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1. The financing and investment operations eligible for support through the External Action Guarantee shall be consistent and aligned with Union policies, the relevant programming documents, as well as with the partner countries’ strategies and policies. They shall in particular support the objectives, general principles and policy framework of the Instrument and, where relevant, the IPA III Regulation, with due regard to the priority areas laid down in Annex V to this Regulation.

2. The External Action Guarantee shall support financing and investment operations which comply with the conditions set out in points (a) to (e) of Article 209(2) of the Financial Regulation concerning in particular the need to achieve additionality, including by addressing market failures or sub-optimal investment situations, alignment of interest of the eligible counterparts, avoiding the distortion of competition, and, where appropriate, maximising private investment, and which:

(a) undergo, in line with Article 34 of the Financial Regulation, ex ante evaluations which shall be proportionate to the objectives and amounts of the envisaged operations to determine the possible implications and risks of these operations with regard to human rights, environmental, labour and social standards including in the form of impact assessments for major programmes that are expected to have a significant impact on these areas, in line with the purpose of the EFSD+ laid down in Article 31(2) of this Regulation and taking due account of the principle of free and prior informed consent of affected communities in land related investments;

(b) ensure complementarity within the different pillars of the External Investment Plan as well as with other initiatives;

(c) are economically and financially viable, with due regard to the possible support from, and co-financing by, private and public partners to the project, while taking into account the specific operating environment and capacities of countries identified as experiencing fragility or conflict, LDCs, small island developing states, landlocked developing countries and heavily indebted poor countries which may benefit from more concessional terms;

(d) are technically viable and are sustainable from an environmental and social point of view and maximise development impact;

(e) do not distort markets in partner countries and regions and do not compete unfairly with local actors;

(f) are implemented in accordance with the policy framework referred to in Article 7, applicable environmental, social and labour law obligations and standards and internationally agreed guidelines, principles and conventions on investments, in particular those adopted by the UN and the OECD, with full respect for international human rights law as well as in accordance with the objectives and general principles laid down in Articles 3 and 8.

3. The External Action Guarantee shall be used to cover the risks for the following instruments:

(a) loans, including local currency loans;

(b) guarantees;

(c) counter-guarantees;

(d) capital market instruments;

(e) any other form of funding or credit enhancement, insurance, and equity or quasi-equity participations.

4. The eligible counterparts for the purposes of the External Action Guarantee shall be those identified in Article 208(4) of the Financial Regulation, including those from partner countries and third countries contributing to the External Action Guarantee, subject to approval by the Commission in accordance with Article 37 of this Regulation. In addition, and by derogation from point (c) of Article 62(1) of the Financial Regulation, bodies governed by private law of a Member State, a partner country or a third country which has contributed to the External Action Guarantee in accordance with Article 37 of this Regulation, and which provide adequate assurance of their financial capacity shall be eligible for the purpose of the External Action Guarantee.

5. Eligible counterparts shall comply with the rules and conditions provided for in point (c) of Article 62(1) of the Financial Regulation. In the case of bodies governed by private law of a Member State, a partner country or a third country which have contributed to the External Action Guarantee in accordance with Article 37 of this Regulation, preference shall be given to those bodies that disclose information related to environment, social, tax and corporate governance criteria. The Commission shall ensure the effective, efficient and fair use of available resources among eligible counterparts, including small and medium-sized counterparts, while promoting cooperation between them and taking due account of their capacities, added value and experience. The Commission shall ensure fair treatment for all eligible counterparts, in accordance with Article 27(7), and shall ensure that conflicts of interest are avoided throughout the implementation period of the EFSD+. In order to ensure complementarity, the Commission may request any relevant information from eligible counterparts about their non-EFSD+ operations.

6. The condition set out in Article 219(4) of the Financial Regulation on contributions with own resources shall apply to each eligible counterpart allocated with a budgetary guarantee under the Instrument on a portfolio basis.

7. The Commission shall select the eligible counterparts in accordance with Article 154 of the Financial Regulation, taking due account of:

(a) the advice of the strategic and regional operational boards;

(b) the objectives of the investment window;

(c) the experience and risk management capacity of the eligible counterpart;

(d) the amount of own and additional resources, as well as private sector co-financing, that the eligible counterpart is ready to mobilise for the investment window taking in due account the size of the investment;

(e) the sectoral or geographic expertise of the eligible counterparts;

(f) the benefits of promoting collaboration between eligible counterparts.

8. On the basis of the multiannual indicative programmes and of the advice provided by the EFSD+ strategic board and the strategic board covering the Western Balkans, the Commission shall, after consulting the regional operational boards and informing the European Parliament and the Council, set up investment windows for regions or specific partner countries, or both, for specific sectors, or for specific projects or specific categories of final beneficiaries, or both, which are to be funded under the Instrument, to be covered by the External Action Guarantee up to a fixed amount. The Commission shall inform the European Parliament and the Council on how the investment windows comply with this Article and on their detailed funding priorities. All requests for financial support within investment windows shall be made to the Commission.

The choice of investment windows shall be duly justified by an analysis of the market failure or sub-optimal investment situations and an assessment of its alignment with the priorities of this Regulation and, where relevant, the IPA III Regulation. The Commission shall carry out that analysis in cooperation with potentially eligible counterparts and stakeholders. Eligible counterparts may provide the instruments referred to in paragraph 3 under an investment window or individual project administered by an eligible counterpart. Those instruments may be provided for the benefit of partner countries, including countries experiencing fragility or conflict, or countries facing challenges in reconstruction and post-conflict recovery, for the benefit of those partner countries’ institutions, including their public national and private local banks and finance institutions, as well as for the benefit of private sector entities, including SMEs, of those partner countries. Those instruments shall not benefit companies controlled by the military or state security sector, except for duly justified cases.

9. The Commission shall assess the operations supported by the External Action Guarantee against the eligibility criteria set out in paragraphs 1, 2 and 3, where possible drawing on the existing result measurement systems of the Union and of eligible counterparts. The Commission shall establish a checklist of the eligibility criteria as set out in Article 31, Article 35(1) and (2) and shall assess and select all proposals to be supported by the External Action Guarantee against this checklist, on the basis of the information provided by the eligible counterparts. If necessary, the Commission shall ask the eligible counterparts to clarify or to amend the information provided. The Commission shall publish on an annual basis the checklists and the results of its assessment for each investment window broken down by country and sector.

10. The Commission is empowered to adopt delegated acts in accordance with Article 44 to amend the priority areas in Annex V.