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Relaunch of Hermes cover for the export of nuclear technology equipment?
Practical Law UK Legal Update 3-501-0549 (Approx. 3 pages)
Relaunch of Hermes cover for the export of nuclear technology equipment?
by Stefan Schramm, Simmons & Simmons
| Published on 15 Dec 2009 • Germany |
This article is part of the PLC Global Finance November e-mail update for Germany.
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In the newly constituted German Federal Parliament (Bundestag) several verbal enquiries (mündliche Anfragen) have been made regarding the current and future activities of the German export credit agency Euler Hermes Kreditversicherungs-AG (Hermes) in relation to export financings of nuclear technology equipment.
The newly constituted German Federal Parliament (Bundestag), which was elected on 27 September 2009, has not shown much activity in the discussion and adoption of legislative acts so far.
However, from an export financing perspective numerous verbal enquiries (mündliche Anfragen) in relation to the German export credit agency Euler Hermes Kreditversicherungs-AG (Hermes) cover for export financings of nuclear technology equipment demand some attention. The enquiries have been made in particular in regards to:
- Whether there are any pending applications for the provision of guarantees (each a Hermes Guarantee) relating to the export financing of nuclear technology equipment by Hermes and to what extent the German government would expect related applications.
- The details of the German government's examination procedure in relation to the default risks of related Hermes Guarantees and whether the German government would consider worthwhile a more transparent examination and approval process in this respect.
- Whether the German government would support future applications for respective Hermes Guarantees and how it intends to exclude related proliferation risks.
These verbal enquiries have not yet been answered by the German government but afford the opportunity to shed some light on the recent history of Hermes Guarantees for the export financing of nuclear technology equipment and the current examination and approval process for Hermes Guarantees in the so called Interministerial Committee (Interministerieller Ausschuss) (IMC).
During the last two election periods of the German Federal Parliament, Hermes Guarantees have been granted in particular in relation to:
- The upgrade of the nuclear power plant Krsko in Krsko, Slowenia (1999).
- The construction of the nuclear power plant Tianwan in Lianyungang, China (2000) (the first Hermes Guarantee for the construction of a nuclear power plant in 20 years).
- The upgrade of the nuclear power plant Atucha-1 in Zárate, Argentinia (2000).
After that, various related Hermes Guarantees have been applied for but were not implemented for political and/or legal reasons.
In terms of process, the IMC decides on whether or not a Hermes Guarantee is granted. The applicant must petition the IMC by a cover application, ideally before the signing of the related export and financing agreements, but in any case before the commencement of the risk to be covered by the Hermes Guarantee.
The IMC consists of:
- Participants from the Federal Ministries of:
- Economics and Technology (Bundesministerium für Wirtschaft und Technologie);
- Finance (Finanzen); and
- Economic Co-operation and Development (wirtschaftliche Zusammenarbeit und Entwicklung).
- Participants from Ihe Federal Foreign Office (Auswärtiges Amt).
- The mandatary committee members (Mandatare) - Hermes and PricewaterhouseCoopers.
- Certain experts from the industry and banking sectors and institutes which play an important role for the exporting industry.
The IMC is chaired by the Federal Ministry of Economics and Technology and holds meetings every eight to nine weeks.
In preparation for the IMC meetings, the mandatary consortium members prepare the filed cover applications for a guarantee decision. The principal criteria for granting a Hermes Guarantee are eligibility for cover pursuant to the relevant Hermes Guarantee provisions and whether the transaction can be justified on the grounds of the risk involved.
The decision for the granting of a Hermes Guarantee is made by the Federal Ministry of Economics and Technology on the merits of the respective cover application in the IMC with the approval (Einwilligung) of the Federal Ministry of Finance and after agreement (Einvernehmen) has been reached in consultation with the Federal Foreign Office and the Federal Ministry for Economic Cooperation and Development.
It remains to be seen to what decisions the new German government will come and what the political climate will be in respect of the granting of Hermes Guarantees relating to export financings of nuclear technology equipment.