Regulation (EU) 2021/1755 of the European Parliament and of the Council of 6 October 2021 establishing the Brexit Adjustment Reserve

CHAPTER I

General provisions

Article 1

Subject matter

Article 2

Objectives

Article 3

Definitions

For the purposes of this Regulation, the following definitions apply:

(1) ‘reference period’ means the reference period referred to in Article 63(5), point (a), of the Financial Regulation, which shall be from 1 January 2020 to 31 December 2023;

(2) ‘applicable law’ means Union law and the national law relating to its application;

(3) ‘irregularity’ means any breach of applicable law resulting from an act or omission by any public or private entity involved in the implementation of the financial contribution from the Reserve, including Member State authorities, which has, or would have, the effect of prejudicing the Union budget by charging an unjustified item of expenditure to the Union budget;

(4) ‘systemic irregularity’ means any irregularity, which may be of a recurring nature, with a high probability of occurrence in similar types of measures;

(5) ‘total errors’ means the sum of the projected random errors and, if applicable, delimited systemic errors and uncorrected anomalous errors;

(6) ‘total error rate’ means total errors divided by the audit population;

(7) ‘residual error rate’ means the total errors less the financial corrections applied by the Member State to reduce the risks identified by the independent audit body, divided by the expenditure to be declared in the application for a financial contribution from the Reserve;

(8) ‘relocation’ means a transfer of the same or similar activity or part thereof within the meaning of Article 2, point (61a), of Commission Regulation (EU) No 651/2014 (¹);

(9) ‘territories with special status’, in the context of this Regulation, means, where appropriate, the British Overseas Territories and the Crown Dependencies.

Article 4

Geographical coverage and resources of the Reserve

The resources referred to in paragraph 2 of this Article shall be provisionally allocated, in both commitment and payment appropriations, pursuant to the methodology set out in Annex I. They shall be made available as follows:

(a) a pre-financing amount of EUR 4 321 749 000 in current prices shall be made available and paid in three instalments of EUR 1 697 933 000 in 2021, EUR 1 298 919 000 in 2022 and EUR 1 324 897 000 in 2023 in accordance with Article 9;

(b) any remaining provisionally allocated amount shall be made available in 2025 in accordance with Article 12.

The amounts referred to in the first subparagraph, point (a), of this paragraph shall be considered pre-financing within the meaning of Article 115(2), point (b)(i), of the Financial Regulation.

By way of derogation from the first subparagraph of this paragraph, the amounts not transferred to the Recovery and Resilience Facility established by Regulation (EU) 2021/241 of the European Parliament and of the Council (²) in accordance with Article 4a that would be due to be paid by the Commission in accordance with Article 12(3) shall not be paid and shall be deducted from the amount referred to in paragraph 2 of this Article.

Where the provisional allocation is not entirely used, the amounts required to be spent for the purpose referred to in the first subparagraph shall be proportionately reduced.

Where the amount required to be spent to support local and regional coastal communities is not entirely used for that purpose, 50 % of the amount unused shall be deducted in the calculation of the total accepted amount.

The amount of eligible expenditure accepted, as referred to in Article 12(2), point (a), shall specify, where applicable, the accepted amount of expenditure to support local and regional coastal communities.

The application for a financial contribution from the Reserve shall include a breakdown of the expenditure incurred and paid for measures supporting local and regional coastal communities, in accordance with Annex II.

Article 4a

Transfer to the Recovery and Resilience Facility

CHAPTER II

Eligibility, technical assistance and exclusion from support

Article 5

Eligibility

The financial contribution from the Reserve shall only support measures specifically carried out by Member States, including at regional and local levels, to contribute to the objectives set out in Article 2 and may cover in particular the following:

(a) measures to support private and public businesses, in particular SMEs, the self-employed, local communities and organisations adversely affected by the withdrawal of the United Kingdom from the Union;

(b) measures to support the economic sectors most adversely affected by the withdrawal of the United Kingdom from the Union;

(c) measures to support businesses, regional and local communities and organisations, including small-scale coastal fisheries, dependent on fishing activities in United Kingdom waters, in waters of territories with special status or in waters covered by fisheries agreements with coastal states where fishing opportunities for Union fleets have been reduced as a result of the United Kingdom’s withdrawal from the Union;

(d) measures to support job creation and protection, including green jobs, short-time work schemes, re-skilling and training in sectors most adversely affected by the withdrawal of the United Kingdom from the Union;

(e) measures to ensure the functioning of border, customs, sanitary and phytosanitary, security and fisheries controls, as well as the collection of indirect taxation, including additional personnel and their training, and infrastructure;

(f) measures to facilitate regimes for certification and authorisation of products, to assist in meeting establishment requirements, to facilitate labelling and marking, for example for safety, health and environmental standards, as well as to assist in mutual recognition;

(g) measures for communication, information and awareness-raising of citizens and businesses about changes to their rights and obligations stemming from the withdrawal of the United Kingdom from the Union;

(h) measures aimed at the reintegration of Union citizens as well as persons having the right to reside on the territory of the Union who left the United Kingdom, as a result of the withdrawal of the United Kingdom from the Union.

Member States shall repay the contribution from the Reserve to an action comprising investment in infrastructure or productive investment, if within 5 years of the final payment to the recipients of the financial contribution from the Reserve or within the period of time set out in State aid rules, where applicable, that action is subject to any of the following:

(a) a cessation of a productive activity or a transfer of a productive activity outside the Member State in which it received financial contribution from the Reserve;

(b) a change in ownership of an item of infrastructure which gives to a firm or a public body an undue advantage;

(c) a substantial change affecting its nature, objectives or implementation conditions which would result in undermining its original objectives.

Member States may reduce the time limit set out in the first subparagraph to 3 years in cases that concern the maintenance of investments or jobs created by SMEs.

This paragraph shall not apply to any action that undergoes cessation of a productive activity due to a non-fraudulent bankruptcy.

Article 6

Technical assistance

Article 7

Exclusion from support

The Reserve shall not support VAT and expenditure supporting relocation as defined in Article 3, point (8).

CHAPTER III

Financial management

Article 8

Implementation and forms of Union funding

Article 9

Pre-financing

By way of derogation from Article 111(2) of the Financial Regulation, the budgetary commitments for the first instalment shall follow the adoption of the implementing act constituting the legal commitment by the Commission.

Article 10

Submission of applications for a financial contribution from the Reserve

Article 11

Content of the application for a financial contribution from the Reserve

The implementation report for the Reserve shall include:

(a) a description of the negative impact of the withdrawal of the United Kingdom from the Union in economic, social, territorial and, where appropriate, environmental terms, including an identification of the sectors, regions, areas and, where relevant, local communities most adversely affected by the withdrawal;

(b) a description of the measures carried out to counter the adverse consequences of the withdrawal of the United Kingdom from the Union, of the extent to which those measures alleviated the regional and sectoral impact referred to in point (a), and how they were implemented;

(c) a justification of the eligibility of the expenditure incurred and paid, and its direct link to the withdrawal of the United Kingdom from the Union;

(d) a description of the arrangements put in place to avoid double funding and to ensure complementarity with other Union instruments and national funding;

(e) a description of the contribution of the measures to climate change mitigation and adaptation.

Article 12

Clearance of the pre-financing of the remaining provisional allocation and calculation of the additional amounts due to Member States

Based on its assessment, the Commission shall, by means of an implementing act, establish the following:

(a) the amount of eligible expenditure accepted;

(b) the amount of technical assistance calculated in accordance with Article 6(2);

(c) the sum of the amounts referred to in points (a) and (b) (‘total accepted amount’);

(d) whether the amount provisionally allocated in accordance with the implementing act under Article 4(5) (‘provisional allocation’) is due to the Member State in accordance with paragraph 3 of this Article, or whether amounts need to be recovered pursuant to paragraph 6 of this Article.

Where the total accepted amount is lower than the pre-financing paid to the Member State concerned, the difference shall be recovered in accordance with the Financial Regulation. The recovered amounts shall be treated as internal assigned revenue in accordance with Article 21(3), point (b), of the Financial Regulation.

Where the sum of the additional amounts calculated for all Member States whose total accepted amount exceeds their provisional allocation is higher than the resources available according to the first subparagraph, the financial contributions from the Reserve for the amounts exceeding the provisional allocations shall be reduced proportionately.

Where the additional payments to Member States whose total accepted amount exceeds their provisional allocation have been made at a rate of 100 %, any remaining amount shall be returned to the Union budget.

Article 13

Use of the euro

Any amounts declared to the Commission by Member States in the application for a financial contribution from the Reserve shall be denominated in euro. Member States whose currency is not the euro shall convert the amounts in the application for a financial contribution from the Reserve into euro using the monthly accounting exchange rate established by the Commission, in the month during which the expenditure is registered in the accounting systems of the body or bodies responsible for the management of the financial contribution from the Reserve.

CHAPTER IV

Management and control systems for the Reserve

Article 14

Management and control

When executing tasks relating to the implementation of the Reserve, Member States shall take all the necessary measures, including legislative, regulatory and administrative measures, to protect the financial interests of the Union, namely by:

(a) designating a body or, where required by the Member State constitutional framework, bodies responsible for the management of the financial contribution from the Reserve and an independent audit body in accordance with Article 63(3) of the Financial Regulation, and supervising such bodies;

(b) setting up management and control systems for the Reserve in accordance with the principles of sound financial management and ensuring that those systems function effectively;

(c) drawing up a description of the management and control systems for the Reserve in accordance with the template set out in Annex III, keeping the description up to date and making it available to the Commission on request;

(d) notifying the Commission of the identity of the designated body or bodies and of the body to which the pre-financing shall be paid, and confirming that the descriptions of the management and control systems for the Reserve have been drawn up, by 10 December 2021;

(e) ensuring that expenditure supported under other Union funds and programmes is not included for support from the Reserve;

(f) preventing, detecting and correcting irregularities and fraud, and avoiding conflict of interest; those actions comprise the collection of information on the beneficial owners of the recipients of funding in accordance with point 4(a) of Annex III; the rules related to the collection and processing of such data shall comply with applicable data protection rules;

(g) cooperating with the Commission, OLAF, the Court of Auditors and, in respect of those Member States participating in enhanced cooperation, the EPPO pursuant to Regulation (EU) 2017/1939.

The use of and access to the data referred to in point (f) shall be limited to the bodies referred to in point (a), the Commission, OLAF, the Court of Auditors and, in respect of those Member States participating in enhanced cooperation pursuant to Regulation (EU) 2017/1939, to the EPPO.

Member States and the Commission shall be allowed to process personal data only where it is necessary for the purpose of meeting their respective obligations under this Regulation and shall process personal data in accordance with Regulation (EU) 2016/679 of the European Parliament and of the Council (³) or Regulation (EU) 2018/1725, whichever is applicable.

The body or bodies responsible for the management of the financial contribution from the Reserve shall:

(a) ensure the functioning of an effective and efficient internal control system;

(b) establish criteria and procedures for the selection of measures to be financed and determine the conditions for a financial contribution from the Reserve;

(c) verify that the measures financed from the Reserve are implemented in accordance with applicable law and the conditions for a financial contribution from the Reserve, and that the expenditure is based on verifiable supporting documents;

(d) establish effective measures to avoid double funding of the same costs by the Reserve and other sources of Union funding;

(e) ensure ex post publication in accordance with Article 38(2) to (6) of the Financial Regulation;

(f) use an accounting system to record and store electronically data on the expenditure incurred to be covered by the financial contribution from the Reserve that provides accurate, complete and reliable information in a timely manner;

(g) keep available all supporting documents regarding expenditure to be covered by the financial contribution from the Reserve for a period of 5 years following the deadline for submission of the application for a financial contribution from the Reserve, and include that obligation in agreements with other entities involved in the implementation of the Reserve;

(h) for the purposes of paragraph 1, point (f), collect information in an electronic standardised format to allow for the identification of recipients of a financial contribution from the Reserve and their beneficial owners in accordance with Annex III.

The audit work shall be carried out in accordance with internationally accepted audit standards.

The audits of financed measures shall cover expenditure on the basis of a sample. That sample shall be representative and based on statistical sampling methods.

Where the population consists of less than 300 sampling units, a non-statistical sampling method may be used based on the professional judgement of the independent audit body. In such cases, the size of the sample shall be sufficient to enable the independent audit body to draw up a valid audit opinion. The non-statistical sampling method shall cover a minimum of 10 % of the sampling units in the population of the reference period, selected randomly.

Article 15

Financial corrections

CHAPTER V

Final provisions

Article 16

Information and communication

Member States and their regional and local authorities, where appropriate, shall be responsible for informing and publicising to Union citizens, including those potentially benefiting from the Reserve, of the role, the results and impact of the Union contribution from the Reserve through information and communication actions and, in that context, raise awareness about the changes resulting from the withdrawal of the United Kingdom from the Union.

Article 17

Evaluation and reporting

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.

ANNEX I

The resources of the Reserve shall be distributed between the Member States according to the following methodology: