Explanatory Memorandum to COM(2025)252 - Position to be adopted on the Union’s behalf in the written procedure by the Participants to the Arrangement on Officially Supported Export Credits in relation to the common line to grant tied aid eligibility to Ukraine - Main contents
Please note
This page contains a limited version of this dossier in the EU Monitor.
| dossier | COM(2025)252 - Position to be adopted on the Union’s behalf in the written procedure by the Participants to the Arrangement on Officially ... |
|---|---|
| source | COM(2025)252  |
| date | 26-05-2025 |
1. Subject matter of the proposal
This proposal concerns a Council decision establishing the position to be taken on the European Union's behalf by the Commission in a written procedure by the participants to the arrangement on Officially Supported Export Credits (the ‘Arrangement’). The written procedure aims at agreeing on a common line to grant tied aid eligibility to Ukraine.
2. Context of the proposal
2.1.The Arrangement on Officially Supported Export Credits
The Arrangement is a “gentlemen's agreement” which provides a framework for the orderly use of officially supported export credits and tied aid. In practice, this means it sets rules that work to eliminate subsidies and trade distortions related to officially supported export credits. These include provisions covering tied aid, i.e. aid which is, in law or in fact, tied to the procurement of goods and/or services from the donor country and/or a restricted number of countries. The Arrangement entered into force in April 1978 is of indefinite duration and, although it receives the administrative support of the OECD Secretariat, is not an OECD Act 1 . The Arrangement is subject to regular updates, in order to take account of market and policy developments affecting the provision of officially supported export credits.
The Arrangement has been transposed, and hence been made legally binding in the EU, by Regulation (EU) No 1233/2011 of the European Parliament and of the Council. 2 Revisions of the terms and conditions of the Arrangement are incorporated into EU law through delegated Acts pursuant to Article 2 of this Regulation.
2.2.The Participants to the Arrangement on Officially Supported Export Credits
The European Commission represents the Union in meetings of the Participants to the Arrangement, as well as in the written procedures for decision-making by the Participants to the Arrangement. Decisions on all amendments of the Arrangement are taken by consensus. The position of the Union is adopted by the Council and is discussed by Member States in the Council Working Group on Export Credits 3 .
2.3.Common line
A common line is an instrument under the Arrangement that allows the participants, on an exceptional basis, to diverge from the Arrangement’s provisions either for a specific transaction or temporarily for a non-specific number of transactions. The procedures for reaching agreement on common lines are set out in Articles 54 to 59 of the Arrangement.
The Article 59 of the Arrangement states that “A Common Line, once agreed, shall be valid for a period of two years from its effective date”. If the Participants need the temporary exceptions of the Arrangement provisions to be longer, they shall agree to several Common Lines.
2.4.The envisaged act of the European Union
Article 32 a) of the Arrangement states: “There shall be no tied aid to countries whose per capita GNI, according to the World Bank data, is above the upper limit for lower middle income countries. The World Bank recalculates this threshold on an annual basis. A country will be reclassified only after its World Bank category has been unchanged for two consecutive years.” In June 2024, the World Bank classified Ukraine as an upper-middle income country for the first time. If the World Bank does so again in their next classification (due in June 2025), Ukraine will no longer be eligible to receive tied aid.
While Ukraine's economy was significantly impaired by the crisis resulting from Russia’s war of aggression against Ukraine, real growth has been driven by construction activity (24.6%), reflecting a sizable increase in investment spending (52.9%) supporting Ukraine's reconstruction effort in the wake of ongoing destruction. Furthermore, the continued decline in population, which has fallen more than 15%, has a significant effect on the rise of per capita GNI.
In the context of Russia’s war of aggression against Ukraine, several EU Member States have already used tied aid to support Ukraine or plan to do so in the near future (the envisaged time frame is the next four years).
As the change of classification is not directly linked to a real significant expansion of the Ukrainian economy, and the Ukrainian situation remains critical, it is crucial that the EU and other Participants maintain the possibility to use all tools that may be needed. It is prudent, in that case to propose and agree on a common line, not least as this situation is foreseen in the Arrangement.
3. The position to be taken on the Union's behalf
The European Union should support common lines under Articles 54 to 59 of the Arrangement to provide for tied aid eligibility for Ukraine for the next four years, irrespective of its World Bank classification.
4. Legal basis
4.1.Procedural legal basis
4.1.1.Principles
Article 218(9) of the Treaty on the Functioning of the European Union (TFEU) provides for decisions establishing ‘the positions to be adopted on the Union’s behalf in a body set up by an agreement, when that body is called upon to adopt acts having legal effects, with the exception of acts supplementing or amending the institutional framework of the agreement.’
The concept of ‘acts having legal effects’ includes acts that have legal effects by virtue of the rules of international law governing the body in question. It also includes instruments that do not have a binding effect under international law, but that are ‘capable of decisively influencing the content of the legislation adopted by the EU legislature’ 4 .
4.1.2.Application to the present case
The rules of an agreed common line supersede the rules of the Arrangement only for the transaction or in the circumstances specified in the common line. While common lines are soft law for other Participants to the Arrangement, for the EU, common lines constitute acts having legal effects by virtue of Article 1 of Regulation (EU) No 1233/2011 of the European Parliament and of the Council of 16 November 2011 on the application of certain guidelines in the field of officially supported export credits and repealing Council Decisions 2001/76/EC and 2001/77/EC, which states that "The guidelines contained in the Arrangement on Officially Supported Export Credits (‘the Arrangement’) shall apply in the Union. The text of the Arrangement is annexed to this Regulation." As common lines are agreed by the Participants following the procedure set out in Articles 54 to 59 of the Arrangement involving the OECD Export Credit Secretariat, they also constitute acts adopted by an international body within the meaning of Article 218(9) TFEU. Therefore, the procedural legal basis for the proposed decision is Article 218(9) TFEU.
4.2.Substantive legal basis
4.2.1.Principles
The substantive legal basis for a decision under Article 218(9) TFEU depends primarily on the objective and content of the envisaged act in respect of which a position is taken on the Union's behalf.
4.2.2.Application to the present case
The objective and content of the envisaged act relate to export credits, which is within the scope of the common commercial policy. Therefore, the substantive legal basis of the proposed decision is Article 207 TFEU.
4.3.Conclusion
The legal basis of the proposed decision should be Article 207 i, first subparagraph, TEFU in conjunction with Article 218(9) TFEU.
5. Publication of the envisaged act
As the common line proposed to the participants will offer the possiblity to make use of a derogation provided under the Arrangement on Officially Supported Export Credits which forms Annex II to the Regulation (EU) No 1233/2011, it is appropriate to publish it in the Official Journal of the European Union after its acceptance.