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.
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.
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.
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.
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:
(i)
the entry into force of each bilateral loan agreement; and
(ii)
the discharge of each repayment obligation, including, to the extent necessary, the applicable conversion rate used;
(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:
(i)
details of the remaining amounts due under each bilateral loan agreement; and
(ii)
details of the amounts that are available to discharge repayment obligations referred to in point (f);
(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).
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.
Source: EUR-Lex (Publications Office of the EU), © European Union, reuse permitted under Commission Decision 2011/833/EU.
