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DRAFT FINANCIAL RULES

Delegates considered the draft financial rules of COP, its subsidiary bodies and the Permanent Secretariat, as contained in A/AC.241/35. The Secretariat noted that: the method of adopting the budget and determining the scales of assessment and size of working capital are political issues; the currency in which budget estimates are constituted and denominated needs to be determined carefully due to exchange fluctuations; a structure of three funds would be best; and a way to reimburse the administrative costs incurred by the host institution has been provided.

Spain, on behalf of the EU, said details of the document should be dealt with at INCD-8 by a group of financial experts provided by delegations.

Currency of denomination: Mauritania, Canada, Lebanon, Uganda, Saudi Arabia, Brazil and Niger prefer the use of the US dollar. Canada, supported by others, said this may also be determined by the location of the Permanent Secretariat.

Method of adoption: There was protracted debate on whether consensus, or a two-thirds majority vote should be used. Bolivia noted that Rule 2(e) of the draft Rules of Procedure for the COP provides for decision-making by consensus, but is not specific in Rule 2(g) relating to the adoption of the programme and budget. The UK said there is an emerging trend in recent environmental conventions to use consensus, mainly due to the size of their budgets. This was done for the Framework Convention on Climate Change (FCCC). Antigua and Barbuda disagreed, noting that the decision on consensus the UK was referring to related to the financial rules governing the financial mechanism of the FCCC, not the financial rules of the COP and its subsidiary bodies. The issue of consensus versus majority decisions appeared in other areas of the document, including the annex language on scope, on establishing a capital reserve, regarding the scale of contributions and on the budget. Mauritania, supported by Benin, suggested adding language that the budget be "adopted by consensus wherever possible. In the absence of consensus the two-thirds majority would be needed for adoption." Germany, the US and the UK said the budget should be adopted by consensus. The US, the UK and Germany added "by consensus" to the annex on a capital reserve. Benin bracketed the change.

Transfers between budget lines: Several delegations questioned who authorize transfers, under what rules and conditions transfers should be permitted, and whether limits should be set for amounts moved between budget lines.

Types of funds: Delegates discussed whether three funds or one fund with separate accounts would be more economical. They also debated whether all developing countries' participation or only that of LDCs should be supported, and by which funds. Norway, supported by Sweden, said support for participation should be for LDC delegates only. The Philippines said other developing countries should be covered as well. Benin suggested that the text should specify which funds would provide assistance to developing countries and NGOs and that a reference to Africa should be added.

Working capital reserve: Mauritania, the Congo, Benin and Uganda supported the idea of a working capital reserve, as it has a precedent in the FCCC. Canada said a capital reserve would have to be negotiated, but an alternative would be for the host organization to have bridging funds.

Scale of contributions: Several countries, including the Congo, Bolivia, Colombia, Bangladesh, and Antigua and Barbuda, said Parties should make contributions based on the UN scale of assessment, as was the case with the FCCC. Switzerland, the US and Japan added the word "voluntary" before annex references to contributions and "indicative" before references to the scale. Other delegations bracketed the changes. Some delegations said that language on "other contributions" covered voluntary contributions, so the main language should not be phrased as voluntary. The US and the UK said the COP should determine the scale by consensus. Several delegations bracketed the change. Colombia proposed a ceiling on contributions of 30% of the total and limits on developing country contributions. Japan bracketed the maximum contribution.

The Working Group adopted a draft decision on financial rules (A/AC.241/WG.I(VII)/L.3), inviting a revised draft of the rules from the Interim Secretariat.

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