of the MFA Loan or eligible bilateral loans; |
| (b) | the bank account details of all bilateral lenders to which payments of the non-repayable financial support under the Mechanism related to their respective bilateral loans shall be made by the Commission; |
| (c) | for payments of the non-repayable financial support under the Mechanism related to the MFA Loan, provisions ensuring that the Union shall use those amounts to directly repay the MFA Loan; |
| (d) | dedicated provisions reflecting Article 5(7) and ensuring that the Union shall not be held liable for any damage caused by Ukraine or by any third parties in the implementation of eligible bilateral loans, including as a consequence of the implementation of the Mechanism, and specifically where the amounts referred to in Article 4(1) vary over time or cease; |
| (e) | the obligation of Ukraine to obtain from the bilateral lenders and provide, without delay, the Commission with proof of:
|
| (f) | the obligation of Ukraine to agree with each bilateral lender that any amounts provided by Ukraine to a bilateral lender to repay the bilateral loan that do not immediately discharge repayment obligations, shall remain available until such time as the repayment obligations fall due, with any interest accrued on that amount also available to be used to discharge obligations under the bilateral loan agreement; |
| (g) | the obligation of Ukraine to accompany each payment request with:
|
| (h) | an express authorisation for bilateral lenders to exceptionally make a request for payment pursuant to Article 8(6), provided that the information referred to in point (g) of this paragraph is submitted by the bilateral lenders; and |
| (i) | any other requirements needed for the implementation of the Mechanism. |
3. To the extent necessary, the ULCM Agreement shall be amended following the entry into force of any Commission implementing decision adopted pursuant to Article 6(4).
Article 8
Disbursement of the non-repayable financial support
1. Ukraine may submit to the Commission twice a year a request for non-repayable financial support under the Mechanism in respect of the MFA Loan and eligible bilateral loans.
2. The Commission shall assess Ukraine’s request for non-repayable financial support under the Mechanism on the basis of the following requirements:
| (a) | compliance with the precondition set out in Article 11(1), which shall only be applicable as regards the MFA Loan; |
| (b) | confirmation that the total value of disbursements in respect of the MFA Loan or each eligible bilateral loan, together with any interest accrued thereon, does not exceed the total amount due to that bilateral lender; and |
| (c) | compliance with the obligations of the ULCM Agreement. |
3. Subject to the availability of the resources referred to in Article 4(1), where the Commission makes a positive assessment of the request for non-repayable financial support under the Mechanism, it shall adopt without undue delay a decision authorising the disbursement of the non-repayable financial support under the Mechanism, including the amount disbursed to support the repayment of each eligible bilateral loan and the amount made available to support the repayment of the MFA Loan. The amount disbursed under the Mechanism shall equal the amount of resources available on the basis of Article 4(1). That amount disbursed shall be allocated in accordance with the Commission decision referred to in Article 5(3).
4. In the event that the amount made available to Ukraine to support the repayment of the MFA Loan is higher than the amount due for repayment under the MFA Loan, the excess amount may be used for early repayment of the MFA Loan in accordance with Article 15(2), point (e), or may be retained by the Union for the exclusive purpose of supporting the repayment of the MFA Loan in the future. Any interest accrued thereon shall also be available to support that purpose.
5. Where the Commission gives a negative assessment to the request for non-repayable financial support under the Mechanism, it shall, without delay, inform Ukraine, giving reasons for its assessment.
6. Without prejudice to paragraphs 1 and 2 of this Article, the Commission may for duly justified reasons exceptionally assess requests for payment submitted by the bilateral lenders, in particular where the Commission has taken a decision in accordance with Article 11(5) or where Ukraine is not in compliance with its obligations under the ULCM Agreement.
CHAPTER III
MACRO-FINANCIAL ASSISTANCE
Article 9
Availability of the Union’s exceptional macro-financial assistance
1. The Union shall make available to Ukraine exceptional macro-financial assistance, with a view to supporting Ukraine in covering its financing needs. The Union’s exceptional macro-financial assistance shall be provided to Ukraine in the form of a loan (the ‘MFA Loan’). The MFA Loan shall contribute to covering Ukraine’s financing gap as identified in cooperation with international financial institutions.
2. The release of the MFA Loan shall be managed by the Commission on the basis of its assessment of the precondition referred to in Article 11(1) and of the implementation of the policy conditions included in the memorandum of understanding referred to in Article 12(1).
3. The MFA Loan shall be available until 31 December 2024. It shall be made available by the Commission in one instalment, which may be disbursed in one or more tranches. The disbursement of all such tranches shall take place by 31 December 2025.
Article 10
Amount
1. The MFA Loan shall be for a maximum amount of EUR 35 billion. However, where, at the moment of the adoption of the Commission decision on the release of the instalment referred to in Article 13, the sum of that maximum amount and of the principal amount of eligible bilateral loans already approved by the Commission in accordance with Article 6, and of the principal amount indicated in stated intentions of third countries communicated to the Commission under the auspices of the G7 ‘Extraordinary Revenue Acceleration Loans for Ukraine’ initiative, exceed EUR 45 billion, the maximum amount of the MFA Loan shall be reduced by the value of the excess.
2. If the financing needs of Ukraine decrease fundamentally during the period of availability of the MFA Loan, including in the event of a settlement by Russia of Ukraine’s war damages, the Commission, acting in accordance with the examination procedure referred to in Article 16(2), may reduce the amount of the MFA Loan or cancel it.
3. The MFA Loan shall have a maximum duration of 45 years.
Article 11
Precondition for support
1. A precondition for granting the MFA Loan shall be that Ukraine continue to uphold and respect effective democratic mechanisms, including a multi-party parliamentary system and the rule of law, and to guarantee respect for human rights, including the rights of persons belonging to minorities.
2. The Commission services and the European External Action Service shall monitor the fulfilment of the precondition set out in paragraph 1, in particular before the instalment is released and tranches are disbursed, taking, as appropriate, duly into account the Commission’s regular enlargement report. The Commission shall take into account the relevant recommendations of international bodies, such as the Council of Europe and its Venice Commission, in that process. The Commission shall inform the Council of the fulfilment of the precondition set out in paragraph 1 before the instalment is released and before tranches are disbursed to Ukraine.
3. Paragraphs 1 and 2 of this Article shall apply in accordance with Decision 2010/427/EU.
4. The assessment referred to in paragraph 2 of this Article shall be conducted together with the assessment provided for in Article 5(2) of Regulation (EU) 2024/792.
5. Where the Commission finds that the precondition set out in paragraph 1 of this Article has not been met or is no longer met, it shall suspend disbursements of the MFA Loan and the release of non-repayable support under the Mechanism referred to in Article 8 as it pertains to the MFA Loan.
Article 12
Memorandum of Understanding
1. The Commission shall agree with Ukraine on policy conditions to which the MFA Loan is to be linked. Those policy conditions shall be set out in a memorandum of understanding (MoU).
2. The policy conditions in the MoU shall be consistent with the qualitative and quantitative steps contained in the Annex to Implementing Decision (EU) 2024/1447 and any amendments thereto. The policy conditions in the MoU shall additionally include a commitment to promote cooperation with the Union on the recovery, reconstruction and modernisation of Ukraine’s defence industry, in line with the objectives of Union programmes aiming at the recovery, reconstruction and modernisation of the Ukraine Defence Technological and Industrial Base and other relevant Union programmes.
3. The Commission shall approve the signature of the MoU and of its amendments by means of implementing acts. Those implementing acts shall be adopted in accordance with the examination procedure referred to in Article 16(2).
Article 13
Decision on release
1. Ukraine shall submit a request for funds ahead of the release of the instalment, accompanied by a report in accordance with the provisions of the MoU.
2. The Commission shall decide on the release of the instalment subject to its assessment of the following requirements:
| (a) | compliance with the precondition set out in Article 11(1); and |
| (b) | the satisfactory fulfilment of the policy conditions set out in the MoU. |
3. The disbursement of tranches may be aligned with the timing of disbursements of a loan or non-repayable financial support under Pillar I of the Ukraine Facility in accordance with Regulation (EU) 2024/792.
Article 14
Borrowing and lending operations
1. In order to finance the MFA Loan, the Commission shall be empowered, on behalf of the Union, to borrow the necessary funds on the capital markets or from financial institutions in accordance with Article 224 of the Financial Regulation.
2. By way of derogation from Article 31(3), second sentence, of Regulation (EU) 2021/947, the financial assistance provided to Ukraine under the MFA Loan shall not be supported by the External Action Guarantee. No provisioning for the MFA Loan shall be constituted and, by way of derogation from Article 214(1) of the Financial Regulation, no provisioning rate as a percentage of the amount referred to in Article 10 of this Regulation shall be set.
3. Amounts suspended in accordance with Article 11(5) of this Regulation shall be available, to the extent necessary, to support the repayment of Union borrowing operations. The use of such resources in that manner shall not release Ukraine from its liability to repay the MFA Loan in accordance with the terms of the MFA Loan Agreement.
Article 15
MFA Loan Agreement
1. The detailed financial terms of the MFA Loan shall be laid down in the MFA Loan Agreement.
2. In addition to the elements laid down in Article 223(4) of the Financial Regulation, the MFA Loan Agreement shall require that:
| (a) | the rights, responsibilities and obligations provided for in the framework agreement under the Ukraine Facility referred to in Article 9 of Regulation (EU) 2024/792 apply to the MFA Loan Agreement and the funds therein; |
| (b) | Ukraine utilise the same management and control systems as proposed in the Ukraine Plan established under Regulation (EU) 2024/792; |
| (c) | it be ensured that the Union is entitled to early repayment of the MFA Loan where it has been established that, in relation to the management of the MFA Loan, Ukraine has engaged in any act of fraud or corruption or any other illegal activity detrimental to the financial interests of the Union; |
| (d) | Ukraine continue to respect the precondition set out in Article 11(1); |
| (e) | the excess amount referred to in Article 8(4) may be used in full or in part for the early repayment of the MFA Loan at the initiative of the Commission or, subject to the approval of the Commission, upon request of Ukraine; and |
| (f) | detailed arrangements for repayment be defined, based on a waterfall structure where:
|
3. Non-compliance with the terms of the MFA Loan Agreement shall constitute a ground for the Commission to suspend or cancel the release of the instalment or tranches or, where warranted, to demand early repayment of the MFA Loan.
4. The MFA Loan Agreement shall be made available, upon request, simultaneously to the European Parliament and to the Council.
Article 16
Committee procedure
1. The Commission shall be assisted by a committee. That 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.
CHAPTER IV
FINAL PROVISIONS
Article 17
Information to the European Parliament and to the Council
1. The Commission shall inform the European Parliament and the Council of developments regarding the implementation of this Regulation, including disbursements under the Mechanism and the MFA Loan, and shall provide those institutions with the relevant documents in due time. That information shall be provided in accordance with the interinstitutional arrangements agreed under the Ukraine Facility, including the Ukraine Facility Dialogue.
2. By 30 June of each year, the Commission shall submit to the European Parliament and to the Council a report on the implementation of this Regulation in the preceding year, including an evaluation of that implementation. That report shall:
| (a) | examine progress made in implementing the MFA Loan; and |
| (b) | assess the economic situation and prospects of Ukraine, as well as progress made in implementing the policy conditions referred to in Article 12(1). |
Where appropriate, in particular after the MFA Loan and all eligible bilateral loan agreements have expired, the Commission shall include in the report referred to in the first subparagraph a review of the adequacy of the arrangements contained in this Regulation.
3. By 31 December 2027, the Commission shall submit to the European Parliament and to the Council an ex post evaluation report, assessing the results and efficiency of the completed MFA Loan provided under this Regulation and the extent to which it has contributed to the aims of the assistance.
Article 18
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.
This Regulation shall be binding in its entirety and directly applicable in all Member States.