Explanatory Memorandum to COM(2019)64 - Measures concerning the implementation and financing of the general budget of the Union in 2019 in relation to the withdrawal of the United Kingdom from the Union

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dossier COM(2019)64 - Measures concerning the implementation and financing of the general budget of the Union in 2019 in relation to the withdrawal ...
source COM(2019)64 EN
date 30-01-2019


1. CONTEXT OF THE PROPOSAL

• Reasons for and objectives of the proposal

Since the notification by the United Kingdom of its withdrawal intention, the European Union has consistently stated that the Union and the United Kingdom should honour their respective obligations resulting from the whole period of the United Kingdom membership in the Union. This principle was recalled in the European Council's conclusions of 29 April 2017, and reflected in the introduction to the draft withdrawal agreement agreed by the 27 Member States and the United Kingdom government on 14 November 2018. The absence of a withdrawal agreement at the withdrawal date would not affect that guiding principle.


The Commission Communication ‘Preparing for the withdrawal of the United Kingdom from the European Union on 30 March 2019: a Contingency Action Plan’ of 13 November 2018 1 set out the contingency measures it plans to take if no withdrawal agreement enters into force on the withdrawal date. In that Communication, the Commission listed the actions it considered necessary while recalling that additional actions may be necessary at a later stage. The Communication also presented the six general principles which contingency measures at all levels should comply with. These include the principles that measures should not replicate the benefits of membership of the Union, nor the terms of any transition period, as provided for in the Withdrawal Agreement; they must be temporary in nature and should in principle not go beyond the end of 2019; and they must be unilateral actions of the European Union in pursuit of its interests, and therefore in principle the Union can revoke them at any time.


A no-deal scenario will leave the budgetary relations between the Union and the UK without agreed legal arrangements, until an agreement is eventually reached. Such a legal vacuum would create considerable uncertainty and difficulties for the implementation of the Union’s budget, for all UK beneficiaries and in some cases also for beneficiaries of the other Member States. In line with the Commission’s overall approach, this proposal is a contingency measure in response to this situation.


After withdrawal, the UK will no longer be member of the European Union; the Treaties and the secondary legislation will not be applicable to the United Kingdom. The United Kingdom or entities established in the United Kingdom will cease to be eligible to receive funding under those Union programmes, unless relevant provisions for participation of third countries are included in the legal acts of EU spending programmes.


The purpose of this proposal is to avoid, or at least minimise, any unnecessary disruption for beneficiaries of EU spending programmes and other actions at the time of withdrawal, also with the expectation that this will facilitate a financial settlement between the Union and the United Kingdom.


The proposed contingency framework provides for the possibility to maintain the eligibility to benefit from Union financing for the UK and UK entities under legal commitments entered into before the withdrawal date beyond that date and for a limited time period (until 31 December 2019). This is subject to the condition that the UK makes a written commitment and continues to contribute to the financing of the budget for 2019 under the terms set in this proposal. In addition, the UK should commit in writing to accept the controls and audits which cover the entire implementation period of the programmes or the actions. Under these conditions, the financial interests of the Union will be protected.


The UK and UK entities, as well as entities from the other Member States whose eligibility is affected by the UK withdrawal, would continue benefiting from the Union financing under the conditions of this proposal. This would mitigate the disruptive effect of the withdrawal on existing agreements and decisions. It would allow for an orderly budget implementation of legal commitments with the UK and UK entities signed or adopted before the date of withdrawal.


Furthermore, as the UK would finance the whole budget 2019, and in line with the objective of implementing fully the multiannual financial framework 2014-2020 decided while the UK was a member of the Union, the UK and UK entities would be eligible in 2019 for the purposes of conditions set in any calls, tenders, contests or any other procedure which may lead to financing from the Union's budget. This would not apply in case there are restrictions in relation to security and to actions involving the European Investment Bank or the European Investment Fund.


The proposed contingency framework would also allow financing of actions in which Member States and Member States' entities are beneficiaries where the eligibility depends on the United Kingdom being a Member State, provided that these specific actions are implemented under legal commitments signed or adopted before the date of withdrawal.


This eligibility of the UK and UK entities would only start applying after the conditions laid down in this proposal have been fulfilled, including that the UK has made its first payment to the EU budget for the period after its withdrawal. The contingency framework providing for the eligibility of UK and UK entities would cease to apply if the UK discontinues the payments or where significant deficiencies have been observed in the execution of the controls and audits.


The proposal is without prejudice to negotiating an agreement with the UK on a financial settlement covering the entirety of mutual obligations. If no agreement is reached in 2019, the situation at the beginning of 2020 will be equivalent to the one at the withdrawal date for the mutual commitments undertaken by the Union and the United Kingdom. In any event the Union and the United Kingdom would need to honour their respective obligations resulting from the whole period of the United Kingdom membership in the Union.

• Consistency with existing policy provisions in the policy area

This proposal aims at minimising the negative impact of the withdrawal of the United Kingdom for the Union budget and for the implementation of the policies of the Union.

• Consistency with other Union policies

This proposal is fully consistent with the Council mandate for the negotiations with the United Kingdom on its withdrawal from the Union.

2. LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY

• Legal basis

Article 352 TFEU and Article 203 of the Euratom Treaty allow the Union to adopt appropriate measures if actions by the Union should prove necessary, within the framework of the policies, to attain one of the objectives set out in the Treaties, and the Treaties have not provided the necessary powers. The proposed Regulation constitutes a measure allowing transition following the withdrawal of a Member State with regard to financing and implementation of actions from the Union budget in a situation in which no agreement has been concluded with that State. Such measure is necessary in order to implement the Union’s budget of the current financial year (2019), allow to receive the payments from the withdrawing Member State, as well as provide a solution for the ongoing actions financed from the Union’s budget for the United Kingdom and United Kingdom’s beneficiaries and for new actions justified by the contribution of the United Kingdom to the budget 2019. The Treaties do not provide for the necessary powers for the Union to adopt such transitory measures and therefore Article 352 TFEU and Article 203 of the Euratom Treaty are the appropriate legal basis.

• Subsidiarity (for non-exclusive competence)

The Union budgetary authority has adopted the Union’s budget 2019 to finance the actions and spending programmes under the MFF 2014-2020 as they were adopted by the Union legislator. The objectives of the proposed action can thus only be achieved by a measure at Union level.

• Proportionality

The proposal does not exceed what is necessary to achieve the objectives of the measure, as it is limited to determining the conditions required for the establishment of eligibility of the United Kingdom and United Kingdom's entities, and is limited in time.

• Choice of the instrument

Given the need for a binding act which would be directly applicable proposing a regulation is the only adequate form.

3. RESULTS OF EX-POST EVALUATIONS, STAKEHOLDER CONSULTATIONS AND IMPACT ASSESSMENTS

• Ex-post evaluations/fitness checks of existing legislation

N/A

• Stakeholder consultations

It was not to possible to carry out a stakeholder consultation due to the urgency for preparing the proposal so that it can be adopted on time by the Council after obtaining the consent of the European Parliament before the European elections.

• Impact assessment

Due to the nature of the proposed measure, no impact assessment was carried out, in line with the Better Regulation Guidelines. There are no other materially different policy options available. The envisaged contingency framework would facilitate the smooth implementation of the budget 2019 and a possible future agreement with the United Kingdom on the respective obligations resulting from the whole period of the UK membership in the Union.

4. BUDGETARY IMPLICATIONS

In a no-deal scenario this proposal would restore the eligibility of the United Kingdom and United Kingdom beneficiaries as long as the United Kingdom continues paying its contribution set in the budget for 2019. Therefore there are no budgetary implications in comparison with the 2019 budget as adopted by the European Parlement in December 2018.

The UK written commitment to accept the necessary controls and audits would be a condition for the application of the contingency framework.