Extensive international regulations aim to prevent states from providing illegal export financing.
Applicable international rules and agreements
Norway is a party to several agreements intended to contribute to fair international export competition. The aim is to ensure that the exporters that win competitions for contracts are those that can most efficiently deliver the most suitable goods and services, and not those that receive the most subsidies or help from their own state – for example in the form of cheap financing.
GIEK is obliged to comply with the international regulations that affect the public sector’s interaction with business sectors exposed to international competition.
The most important international agreements are:
- The World Trade Organisation (WTO) subsidy rules
- The EEA Agreement’s government support rules
- OECD-affiliated export financing agreements (guarantee terms and conditions, sustainability, anti-corruption, responsible lending, etc)
Exchange of information, cooperation and rule development
GIEK has sister organisations worldwide – Export Credit Agencies, or ECAs. Through our international network, our participation in various forums, and cooperation on individual transactions, we gain insight into trends and into the way other ECAs implement rules, interpret principles and develop product ranges.
As an adviser to the ministry, GIEK assists in the work of developing existing and new international export financing rules.
We work with:
- OECD export credit groups
- International Working Group (IWG) – potential new export financing agreement
- Berne Union – international industry organisation
- Nordic cooperation between ECAs
- Paris Club – a group of creditors
- Guarantee cooperation
World Trade Organisation (WTO) subsidy rules
Norway has been a member of the WTO since its formation in 1995. The WTO has a separate agreement on goods subsidies called the Agreement on Subsidies and Countervailing Measures (ASCM). According to the ASCM, states and public bodies may not provide export-dependent financial contributions that confer an advantage on the recipient. Cheap export credits and export credit guarantees are explicitly mentioned in the list of prohibited subsidies, cf. annex 1, letters k and j. The ASCM also stipulates that export credits are permitted as long as they comply with the conditions of the OECD-affiliated agreement on publicly supported export credits (see below). If anyone believes a prohibited subsidy has been given, the issue may be addressed in the WTO’s dispute-resolution system.
EEA Agreement’s government support rules
The EEA Agreement's government support rules are stricter and more detailed than the WTO rules. The starting point is that all competition-distorting government support to industry within the EU/EEA is prohibited, but there are some exceptions. When the public sector provides guarantees on market-based terms, the guarantees are not counted as government support. There are clear guidelines defining market-based terms in the context of state guarantees. These do not apply to export credit guarantees (which are regulated by the OECD, see below), but when GIEK issues a building loan guarantee, for example, it does so in accordance with the guidelines. This reduces the guarantee recipient’s risk of being confronted with demands to repay illegal support. The EFTA Surveillance Authority (ESA) monitors Norway’s and the other members’ compliance with the EEA Agreement.
Through the OECD (Organisation for Economic Co-operation and Development), detailed rules, guidelines and recommendations have been issued relating to the member countries’ public export financing organisations (Export Credit Agencies, or ECAs) and activities. The OECD consists of 35 relatively rich countries and is best known for its statistics and more in loans they can manage to bear in the long term.
The agreement only applies to loans where the state is responsible for repayment, i.e. loans to public enterprises and/or loans with a special state guarantee. The shared responsibility obligates the ECAs to check IMF/World Bank assessments of a country’s debt (Debt Sustainability Analysis, or DSA), refrain from financing unproductive projects, and respect any debt ceilings. ECAs are urged to ask the country’s authorities for confirmation that the project in question is in accordance with their own lending and development plans.
“Arrangement” – regulates guarantee terms and conditions
The Arrangement on Officially Supported Export Credits states general principles for public, long-term export financing as well as specifically permitted guarantee conditions. Some important general principles are that guarantees are to be priced according to the risk of loss and that the guarantee period must correspond in length to the lifetime of the financed product. The agreement specifically regulates minimum prices (premiums), repayment profiles, periods, equity requirements, degrees of cover, financing of local content, etc. The agreement also specifies the conditions that make it possible to deviate from the standard terms. For example, some latitude is permitted to match another ECA’s financing offer. In addition, exports in certain sectors, such as renewable energy, can be favoured with better-than-standard financing terms. For more information on specific terms and conditions, please look up the agreement itself. There, the common principles and standard sets of rules are shown first, followed by separate sets of rules for ships, nuclear power plants, aircraft, renewable energy/climate measures, railways, coal-fired power plants and project financing.
“Common Approaches” – to social and environmental sustainability assessments
Through the Common Approaches (i.e. Recommendation of the Council on Common Approaches for Officially Supported Export Credits and Environmental and Social Due Diligence), last updated in 2015, ECAs in the OECD have developed common guidelines for surveying and assessing environmental and social risks in individual cases. The guidelines are based on recognised international conventions and recommendations from the UN and OECD that relate to the protection of human rights, employee rights, the environment and the climate.
“Recommendation” – on corruption risk
In 2006, the ECAs in the OECD agreed on common measures to estimate the risk of, and counteract, corruption in the cases we finance. This is called the “Recommendation”, i.e. the OECD Council Recommendation on Bribery and Officially Supported Export Credits. Since 2006, the anti-corruption field has evolved greatly in terms of both legislation and international standards and practice. GIEK’s approach is also more conservative than what the Recommendation entails, and we are now taking part in the work of updating the Recommendation.
SL Agreement – on sustainable lending to poor, debt-ridden countries
Through the SL Agreement, last revised in 2016, the ECAs in the OECD undertake a shared responsibility for helping ensure that low-income countries do not take up more in loans they can manage to bear in the long term. The agreement only applies to loans where the state is responsible for repayment, i.e. loans to public enterprises and/or loans with a special state guarantee. The shared responsibility obligates the ECAs to check IMF/World Bank assessments of a country’s debt (Debt Sustainability Analysis, or DSA), refrain from financing unproductive projects, and respect any debt ceilings. ECAs are urged to ask the country’s authorities for confirmation that the project in question is in accordance with their own lending and development plans.
MNE Guidelines – OECD guidelines for multinational enterprises
The MNE Guidelines are guidelines for responsible/ethical business operations in multinational enterprises (MNEs). They cover 46 countries (including 12 non-OECD countries). The guidelines are sector-independent and deal with everything from human and employee rights to the environment, consumer interests, corruption, technology, competition and taxation. In addition to complying with the MNE Guidelines itself, GIEK urges its customers to do so. Although compliance with the guidelines is voluntary for companies, breaches can be reported to a national, independent complaints body, called a National Contact Point (NCP). From 2000 to 2015, some 320 complaints in total were reported to the NCPs.
The OECD’s export credit groups (ECG and Participants)
The OECD’s export credit groups (ECG and Participants)
The OECD (Organisation for Economic Co-operation and Development) consists of 35 relatively rich countries and is best known for its statistics and comparisons among member countries on topics including development aid efforts and school pupil performance (PISA surveys). The OECD also prepares export credit statistics dealing with topics such as the ECAs’ business volumes, losses, products and trends, as well as financing risks in individual countries. These statistics are reviewed at meetings of the OECD’s export credit groups, which GIEK attends together with Export Credit Norway and the Ministry of Trade, Industry and Fisheries. In these groups, we also discuss the implementation and further development of applicable OECD rules and recommendations. To support this work and encourage ECAs to learn from one another, there are also separate expert groups focusing on pricing and social responsibility.
International Working Group (IWG) – potential new export financing agreement
The OECD rules do not apply to large countries like China, Brazil, Russia, India and South Africa. That can have a negative impact on competition conditions for Norwegian exporters (and exporters in other OECD countries). In 2011, an initiative was therefore taken to appoint an international working group (IWG) to negotiate a new export financing agreement that applies to more countries. The Norwegian delegation to the IWG is made up of GIEK, Export Credit Norway and the Ministry of Trade, Industry and Fisheries. Arriving at the wording of an agreement will be a long-term project, but in the meantime GIEK also benefits from the information available at group meetings and the opportunity the group provides for important networking.
The Berne Union
The Berne Union was established in 1934 to promote international acceptance of good, sound principles for the issuance of export credit and investment guarantees. Today, the Berne Union is the world’s leading organisation for international credit insurers – both private and public. In 2014, the organisation’s 80 members insured more than 10% of world trade. GIEK attends regular meetings twice a year, in addition to expert meetings on various topics. Through these meetings and its membership, GIEK has access to the organisation’s statistics and benchmarking, and can exchange experience with colleagues worldwide.
The Paris Club
Under the leadership of the Norwegian Ministry of Foreign Affairs, GIEK participates in the Paris Club. This is an informal forum where 21 creditor countries, all with major exposure to other states, discuss topics related to national debt. The forum works to find long-term, sustainable solutions for countries with debt problems, and in individual cases this may entail debt forgiveness. The Paris Club has no fixed rules but is governed by some guiding principles: solidarity between creditors, consensus among creditors, information sharing, case-by-case decision-making, conditionality (debt forgiveness by the club’s members requires the debtor to comply with an IMF programme) and equal treatment of creditors.
GIEK helps to realise good projects in poor countries by assessing the project’s positive impact on development and ensuring the project does not conflict with Norway’s aid policy.
GIEK’s normal credit-assessment procedure ensures that cases receiving guarantee offers have been assessed as being on a solid foundation with regard to ability to deliver, earnings and debt-service capacity. As regards sales to poor countries, where the state may have less administrative capacity, GIEK will be particularly cautious and ensure that the transaction is justifiable from a development viewpoint.
The OECD has prepared guidelines for use when considering new credit to countries with a limited capacity to raise new loans. The result, in brief, is that GIEK will only provide a guarantee if the project is in accordance with the recipient country’s economic and social strategy. GIEK will also ensure that the project does not conflict with the country's obligations to the IMF and World Bank. Such restrictions apply to around 60 countries and only relate to transactions with public-sector buyers or state-owned companies and transactions where there is a state counter-guarantee.
GIEK complies with the OECD’s sustainable lending principles. These rules include a requirement that export loans to certain countries must contain a gift element (a minimum grant element for external financing). Some countries that are entitled to a gift element can nonetheless raise commercial loans, but only within certain limits. Since Norway does not offer export loans with a gift element, so-called tied aid, GIEK can only offer guarantees if the IMF agreements allow limited commercial loans.
The list of countries covered by the sustainable lending rules can be found here.