Explanatory Memorandum to COM(2019)461 - Measures concerning the implementation and financing of the general budget of the Union in 2020 in relation to the withdrawal of the United Kingdom from the Union - Main contents
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This page contains a limited version of this dossier in the EU Monitor.
| dossier | COM(2019)461 - Measures concerning the implementation and financing of the general budget of the Union in 2020 in relation to the ... |
|---|---|
| source | COM(2019)461  |
| date | 04-09-2019 |
1. CONTEXT OF THE PROPOSAL
• Reasons for and objectives of the proposal
The United Kingdom has decided to leave the European Union, invoking the procedure in Article 50 of the Treaty on European Union (TEU). Following a request by the United Kingdom, the European Council (Article 50) agreed on 11 April 2019 1 to extend further 2 the period provided for in Article 50(3) TEU until 31 October 2019. Unless the United Kingdom ratifies the Withdrawal Agreement by 31 October 2019 or requests a third extension, to which the European Council (Article 50) agrees by unanimity, the period under Article 50(3) TEU will end then. The United Kingdom will then be a third country as of 1 November 2019 without an agreement to ensure an orderly withdrawal.The Commission continues to consider that an orderly withdrawal of the United Kingdom from the Union on the basis of the Withdrawal Agreement is the best outcome.
The Communication of 12 June 2019 on the ‘State of play of preparations of contingency measures for the withdrawal of the United Kingdom from the European Union’ 3 recalled that, in line with the approach which the European Council (Article 50) has emphasised throughout the process, all actors must continue to prepare for all possible outcomes, including a withdrawal without an agreement. It concluded that the Commission would continue to monitor political developments and assess if any extension of the adopted measures would be needed. This proposal is an extension to 2020 of the contingency framework for the Union budget laid down in Council Regulation (EU, Euratom) 2019/1197 of 9 July 2019 on 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 4 . The proposal lays down rules on the relations between the Union, on the one hand, and the United Kingdom and its beneficiaries, on the other, as regards the financing and implementation of the budget in 2020.
Since the notification by the United Kingdom of its withdrawal intention, the European Union has consistently stated that the Union and the United Kingdom are bound to honour their respective obligations resulting from the whole period of the United Kingdom’s 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 Withdrawal Agreement 5 . The absence of a withdrawal agreement at the withdrawal date would not affect that guiding principle.
A withdrawal without an agreement would leave the budgetary relations between the Union and the UK without agreed legal arrangements. Such a legal vacuum would create considerable uncertainty and difficulties for the implementation of the Union’s budgets for 2019 and 2020, 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 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 extend to 2020 the contingency framework under Regulation (EU, Euratom) 2019/1197 and, consequently, to avoid, or at least minimise, the most significant disruptions for beneficiaries of EU spending programmes and other actions at the time of withdrawal and until the end of 2020, 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 throughout 2020 the eligibility to benefit from Union financing for the United Kingdom and United Kingdom entities under legal commitments entered into before the withdrawal date or between the withdrawal date and the end of 2019, in application of Regulation (EU, Euratom) 2019/1197. This is subject to the condition that the United Kingdom makes a written commitment to contribute to the financing of the budget for 2020 under the terms set in this proposal. In addition, the United Kingdom 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 United Kingdom and United Kingdom 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 most significant disruptions of the withdrawal on existing agreements and decisions. It would allow for an orderly budget implementation of legal commitments with the United Kingdom and United Kingdom entities signed or adopted before the date of withdrawal or between the withdrawal date and the end of 2019, in application of Regulation (EU, Euratom) 2019/1197.
Furthermore, as the United Kingdom would finance its share of the budget 2020, and in line with the objective of implementing fully the multiannual financial framework 2014-2020 decided while the United Kingdom was a member of the Union, the United Kingdom and United Kingdom entities would be eligible in 2020 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 or to actions involving the European Investment Bank or the European Investment Fund. Such Union funding would be limited to eligible expenditure incurred in 2020, except for public procurement contracts signed before the end of 2020 in application of Title VII of Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the Council (‘the Financial Regulation’), which would continue to be implemented in accordance with their terms, and except for the United Kingdom agricultural direct payment scheme for the claim year 2020, which will be excluded from eligibility.
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 or results from Regulation (EU, Euratom) 2019/1197, provided that these specific actions are implemented under legal commitments signed or adopted before the date of withdrawal or in 2019 in application of Regulation (EU, Euratom) 2019/1197.
This eligibility of the United Kingdom and United Kingdom entities would only start applying after the conditions laid down in this proposal have been fulfilled, including that the United Kingdom has made its first payment to the EU budget for 2020. The contingency framework providing for the eligibility of United Kingdom and United Kingdom entities would cease to apply if the United Kingdom discontinues the payments or where significant deficiencies have been observed in the execution of the controls and audits.
The contribution from the United Kingdom is based on the draft budget for 2020 as proposed on 5 July 2019 for 28 Member States 6 and would be adjusted to take into account the level of payment appropriations under the adopted budget. It is reasonable that no Member State is in a less favourable position as regards their contribution than laid down in the budget for 2020 as proposed, following the adoption of this Regulation. Therefore, to ensure the beneficial effect of this Regulation for all Member States, a specific amount would be deducted before that contribution is entered in the Union budget. Such specific amount would benefit the Member States which would otherwise be at a disadvantage following the adoption of this Regulation, as further specified in dedicated practical arrangements setting out the distribution of the payments due and entrusting the Commission with the disbursement of the specific amount.
The proposal is without prejudice to negotiating an agreement with the United Kingdom on a financial settlement covering the entirety of mutual obligations. If no agreement is reached in 2019 or 2020, the situation at the beginning of 2021 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 is part of the Union preparedness and contingency plan to mitigate the most significant disruptions of a withdrawal of the United Kingdom from the Union without a withdrawal agreement and 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 for 2020, which was proposed on 5 July 2019 for 28 Member States, 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 2020. 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’s budget 2020, which was proposed on 5 July 2019 for 28 Member States, will finance the actions and spending programmes under the multiannual financial framework 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. It 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
• 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 in time by the Council after obtaining the consent of the European Parliament in order to minimise the period of uncertainty for the beneficiaries and for the financing of the budget for 2020.
• Impact assessment
Due to the nature of the proposed measure, no impact assessment was carried out, in line with the Better Regulation Guidelines. The envisaged contingency framework would facilitate the smooth implementation of the budget 2020 and a possible future agreement with the United Kingdom on the respective obligations resulting from the whole period of the United Kingdom’s membership in the Union.
4. BUDGETARY IMPLICATIONS
In case of a withdrawal without an agreement, this proposal would restore the eligibility of the United Kingdom and United Kingdom beneficiaries as long as the United Kingdom contributes to the budget for 2020. It would also allow receiving the United Kingdom’s contributions as laid down in the draft budget for 2020, which was proposed on 5 July 2019 for 28 Member States, after adjusting those contributions to take into account the level of payment appropriations under the adopted budget.
The United Kingdom’s acceptance of the conditions for the 2019 contingency framework and its written commitment to accept the necessary controls and audits would be conditions for the application of this contingency framework for 2020.