Regulation (EU) No 1303/2013 of the European Parliament and of the CouncilShow full title

Article 37 E+S+N.I. Financial instruments

1. [F2 Support for rural development] may be used to support financial instruments under one or more programmes , including when organised through funds of funds, in order to contribute to the achievement of specific objectives set out under a priority.

Financial instruments shall be implemented to support investments which are expected to be financially viable and do not give rise to sufficient funding from market sources. When applying this Title, the managing authorities, the bodies implementing funds of funds, and the bodies implementing financial instruments shall comply with applicable law, in particular on F3 ... public procurement.

2. Support of financial instruments shall be based on an ex ante assessment which has established evidence of market failures or suboptimal investment situations, and the estimated level and scope of public investment needs, including types of financial instruments to be supported. Such ex ante assessment shall include:

(a) an analysis of market failures, suboptimal investment situations, and investment needs for policy areas and thematic objectives or investment priorities to be addressed with a view to contributing to the achievement of specific objectives set out under a priority and to be supported through financial instruments. That analysis shall be based on available good practices methodology;

(b) an assessment of the added value of the financial instruments that are being considered for [F4 support for rural development], consistency with other forms of public intervention addressing the same market, F5 ... the proportionality of the envisaged intervention and measures to minimise market distortion;

[F6 (c) an estimate of additional public and private resources to be potentially raised by the financial instrument down to the level of the final recipient (expected leverage effect), including as appropriate an assessment of the need for, and the extent of, differentiated treatment as referred to in Article 43a to attract counterpart resources from investors operating under the market economy principle and/or a description of the mechanisms which will be used to establish the need for, and extent of, such differentiated treatment, such as a competitive or appropriately independent assessment process;]

(d) an assessment of lessons learnt from similar instruments and ex ante assessments carried out by the [F7 relevant authority] in the past, and how such lessons will be applied in the future;

(e) the proposed investment strategy, including an examination of options for implementation arrangements within the meaning of Article 38, financial products to be offered, final recipients targeted and envisaged combination with grant support as appropriate;

(f) a specification of the expected results and how the financial instrument concerned is expected to contribute to the achievement of the specific objectives set out under the relevant priority including indicators for that contribution;

(g) provisions allowing for the ex ante assessment to be reviewed and updated as required during the implementation of any financial instrument which has been implemented based upon such assessment, where during the implementation phase, the managing authority considers that the ex ante assessment may no longer accurately represent the market conditions existing at the time of implementation.

[F6 3. The ex ante assessment referred to in paragraph 2 of this Article may take into account the ex ante evaluations referred to in point (h) of the first subparagraph and the second subparagraph of Article 209(2) of the Financial Regulation and may be performed in stages. It shall, in any event, be completed before the managing authority decides to make programme contributions to a financial instrument.]

The summary findings and conclusions of ex ante assessments in relation to financial instruments shall be published within three months of their date of finalisation.

The ex ante assessment shall be submitted to the monitoring committee for information purposes in accordance with the Fund-specific rules.

4. Where financial instruments support financing to enterprises, including SMEs, such support shall target the establishment of new enterprises, early stage-capital, i.e. seed capital and start-up capital, expansion capital, capital for the strengthening of the general activities of an enterprise, or the realisation of new projects, penetration of new markets or new developments by existing enterprises, F8 ... in accordance with the Fund-specific rules. Such support may include investment in both tangible and intangible assets as well as working capital F9 ... with a view to stimulating the private sector as a supplier of funding to enterprises. It may also include the costs of transfer of proprietary rights in enterprises provided that such transfers take place between independent investors.

[F10 Financial instruments may also provide support in the form of working capital to SMEs, if necessary as a temporary measure, to provide an effective response to a public health crisis.]

5. Investments that are to be supported through financial instruments shall not be physically completed or fully implemented at the date of the investment decision.

6. Where financial instruments provide support to final recipients in respect of infrastructure investments with the objective of supporting urban development or urban regeneration or similar infrastructure investments with the objectives of diversifying non-agricultural activities in rural areas, such support may include the amount necessary for the reorganisation of a debt portfolio regarding infrastructure forming part of the new investment, up to a maximum of 20 % of the total amount of programme support from the financial instrument to the investment.

7. Financial instruments may be combined with grants, interest rate subsidies and guarantee fee subsidies. Where [F11 support for rural development] is provided by means of financial instruments and combined in a single operation, with other forms of support directly related to financial instruments targeting the same final recipients, including technical support, interest rate subsidies and guarantee fee subsidies, the provisions applicable to financial instruments shall apply to all forms of support within that operation. In such cases, F12 ... separate records shall be maintained for each form of support.

F13 8. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9. The combination of support provided through grants and financial instruments as referred to in paragraphs 7 and 8 mayF14 ... cover the same expenditure item provided that the sum of all forms of support combined does not exceed the total amount of the expenditure item concerned. Grants shall not be used to reimburse support received from financial instruments. Financial instruments shall not be used to pre-finance grants.

10. Contributions in kind shall not constitute eligible expenditure in respect of financial instruments, except for contributions of land or real estate in respect of investments with the objective of supporting rural development, urban development or urban regeneration, where the land or real estate forms part of the investment. Such contributions of land or real estate shall be eligible provided that the conditions laid down in Article 69(1) are met.

11. VAT shall not constitute eligible expenditure of an operation, except in the case of VAT which is non-recoverable under national VAT legislation. The treatment of VAT at the level of investments made by final recipients shall not be taken into account for the purposes of determining the eligibility of expenditure under the financial instrument. However, where financial instruments are combined with grants under paragraphs 7 and 8 of this Article, the provisions of Article 69(3) shall apply to the grant.

F15 12. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F16 13. The appropriate authority may make regulations in relation to support for rural development laying down additional specific rules on the purchase of land and on combining technical support with financial instruments.]

Extent Information

E1 This version of this provision applies to England, Scotland and Northern Ireland only; a separate version has been created for Wales

Textual Amendments

F2 Words in Art. 37(1) substituted (31.12.2020) by The European Structural and Investment Funds Common Provisions (Amendment) (EU Exit) Regulations 2019 (S.I. 2019/785), regs. 1, 8(1)(b) (as amended by S.I. 2020/1542, regs. 1(2), 13(6)(a)(i)); 2020 c. 1, Sch. 5 para. 1(1)

F3 Words in Art. 37(1) omitted (31.12.2020) by virtue of The State Aid (Revocations and Amendments) (EU Exit) Regulations 2020 (S.I. 2020/1470), reg. 1(2), Sch. 1 para. 7(2)(a) (with Sch. 3)

F4 Words in Art. 37(2)(b) substituted (31.12.2020) by The European Structural and Investment Funds Common Provisions (Amendment) (EU Exit) Regulations 2019 (S.I. 2019/785), regs. 1, 8(1)(c) (as amended by S.I. 2020/1542, regs. 1(2), 13(6)(a)(ii)); 2020 c. 1, Sch. 5 para. 1(1)

F5 Words in Art. 37(2)(b) omitted (31.12.2020) by virtue of The State Aid (Revocations and Amendments) (EU Exit) Regulations 2020 (S.I. 2020/1470), reg. 1(2), Sch. 1 para. 7(2)(b) (with Sch. 3)

F6 Substituted by Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the Council of 18 July 2018 on the financial rules applicable to the general budget of the Union, amending Regulations (EU) No 1296/2013, (EU) No 1301/2013, (EU) No 1303/2013, (EU) No 1304/2013, (EU) No 1309/2013, (EU) No 1316/2013, (EU) No 223/2014, (EU) No 283/2014, and Decision No 541/2014/EU and repealing Regulation (EU, Euratom) No 966/2012.

F7 Words in Art. 37(2)(d) substituted (31.12.2020) by The European Structural and Investment Funds Common Provisions (Amendment) (EU Exit) Regulations 2019 (S.I. 2019/785), regs. 1, 8(1)(d); 2020 c. 1, Sch. 5 para. 1(1)

F8 Words in Art. 37(4) omitted (31.12.2020) by virtue of The State Aid (Revocations and Amendments) (EU Exit) Regulations 2020 (S.I. 2020/1470), reg. 1(2), Sch. 1 para. 7(2)(c)(i) (with Sch. 3)

F9 Words in Art. 37(4) omitted (31.12.2020) by virtue of The State Aid (Revocations and Amendments) (EU Exit) Regulations 2020 (S.I. 2020/1470), reg. 1(2), Sch. 1 para. 7(2)(c)(ii) (with Sch. 3)

F10 Inserted by Regulation (EU) 2020/460 of the European Parliament and of the Council of 30 March 2020 amending Regulations (EU) No 1301/2013, (EU) No 1303/2013 and (EU) No 508/2014 as regards specific measures to mobilise investments in the healthcare systems of Member States and in other sectors of their economies in response to the COVID-19 outbreak (Coronavirus Response Investment Initiative).

F11 Words in Art. 37(7) substituted (31.12.2020) by The European Structural and Investment Funds Common Provisions (Amendment) (EU Exit) Regulations 2019 (S.I. 2019/785), regs. 1, 8(1)(e) (as amended by S.I. 2020/1542, regs. 1(2), 13(6)(a)(iii)); 2020 c. 1, Sch. 5 para. 1(1)

F12 Words in Art. 37(7) omitted (31.12.2020) by virtue of The State Aid (Revocations and Amendments) (EU Exit) Regulations 2020 (S.I. 2020/1470), reg. 1(2), Sch. 1 para. 7(2)(d) (with Sch. 3)

F13 Art. 37(8) omitted (31.12.2020) by virtue of The European Structural and Investment Funds Common Provisions (Amendment) (EU Exit) Regulations 2019 (S.I. 2019/785), regs. 1, 8(1)(f); 2020 c. 1, Sch. 5 para. 1(1)

F14 Words in Art. 37(9) omitted (31.12.2020) by virtue of The State Aid (Revocations and Amendments) (EU Exit) Regulations 2020 (S.I. 2020/1470), reg. 1(2), Sch. 1 para. 7(2)(e) (with Sch. 3)

F15 Art. 37(12) omitted (31.12.2020) by virtue of The State Aid (Revocations and Amendments) (EU Exit) Regulations 2020 (S.I. 2020/1470), reg. 1(2), Sch. 1 para. 7(2)(f) (with Sch. 3)

F16 Art. 37(13) substituted (31.12.2020) by The Agriculture (Legislative Functions) (EU Exit) Regulations 2019 (S.I. 2019/748), regs. 1, 77; 2020 c. 1, Sch. 5 para. 1(1)

Article 37 W Financial instruments

1. [F17 Support for rural development] may be used to support financial instruments under one or more programmes F18 ... in order to contribute to the achievement of specific objectives set out under a priority.

Financial instruments shall be implemented to support investments which are expected to be financially viable and do not give rise to sufficient funding from market sources. When applying this Title, the managing authorities F19 ... and the bodies implementing financial instruments shall comply with applicable law, in particular on F20 ... public procurement.

2. Support of financial instruments shall be based on an F21 ... assessment which has established evidence of market failures or suboptimal investment situations, and the estimated level and scope of public investment needs, including types of financial instruments to be supported. Such F21 ... assessment shall include:

(a) an analysis of market failures, suboptimal investment situations, and investment needs for policy areas F22 ... or investment priorities to be addressed with a view to contributing to the achievement of specific objectives set out under a priority and to be supported through financial instruments. That analysis shall be based on available good practices methodology;

(b) an assessment of the added value of the financial instruments that are being considered for [F23 support for rural development], consistency with other forms of public intervention addressing the same market, F24 ... the proportionality of the envisaged intervention and measures to minimise market distortion;

[F25 (c) an estimate of additional public and private resources to be potentially raised by the financial instrument down to the level of the final recipient (expected leverage effect), including as appropriate an assessment of the need for, and the extent of, differentiated treatment as referred to in Article 43a to attract counterpart resources from investors operating under the market economy principle and/or a description of the mechanisms which will be used to establish the need for, and extent of, such differentiated treatment, such as a competitive or appropriately independent assessment process;]

(d) an assessment of lessons learnt from similar instruments and F21 ... assessments carried out by the [F26 relevant authority] in the past, and how such lessons will be applied in the future;

(e) the proposed investment strategy, including an examination of options for implementation arrangements within the meaning of Article 38, financial products to be offered, final recipients targeted and envisaged combination with grant support as appropriate;

(f) a specification of the expected results and how the financial instrument concerned is expected to contribute to the achievement of the specific objectives set out under the relevant priority including indicators for that contribution;

(g) provisions allowing for the F21 ... assessment to be reviewed and updated as required during the implementation of any financial instrument which has been implemented based upon such assessment, where during the implementation phase, the managing authority considers that the F21 ... assessment may no longer accurately represent the market conditions existing at the time of implementation.

[F25 3. The F21 ... assessment referred to in paragraph 2 of this Article may take into account the F21 ... evaluations referred to in point (h) of the first subparagraph and the second subparagraph of Article 209(2) of the Financial Regulation and may be performed in stages. It shall, in any event, be completed before the managing authority decides to make programme contributions to a financial instrument.]

The summary findings and conclusions of F21 ... assessments in relation to financial instruments shall be published within three months of their date of finalisation.

F27 ...

4. Where financial instruments support financing to enterprises F28 ... such support shall target the establishment of new enterprises, early stage-capital, i.e. seed capital and start-up capital, expansion capital, capital for the strengthening of the general activities of an enterprise, or the realisation of new projects, penetration of new markets or new developments by existing enterprises, F29 ... F30 .... Such support may include investment in both tangible and intangible assets as well as working capital F31 ... with a view to stimulating the private sector as a supplier of funding to enterprises. It may also include the costs of transfer of proprietary rights in enterprises provided that such transfers take place between independent investors.

[F32 Financial instruments may also provide support in the form of working capital to [F33 businesses], if necessary as a temporary measure, to provide an effective response to a public health crisis.]

5. Investments that are to be supported through financial instruments shall not be physically completed or fully implemented at the date of the investment decision.

6. Where financial instruments provide support to final recipients in respect of infrastructure investments with the objective of supporting urban development or urban regeneration or similar infrastructure investments with the objectives of diversifying non-agricultural activities in rural areas, such support may include the amount necessary for the reorganisation of a debt portfolio regarding infrastructure forming part of the new investment, up to a maximum of 20 % of the total amount of programme support from the financial instrument to the investment.

7. Financial instruments may be combined with grants, interest rate subsidies and guarantee fee subsidies. Where [F34 support for rural development] is provided by means of financial instruments and combined in a single operation, with other forms of support directly related to financial instruments targeting the same final recipients, including technical support, interest rate subsidies and guarantee fee subsidies, the provisions applicable to financial instruments shall apply to all forms of support within that operation. In such cases, F35 ... separate records shall be maintained for each form of support.

F36 8. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9. The combination of support provided through grants and financial instruments as referred to in [F37 paragraph 7] may F38 ... cover the same expenditure item provided that the sum of all forms of support combined does not exceed the total amount of the expenditure item concerned. Grants shall not be used to reimburse support received from financial instruments. Financial instruments shall not be used to pre-finance grants.

10. Contributions in kind shall not constitute eligible expenditure in respect of financial instruments, except for contributions of land or real estate in respect of investments with the objective of supporting rural development, urban development or urban regeneration, where the land or real estate forms part of the investment. Such contributions of land or real estate shall be eligible provided that the conditions laid down in Article 69(1) are met.

11. VAT shall not constitute eligible expenditure of an operation, except in the case of VAT which is non-recoverable under national VAT legislation. The treatment of VAT at the level of investments made by final recipients shall not be taken into account for the purposes of determining the eligibility of expenditure under the financial instrument. However, where financial instruments are combined with grants under [F39 paragraph 7] of this Article, the provisions of Article 69(3) shall apply to the grant.

F40 12. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F41 13. The appropriate authority may make regulations in relation to support for rural development laying down additional specific rules on the purchase of land and on combining technical support with financial instruments.]

Extent Information

E2 This version of this provision applies to Wales only; a separate version has been created for England, Scotland and Northern Ireland

Textual Amendments

F17 Words in Art. 37(1) substituted (31.12.2020) by The European Structural and Investment Funds Common Provisions (Amendment) (EU Exit) Regulations 2019 (S.I. 2019/785), regs. 1, 8(1)(b) (as amended by S.I. 2020/1542, regs. 1(2), 13(6)(a)(i)); 2020 c. 1, Sch. 5 para. 1(1)

F18 Words in Art. 37(1) omitted (W.) in so far as it relates to domestic support for rural development (26.3.2021) by virtue of The Agricultural Support (Miscellaneous Amendments) (Wales) (EU Exit) Regulations 2021 (S.I. 2021/400), regs. 1(2), 6(12)(b)(i)

F19 Words in Art. 37(1) omitted (W.) in so far as it relates to domestic support for rural development (26.3.2021) by virtue of The Agricultural Support (Miscellaneous Amendments) (Wales) (EU Exit) Regulations 2021 (S.I. 2021/400), regs. 1(2), 6(12)(b)(ii)

F20 Words in Art. 37(1) omitted (31.12.2020) by virtue of The State Aid (Revocations and Amendments) (EU Exit) Regulations 2020 (S.I. 2020/1470), reg. 1(2), Sch. 1 para. 7(2)(a) (with Sch. 3)

F21 Words in Art. 37 omitted (W.) in so far as it relates to domestic support for rural development (26.3.2021) by virtue of The Agricultural Support (Miscellaneous Amendments) (Wales) (EU Exit) Regulations 2021 (S.I. 2021/400), regs. 1(2), 6(12)(a)

F22 Words in Art. 37(2)(a) omitted (W.) in so far as it relates to domestic support for rural development (26.3.2021) by virtue of The Agricultural Support (Miscellaneous Amendments) (Wales) (EU Exit) Regulations 2021 (S.I. 2021/400), regs. 1(2), 6(12)(c)

F23 Words in Art. 37(2)(b) substituted (31.12.2020) by The European Structural and Investment Funds Common Provisions (Amendment) (EU Exit) Regulations 2019 (S.I. 2019/785), regs. 1, 8(1)(c) (as amended by S.I. 2020/1542, regs. 1(2), 13(6)(a)(ii)); 2020 c. 1, Sch. 5 para. 1(1)

F24 Words in Art. 37(2)(b) omitted (31.12.2020) by virtue of The State Aid (Revocations and Amendments) (EU Exit) Regulations 2020 (S.I. 2020/1470), reg. 1(2), Sch. 1 para. 7(2)(b) (with Sch. 3)

F25 Substituted by Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the Council of 18 July 2018 on the financial rules applicable to the general budget of the Union, amending Regulations (EU) No 1296/2013, (EU) No 1301/2013, (EU) No 1303/2013, (EU) No 1304/2013, (EU) No 1309/2013, (EU) No 1316/2013, (EU) No 223/2014, (EU) No 283/2014, and Decision No 541/2014/EU and repealing Regulation (EU, Euratom) No 966/2012.

F26 Words in Art. 37(2)(d) substituted (31.12.2020) by The European Structural and Investment Funds Common Provisions (Amendment) (EU Exit) Regulations 2019 (S.I. 2019/785), regs. 1, 8(1)(d); 2020 c. 1, Sch. 5 para. 1(1)

F27 Words in Art. 37(3) omitted (W.) in so far as it relates to domestic support for rural development (26.3.2021) by virtue of The Agricultural Support (Miscellaneous Amendments) (Wales) (EU Exit) Regulations 2021 (S.I. 2021/400), regs. 1(2), 6(12)(d)

F28 Words in Art. 37(4) omitted (W.) in so far as it relates to domestic support for rural development (26.3.2021) by virtue of The Agricultural Support (Miscellaneous Amendments) (Wales) (EU Exit) Regulations 2021 (S.I. 2021/400), regs. 1(2), 6(12)(e)(i)(aa)

F29 Words in Art. 37(4) omitted (31.12.2020) by virtue of The State Aid (Revocations and Amendments) (EU Exit) Regulations 2020 (S.I. 2020/1470), reg. 1(2), Sch. 1 para. 7(2)(c)(i) (with Sch. 3)

F30 Words in Art. 37(4) omitted (W.) in so far as it relates to domestic support for rural development (26.3.2021) by virtue of The Agricultural Support (Miscellaneous Amendments) (Wales) (EU Exit) Regulations 2021 (S.I. 2021/400), regs. 1(2), 6(12)(e)(i)(bb)

F31 Words in Art. 37(4) omitted (31.12.2020) by virtue of The State Aid (Revocations and Amendments) (EU Exit) Regulations 2020 (S.I. 2020/1470), reg. 1(2), Sch. 1 para. 7(2)(c)(ii) (with Sch. 3)

F32 Inserted by Regulation (EU) 2020/460 of the European Parliament and of the Council of 30 March 2020 amending Regulations (EU) No 1301/2013, (EU) No 1303/2013 and (EU) No 508/2014 as regards specific measures to mobilise investments in the healthcare systems of Member States and in other sectors of their economies in response to the COVID-19 outbreak (Coronavirus Response Investment Initiative).

F33 Word in Art. 37(4) substituted (W.) in so far as it relates to domestic support for rural development (26.3.2021) by The Agricultural Support (Miscellaneous Amendments) (Wales) (EU Exit) Regulations 2021 (S.I. 2021/400), regs. 1(2), 6(12)(e)(ii)

F34 Words in Art. 37(7) substituted (31.12.2020) by The European Structural and Investment Funds Common Provisions (Amendment) (EU Exit) Regulations 2019 (S.I. 2019/785), regs. 1, 8(1)(e) (as amended by S.I. 2020/1542, regs. 1(2), 13(6)(a)(iii)); 2020 c. 1, Sch. 5 para. 1(1)

F35 Words in Art. 37(7) omitted (31.12.2020) by virtue of The State Aid (Revocations and Amendments) (EU Exit) Regulations 2020 (S.I. 2020/1470), reg. 1(2), Sch. 1 para. 7(2)(d) (with Sch. 3)

F36 Art. 37(8) omitted (31.12.2020) by virtue of The European Structural and Investment Funds Common Provisions (Amendment) (EU Exit) Regulations 2019 (S.I. 2019/785), regs. 1, 8(1)(f); 2020 c. 1, Sch. 5 para. 1(1)

F37 Words in Art. 37(9) substituted (W.) in so far as it relates to domestic support for rural development (26.3.2021) by The Agricultural Support (Miscellaneous Amendments) (Wales) (EU Exit) Regulations 2021 (S.I. 2021/400), regs. 1(2), 6(12)(f)

F38 Words in Art. 37(9) omitted (31.12.2020) by virtue of The State Aid (Revocations and Amendments) (EU Exit) Regulations 2020 (S.I. 2020/1470), reg. 1(2), Sch. 1 para. 7(2)(e) (with Sch. 3)

F39 Words in Art. 37(11) substituted (W.) in so far as it relates to domestic support for rural development (26.3.2021) by The Agricultural Support (Miscellaneous Amendments) (Wales) (EU Exit) Regulations 2021 (S.I. 2021/400), regs. 1(2), 6(12)(g)

F40 Art. 37(12) omitted (31.12.2020) by virtue of The State Aid (Revocations and Amendments) (EU Exit) Regulations 2020 (S.I. 2020/1470), reg. 1(2), Sch. 1 para. 7(2)(f) (with Sch. 3)

F41 Art. 37(13) substituted (31.12.2020) by The Agriculture (Legislative Functions) (EU Exit) Regulations 2019 (S.I. 2019/748), regs. 1, 77; 2020 c. 1, Sch. 5 para. 1(1)