Concept and Legal Classification of the ERP Special Fund
Das ERP Special Fund (ERP-SV) is a legally independent special fund of the Federal Government in Germany, established on the basis of the Act on the Special Fund of the Federal Government ‘European Recovery Program’ (ERP Special Fund Act – ERP-SVG). Historically, it is based on the funds provided by the United States as part of the so-called Marshall Plan after the Second World War. The special fund primarily serves to promote the economy, especially medium-sized enterprises, and to finance structural policy and innovation-related measures.
Legal Basis and Origins
Statutory Basis
The ERP Special Fund is regulated by the ERP Special Fund Act (ERP-SVG) which sets out the legal framework for the administration, management, and use of the assets for public benefit purposes. In particular, the law specifies:
- Appropriation of the funds allocated to the ERP Special Fund,
- Principles of asset management,
- Responsibilities within the committee structure.
Origin and Historical Development
The assets were established through allocations from US economic aid programs (Marshall Plan) between 1948 and 1952. Initially administered by the “Administrative Office for Economic Aid” (VAW), since 1965, after the ERP-SVG came into force, it has been managed as a legally independent federal asset. The assets are classified as a ‘special fund of the Federal Government without separate legal personality’.
Asset Structure and Administration
Legal Nature of the ERP Special Fund
As an instrument of constitutional law, the ERP-SV constitutes a special fund of the Federal Government within the meaning of Art. 110 para. 1 of the Basic Law (GG). According to budgetary law, special funds are asset pools that are economically, legally, and administratively separate from the federal budget, formed for a specific purpose.
The special fund is not a legal entity in its own right, but rather a part of the Federal Government, yet it acts independently from an economic and financial perspective pursuant to its budgetary classification.
Organizational Structure and Bodies
Composition and Committees
Central to its administration is the ERP Administrative Commission, whose composition and powers are determined by the ERP-SVG and its rules of procedure. The Commission decides on the guiding principles for the use of funds and oversees the targeted use of those funds. Administration and management are carried out by the Federal Ministry for Economic Affairs and Climate Action (BMWK) as the highest supervisory authority.
Involvement of Additional Institutions
The actual deployment of funds is often carried out operationally by the Kreditanstalt für Wiederaufbau (KfW) and other appointed bodies under relevant legal provisions and administrative agreements.
Purpose and Use
Earmarking
The earmarking of funds is legally specified in the ERP-SVG and in the respective funding guidelines. Key areas include:
- Promotion of small and medium-sized enterprises (SMEs),
- structural policy measures,
- promotion of innovation,
- business start-ups and company growth,
- qualification and training.
Central to this is the permanent preservation of assets through the return and reinvestment using revolving financial instruments.
Funding Instruments and Legal Forms of Financing
The common instruments include in particular:
- loans with preferential interest rates,
- equity investments,
- guarantees and sureties,
- innovative forms of financing.
The legal framework for this is derived from budgetary law, the German Banking Act (KWG), allocation and procurement regulations. The drafting of contracts is governed by principles of private law while adhering to public-purpose requirements.
Supervision and Control
Budgetary Control
The special fund is subject to the budgetary supervision of the Federal Government. Control is exercised by:
- the German Bundestag (budgetary authority, Art. 110 GG, parliamentary control),
- the Federal Ministry of Finance (administrative supervision),
- the Federal Court of Auditors (professional and economic audit).
Budgetary income and expenditures are managed separately from the federal budget, but remain subject to the principles of the Federal Budget Code (BHO).
Reporting Obligations and Transparency
The ERP-SVG requires regular reporting to the Bundestag and the publication of audited annual financial statements. Further transparency obligations arise from budgetary control mechanisms as well as freedom of information regulations.
Relationship to European and International Law
The ERP Special Fund is an exclusively national fund; however, its funding activities may be subject to the restrictions of European state aid law (Art. 107 et seq. TFEU). Granting of aid must be reviewed in accordance with state aid law and, if necessary, notified to the European Commission.
Other Legal Issues
Legal Status and Disputes
The ERP-SV is not an independent legal entity, but it is capable of acting within the scope of its functions. The legal owner is always the Federal Republic of Germany. Disputes frequently concern the budgetary treatment, accounting, the legal status of beneficiaries, and the applicability of general federal funding principles.
Insolvency Protection and Safeguards
The ERP Special Fund enjoys insolvency protection as a result of its independence and separation from federal assets; insolvency of the Federal Government, and thus of the special fund, is excluded.
Literature and Additional Regulations
Key statutory foundations:
- ERP Special Fund Act (ERP-SVG)
- Federal Budget Code (BHO)
- Central administrative regulations
Further information is provided in periodic reports by the BMWK, the annual reports of the Federal Court of Auditors, and the funding regulations of the KfW.
Summary
Das ERP Special Fund is a significant, federally regulated and highly differentiated instrument of German economic promotion with strictly defined objectives, detailed governance structures, and comprehensive control under both budgetary and state aid laws. It originates from Marshall Plan resources and primarily aims to promote sustainable economic development and innovation in the public interest, taking into account a wide range of regulations at both federal and European levels.
Frequently Asked Questions
Who is the legal holder and custodian of the ERP Special Fund?
The ERP Special Fund is a legally dependent asset of the Federal Government, which, pursuant to § 1 (1) of the ERP Act, is owned by the Federal Government but managed separately from its budgetary funds. Administration of the special fund is carried out by the Federal Ministry for Economic Affairs and Climate Action (BMWK) as the responsible ministry, which decides on the use of funds within its legal remit. The Federal Court of Auditors reviews the proper management and use of the funds. In banking terms, Kreditanstalt für Wiederaufbau (KfW) performs certain tasks in connection with the implementation of funding programs as the appointed financial institution, but does not hold ownership or custodial functions. The special fund always remains assigned to the federal budget, but is organized separately by law.
Which statutory foundations govern the ERP Special Fund?
The essential legal provisions for the ERP Special Fund are primarily found in the Act on the Administration of the ERP Special Fund (ERP Act). Supplementary provisions are contained in the Budgetary Principles Act (HGrG), the Federal Budget Code (BHO), and specific administrative guidelines, ordinances, or individual decisions of the German Bundestag. The provisions of the ERP Act take precedence as far as they deviate from or modify general budgetary regulations. The ERP Special Fund is also subject to the auditing and reporting obligations to the Bundestag and the Federal Court of Auditors in accordance with the respective statutory foundations.
How is the use of funds from the ERP Special Fund legally regulated?
The use of funds from the ERP Special Fund is subject to strict legal requirements. In principle, the funds may only be used for purposes specified in the economic plans and individual resolutions issued for each funding period. Use is based on economic plans drawn up annually by the Federal Ministry for Economic Affairs and Climate Action and approved by the Bundestag. Investments and allocations from the special fund must be transparent, purpose-bound, and verifiable. Furthermore, budgetary and procurement regulations as well as the principles of efficiency and economy apply. Misappropriation or not-approved uses constitute unlawful budget overruns and may have consequences.
How is parliamentary control of funds from the ERP Special Fund exercised?
Parliamentary control of the ERP Special Fund is a key legal element. The Bundestag primarily exercises control through its budget committees, especially in the approval and supervision of the annual economic plans. In addition, the Federal Court of Auditors is obliged to review and report on the appropriateness and economic use of funds. The Federal Ministry for Economic Affairs and Climate Action is also legally required to report regularly to the Bundestag on the status and development of the special fund. Amendments or special audits may also be initiated by parliament.
What are the special budgetary features of the ERP Special Fund compared to the federal budget?
Within German budgetary law, the ERP Special Fund holds a special position. It is to be managed strictly separately from the rest of the federal budget, both legally and financially (§ 1 ERP Act), but is governed by the principles of the Federal Budget Code unless the ERP Act provides otherwise. In particular, revenues and expenditures of the special fund are not consolidated with the general federal budget but are instead managed in separate economic plans. Surpluses are not automatically transferred to the federal budget but remain in the special fund for reinvestment or earmarked use. Commingling is prohibited by budgetary law.
What is the role of European law requirements in connection with the ERP Special Fund?
European law requirements affect the ERP Special Fund particularly in connection with European Union state aid law. Since funded programs from the special fund often benefit companies, it must be examined whether these measures qualify as state aid within the meaning of Art. 107 TFEU. In such cases, the programs must either fall under an existing exemption regulation (e.g., General Block Exemption Regulation) or be notified and approved by the European Commission. This necessitates careful legal examination and, if necessary, adaptation of funding conditions to avoid legal conflicts with European secondary legislation.
When and how can the ERP Special Fund be legally dissolved?
The legal dissolution of the ERP Special Fund requires a legislative basis. Dissolution can only occur by means of a formal federal law, which must provide for both the repeal of the ERP Act and regulation of the future use or return of the remaining funds. The law must in particular determine who will receive the assets, how outstanding obligations are to be settled, and the manner in which ongoing funding programs are to be continued or terminated. A simple budgetary measure or ministerial order is not sufficient for dissolution, since the special fund is established by statute.
