INTERNAL AGREEMENT on the Financial Protocol

THE REPRESENTATIVES OF THE GOVERNMENTS OF THE MEMBER STATES OF THE EUROPEAN ECONOMIC COMMUNITY, MEETING IN THE COUNCIL,

HAVING REGARD to the Financial Protocol to the Agreement establishing an Association between the European Economic Community and Turkey,

CONSIDERING that the internal conditions for the application of that Financial Protocol should be defined,

HAVE AGREED AS FOLLOWS :

CHAPTER I

Loans on special terms

Article 1

The loans provided for in Article 3 of the Financial Protocol shall be granted by the European Investment Bank, acting under an authority given to it by the Member States.

Article 2

Transactions under that authority shall be effected by the Bank, irrespective of the source of the funds employed, for the account of and at the risk of the Member States. The risk on each loan shall be shared between the Member States in proportion to their respective shares laid down in Article 4.

Article 3

Loans referred to in this Agreement shall be financed as follows :

(a) from funds directly or indirectly made available to the Bank by the Member States, in particular during an initial period of two years ;

or

(b) from funds raised by the Bank by :

1. the mobilization of loans, in whole or in part,

2. direct borrowing from public or semi-governmental investment institutions.

Article 4

Provision of the amount of 195 million units of account laid down in Article 3 of the Financial Protocol shall be shared between the Member States in million units of account as follows :

- Belgium // 14.3

- Federal Republic of Germany // 65.2

- France // 65.2

- Italy // 35.7

- Luxenbourg // 0.3

- Netherlands // 14.3

Each Member States undertakes to make available to the Bank, in accordance with conditions set out in Article 5 and up to the amount of its share, the funds necessary for the granting of loans.

Article 5

To the extent that a Member State has made available to the Bank its share expressed in units of account of the funds needed for the financing of loans until their repayment, that Member State may not be called upon to make further contributions or to assume other charges or risks.

To the extent that the Member States has not made available to the Bank the funds needed for the financing of loans until their repayment, it undertakes to bear the cost of obtaining funds corresponding to its share expressed in units of account. This undertaking may, in particular, take the following forms :

(a) making available to the Bank the funds needed for the financing of loans until the Bank has obtained other funds by the means indicated in Article 3(b) ;

(b) making available to the Bank, as bridging finance, the funds needed to repay funds obtained by the means indicated in Article 3(b), where such repayment must precede the repayment of the loans ;

(c) providing the security needed to enable the Bank to obtain funds from third parties ;

(d) making goods differences between the cost of the funds employed by the Bank and interest yielded by loans.

The terms of transactions of the kind reffered to in Article 3(b) and the amounts involved therein must receive the prior agreement of the Member State against whose share such transactions are to be charged.

Article 6

When a loan is granted the Bank shall inform the Member State ofthe probable schedule of payments to the recipient of the loan.

These forcasts shall be summarized on 30 June and 31 December of each year.

Article 7

The amount made available by a Member State or raised on its account shall be charged against the share of that Member State on the basis of the parity in terms of the unit of account ruling on the day on which the funds are drawn for payment to the recipient of the loan.

Transfers of funds between the Bank and member States shall be effected, at the choice of the latter, by ments either of drafts on the Treasures of Member States or of accounts opened by each Member State with its Treasury or with bodies designated by it.

The Bank shall draw funds as and when they are actually to be used.

Article 8

The amounts of the credit lines for each loan granted by the Bank shall be expressed in units of account and charged, on the date of signature of each loan contract, against the total amount of financial aid laid down in Article 3 of the Financial Protocol.

Where a credit line is cancelled before all or part of the payments thereunder have been effected, the portion not paid out shall be considered as not having been granted.

Payments to recipients of loans shall be in the currencies made available to the Bank pursuant to Article 3 and shall be charged against the credit lines on the basis of the parity in terms of the unit of account on the day of payment of the currency in which payments is effected.

Loans shall be repayable in the currencies in which they were paid out, up to the amounts paid out in each currencies ; interest shall be payable in the currency in which the principal of the loan is repayable.

Repayments and interest received by the Bank in respect of each loan shall be distributed among the Member States in proportion to the amount of the principal which was charged against each share. The procedure for distribution of these receipts shall be agreed between the Bank and each Member State.

Article 9

In so far as they are not laid down in the Financial Protocol, the general principles governing the choice of projects and the terms of loans shall be laid down in the authority given to the European Investment Bank.

The Board of Governors of the Bank shall determine the policy to be followed by the Bank, having regard in particular to the aims of the Agreement of Association.

Article 10

Loans shall be granted by the Bank in accordance with the procedure laid down by its Statute for its normal operations, subject to the following provisions.

Requests for loans which are recommended by the Turkish Governement shall be forwarded by the Bank of the Member States and to the Commission, with any appropriate comments.

It shall be assumed that there is no objection to a loan request if the Bank does not receive, within four weeks from the dispach of the documents a request from a Member State for consultation between Member States.

Otherwise, a Committee consisting of one representative of each Member State, and in which a representative of the Commission, shall determine the eligibility if the request.

The Committee shall invite experts from the Bank to attend these meetings.

The Committee shall decide by a qualified majority of 67 votes, the votes being weighted as follows :

- Belgium // 8

- Federal Republic of Germany // 33

- France // 33

- Italy // 17

- Luxembourg // 1

- Netherlands // 8

CHAPTER II

Ordinary loans

Article 11

The Member States undertake to provide the Bank, in proportion to their respective shares in its subscribed capital, with guarantees where by they will be liable as principal debtors in respect of all financial obligations incurred by recipients of loans under the terms of loans granted by the Bank from its own resources pursuant to Article 9 of the Financial Protocol within the limit of a capital amount not exceeding 25 million units of account.

The obligations arising from the provisions of the preceding paragraph shall take the form of contracts of guarantee between the individual Member States and the Bank.

CHAPTER III

Final provisions

Article 12

This Agreement shall be approved by each Member State in accordance with its own constitutional requirements. The Government of each Member State shall notify the Secretariat of the Council of the European Communities of the completion of the procedures required for the entry into force of this Agreement. This Agreement shall enter into force on the day on which the last of those notifications is effected.

Article 13

This Agreement, drawn up in a single original in the Dutch, French, German and Italian languages, all four texts being equally authentic, shall be deposited in the archives of the Secretariat of the Council of the European Communities which shal transmit a certified copy to the Governements of each of the Signatory States.

In witness whereof, the undersigned Plenipotentiaries have signed this Agreement.

Done at Brussels on the twenty-third day of November in the year one thousand nine hundred and seventy.

For His Majesty the King of the Belgians :

Pierre HARMEL

For the President of the Federal Republic of Germany :

Walter SCHEEL

For the President of the French Republic :

Maurice SCHUMANN

For the President of the Italian Republic :

Mario PEDINI

For His Royal Highness the Grand Duke of Luxembourg :

Gaston THORN

For Her Majesty the Queen of the Netherlands :

J.M.A.H. LUNS