The European Investment Bank (EIB) has revised its existing policy towards offshore financial centers (OFCs), ensuring that it is fully in line with the principles endorsed by the April 2009 London G20 summit. The EIB’s Interim Revised OFC Policy was approved by the Board of Directors on 14th July 2009 following extensive consultations with EU Member States, key expert Lead Organisations, International Financial Institutions (IFIs) and other concerned stakeholders, including civil society organisations.
Strict internal rules regarding the use of OFCs have been in place for several years at the EIB, which from 2005 was among the first IFIs to have a policy on such jurisdictions applicable to all EIB’s lending, borrowing and treasury activities. With the adoption of the Interim Revised OFC Policy, and as the European Union’s long-term financing institution, the EIB confirms its leading role in addressing the problems caused by non-cooperative jurisdictions, including tax havens, as well as its commitment to ensure that its loans are used for the purposes intended – that is, the promotion of EU priority objectives.
While continuing not to tolerate any activity carried out for illegal purposes – such as money laundering, terrorism financing, tax fraud and tax evasion – and discouraging prohibited activities and harmful tax practices, the Interim Revised OFC Policy adds up a number of other features:
– It adopts the country lists and reports produced by the key expert Lead Organisations, such as the OECD, the IMF, the Financial Stability Board and the Financial Action Task Force (FATF).
– It confirms the EIB’s existing commitment to refuse to operate wherever there is an OFC link to a prohibited (“blacklisted”) jurisdiction, unless a project is physically located in such a jurisdiction and does not show indications that the OFC structure is used for illegal activities or harmful tax practices. This exception is necessary to avoid penalising the general population of countries for which the EIB has a mandate from the European Council to support development.
– The EIB will insist on active measures in cases where monitored (“grey-listed”) jurisdictions are involved. For all OFC operations approved by the Board of Directors on or after 31st March 2010, the EIB will impose on any counterparty incorporated in a grey-listed jurisdiction an obligation to transfer its place of incorporation to a jurisdiction that is not an OFC, prior to signing the relevant contracts.
– From the same date, all the EIB’s new contracts will include a relocation clause requiring the counterparty’s relocation to a jurisdiction that is not an OFC if its jurisdiction of incorporation subsequently becomes classified as an OFC or equivalent by a Lead Organisation. Such relocation will have to be completed within 12 months.
Recognising that developments on these issues will continue at the political level, the EIB will keep this Interim Revised OFC Policy under review. It will propose updates to the Board of Directors as appropriate, following any changes in the EU’s OFC policies and legal framework or Lead Organisations’ positions, and in line with developments in other IFIs’ practices and rules.