SPECIAL ACCESSION PROGRAMME FOR AGRICULTURE AND RURAL DEVELOPMENT

IN THE REPUBLIC OF LATVIA ANNUAL FINANCING AGREEMENT 2003 BETWEEN THE COMMISSION OF THE EUROPEAN COMMUNITIES ON BEHALF OF THE EUROPEAN COMMUNITY AND THE REPUBLIC OF LATVIA

The Commission of the European Communities, hereinafter referred to as “the Commission”, acting for and on behalf of the European Community, hereinafter referred to as “the Community” of the one part, and “the Republic of Latvia” of the other part, and together jointly referred to as “the Contracting Parties”,

Whereas:

(1) A Special Accession Programme for Agriculture and Rural Development (hereinafter referred to as "SAPARD") providing for a Community financial contribution has been established by Council Regulation (EC) No 1268/1999 on Community support for pre-accession measures for agriculture and rural development in the Applicant Countries of central and eastern Europe in the pre-accession period1, as last amended by Regulation (EC) No 696/20032;

(2) The plan submitted by the Republic of Latvia was approved as an Agriculture and Rural Development Programme by a Decision taken in accordance with Article 4 (5) of Regulation (EC) No 1268/1999 on 25 October 2000. The Programme was (last) amended by a Decision taken on 18 February 2003;

(3) The Multi-annual Financing Agreement between the Commission acting on behalf of the Community and the Republic of Latvia, as last amended by the Annual Financing Agreement 2002 between the Commission acting on behalf of the Community and the Republic of Latvia (hereinafter referred to as “MAFA”), has been concluded on 4 July 2001 and provides in Article 2 that the financial commitment of the Community shall be set out in Annual Financing Agreements;

(4) It is necessary to set out the Community financial commitment for the year 2003 for the execution of the Agriculture and Rural Development Programme, and any amendments thereof, (hereinafter referred to as “the Programme”), in the Republic of Latvia, and to state the period of validity of that commitment. Moreover, to reflect the provisions of Commission Regulation (EC) No 2222/2000 of 7 June 2000 laying down financial rules for the application of Council Regulation (EC) No 1268/1999 on Community support for pre-accession measures for agriculture and rural development in the applicant countries of central and eastern Europe in the pre-accession period3, as last amended by Regulation (EC) No 188/20034 it is necessary to the increase the time limits of validity of financial commitments set out in the Annual Financing Agreements for 2000, 2001 and 2002. For the same reason it is also necessary to adjust the provisions in the Multi-annual Financing Agreement concerning the submission of applications for payment from the Commission;

(5) Account must be taken of the prospect that for a certain period after the Republic of Latvia has become a Member State the SAPARD Agency may enter into contracts with beneficiaries. Provision needs to be made so that the requirements of these contracts reflect the change in status of the Republic of Latvia;

(6) As a general rule, public procurement procedures should be carried out in a way as to guarantee transparency, non-discrimination and that there are no conflicts of interest. The relevant rules of the MAFA should therefore be amended accordingly;

(7) Certain inconsistencies relevant to MAFA have come to light that need to be addressed;

HAVE AGREED AS FOLLOWS:

Article 1

Objective

This Agreement sets out the Community financial commitment for the Republic of Latvia for the year 2003. It also modifies the Multi-annual Financing Agreement signed on 25 January 2001, as amended, as well as the Annual Financing Agreements 2000, 2001 and 2002.

Article 2

Commitment

The financial contribution of the Community for the year 2003 is limited to 23.528.615 e. This commitment is valid only for execution of the Programme, as amended, in conformity with the Multi-annual Financing Agreement between the Community and the Republic of Latvia.

Article 3

Period of commitment

The Commission shall automatically decommit any part of the commitment referred to in Article 2 which has not been settled by a payment on account, or for which it has not received an acceptable payment application, by 31 December 2006 at the latest.

No contract involving Community funds relating to this Agreement shall be entered into by the SAPARD Agency with any beneficiary later than the date the Republic of Latvia enters into contracts involving a form of assistance for Rural Development for the Republic of Latvia as a member of the European Union.

Article 4

Amendment of the Annual Financing Agreement 2000

Article 3 of the Annual Financing Agreement 2000, concluded between the Commission and the Republic of Latvia, is replaced by the following:

“Article 3

Period of commitment

The Commission shall automatically decommit any part of the commitment referred to in Article 2 which has not been settled by a payment on account, or for which it has not received an acceptable payment application, by 31 December 2004 at the latest.

No contract involving Community funds relating to this Agreement shall be entered into by the SAPARD Agency with any beneficiary later than the date the Republic of Latvia enters into contracts involving a form of assistance for Rural Development for the Republic of Latvia as a member of the European Union.”

Article 5

Amendment of the Annual Financing Agreement 2001

Article 3 of the Annual Financing Agreement 2001, concluded between the Commission and the Republic of Latvia is replaced by the following:

“Article 3

Period of commitment

The Commission shall automatically decommit any part of the commitment referred to in Article 2 which has not been settled by a payment on account, or for which it has not received an acceptable payment application, by 31 December 2005 at the latest.

No contract involving Community funds relating to this Agreement shall be entered into by the SAPARD Agency with any beneficiary later than the date the Republic of Latvia enters into contracts involving a form of assistance for Rural Development for the Republic of Latvia as a member of the European Union.”

Article 6

Amendment of the Annual Financing Agreement 2002

Article 3 of the Annual Financing Agreement 2002, concluded between the Commission and the Republic of Latvia, is replaced by the following:

“Article 3

Period of commitment

The Commission shall automatically decommit any part of the commitment referred to in Article 2 which has not been settled by a payment on account, or for which it has not received an acceptable payment application, by 31 December 2006 at the latest.

No contract involving Community funds relating to this Agreement shall be entered into by the SAPARD Agency with any beneficiary later than the date the Republic of Latvia enters into contracts involving a form of assistance for Rural Development for the Republic of Latvia as a member of the European Union.”

Article 7

Amendment of the Multi-annual Financing Agreement

The Multi-annual Financing Agreement is amended as follows:

1. In Article 9 of Section A, paragraph 1 is replaced by the following:

“1. The SAPARD Agency shall, on a quarterly basis, present payment applications in accordance with the Form D-1 as set out in Section D, signed and certified, and transmitted by the National Authorising Officer, on behalf of the Republic of Latvia, to the Commission within one month of the end of each quarter. However, supplementary applications may be submitted only if justified on the basis of the risk of the net balance in the SAPARD euro account being exhausted before the next quarterly application has been processed or if there is a risk of decommitment being invoked pursuant to the provisions of the relevant Annual Financing Agreement.”

2. In Article 11 of Section A, the reference in paragraph 7 to “by 30 September” is replaced by “before 30 September”.

3. In Article 13 of Section A, point 1 (b) is replaced by the following:

“(b) prevent and deal with suspected and actual cases of fraud and irregularities.”

4. In Article 14 of Section A, point 2.6 is replaced by the following:

“2.6. The rules for the procurement by public bodies of services, works and supplies in the Republic of Latvia shall be transparent, non-discriminatory and give rise to no conflicts of interest. They shall be consistent with the rules set out in the Commission manual entitled “Service, Supply, and Work Contracts concluded within the Framework of Community Co-operation for the Third Countries5". However, the requirements for ex-ante approval by the Commission included therein shall not apply. The services, works, and supplies procured shall originate in the Community or in the countries referred to in Item 8 of Section F. However public procurement procedures initiated from accession to the European Union shall be run in accordance with Community legislation.”

5. In Article 4 (2) of Section B, point (j) is replaced by the following:

“(j) general costs for a given project, such as architects', engineers' consultants' and legal fees, costs of feasibility studies for preparing and/or implementing the project, and costs for acquisition of patents and licences, directly related to that project, which exceed 12% of total eligible expenditure excluding these general costs ;”

6. In the appendix to Section E the last paragraph of each of the examples A to E inclusive is replaced by the following:

“Our audit was conducted between DD/MM/YYYY and DD/MM/YYYY. A report on our findings is delivered at the same date as the date of this certificate. This certificate also covers the SAPARD euro account.”

7. The text of item 5 of Section F, is replaced by the following:

“Irregularity shall mean any infringement of this Agreement and ensuing contracts resulting from an act or omission by an economic operator6, which has, or would have, the effect of prejudicing the general budget of the European Communities by an unjustified item of expenditure.

Fraud shall mean any intentional act or omission relating to:

(i) the use or presentation of false, incorrect or incomplete statements or documents, which has, or could have, as its effect the misappropriation or wrongful retention of funds from the general budget of the European Communities;

(ii) non-disclosure of information in violation of a specific obligation, with the same effect as that referred to under (i);

(iii) the misapplication of such funds for purposes other than those for which they are originally granted.”

8. The text of item 6 of Section F, is replaced by the following:

“Administrative measures and penalties may be applied to economic operators where their activity may have led them via an irregular application of this Agreement or ensuing contracts to attempt to or to harm the Community contribution and also to the natural or legal persons who have been involved in the commission of the irregularity or who are expected to answer for an irregularity to avoid it being committed.”

Article 8

Entry into Force

This Agreement shall enter into force on the date when both Contracting Parties have notified each other of the completion of all necessary formalities for its conclusion.

Article 9

Signature

This Agreement shall be drawn up in duplicate in English and in Latvian, only the English text being authentic.

Done at Brussels and at Riga, respectively, this twenty-seventh day of June in the year two thousand and three.

1 OJ L 161, 26.06.1999, p. 87–93.

2 OJ L 99, 27.04.2003, p. 24.

3 OJ L 253, 7.10.2000, p. 5.

4 OJ L 27, 1.02.2003, p. 14.

5 SEC(1999) 1801/2.

6 For the purposes of this point and point 8 “economic operator” is defined as all natural legal persons or other bodies recognised by national law (private individuals, enterprises, public establishments or State regional and local authorities).

For the Commission of the European Communities:

Franz FISCHLER

Member of the Commission

For the Republic of Latvia:

Inguna SUDRABA

Deputy State Secretary

Ministry of Finance

National Authorising Officer