Guidance

Guidance to applicants: Processes and factors in UK Export Finance consideration of applications

Updated 26 November 2021

1) This is a statement of how UK Export Finance processes applications and the principal factors that it will, or may, take into account in doing so^{[footnote 1]}.

Processes

2) Potential applicants can approach UK Export Finance for a preliminary indication of the likelihood that the sort of support they require might be considered; but UK Export Finance’s formal consideration of cases put to it for support is based upon its application forms. The standard format of such an application form can be found on UKEF’s website and an applicant will need to submit an application form.

3) The information on the application form provides triggers for UK Export Finance to consider what types of assessment are appropriate; and is the starting point for its decisions on which assessments are relevant. The possible types of assessment include whether:

• the support requested falls within UK Export Finance’s statutory powers; and
• giving that support would, taking into account the premium UK Export Finance would charge, constitute an acceptable financial risk to the taxpayer; and
• the environmental, social and human rights (“ESHR”) risks and impacts of the case are acceptable; and
• the debt sustainability of the lending is satisfactory; and
• whether support may be given in the light of UK Export Finance’s policies regarding bribery and corruption.

Factors

Financial

4) The assessment of financial risk will vary greatly, depending upon the type of transaction for which support is sought and the degree of need to make detailed investigations into the viability of the project in respect of which an export is being supplied. Financial assessment and ESHR risk management are largely independent: whilst there may be circumstances where ESHR issues, for example, have a direct impact on financial risk, the ESHR impact considerations usually considered in a parallel process to the assessment to financial risk in order for support to be given.

Ethical

5) In accordance with its Mission and Principles Statement, UK Export Finance abides by factors included in documents published by the OECD^{[footnote 2]} in respect of:

• ESHR risk management (the revised Council Recommendation on Common Approaches for Officially Supported Export Credits and Environmental and Social Due Diligence, (“the Common Approaches”));
• Sustainable Lending (Principles and Guidelines to Promote Sustainable Lending Practices and the Provision of Official Export Credits to Low Income Countries, (“the Lending Principles”)); and
• Bribery and Corruption (the OECD Council Recommendation on Bribery and Officially Supported Export Credits, (“the Bribery Recommendation”));

together “the International Documents”.

6) In order to implement its Mission and Principles Statement in this regard, UK Export Finance’s policy is to follow the provisions of those International Documents in the way set out in this guidance of Processes and Factors.

ESHR risk management

7) UK Export Finance will consider the ESHR risks and impacts of cases it is being asked to consider as set out in UK Export Finance’s Policy and Practice on Environmental, Social and Human Rights due diligence and monitoring.

8) A flow-chart that sets out the main processes by which UK Export Finance typically considers the ESHR risks and impacts of cases, and a note on Human Rights and Social Risks and Impacts can be found within our Environmental, Social and Human Rights policy pages. Note these are updated versions of those found in previous revisions of this document.

9) UK Export Finance does not review defence exports that are governed by the UK export licensing regime.

10) We take account of climate change within our decision-making processes for all our products in a manner proportionate to the risks and impacts associated with the projects and our support.

Debt Sustainability

11) Where the Lending Principles suggest that it should, UK Export Finance will make an assessment of whether an export for which its support has been sought is appropriate in the context of it representing a sustainable debt for the country concerned. In doing so, UK Export Finance will liaise as appropriate with other Government Departments.

12) An assessment will be undertaken where goods and services are supplied to an overseas public sector buyer for civil purposes. Where the buyer is in the private sector, the main consideration is the risk of debt migration to the public sector. In the case of defence exports, an export licence is generally required and the processes referenced at paragraph 9 above apply.

13) Assessments of the sustainability of a debt are likely to include, but may not always be restricted to:

• whether the project is a priority of social and economic development and has been appropriately approved by the buyer;
• whether the amount and tenor of the proposed new debt is consistent with the country’s debt sustainability analysis under the World Bank/IMF Debt Sustainability Framework;
• whether the amount and tenor of the proposed new debt complies with any limit set in the country’s IMF and/or IDA program;
• whether the export contract price represents value for money where there has not been a competitive tender.

Anti-Bribery and Corruption Procedures

14) UK Export Finance abides by the Bribery Recommendation but the following should be noted:

• UK Export Finance’s particular procedures and the rationale for them are set out in the Final Response (“the Final Response”) to the Public Consultation on UK Export Finance’s anti-bribery and corruption procedures which concluded in 2006. This can be found at www.gov.uk/uk-export-finance. None of the procedures are altered by this statement of Processes and Factors, save as described in paragraphs 15 and 16 below. The definitive statement of UK Export Finance’s role in this area of policy is to be found at paragraph 28 of the Final Response;
• UK Export Finance makes reasonable enquiries about corruption before granting support;
• For that purpose, UK Export Finance always asks that applicants should disclose the matters referred to at paragraph 1(e) of the Bribery Recommendation in relation to the use of agents;
• The details of the contractual powers and pre-contractual representations in UK Export Finance standard forms enabling it to have financial recourse to applicants, should transactions prove to have been tainted by bribery and corruption, are to be found in UK Export Finance’s standard contracts and, in particular, in those appended to the Final Response. Guidance notes in relation to the definition of “Consortium Partner”, “Administrative Sanction” and “Administrative Measure”, being terms in UK Export Finance application forms with particular relevance to anti-bribery and corruption measures, are appended to UK Export Finance’s standard application form which can be found on UK Export Finance’s website.

15) Certain differences to UK Export Finance’s standard manner of operation of its anti-bribery and corruption procedures apply to circumstances where:

• a British exporter has a contract of export with a foreign purchaser (“the subcontract”);
• the foreign purchaser has a further contract of export from his country incorporating the British supply (the “head contract”);
• the foreign purchaser is supported by the ECA of his country (the “Lead ECA”); and
• UK Export Finance reinsures^{[footnote 3]} the Lead ECA in relation to the British share of the head contract.

16) These variations do not apply where UK Export Finance reinsures or otherwise supports a foreign ECA in respect of the value of the British contract where the British contract is directly made with the end purchaser.

17) In cases where the Lead ECA is that of a country which is a member of the OECD, UK Export Finance’s enquiries in relation to support for the head contract by the Lead ECA will be restricted to assessing the adequacy of the Lead ECA’s recourse rights and the obtaining of satisfactory recourse from the Lead ECA to UK Export Finance in the case of bribery and corruption having occurred. UK Export Finance will, subject to the situation described below in paragraph 18, continue to apply its procedures to the subcontract.

18) In relation to such a subcontract, UK Export Finance will exercise discretion in balancing the demands of rigour and of workability in the application of its standard anti-bribery and corruption procedures. No assumptions should be made that UK Export Finance will not apply its standard procedures in full simply by virtue of the fact that the British export is being made to a foreign purchaser who will incorporate the product in a further sale onward. The discretion provides for alterations to standard procedures principally in circumstances where there are multiple subcontracts to the same foreign seller, where some or all of which are of relatively low value.

UK Export Finance

Revised ESHR sections, November 2021

Annexes

The Annexes to this document have now been updated and replaced:

• Annex A: OECD Common Approaches process chart
• Note on Human Rights

A revised flowchart sets out the main processes by which UK Export Finance considers the ESHR risks and impacts of cases, and a note on Human Rights and Social Risks and Impacts has also been updated. Both documents should be read in conjunction with UK Export Finance’s Policy and Practice on Environmental, Social and Human Rights due diligence and monitoring.

1. This statement is neither comprehensive nor categoric in relation to the considerations it describes. It is not comprehensive because it is intended as a generalised overview for the purpose of potential new applicants to UK Export Finance. It is not categoric because it cannot prescribe what will happen in all future sets of circumstances. Potential applicants desiring further detail may contact UKEF on 020 7271 8010. ↩

2. www.oecd.org ↩

3. “Reinsure” is used in this context to mean any conditional commitment to pay the Lead ECA. ↩