This publication was elaborated within the framework of the EU Phare

supported project RO-2002/000-586.03.01.04.02 – “Initial Training in

European Affairs for Civil Servants from the Central Public
Administration in Romania”, implemented by the European Institute
of Romania in collaboration with EUROMED – Euro Mediterranean
Networks from Belgium in September 2005.

©2005, Institutul European din Romania

Printed by MasterPrint Super Offset, phone+40 21 223.04.00, fax +40 21 222.80.25
 PREFACE

In front of you, you will find the “handbook on EU Affairs”, which is a tangible
outcome of project RO-2002/000-586.03.01.04.02, “Initial Training in European Affairs
for Civil Servants from the Central Public Administration In Romania”. The project’s
main aim was to familiarise a group of maximum 400 civil servants operating at central
administrative level with both the general and more specific aspects of the European
integration process basically to prepare Romania and its administration adequately for
the future integration into the EU.
Throughout the project implementation period, which took place from December 2004
up to October 2005, over 40 trainers from both EU Member States and Romania
facilitated 32 training sessions. Each session was facilitated by three different trainers.
One academic trainer from an old EU Member State was assisted by a Romanian trainer.
A new aspect in the current project was the fact that representatives from
administrations of the new EU Member States were prepared to share their pre-
accession experiences with their Romanian colleagues. In this way, first hand accession
related information was forwarded to the trainees.
In order to make the outcome of the project sustainable and the training material
accessible to a much wider audience, it was decided to produce a “handbook on EU
Affairs” under the project. Authors of the different papers included in this publication
were all involved in activities implemented during project implementation and served as
trainer/facilitator under the project.
The function of the “handbook” is that it can serve as a reference guide to all civil
servants who are currently active in the Romanian administration (both at central and
de-centralised level) and who are directly or indirectly involved in the accession process
that will culminate in full membership for Romania.
Without the professional and enthusiastic support of all those who helped us by
contributing to this publication, it would have never been possible to finalise the
document in time and print it successfully. We are especially grateful to one of our
consortium partners, the “Katholieke Universiteit of Leuven” (Belgium), who managed
to attract some extremely professional academic experts on a number of topic areas.
Also the dedicated way in which some of the Romanian trainers have been involved in
this exercise must be mentioned here. In addition, we owe a word of thanks to those civil
servants from the new EU Members States who were willing to contribute to this
publication and whose contributions turned out to be extremely valuable.
A final word of thanks goes to both the European Institute of Romania (EIR) and the
Delegation of the European Union in Romania. Both institutions gave us the chance to
implement the project following a fixed approach that has resulted among others into
this publication.

Bucharest, August 2005,

On behalf of the EUROMED project team,

Rolf Hunink, team-leader
 ABBREVIATIONS
ACP - African, Caribbean and Pacific Countries
AFSJ - Area of Freedom, Security and Justice
CAP - Common Agricultural Policy
CEFTA - Central European Free Trade Agreement
CFSP - Common Foreign and Security Policy
EAFRD - European Agricultural Fund for Rural Development
EAGF - European Agricultural Guarantee Fund
EC - European Community
ECB - European Central Bank
ECHO - Humanitarian Aid Office of the European Commission
ECJ - European Court of Justice
ECOFIN - Council formation coordinating economic and financial affairs
ECSC - European Coal and Steel Community
EDF - European Development Fund
EEA - European Economic Area
EEC - European Economic Community
EFTA - European Free Trade Association
EMS - European Monetary System
EMU - Economic and Monetary Union
EP - European Parliament
EPA - Economic Partnership Agreements
ERM - Exchange Rate Mechanism
ESCB - European System of Central Banks
ESDP - European Security and Defence Policy
EU - European Union
EURATOM - European Atomic Energy Community
EURODAC - Computerised central database for comparing the fingerprints of asylum
applicants in the EU
GATS - General Agreement on Trade in Services
GATT - General Agreement on Tariffs and Trade
GDP - Gross Domestic Product
GNP - Gross National Product
GSP - Generalised System of Preferences
IACS - Integrated Administration and Control System
ISPA - Instrument for Structural Policies for Pre-accession
JHA - Justice and Home Affairs
NATO - North Atlantic Treaty Organisation
NIS - Newly Independent States
OCT - Oversea Countries and Territories
OECD - Organisation for Economic Co-operation and Development
OMC - Open Method of Coordination
PHARE - Poland and Hungary Assistance for the Restructuring of the Economy;
(currently the EU’s main financial instrument for accession of the Central and Eastern
European countries)
QMV - Qualified Majority Vote
SAPARD - Special Accession Programme for Agriculture and Rural Development
SGP - Stability and Growth Pact
TEC - Treaty on the European Community
TEU - Treaty on the European Union
TRIPS - Trade-Related Aspects of Intellectual Property Rights
UNO - United Nations Organisation
WEU - Western European Union
WTO - World Trade Organisation
 TABLE OF CONTENTS

SECTION 1: GENERAL EU AFFAIRS

Chapter 1: History of EU Integration and the EU Institutional Framework
Frank Delmartino, Rudolf Hrbek 9
Chapter 2: European Union’s Policies
Laurent Van Depoele, Ana Maria Dobre 27
Chapter 3: Transposition and Implementation of EC Directives and
EC Control of Correct Implementation of EC Law - Experiences of France
François Brillanceau 51

SECTION 2: INTERNAL MARKET

Chapter 4: The Functioning of the Internal Market
Robert Hine 67
Chapter 5: Transposition and Implementation of the Internal Market
Acquis - Experiences of Poland
Grzegorz Lang 77
Chapter 6: EU Telecommunciations Policy
Jukka Kanervisto 89
Chapter 7: Adopting the Acquis Communautaire in the field of Information
Society - Experiences of Poland
Arkadiusz Plucinski 107
Chapter 8: EU Transport and Infrastructure Policy and Experiences of the
Slovak Republic in Implementation
Roman Horvath 117
Chapter 9: EU Energy Policy and its Transposition and Implementation in
Romania
Lavinia Ileana Andrei 131

SECTION 3: EU COMMON AGRICULTURAL POLICY

Chapter 10: The EU Common Agricultural Policy
Laurent Van Depoele 143
Chapter 11: Implementation of the Common Agricultural Policy in Poland
`

Katarzyna Okon 151

Chapter 12: The Transposition of the Romanian Agriculture and Rurality

to the EU Common Agricultural Policy
Cosmin Sãlãºan 167

SECTION 4: EU REGIONAL DEVELOPMENT AND COHESION POLICY

Chapter 13: EU Regional Development and Cohesion Policy
Charalampos Koutalakis 175
Chapter 14: Implementation of Regional Development Policy - Experiences
of the Slovak Republic
Silvia Matúšová 187
Chapter 15: Regional Development Policy in Romania - Institutional
Transformations and Future Challenges
Daniela Luminiþa Constantin 197
SECTION 5: EU ENVIRONMENTAL POLICY
Chapter 16: EU Environmental Policy
Hans Bruyninckx 213
Chapter 17: Adapting the Romanian System for the Protection of the
Environment to EU Standards - Outcomes and Future Challanges
Cristina Maria Arion 225

SECTION 6: EU ECONOMIC POLICY AND EMU

Chapter 18: Economic and Monetary Union
Kenneth Dyson 245
Chapter 19: Implementing the EMU Acquis - Experiences of Slovenia
Matej More 255

SECTION 7: EU SOCIAL AND EMPLOYMENT POLICY

Chapter 20: EU Social Policy, Employment Policy, Higher Education and
Research Policy
Erol Kulahci 269
Chapter 21: Transposition and Implementation of EU Social and
Employment Policy - Experiences of the Slovak Republic
Valéria Kubalová 283

SECTION 8: EU JUSTICE AND HOME AFFAIRS

Chapter 22: EU Justice and Home Affairs
Jörg Monar 293
Chapter 23: Implementation of EU Justice and Home Affairs in Poland
Adam Dudzic 309
Chapter 24: Implementation of EU Justice and Home Affairs in Romania
Sebastian Laurenþiu Lãzãroiu 319

SECTION 9: EU TRADE AND DEVELOPMENT POLICY

Chapter 25: EU External Trade and Development Policy
Bart Kerremans, Jan Orbie 327
Chapter 26: Implementation of the EU Trade and Development Policy -
Experiences of Poland
Sebastian Barkowski 341
Chapter 27: Transposition and Implementation of the EU Trade and
Development Policy - Costs and Benefits for Romania
Florin Bonciu 347

SECTION 10: EU COMMON FOREIGN AND SECURITY POLICY

Chapter 28: EU Common Foreign, Security and Defence Policy
Fulvio Attinà 353
Chapter 21: Romania’s Security and Defence Policy from the Perspective
of the Common Foreign and Security Policy and the European Security
and Defence Policy
Liviu Mureºan 363
 SECTION 1

GENERAL EU AFFAIRS

History of EU Integration

EU Institutional Framework

EU Policies

Transposition and Implementation

of the Acquis Communautaire
 Chapter 1

CHAPTER 1

HISTORY OF EUROPEAN INTEGRATION AND

THE EU INSTITUTIONAL FRAMEWORK

Frank Delmartino, Rudolf Hrbek*

1. INTRODUCTION

A handbook that mainly deals with European policies clearly needs an introductory
chapter on the European construction as a whole. Crucial questions should be
addressed, such as:

Who initiated the European integration process and which phases in the process
can be distinguished?
Which are the main institutions and actors in the EU’s policy- and decision-
making process? and, finally,
Where are we going from here, given the current operation of enlargement and
the drafting of a constitutional treaty?

In line with the questions mentioned above, first the European integration process will
be presented in a historical perspective, followed by an overview of the main EU
institutions and decision-making processes. Finally, the ongoing operation of
enlargement and the process of ‘constitutionalisation’ will be approached as
complementary dimensions of the ‘widening’ and the ‘deepening’ of the Union.

2. THE EUROPEAN INTEGRATION PROCESS IN A HISTORICAL

PERSPECTIVE
2.1. The context
The general history of the European continent in the first half of the twentieth century
is well known, worldwide, as it has indeed affected the entire world. The two European
wars (1914-1918 and 1939-1945) gradually expanded into world wars. Their
devastating effect was not only physical, material and economic, but moral as well. A
new world order was ready for emerging from the debacle, stressing the rule of
(international) law and the end of excessive state-centrism.

* Frank Delmartino is Jean Monnet Professor at the Catholic University of Leuven, Belgium and Visiting
Professor at the College of Europe, Bruges, Belgium.
Rudolf Hrbek holds a Chair for Political Science at the University of Tübingen, Germany, a Jean Monnet
Chair and is Responsible for the Jean Monnet Centre of Excellence at University of Tübingen; He is also
Visiting Professor at the College of Europe, Bruges, Belgium.
9
Chapter 1

The framework for a worldwide new legal order was provided by the United Nations
Charter (1945). However, on the European continent, with its outspoken antagonisms, a
particular formula had to be found for guaranteeing peaceful relations and overall social
and economic development. Europe’s economy was in a very poor condition indeed,
and the American Marshall plan was much welcomed as a decisive boost. As a result of
the inceptive Cold War, only the West-European countries were effectively benefiting
from the transatlantic input. Nevertheless the opportunity was not seized for setting up
a systematic transnational cooperation.

Given the state-centrism of most governments, the so-called ‘European Movement’ was
mainly rooted in civil society. Academics, trade-unionists, some politicians, in one
word: activists of all kind advocated a federal type institutional order for the old
continent, envisaging a supra-national authority with effective powers for guaranteeing
a peaceful and stable political and economic order.

The outcome of the first assembly of the ‘federalists’ (1948) was not warmly welcomed
by the governments. A Council of Europe was established in 1949, encompassing a
Parliamentary Assembly and a Conference of Ministers (of Foreign Affairs), but the
only major breakthrough was realised in the field of human rights. A Convention was
agreed upon and formally enacted, stipulating the fundamental freedoms and the
preconditions for the rule of law, as they are understood in the constitutional tradition
of the Western liberal democracies. A court, based in Strasbourg, was established for
supervising their correct application.

Undeniably, this agreement marks a new era in European intergovernmental

cooperation. On the other hand, intergovernmentalism does not reach beyond the
willingness and commitment of the least devoted partner. Unanimity among many states
is hard to achieve, especially with regard to crucial political and economic issues. One
could indeed not expect from the Council of Europe with its Assembly–based method
of decision-making, to forge a fundamentally new type of transnational integration.

Such an initiative had to come from a key actor, having the legitimacy and the moral
authority for setting a new standard. The proposal made on a press conference on 9 May
1950 by the French Minister of Foreign Affairs, Robert Schuman, was indeed breaking
new ground. France proposed to share with Germany and with other interested
countries, its sovereign regulating powers in the crucial strategic fields of coal and steel.
In line with the wording in French language “mise en commun” (‘pooling’), a
Community was to be established, exercising supra-national competences, with a ‘High
Authority’ as decisive actor.

Apart from the German Chancellor Adenauer, who agreed in advance, the French move
was a surprise to all European governments. Only the USA were informed on
beforehand, as they strongly supported closer cooperation between the European
partners. The British, on the other hand, were not too enthusiast. They did not welcome
any threat to the sovereign decision-making power of the Parliament in Westminster.
Moreover, their relation with Europe was ambiguous: for sure they were with Europe;

10
 Chapter 1

but were they in Europe? Finally the reaction of Britain and the Scandinavians was
negative, whereas Italy and the Benelux countries were prepared to start negotiations.

In the light of history, the year 1950 was gathering all preconditions for a unique
juncture, opening the path towards integration: the intelligence and courage of the
leaders, the strong motivation of the European movement, the external threat of the Cold
War and the support of the USA. The institutional formula, however, had still to be
shaped in operational terms. And here Jean Monnet came to the fore as a skilful
negotiator. The Treaty of Paris (1951) has given birth to the first truly supra-national
institution on the European continent.

2.2. The foundations

Once the six founding countries had agreed on the principle of sharing their sovereign
rights in the particular field of coal and steel, in other words the heavy industry of the
early fifties, their political assent had to be formulated in legally solid and consistent
institutions and procedures. Schuman’s initial plan was not concrete at all. “The French
have a plan to have a plan”, was a cynical but not unfounded British remark at that time.
In Monnet’s eyes, the ‘Haute Autorité’ (High Authority) of technocrats should be given
all responsibilities for regulating the sector in an authoritative way. These ‘Eurocrats’
should be nominated by the member states and approved by the Council of Ministers.
However, once appointed, they would no longer accept any instruction from their
governments and only serve the European interest.

A Council of Ministers was foreseen, not for supervising the High Authority, but for
dealing with the implications of the coal and steel policies on the overall economic
development. The Treaty of Paris was far going indeed in transferring regulatory powers
to the supra-national High Authority. A few years later, in the more encompassing
Treaty of Rome (1957), a division of tasks will be introduced between the functions of
policy initiation and – implementation on the one hand, given to the European
Commission, taking the succession of the High Authority, and the proper decision-
making assigned to the Council of Ministers, on the other. The Coal- and Steel
Community was thus bestowed with the most elaborate form of technocratic power.

Remarkably enough, this transfer of authority was widely accepted throughout society
at that time, as it was seen as a way of bypassing the disastrous state policies of the past,
when the energy and steel sectors had been determining factors in preparing and
conducting the wars. Although the High Authority, led by Monnet, was highly
performing, the full transfer of state powers to an appointed transnational body was
never repeated. In its first years of existence, the supra-national character of the
European integration process was reaching its highest peak. In Rome, and more
decisively since Maastricht (1992), the treaty making powers, in fact the governments
of the Member States, have restored the balance between supra-nationalism and
intergovernmentalism. The golden years of the Monnet-method have been short.
Having highlighted the unique position of the High Authority, combining legislative
11
Chapter 1

with executive powers, albeit in a ‘technical’ policy field, one should not forget about a
third and a fourth actor. Right from the beginning a Parliamentary Assembly was
foreseen as an important consultative body. These delegates of the national parliaments
of the six Member States were asked for advice on all legislative proposals. European
initiatives should indeed be consistent with national policies, and vice-versa. Next to the
Council of Ministers, the members of Parliament were seen as part of a network of
mutual information, consultation and (limited) involvement in the decision-making
process. This significant though not decisive role in the early years of the European
Community has marked the perception of the European Parliament (EP) by the general
public. Although directly elected since 1979 and empowered by all treaty revisions
since 1986, the EP is still lacking the central place in political life it occupies in national
democracies.

On the other hand, the Court of Justice has been a crucial actor right from the beginning
of the integration process. Its authority in solving legal disputes, quite often involving
Member States, has never been questioned. Moreover, by interpreting the treaties in a
consistent pro-integrationist way, it has contributed to the creation of a solid body of
European law. One should not underestimate the stabilising effect of legal standards and
procedures – the so called ‘acquis communautaire’ – on a Community/Union frequently
shaken by political turmoil.

Despite the major changes these four actors have been going through in the last fifty
years, they still form the institutional backbone of the Union. There is a striking
continuity in this respect, although membership has increased dramatically and the
competences are covering nowadays nearly the full spectrum of public policy.

2.3. From ‘high politics’ to economic integration

A painful illustration of the limits of European integration was given by the aborted
treaty on a European Defence Community. In the ‘europhoric’ early fifties, the French
Prime Minister René Pléven wanted to establish a genuinely European defence capacity
based on systematic cooperation in the field of foreign policy. Given the external threat
of the East-West confrontation, an agreement among the ‘Six’ was reached, applying in
essence the Monnet-formula to the domain of ‘high politics’. However, the Treaty on
the European Defence Community (1952) was never ratified. Shifting away from its
government’s view, the French Parliament rejected the project (1954).

The failure of setting up a common foreign and defence policy was very deeply
resented. A tremendous opportunity was lost for complementing the technocratic Coal
and Steel Community with a political superstructure. The deception was so general that
many doubted about the future of the integration project.
In these moments of crisis the Benelux countries were taking over the initiative.
Meeting in Messina (Sicily) in 1955, the Ministers of Foreign Affairs agreed on
concentrating their attention once more on ‘low politics’, in other words: economic
integration. In this respect the opportunities of the mid-fifties were twofold: on the one
12
 Chapter 1

hand the availability of nuclear technology for civil purpose, especially as a source of
energy, and on the other the growing awareness that lowering the customs tariffs
between the Six would stimulate their trade relations and ultimately their overall
economic development. Consequently, an Atomic Energy Community (commonly
called Euratom) was established, dealing with regulatory issues, including safety
measures, as well as with research and development. Transnational research centres
were founded, giving a boost to this emerging industrial sector.

The second Community to be founded was the European Economic Community (EEC)
that, over the years, was to become the flagship of the integration process. Initiated as a
successful Customs Union in the late fifties and early sixties, it gradually evolved into
a Common Market in the sixties and seventies. In the late eighties, the Delors
Commission was seeing its achievement as its first priority. The economic and monetary
union (EMU), including a single currency for most of the Member States, is the latest
step, initiated in the nineties (Maastricht, 1992). Whereas most of the coal mines have
been closed in the meantime and the use of nuclear energy is controversial nowadays,
the EEC has been a success story, whose concluding point has not been reached yet. A
lot has still to be achieved for fully guaranteeing the ‘four freedoms’: the free circulation
of persons and goods, capital and services. Fiscal harmonisation between the Member
States, for example, is still in an embryonic phase.

In any case, by leaving out for some time ‘high politics’ and embarking on less
symbolic, albeit highly effective, endeavours, the European leaders were taking a
historical decision with far reaching consequences. The integration process will follow
this path throughout the sixties, seventies and eighties: a strategy of pragmatism,
focusing on its profile as a successful transnational economic organisation. Quite some
pragmatic nations will be attracted by this ‘Common Market’, as the EEC was
commonly named at that time. Only after a dramatic shift in the international order
(1989-1991), the overall picture will be rebalanced. So, the present-day political-
economic Union, looking for constitutional status, is in fact not entirely new. In our
view the aims of the founding period are back on the agenda, albeit in a fundamentally
different context.

foremost in the field of agriculture, the treaty makes clear in its preamble that the
Member States are “determined to lay the foundations of an ever closer union among
the peoples of Europe”. This wording has been kept in all updated versions and has
been taken over in art.1 of the Treaty on European Union (1992) as a crucial mission
statement. It illustrates the open end-character of the Treaty of Rome: a series of
concrete arrangements are made and commitments are taken, but this is to be considered
as a step in an ongoing process. In one word, the Treaty of Rome has been a cornerstone
for European institutions and policies, but a stepping stone towards future development
as well.

13
Chapter 1

2.4. Completion, Deepening, Widening

The impact of General de Gaulle as a dominant leader in the European arena (1958-
1969) has not benefited to the dynamic expansion of the young European Community.
He insisted on the intergovernmental character of the integration project, disliking
supranational guidance from ‘Brussels’. The European Community was seen as a ‘zone
of influence’ where France could exercise its political leadership. In this perspective
quite some initiatives were taken unilaterally, e.g. regarding political cooperation, the so
called Plan Fouchet (1961), aiming at establishing a Political Community. The partners,
however, were suspicious as they had the feeling that the discourse was not genuinely
oriented towards greater internal consistency, but rather challenging the British and
transatlantic ‘allies’. Therefore, when the British government repeatedly showed an
interest in joining the Community (1963, 1967), the general was openly opposed.

As soon as de Gaulle left office in 1969, new hopes raised of deepening and widening
the integration process. At a historical summit meeting of the Six in The Hague
(December 1969), the new French president, Georges Pompidou, did not deceive his
partners. It was argued that the Community first of all should complete the internal
market decided upon in the Treaty of Rome. Moreover, it should deepen its profile by
taking on board new policy fields and, finally, it should widen its horizon by being open
to new membership.

As far as deepening was concerned, two fields were taken into consideration: economic
and monetary union on the one hand and political cooperation on the other. For both
topics a committee of experts was appointed. The one on the EMU was chaired by the
Prime Minister of Luxembourg, Pierre Werner, and was delivering in 1970 a
recommendation on closer monetary cooperation. However, the monetary system
suffered from the turmoil in the seventies and eighties. Only in Maastricht (1992), the
Treaty on European Union was formally introducing the EMU and the single currency
became finally operational in 1999, almost thirty years after Werner’s recommendation.

The committee dealing with political cooperation did not want to be trapped in the old
debate on sharing sovereignty in high politics. Chaired by a Belgian diplomat, Pierre
Davignon, the committee suggested to leave the systematic political cooperation to the
‘professionals’, in this case the directors of political affairs in the six Ministries of
Foreign Affairs. Behind closed doors they would meet regularly and try to coordinate
their positions. It was a deliberate choice for a low profile in political cooperation, till
the moment would come for more outspoken statements. Exactly as for the EMU,
Common Foreign- and Security Policy (CFSP) was to be (re)introduced in Maastricht,
but was based on many years of diplomatic consultations in the political committee.

Widening the Community was another decision of the summit in The Hague. First of all
with Britain and other members of the European Free Trade Association (EFTA):
Ireland, Denmark and Norway (1973). The Norwegian voters, however, did not follow
their government and rejected the accession treaty in a referendum, exactly as they
would do twenty years later (1994).
It is important to note that each and every operation of enlargement has its effects in
14
 Chapter 1

terms of added economic-political value and, in some case, by increasing the disparities
between the better off countries and those lagging behind, at least economically.
Welcoming Greece (1981), Spain and Portugal (1986) was significant in this respect.
More recently (1995), with the accession of three countries with a high GDP – Austria,
Finland, Sweden – once again the attractiveness of the Single Market vis-à-vis the more
loose EFTA-formula was demonstrated. The newest enlargement (2004) with ten,
mainly Central- and Eastern European countries, has challenged, more than ever before,
the assimilation capacity of the Union.

Apart from this economic dimension, every new member has its political sensitivity and
agenda. The euroscepticism of some British is well known, but one should keep in mind
that most of the newcomers joined the Economic Community rather than the Political
Union. Between the Franco-German axis, in most cases supported by the Benelux-
countries and Italy, in other words the ‘Founding Fathers’, and the new Member States,
there is quite often a fundamental difference in perception of the European project. For
almost a quarter of a century (1950-1973) the Six were building up a ‘family tradition’,
in good and bad days, but, quite evidently, with some commitment to each other. With
the start of the enlargement exercise, a ‘Europe of the second generation’ has emerged,
less dogmatic and more pragmatic.

In any case, this pragmatic style can be observed in the way the Community has been
dealing with new policy fields. As the Treaty of Rome was considered sacrosanct during
the sixties and seventies, new dimensions of economic integration could not be
incorporated into the legal charter. The only major institutional changes of that period
regarded the European executive branch (1965) and the European Parliament (1979).
The three Communities were given a single management structure: one Commission
and one Council of Ministers, whereas the Parliamentary Assembly became a directly
elected Parliament.

On the content, however, i.e. the new awareness of the environmental dimension, the
need for regional development policies, for a consistent research strategy, etc., no new
treaty provisions were made until 1985-1986 with the enactment of the so-called Single
European Act. So, the Community was given legislative capacity, was establishing
funds and programmes that significantly contributed to a diversification of the policy
spectrum. The EEC was more than a regulator; it was proactive in many respects, more
and more approaching the profile of a welfare state. Especially the Commission-Delors
contributed to this image. Next to its commitment to the Single Market, to be achieved
by 1992, Jacques Delors advocated a ‘voluntarist’ approach: a policy not only aiming at
regulating but at changing society. Under his leadership the Commission took the lead
in upgrading the various policies of the Community. However, an updated institutional
framework – a new treaty – was missing. As a result of the events of 1989, an
unexpected opportunity was offered for a brand new Treaty on European Union.

15
Chapter 1

2.5. From Community to Union

The implosion of the Communist regimes in Central- and Eastern Europe (1989),
followed by the dissolution of the Soviet-Union in 1991, were taking Western Europe
by surprise.

For the then 12 Member States of the EEC, the challenge was immense. The German
reunification had learned how complex and costly the ‘integration’ of a former
communist society and economy could be. An enlargement with ‘the other half of
Europe’ would be going far beyond the reach of previous experiences such as the
accession of Spain and Portugal.

But even apart from the financial-economic dimension, the institutions had not been
designed for encompassing pan-European organisation, dealing with politics and a wide
range of policies. Should the aims and strategies of the Communities not fundamentally
be reformulated in view of the oncoming enlargement? This was at least the opinion of
the founding fathers, the original Six. Considering the external challenge to be an
unexpected opportunity, they insisted on having an intergovernmental conference for
shaping a European Union on a broad new basis.

It could be expected that not everybody around the table in Maastricht (1991-1992) was
as enthusiastic as the Germans and the French in giving the EEC a straightforward
political profile. Especially the British Conservatives, lead by John Major, were not
prepared to qualify the emerging polity as a fully-fledged federation. Calling it a Union
was not very much contributing to more clarity, but at least it was a new name,
symbolically highlighting the innovative character and the momentum of the Treaty.

More important, indeed, than ‘the name of the game’, was the significant extension of
the policy horizon of the newly created Union. The mainly economic orientation of the
Communities was enlarged with two new dimensions: foreign policy, including
international security, and internal security. ‘Maastricht’ has to be seen as a starting
point of an evolution that has been decisive for the all round-character of the Union as
a polity. Having enshrined in the new Treaty their commitment to an Economic and
Monetary Union, including a central bank and a single currency, the heads of state and
government were upgrading their low profile political cooperation to the status of a
Common Policy and adding a new branch to the tree: cooperation in the fields of Justice
and Home Affairs.

Initially, the Common Foreign- and Security Policy (CFSP) was mainly of a declaratory
nature, although ambitious enough, “including the progressive framing of a common
defence policy, which might lead to a common defence”. Gradually, after having been
confronted with the disastrous events in Bosnia, the EU’s backyard, the follow-up
Treaty of Amsterdam (1997) would reinforce the operational capabilities of the CFSP.
In the fields of Justice and Home Affairs, despite the aim of creating an area of freedom,
security and justice, the beginnings were modest too, but of high symbolic significance.
The judicial- and police organisation, exactly as the Ministries of the Interior and

16
 Chapter 1

Justice, were indeed regarded as one of the few bastions still untouched by the
europeanisation process. However, confronted as they were in the nineties with an
‘explosion’ of migratory movements and increasing cross-border criminality, new
arrangements were made and new organisations set up, such as Europol and Eurojust.

Moreover, the institutional framework and the decision-making process were

fundamentally reviewed. Finally, some crucial concepts and principles were introduced,
such as the principle of subsidiarity and the notion of citizenship. However, these
achievements of Maastricht and its follow-up treaties - Amsterdam (1997) and Nice
(2000) - are included in the third part of this contribution.

3. THE MAIN INSTITUTIONS AND ACTORS IN THE EU’S POLICY

AND DECISION-MAKING PROCESS

The policy-making process in the European Union is extremely complex, given the wide
variety of policies, the diversity of interests, the number of Member States involved and
the specific character of trans-national decision-making. The EU is not a classical state
indeed, where policies are decided upon in the dialogue between government and
parliament. Since the very beginnings of the European integration process, a crucial
third partner, the Commission (originally the High Authority) is given the task of policy
initiation and -implementation. Therefore, we will first highlight the particular position
of the European Commission, before stressing the role of the other core ‘players’: the
Parliament, the Council and the Court of Justice.

3.1. The European Commission

The profile of the Commission has evolved over the years. In the eyes of the founding
fathers, the Commission consisted of a limited group of ‘technocrats’, i.e. professional
experts, nominated by their respective governments, but exclusively serving European
interests. One could compare these Commissioners to the governor(s) of Central Banks,
appointed by their governments, but keeping a critical distance to those who appointed
them. Although not elected, their legitimacy arises from the quality of their decision-
making and from the policies they deliver.

This original philosophy is still valid, but the size of the organisation has been
dramatically changed as a result of the enlargement of the Union. Every of the 25 (soon
27) Member States is represented in the Commission. However, the decision-making is
a collective endeavour. Moreover, a staff of highly qualified civil servants is supporting
this College of Commissioners. Divided into directorates-general (DG’s), this
bureaucracy is the operational task force of the EU.

Despite these appearances, the Commission is not a government in the traditional sense.
Its role is focused on the functions of preparing and proposing policies, as well as on

17
Chapter 1

implementing them. The proper decision-making lies with the Member States, mostly
in interaction with the European Parliament. In other words, if the dynamics of policy-
making belong to the profile of the Commission, the Member States’ governments and
the European Parliament are the ultimate decision-makers.

3.2. Council of Ministers and European Council

In contrast to the Commission, devoted to ‘European’ interests, the Member States are
considered to promote national interests. The Council of Ministers and the overarching
European Council are indeed the supreme representatives of the States the Union is built
on. Very correctly, they are called ‘the masters of the treaties’, since all basic
arrangements are founded on their consensus. In daily practice of policy-making,
however, they are one out of the three major actors, albeit a crucial one.

Actually, national interests and European interest are in most cases convergent.
Therefore, the Council is not per definition the opponent of the Commission or the
Parliament, but can put other accents and, especially, wants to limit the expenditure. In
any case, the Council with its numerous working committees and its group of permanent
representatives of the Member States (COREPER) is a counterweight to the
technocratic power of the Commission.

The Ministers are meeting in different settings. The ‘general affairs’ council, composed
by the Ministers of Foreign Affairs, deals with the general issues. Some ‘specialised’
meetings are equally important: for example the Ministers of Economy and Finance
(ECOFIN), the Ministers of Agriculture and Fisheries, the Ministers of Foreign Affairs,
responsible for the European Common Foreign and Security Policy. Next to the regular,
formal meetings, informal gatherings are exploring the consensus building regarding the
main issues at stake.

Since 1974 the heads of state and government are meeting as well on a regular basis (4
times a year), as they want to discuss strategic issues and the overall development of the
Union. Their ‘summit meetings’ have gradually been formalised. As a result, the
‘European Council’, as their meeting is called, becomes an institution of its own, a kind
of supreme decision-making body. he Constitutional Treaty stresses its role and has
introduced a permanent presidency for the European Council. In the meantime, Council
meetings at all levels are chaired by a rotating presidency.

3.3. The European Parliament

As we have seen in the historical overview, a Parliamentary Assembly has been

functioning right from the beginning of the European integration process. A double
‘emancipation’ took place since the late seventies. On the one hand the direct election
of the Parliament (1979) contributed to its democratic legitimacy, whereas, on the other
hand, its powers have been increased at every Treaty reform since the Single European

18
 Chapter 1

Act. Procedures were developed for involving the EP significantly in the decision-
making process. The co-decision procedure has been introduced in Maastricht (1992),
but its scope of application is gradually enlarging. Today, the EP is an equal partner with
the Council of Ministers on deciding on a wide range of matters and policies, especially
in the social and economic fields.

The competences of the EP can be compared to the ones of all parliaments in

democratic political systems. They encompass the functions of:

Control: political discussion and budgetary supervision. Ultimately, confidence

in the European Commission can be withdrawn, implying its resignation;
Legislation: the EP is involved in elaborating European legislation, albeit via
different procedures according to the matter (from consultation, over cooperation
to co-decision);
Budgetary power: the budget of the EU has to be established by the Council and
the Parliament;
Assent: crucial agreements, such as the acceptance of new Member States, and
appointments, such as the president and the members of the European
Commission, have to be agreed upon by the EP.

Once a month, plenary sessions take place in Strasbourg, whereas commissions- and
fraction meetings are being held in Brussels, two weeks a month. As in all parliaments,
the detailed scrutiny of policy proposals and legislative texts are of utmost importance.

Although the members of European Parliament (MEP’s) are elected via national (or
sub-national) constituencies and via a proportional system for a mandate of five years,
they don’t primarily represent national interests but the European interest as a whole.
Therefore, the political fractions are not nation-based but rather ideology-oriented.

3.4. The European Court of Justice

Based in Luxembourg, the ECJ has built up over the years a solid reputation not only in
setting legal disputes, but as well in interpreting European law in an authoritative way.
One should not forget, indeed, that the application of the law on a day-to-day basis is
primarily a responsibility of national courts and agencies. So, ‘national’ judges quite
frequently consult the ECJ before delivering their verdict.

As a result of the cases brought before the Court in Luxembourg and the interpretation
given on the request of national courts, a whole ‘jurisprudence’ has developed: a
consistent body of European law that complements the Treaties. The best-known
example of the impact of the ECJ on the self-understanding of the Union is the principle
that European law has precedence (supremacy) over national law. This ruling of the
Court has finally been integrated as a core principle in the Constitutional Treaty.
Next to the Court of Justice, a Court of First Instance has been established since 1989,
in order to leave more room to the ECJ for debating the most significant cases. The
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Chapter 1

workload is indeed heavy. Therefore, in both courts every Member State is represented
with a judge. The judgments are delivered by ‘Chambers’, mostly with 3 to 5 judges.

Summarising, the ECJ is not just formally an institution of the EU. It’s a crucial actor
as well, given its constant vigilance in applying the rule of law and its contribution to
the formation of a consistent legal framework.

3.5. Other institutions and bodies

Given the limited scope of this contribution, we will only briefly mention some other
institutions and bodies:

z The European Court of Auditors, based in Luxembourg, controls the

expenditure of the EU and reports to the European Parliament.
z The European Central Bank, based in Frankfurt, has full authority over the
monetary policy regarding the single currency: the Euro.

Two advisory bodies have been established for providing the Commission, Council and
Parliament with recommendations regarding most social and economic policies:

z The Economic and Social Committee (ECOSOC) has a long tradition (Treaty
of Rome) of involving the ‘social partners’, i.e. employers, trade unions and
professional organisations, in policy formulation.
z The Committee of the Regions is more recent (Treaty of Maastricht) and
consists of representatives of territorial units: regions and municipalities.
z They are rather focused on the territorial cohesion of policies and on the
application of the principle of subsidiarity.

Quite some executive tasks of the Union have been ‘decentralised’ to agencies or
offices, that either have been given a regulatory assignment, or rather a supportive one,
by providing scientific advice. Just a couple of examples:

z The Office for the Harmonisation of the Internal Market, based in Alicante;
z The Scientific Centre in Ispra;
z The Environment Agency in Copenhagen.

4. DEEPENING AND WIDENING: THE PROCESS OF

CONSTITUTIONALISATION AND ENLARGEMENT
The Treaty on the European Union (TEU), commonly called the Treaty of Maastricht
(1992) paved the way to both a fundamental revision of the Treaties and the oncoming
enlargement of the Union. As we have seen in the historical overview, the changes of
regime in Central- and Eastern-Europe clearly indicated that the Union would
encompass in a foreseeable future the major part of the European continent. Therefore,
some crucial innovations had to be introduced.
In this third part of our contribution, we will mainly highlight those new concepts and
principles and link them to the ongoing constitutional debate.
20
 Chapter 1

4.1. Innovations since Maastricht

We mainly think of five innovations:

The political principles are for the first time explicitly mentioned in the treaties: “The
Union is founded on the principles of liberty, democracy, respect for human rights and
fundamental freedoms, and the rule of law, principles which are in common to the
Member States” (art. 6 and 7 of the TEU Treaty). The last element clearly shows that
the innovative character of this provision does not lie in the enumeration of the
principles, but in the compliance expected from the (candidate) Member States with the
political foundations of the Union. Art. 7 therefore sanctions any “serious and persistent
breach” of this principles, for instance by excluding a state from the decision-making
process. It is obvious that the political principles were formulated in view of the
oncoming enlargement. Their application is one of the main conditions for accession,
the so-called Copenhagen Criteria (1993). However, in recent years current Member
States have been as well under scrutiny, although not (yet) in application of the
procedure of art. 7. Clearly enough, the EU is seen as a political democracy applying
the rule of law and protecting individual and collective rights and freedoms.

A second principle, the principle of subsidiarity, is related to the division of tasks

between the Union and its Member States (art. 5). In essence, the Community should
take action “only if and insofar as the objectives of the proposed action cannot be
sufficiently achieved by the Member States and can therefore, by reason of the scale or
effects of the proposed action, be better achieved by the Community”. In other words,
rather than by imposing a strictly legal delimitation of the area of involvement of the
Union, the Treaty has provided the Commission, Council and Parliament with a
guiding principle for embarking (or not) on new policies. Such flexibility in
interpretation does not refer to a traditional treaty between states, but rather to a
common policy space.

One of the most striking innovations is the introduction of European citizenship (art.
17-22). All nationals of the Member States have been given this additional political
identity and the rights related to it: the right of moving and residing freely within the
Union, the right to vote and to be elected at municipal and European level (elections for
the European Parliament) in the country of actual residence, the right to call for
diplomatic and consular protection from any Member State of the Union, in case the
own State is not represented in a third country. Thus, being a citizen of the EU has more
than a symbolic value. A transnational community is effectively taking shape, based on
definite rights and freedoms. As the Danish public opinion was not too pleased with this
double identity, an ‘opt out’ clause was negotiated and the Amsterdam Treaty (1997)
made clear that “citizenship of the Union shall complement and not replace national
citizenship”.
The co-decision powers given to the European Parliament in Maastricht can be seen
as another breakthrough of political legitimacy. The Union is gradually shifting away
from technocratic decision-making towards a decisive impact of the directly elected
representatives of the citizens.

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Chapter 1

Finally, the provisions on closer cooperation make clear that a scenario has been
prepared for the case the integration process gets differentiated (art. 43-45). An inner
circle of countries could take the lead in a particular policy field, whereas the others are
free to join in a later stage. Although this procedure has not been used yet, its insertion
in the Treaty reveals the political will not to slow down the integration process to the
pace of the least committed Member States.

Maastricht and its follow-up Treaties – Amsterdam (1997) and Nice (2000) – have
indeed laid down the foundations for the constitutionalisation process that characterises
the present-day debate.

4.2. The constitutional debate

Fifty years after the Schuman declaration, at the beginning of the 21st century, the
Union is confronted with two major challenges: on the one hand, a new wave of
accessions in 2004, to be continued in 2007 and beyond, and, on the other hand, the still
unresolved question of the ‘finalité politique’, i.e. the debate on the very nature of the
integration process.

Both issues, of course, are interrelated. A Union with, for instance, 30 Member States,
including sooner or later Turkey or even Ukraine, would not only fundamentally change
the demographic balance, but affect the historical self-understanding of the project as
well. Such scenario thinking, however, goes beyond the aims of this article. Let’s rather
look at the present-day reality in retrospect: which crucial questions that in the past were
never given an adequate response, are now back on the agenda? We mainly see two of
these issues.

First, the challenge of enlargement. As we mentioned earlier, the accession of the first
wave of candidate countries, and especially of Britain, was highly controversial. Not
because there were any doubts on the democratic character or the economic
performance of the United Kingdom. The debate was more fundamental: is this country
prepared to take a loyal and active part in developing the existing project with its
integrative dynamics? Or is it mainly interested in joining a successful common market,
with all the economic benefits it expects from an enlarged free trade zone?

The question can be raised for most of the subsequent accessions and the answer is not
easy at all. Governments are changing over time, and even within those governments
individual ministers can have different views and attitudes.

Finally, the position taken by civil society and by the citizens/voters in general, can be
determining for the overall image a country gets vis-à-vis the integration process.
However, rather than focusing on the questionable loyalty of the newcomers, one should
stress the incapacity of the Member States in defining the essence of their undertaking.
No unequivocal mission statement was presented to the candidates before 1993 and the
then formulated ‘Copenhagen criteria’ are very much open for interpretation.

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 Chapter 1

Mainly three conditions have been put forward:

z Stability of the democratic institutions; application of the fundamental political

principles, including minority rights;
z A functioning market economy, open to external competition;

z Full acceptance of the ‘acquis communautaire’.

The legitimacy of the Union can be seen as the second present-day challenge. At the
Nice Summit (December 2000), after a couple of days and nights, an agreement was
reached on the figures, not on the content of the functioning of an enlarged EU. For all
candidate countries, including Bulgaria and Romania whose accessions are foreseen in
2007, all details were agreed upon: the number of seats in Parliament, the weighting of
the votes for decision-making in the Council of Ministers, etc. Despite the apparent
success of the meeting, remarkably enough, a declaration was added to the Nice Treaty,
highlighting the unresolved questions: the delimitation of powers between Union and
Member States, the role of national parliaments, and, more in general, the increasing
‘democratic deficit’. It is a striking paradox indeed: despite a significant increase of
powers for the European Parliament, the participation of the electorate and, in general,
the interest of the public in EU affairs is decreasing.

A reflection round was announced and a more in depth analysis was to be presented one
year later, at the European Council meeting of Laeken (Brussels) in December 2001.
The Belgian presidency, however, came with more questions than answers, illustrating
once more the inconsistency of views among European leaders. Therefore they were
taking the initiative of transferring this difficult dossier to a Convention, i.e. an ad hoc
assembly of representatives of all political actors involved: the governments, the
national parliaments, the Commission, the European parliament, etc., 105 participants
in total. The 13 candidate countries, including Turkey, were invited to take part as
observers. The European Council expected ‘some suggestions’ from this extraordinary
assembly. In fact, due to the leadership of the presidium of three ‘wise men’, former
French president Giscard d’Estaing, former Italian Prime Minister Amato and former
Belgian Prime Minister Dehaene, after some months a convergence of views was
emerging and the final result in July 2003 was a draft for a Constitutional Treaty.

Undoubtedly, the constitutionalisation of the Treaties can be seen as a historical

breakthrough. Disagreement on the existence of a political character of the Union seems
no longer possible. Some parts of the document, especially the second part that
incorporates the Charter of fundamental rights and freedoms, are stressing the classical
constitutional status of this basic charter. One should, however, not prematurely
conclude that by agreeing on a constitutional treaty the EU has come to full clarification
on its state character. Art. 1 of the Constitution on the ‘Establishment of the Union’ is
formulated as follows: “Reflecting the will of the citizens and States of Europe to build
a common future, this Constitution establishes the European Union, on which the
Member States confer competences to attain objectives they have in common”…

Apart from the solemn wording in a treaty qualified as ‘constitutional’, not too much
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Chapter 1

progress has been made in terms of self-definition. There is a long way to go before all
Member States will fully share their understanding of “an ever closer Union”.

This Constitutional Treaty has been under the scrutiny of an Intergovernmental

Conference, and finally, was signed on 29 October 2004. In principle, the Member
States have two years to ratify the treaty with the ratification process differing from
Member State to Member State depending upon whether direct democracy (via a
popular referendum) or parliamentary democracy is favoured. The Constitution can take
effect only if all 25 Member States ratify it either in a parliamentary vote or by
referendum. To date, thirteen nations have ratified the document: Austria, Cyprus,
Germany, Greece, Hungary, Italy, Latvia, Lithuania, Luxembourg, Malta, Slovakia,
Slovenia and Spain. While most countries announced that the ratification of the treaty
would come through a parliamentary process, a number of countries initially indicated
that they would hold a referendum on the constitution. Those countries were the UK,
Spain, Portugal, Poland Czech Republic, Denmark, Ireland, Luxembourg, France and
the Netherlands.

Spanish voters approved the treaty in a consultative referendum on 20 February 2005.

The decision was put to a Parliamentary vote and passed by Parliament on 19 May. In
a referendum held on 29 May, French voters rejected the terms of the treaty with a ‘no’
vote of 55.6%. Dutch voters followed suit in a consultative vote on 1 June, with 61.8%
of the turnout voting against the treaty. Luxembourg voters approved the treaty in a
consultative referendum on 28 June 2005 with a ‘yes’ vote of 56,5%.

Two weeks after the failed referenda on the EU Constitution in France and the
Netherlands, the EU summit on 16 and 17 June 2005 decided to put the document’s
ratification process on hold. A period of reflection and consultation was launched.
During this period an intensified and broadened debate should take place in each of the
Member States, involving citizens, civil society, social partners, national parliaments
and political parties.

The French and Dutch “no” caused a wave of euro-pessimism inside the Union.
However, without wanting to underestimate the serious consequences of this rejection
of the Constitutional Treaty for the day-to-day function of the European Union, it would
be exaggerated to consider this event as a political implosion of the Union. As this
historical overview aimed to prove, the process of European integration has always been
a process of ups and downs. It has never been a steady road in the direction of an “ever
closer union”. Besides that, it would be inappropriate to interpret the French and Dutch
rejection of the Constitutional Treaty as an overall rejection of the European Union.

24
 Chapter 1

Relevant official documents and information can be found at the

following websites:

– Main treaties of the European Union (Eur-lex):

http://europa.eu.int/eur-lex/lex/en/treaties/index.htm

– Institutions of the European Union:

http://europa.eu.int/institutions/index_en.htm

– The Future of the European Union – debate:

http://europa.eu.int/constitution/futurum/index_en.htm

– European Commission, DG Enlargement:

http://europa.eu.int/comm/enlargement/

– History of European Integration (Leiden University, Netherlands):

http://www.eu-history.leidenuniv.nl/

– European Convention:
http://european-convention.eu.int

– Enafree, Multimedia Documents on the process of European integration:

http://www.enafree.lu/en/

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 Chapter 2

CHAPTER 2

EUROPEAN UNION’S POLICIES

Laurent Van Depoele*

Ana Maria Dobre*

1. INTRODUCTION

An overview of the EU policies represents an attempt to display the most important

historical trends, interests and ideas that characterise the evolution of the European
integration. From the outset some aspects need to be clear.

First, The EU is constructed out of three originally disconnected Communities: the

European Coal and Steel Community (ECSC), the European Atomic Energy
Community (EURATOM) and the European Economic Community (EEC). These
communities became known as the European Community (EC) and were associated
with the ‘first pillar’, when the EU has been set up by the Treaty on European Union
(TEU) in 1992. The first pillar implies supranational cooperation and consists of the
sets of rules of the original forms of economic cooperation (the former European
Communities (EEC, EURATOM, and ECSC)) including an Economic and Monetary
Union (EMU). In these domains most decisions are made by qualified majority
voting (QMV) within the Council, even though the general goal is to reach
agreement in negotiations. The ‘first pillar’ is complemented by other pillars of
organised cooperation: The Common Foreign and Security Policy (the ‘Second
Pillar’) and Justice and Home Affairs (the ‘Third Pillar’). Cooperation under the
‘second’ and ‘third pillars’ is ‘intergovernmental’, which means that cooperation
between Member States is taking place according to classic international law, but
within a single European institutional framework. The pillar structure is eliminated
in the Treaty establishing a Constitution for Europe, which is still in the process of
ratification.

Secondly, another important aspect is that the EU has been active in a series of policy
fields which have produced several ‘working methods’ such as the ‘Community
method’, the ‘intergovernmental method’ and the ‘open-method of coordination’
(OMC).

The ‘Community method’, which is a reaction to the intergovernmental diplomacy in

* Professor, University of Leuven, Faculty of Social Sciences, Department of Political Science, Institute for
International and European Policy, Belgium.
* Ph.D. Candidate, University of Leuven, Faculty of Social Sciences, Department of Political Science,
Institute for International and European Policy, Belgium.
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Chapter 2

Europe before and immediately after World War II and is based on the following
institutional structure: The Council of the EU takes decisions on the basis of proposals
from the Commission, which has the exclusive right of initiative, after discussion within
the European Parliament (EP) and other bodies. In a growing number of cases, the
Council decides in codecision with the EP. Even though unanimity is still present, under
the ‘Community method’ decisions are taken in the Council by QMV, which means that
a decision can enter into force without the support of all Member States. Furthermore
EU law has precedence over national law and cannot be undone by national legislation.
Another important institution within the ‘Community method’ is the European Court of
Justice (ECJ), which has the power to fine Member States in breach of their legal
obligations under the EU law and which assures that EU law is observed in a uniform
manner in the interpretation of the Treaties.

The ‘intergovernmental method’ implies that cooperation takes place outside the
‘Community method’ and on the basis of collaboration between individual member
countries. Member States keep entirely the attributes of their national sovereignty and
therefore keep their veto power since all decisions are taken by unanimity. The
supranational institutions such as the EP or the ECJ have a considerably reduced role
within the ‘intergovernmental method’.

The ‘open-method of coordination’ (OMC) has no constraining legal aspects like the
‘Community method’. It is a voluntary process where all Member States decide by
consensus to define a number of policy objectives. The OMC is not based on legal
instruments and introduced legislation; it is supported, for example in the context of the
Lisbon Strategy (2000), by a Community Action Programme (2002-2006) aimed to
encourage cooperation in areas such as fighting social exclusion, eradication of poverty
and improvement of the employment situation. Currently, the OMC is used in policy
fields such as: employment, social inclusion, pensions, health care, education/training
and youth policy.

z This method, which may be referred to as ‘soft law’, involves the following steps:
z The fixing of guidelines for the EU;
z The establishment of quantitative and qualitative indicators and benchmarks;

z The translation of the guidelines into national and regional policies;

z The periodic monitoring, evaluation and peer review at EU level.

Thirdly, the EU is one of the most interesting modern projects of state cooperation,
which evolved over time into more than just a simple arena of intergovernmental
negotiations. The EU today is known as a sui generis type of international organisation,
a unique kind of polity which proposes a multi-level approach to governance,
involving not only nation-states, but also supranational and sub-national authorities. In
addition, numerous national, regional or local actors from the Member States developed
their activity in the EU arena. They are consulted by the EU institutions in the process
of decision-making and also in the process of reflection on the EU development. One
example is the Convention for the drafting of the Treaty establishing the EU
Constitution. In this context, the consultation process was opened to all representatives

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 Chapter 2

of organised civil society or other type of aggregated interests such as industry and
labour associations.

In the following lines, we will portray to what extent the EU policies reflect coherent
paths of development, while focussing on the impressive diversity and intricacy of the
policy fields under study: Internal market, Common Agriculture Policy, Cohesion and
Regional Development Policy, Environmental Policy, Economic and Monetary Union,
Social and Employment Policy, Justice and Home Affairs, Common Foreign and
Security Policy and External Trade and Development Policy.

We have to point out that EU competences may be different from one policy area to
another. The Treaty establishing the EU Constitution gives a classification of EU
competences (Art. I-12 to I–18); this classification has already been established in the
past by ECJ judgements in the 1970s, 1980s and 1990s.

In the case of exclusive EU competences, the following policy areas are to be

mentioned:

z Customs union,
z Competition rules,
z Monetary policy in Euroland,

z Fisheries conservation policy,

z Common commercial policy.

In these areas, according to the Treaty establishing the EU Constitution the EU may
legislate and adopt legally binding acts.
In the case of shared EU/Member States’ competences, the following policy areas are to
be mentioned:
z Internal market,
z Social policy,

z Agriculture and fisheries,

z Environment,
z Transport,

z Energy,

z Freedom, security and justice.

Finally, according to the Treaty establishing the EU Constitution, the EU has the competence to carry
out supporting, coordinating or complementary actions in areas such as:
z Industry,

z Culture,

z Tourism,

z Education etc.

No harmonisation measures can be adopted in these fields.

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Chapter 2

2. THE BUDGET OF THE EU

The budget, without which the EU would be unable to function, is a source of both,
solidarity and tensions between the Member States. Tensions were clearly illustrated
again during the European Council of 16 and 17 June 2005 in Brussels when dealing
with the financial perspectives 2007-2013.

2.1. The Composition of the Budget: Expenditures

From 1958 to 1970 the Community budget was financed exclusively by contributions
from the Member States. In 1970, the Luxembourg European Council launched for the
first time a system of own resources for the general budget of the Community, which
started functioning in 1971. The aim was to increase the Community’s financial
independence from Member States’ transfers.

The financing of the EU, i.e. its ”own resources”, consists of four elements:

z Agricultural levies charged on the import of agricultural products from third

countries;
z Customs duties, which are levied on products from third countries;
z Contributions based on value added tax (VAT), which are calculated on the VAT

base of each Member State; and

z Gross national product (GNP)-related contributions, which are based on a

forecast of each Member State’s GNP1.

Other revenue is derived from surpluses from previous budget years and contributions
from European Economic Area (EEA) countries.

Revenue and expenditure must be in equilibrium, which means that no budget deficit is
allowed. Unforeseen expenditure which appears during the budget year must be
financed by an additional or amending budget.

The expenditure of the budget is divided into two categories. The first is “compulsory
expenditure”, which is the direct result of EU regulations for example and contributions
to the Common Agricultural Policy. The second is called “non-compulsory expenditure”
and concerns expenses covering structural funds or administrative costs.

1 GDP: the total market values of goods and services produced inside an economy during a given period of
time. GDP is divided into four categories: (1) consumer spending, (2) business and real estate investment, (3)
government spending and (4) trade deficit.
GNP= The total market value of goods and services produced during a given period by labor and capital
supplied by residents of a country, regardless of where the labor and capital are located. GNP differs from
GDP primarily by including the capital income that residents earn from investments abroad and excluding the
capital income that nonresidents earn from domestic investment.

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 Chapter 2

2.2. The Principles of the EU Budget

The EU budget is governed by several principles such as the principle of unity, which
means that all the EU’s revenue and expenditure must be brought together in a single
document. Secondly, the principle of annuality implies that budget operations relate to
a given budget year. Commitment appropriations refer to the total cost in the financial
year of operations to be performed. The payment appropriations cover expenditure, up
to the amount entered in the budget, resulting from the commitments entered into during
the financial year and/or previous financial years. Thirdly, the principle of equilibrium
requires that expenditure must not exceed revenue estimated for a financial year. No
funds may be borrowed to cover a budget deficit.

2.3. The Expenditures Headings – The Budget Items

The EU budget is divided into seven expenditure headings:

z The Common Agricultural Policy (CAP) is the largest budget item

(approximately 45 % of the total budget). Expenditures under this heading
finance on the one hand the market related measures such as the domestic
support, the export subsidies, and the direct payments to farmers (the first pillar
of the CAP) at 100% and on the other hand the measures related to rural
development (second pillar of the CAP) on the basis of co-financing. Are also
financed export subsidies for agricultural products to countries outside the EU
and measures for developing rural areas. The agricultural Council of 30 May
2005 reached an agreement on the establishment of two funds, one for the first
pillar which is called the European Agricultural Guarantee Fund (EAGF) and
one for the second pillar which is called the European Agricultural Fund for
Rural Development (EAFRD);
z The second expenditure heading is related to various types of structural

operations, supporting for example the underdeveloped regions of Europe, areas

affected by industrial decline, sparsely populated areas or measures to fight
unemployment;
z The third heading is internal policies such as investments in research and

technical development, education, culture, information society, social issues,

energy, the environment, consumer protection, the internal market, industry and
trans-European networks;
z The fourth expenditure heading is destined to external action including

cooperation with countries around the Mediterranean sea, in Central and Eastern
Europe, as well as developing countries in Latin America, Asia, Africa and the
Middle East. The money is also used for humanitarian aid and initiatives in
support of democratic development and respect for human rights.
z Appropriations of the Administration of the EU institutions represent the fifth

heading. These include salary and pension contributions for employees,

translations, construction and maintenance of buildings and costs for external
and internal EU offices;

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zThe sixth heading is related to the reserves which may only be used in special
contexts and for special needs for example, in case of disaster assistance;
Pre-accession aid represents the seventh expenditure heading and consists
amongst others of agricultural and structural support for applicant states (costs
for the PHARE programme, ISPA, SAPARD).

2.4. Political Implications of the EU Budget

Budgetary politics in the EU is marked not only by constant negotiations between the
institutions, but also between Member States. The clear cleavage over time is the one
between net contributors and net beneficiaries. Net contributor means that a country is
sending more to the EU budget than it is getting back through the process of
redistribution. Among the net contributors we can count Germany, the Netherlands,
Sweden, Austria, France and the United Kingdom. They usually ask for the reduction of
budgetary imbalances, arguing for budget austerity and changes to the system of
burden-sharing. On the other side, the main beneficiaries of the EU budget are
particularly the Mediterranean states and Ireland.

The question of budget negotiations for establishing the budgetary frameworks is

therefore very important in understanding how the EU functions and how the Member
States position themselves in this supranational arena. The issue of fair and just
treatment of Member States in the EU budget is not new. Former UK Prime Minister
Thatcher started already in the early 80’s to claim “her money back”. She succeeded to
convince the European Council in Fontainebleau in June 1984 to introduce a ‘correction
mechanism’, known as the ‘rebate system’. The principle underlying this mechanism
consisted in reimbursing to the UK 66% of its net VAT contribution to the EU budget.
The arguments in favour at that time were that the UK had the lowest income per capita
amongst the then Member States, with the exception of Ireland, and, as from 1981, of
Greece; the UK also had the largest share in the harmonised VAT base. Another
argument was related to the agriculture issue. Under the EU budget, agriculture then
accounted for more than 70% of the outlays while the agricultural sector in the UK was
much less extensive than on the continent. In 2003 the GNI per capita in the UK stood
at 111,2% of the EU average. In the enlarged EU, the UK rebate would reach substantial
amounts in the years ahead: 7,1 billion euros per year in 2007-2013 compared with 4,7
billion in 1997-2003. Such future increase in the rebate, if left uncorrected, is according
to Commission, as well as to most other Member States, no longer justifiable.

Reaching therefore unanimous agreement amongst the Member States about the budget
is a laborious process. In order to reduce disputes over each annual budget, the
European Council agreed in 1988 to fix a financial perspective which is a long term
spending plan which sets the frame in which the annual budget has to be integrated.
Such financial perspectives have been fixed by the European Council for the periods
1988-1992, 1993-1999 and 2000-2006. For the latter period the maximum possible
expenditures of the EU budget was fixed at 1,24% of the GNI of the EU (without taking
into account the European Development Fund). In February 2004 the European

32
 Chapter 2

Commission proposed the financial perspectives for the period 2007-2013 taking into
account all expenditures for the EU of 27 Member States.

In this context, the Commission took note of the position of the six above-mentioned net
contributors to the budget according to which they were not prepared to go beyond 1%
of the GNI of the EU. Accordingly, the Commission proposed a ceiling at a very modest
level of 1,14%. During the latest European Council meeting in Brussels (16/17 June
2005) no agreement was reached on these financial perspectives, although the
Luxemburg Presidency presented a compromise proposal at 1,06%. The ceiling was not
the only point of discontent but equally the UK rebate and the CAP expenditures. This
failure illustrates once again the complexity of the budgetary discussions.

2.5. The Budget Procedure

As for the budget procedure, on a yearly basis, the European Commission presents a
draft budget for the following year to the Council of Ministers. The figures of the
proposal are planned on the basis of calculations or estimates of the needs of the EU and
the common institutions as well as anticipated revenues and economic projections for
the future years to come. The Council of Ministers reviews the budget proposal and then
submits it to the EP. The EP has different ways of responding. It can decide on changes
to certain types of expenditure (the “non-compulsory” expenditures) and propose
changes to the Council of Ministers on the “compulsory” expenditures, which are those
following treaty obligations. The EP may also reject the entire budget proposal and
demand that the Commission presents a new proposal. It is the EP which finally decides
and adopts the budget in its entirety. The EU budget is managed by the Commission
which has to follow the rules laid down in the financial regulations. The European Court
of Auditors has the task of monitoring how the EU’s funds are used, both within the EU
institutions and in Member States. The annual report of the Court of Auditors as well as
the accounts and financial statements are examined by the European Parliament before
giving discharge to the Commission.

3. THE COMMON MARKET

When the EC was created, one of its main objectives was to support economic
development and guarantee prosperity in Europe. The common market was established
through the European Economic Community (EEC) Treaty which came into force in
1958. The signatories of the Treaty aimed at the elimination of trade barriers between
the 6 Member States at that time in order to enhance economic prosperity and further
advance towards ”an ever closer union among the peoples of Europe”. In a common
market national markets could function without any borders and impediments to
economic expansion. The customs union and the free movement of goods, services,
persons and capital between the Member States stayed therefore at the basis of the EU
common market.
The common market in the early days of the EEC covered the following areas: the free

33
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movement of goods, services, persons and capital, a customs union and a Common
Commercial Policy, a Common Competition Policy, a Common Agricultural and
Fisheries Policies and a Common Transport Policy.

According to the original plan, the deadline for establishing a common market was set
up by the end of 1969. The customs duties and tariffs were abolished within the EEC in
July 1968 - eighteen months ahead of schedule. However, the partially attained goal in
this area led the European Commission, under the charismatic guidance of Jacques
Delors, to draw up in 1985 a White Paper outlining concrete action for the completion
of the “Internal Market”. The White Paper contained a detailed programme of almost
300 legislative proposals aimed at removing all remaining border barriers between the
Member States. According to the White Paper, the restricting features that needed to be
changed in order to allow the single market to function properly were of three types:

z Physical barriers at the borders between Member States such as customs and
police controls;
z Technical barriers such as national rules for products and standards on goods, and

z Fiscal barriers between Member States such as taxation in the form of excise

duties and value-added tax on goods and services.

The Single European Act, which came into force on 1 July 1987 introduced changes to
the decision-making process and introduced the usage of QMV in the Council, which
meant that it finally became easier to carry out the programme of proposals presented
in the White Paper and thus enabled the EEC to accomplish the single market according
to the fixed time schedule. It was agreed that all legislative proposals of the White Paper
should be implemented by the end of 1992 so that the Internal Market could be
‘completed’ by 1 January 1993.

According to the evaluation of the Commission, after ten years of functioning the
Internal Market has reached important achievements but is facing still numerous
challenges2. The Commission highlighted different categories of achievements and
benefits:

z Creation of about 2.5 million jobs in the EU since 1992;

z A wider choice of high quality goods and services;
z Cheaper prices for goods;
z Lower telecommunications tariffs;

z The elimination of delivery times and reduction of costs due to the absence of

border bureaucracy and to the existence of the mutual recognition principle.

Nevertheless, despite these achievements, the Internal Market is not ‘completed’ and has
to cope with the latest developments and challenges ahead. In practical terms, after
enlargement, in May 2004, the challenge will be to ensure the effective operation of the
Internal Market and to remove existing barriers and prevent the emergence of new
barriers in a EU of 25 and soon 27 Member States. The second challenge is to meet the
2 See document on: http://europa.eu.int/comm/internal_market/10years/workingdoc_en.htm

34
 Chapter 2

Lisbon target of becoming the “most competitive and dynamic knowledge-based

economy in the world by 2010”.

4. COMMON AGRICULTURAL POLICY

The Common Agricultural Policy (CAP) generated the so-called ‘community method of
policy-making’, with an important role for supranational institutions such as the
European Commission. In general, the result of decisions taken in the field of the CAP
reflects the work of three main EU institutions: the Council of the European Union, the
European Parliament and the European Commission. The proper functioning of the
institutional triangle and the will and interests of the Member States are at the origin of
the development of this policy field, which became the symbol of intensified European
integration and transfer of national prerogatives to the supranational European level.

Initially, at the beginning of the EEC, the aims of the CAP were to:

z Increase agriculture productivity;

z Ensure thereby a fair standard of living for the agricultural population;
z Stabilise prices;
z Guarantee regular supplies;
z Ensure reasonable supplies to consumers.

The CAP was built to take account of:

z The special character of agriculture;

z The need to make adjustments slowly;:
z The importance of agriculture in the economy.

In order to achieve these objectives, the EU created an ample system of price guarantees
and other subsidies to farmers. The high costs and problems of overproduction have
called for reforms of the CAP. The problems of the (unreformed) CAP became obvious
over time:

zSurpluses (butter mountains, wine lakes etc);

z Internal trade relations;
z Some farm incomes unsatisfactory;
z Taxpayer burden;
z Environmental damage: price support encouraged intensification with high use of
chemical inputs and destruction of wildlife habitats; consumer food safety (mad
cow disease).

Among the successive reforms, one can mention the Mansholt Plan, the 1980s Reforms,
the 1992 MacSharry Reform, the Agenda 2000 and the Fischler Reform3. The pressures
for further reform were equally of external nature (e.g. the GATT trade negotiations
such as the Uruguay Round from 1986-1995; the CAP was and is still now constrained
by trade rules and by the pressures to cut EU price support and export subsidies) and
also linked to the enlargement to the Central and Eastern European countries. In this

35
Chapter 2

context of internal and external contestations of the CAP system, the Fischler Reforms
proposed to:
z Cut further the intervention prices;

z Give farmers compensation for loss of income (direct income support).

On 26 June 2003, EU farm ministers adopted the Fischler CAP reform. The key
elements refer to a single farm payment for EU farmers, independent from production.
This payment is linked to the respect of the environment, food safety, animal and plant
health and animal welfare standards. Other aspects are the increase of funding for the
rural development policy, the reduction in direct payments, the introduction of a
mechanism for financial discipline to ensure that the farm budget fixed until 2013 is not
exceeded, and important revisions to the market policy of the CAP through price cuts in
different sectors.

5. REGIONAL POLICY

5.1. The Aims

‘Economic and social cohesion’ was first introduced in the treaties with the Single
European Act in 1986. The aims of EU regional policy are:

z Reducing regional disparities;

z Convergence between Member States;
z Promoting good practice in regional development;

z Promoting good governance;

z Supporting/compensating for other EU policies.

5.2. The Principles

The 1988 Reforms are important for the evolution of this policy field because it is at that
time that the core policy principles were introduced:

z Additionality: Structural Funds must add to, not substitute Member States’ public
expenditures;
z Partnership: This principle assures the involvement of the regions, not just

national governments in formulating and implementing structural policy;

z Programming: The accent is put on planning and continuity rather than on ad hoc

activities;

z Concentration: The EU financial resources in structural funds concentrate on a

few major priority Objectives.

3 For an overview of reforms, see http://europa.eu.int/scadplus/leg/en/s04002.htm

36
 Chapter 2

5.3. The Objectives

Until 1999, there were 6 main Objectives, but they were reduced to three:

z Objective 1 redevelops regions with GDP of less than 75% of the EU average;
z Objective 2 assists regions affected by industrial decline and the redevelopment
of rural areas;
z Objective 3 assists in adapting and modernising education and training systems.

The European Commission’s Third Cohesion Report of February 2004 proposed a new
reformulation of the Objectives for the period 2007-2013, which were laid down in its
draft Regulation for Structural Funds Policy 2007-2013, as follows:

z First objective: Convergence and competitiveness (including regions less than

75% of EU 25 average GDP/head, statistical effect regions: less than 75% of EU
15 GDP/head but more than 75% of EU 25);
z Second objective: Regional competitiveness and employment (current objectives
2, 3);
z Third objective: European Territorial co-operation (interregional co-operation,
external cross-border co-operation).

This proposal should in principle be adopted around mid 2005 in order to leave
sufficient time to the Member States to prepare the programming documents during
2006 so that they could be implemented as from 1 January 2007. However, it might be
difficult to prepare such documents without knowing the financial envelope for
cohesion policy which is of course part of the financial perspectives 2007-2013.

5.4. The Instruments: The Structural Funds

The instruments of the Community in the sphere of economic and social cohesion are
represented by:

z The European Regional Development Fund;

z The European Social Fund;
z The European Agricultural Guidance and Guarantee Fund and the Financial

z Instrument for Fisheries Guidance;

z The Cohesion Fund.

The Cohesion fund is a special solidarity fund which helps to finance projects for the
environment and transport networks in those countries in which the GDP is below 90%
of the EU average (as regards the former EU-15 this concerned: Spain, Greece, Ireland
and Portugal).

Another category is represented by the Pre-accession instruments, which are aimed at

helping the future Member States to prepare for membership. They consist of three
funds:
z The Instrument for Structural Policies for Pre-Accession (ISPA);

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Chapter 2

z The Special Accession Programme for Agricultural and Rural Development

(SAPARD);
z PHARE.

5.5. The Actors and Decision-Making

The ‘Community method’ applies in this policy field, with the remark that QMV is not
the rule of game. In terms of decision making (art. 161 TEC), on a proposal of the
European Commission, the Council acts by unanimity after obtaining the assent of the
EP in order to determine the functioning aspects relating to both the Structural Funds
and the Cohesion fund. The Treaty of Nice changed this decision-making procedure.
Accordingly, from 1 January 2007, the Council will act by QMV in matters relating to
the Structural Funds and the Cohesion Fund.

6. ENVIRONMENTAL POLICY

6.1. History and Decision-Making

The protection of the environment is now a major concern at EU level, but, compared
to the economic and market oriented policies, this preoccupation has emerged rather
late. In the 1950s and 1960s, the cooperation on environmental issues was not a
Community concern and the advancements in the field were due to the important
leadership role of the ‘green’ states: Germany, Denmark and the Netherlands.

The main steps of this evolution and recognition of the importance of environmental
policy at the EU level came about with the occasion of a series of treaty changes. In the
Single European Act in 1986, the environmental policy was finally given a legal basis.
The Treaty of Maastricht in 1992 introduced QMV in the Council of Ministers and the
cooperation procedure (with the EP). And the Treaty of Amsterdam in 1997 extended
QMV and introduced the co-decision procedure enlarging considerably the scope of the
EU in the decision-making of environmental issues.

Additionally, through the Treaty of Amsterdam, the protection of environment became

one of the principles of the EU as stated in Article 2 TEC and in a general horizontal
clause in Article 6 TEC. We remark therefore the gradual ‘communitarisation’
(extension of the ‘Community method’) to environmental policy, which was at the
beginning a purely intergovernmental type of cooperation between the Member States.

6.2. The Instruments

As regards the instruments, we can quote:

z The so-called ‘Control and Command Approach’, which refers to the legislative
framework on environmental protection (EU directives and regulations in the
field of environment);
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 Chapter 2

zThe ‘symbolic and informal policy instruments’: The Community Action

Programmes on the Environment. For illustration, the Sixth Action Programme
for the Environment sets out the priorities for the European Community up to
2010. Four areas are emphasised: climate change, nature and biodiversity,
environment and health and the management of natural resources and waste.
These action programmes have a less restraining legal value. They only set up
frameworks and priorities for future actions in the Member States in the field of
environment. These Action Programmes started to be introduced in 1990s as a
solution for the numerous blockages in the field. The traditional legally binding
method through the adoption of EU regulations and directives proved to be
inefficient in the area of environment;
zThe new instruments and modes of policy-making: eco-labels, eco-audits

(environmental management system), voluntary agreements and variants of eco-

taxes4.

The Götheborg European Council (June 2001) approved the European Strategy for
sustainable development which refers to coordinated development of common policies
and a set of headline objectives to limit climate change and increase clean energy. In this
field the EU is working essentially with framework directives which have to be
translated into national legislation by the Member States. Another instrument has to be
mentioned: LIFE, which is an instrument financing projects designed to promote the
development and implementation of the EU’s environmental policy5.

6.3. The Actors

One of the main actors in this field at the EU level is the European Commission, which
is a key player at the level of policy-formulation. This means that the Commission has
the right of initiative and can thus propose legislation.

Other actors are the Council, the EP’s Environment Committee and the ECJ. Another
important actor is the European Environmental Agency, in Copenhagen, which was set
up to gather and disseminate comparable environmental data from the Member States.
Its role is advisory but its work conclusions helped in the adoption of new measures and
for assessing the impact of these decisions6.

And finally, but not lastly, the actors’ arena is completed by the presence of very active
environmental groups. These groups form ‘the Green 9’, which consists of nine leading
environmental non-governmental organisations (NGOs) active at EU level: BirdLife
International, Climate Action Network Europe (CAN-Europe), European Environment
Bureau (EEB), EPHA Environment Network (EEN), European Federation for Transport

4 See more explanations in Alberta Sbragia, “Environmental Policy: Economic Constraints and External
Pressures”, in Helen Wallace and William Wallace (eds.), Policy-Making in the European Union (fourth
Edition), Oxford: Oxford University Press, 2000, pp. 293-316.
5 LIFE website: http://europa.eu.int/comm/environment/life/news/index.htm
6 See for instance European Environment Agency, Europe’s environment: the third assessment,
Luxembourg: Office for Official Publications of the European Communities, Copenhagen 2003,
http://www.eea.eu.int.

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Chapter 2

and Environment (T&E), Friends of the Earth Europe (FoEE), Greenpeace,

International Friends of Nature (IFN) and World Wide Fund European Policy Office
(WWF-EPO).

In terms of international cooperation, according to the EU Treaty, one of the objectives

of EU policy on the environment is to promote measures at international level to deal
with regional or global environmental problems. The Community has been a party to
international conventions on environmental conservation since the 1970s7, and more
recently, the Community has also signed the Kyoto Protocol, which provides for
measures and commitments to reduce greenhouse gas emissions.

7. ECONOMIC AND MONETARY POLICY

7.1. Historical Evolution

The idea of convergence between the economies and currencies of the Member States
came more and more under discussion since the creation of the EEC and in 1970 the
Werner Report concretely proposed a scheme, which led to the set up of the European
Monetary System (EMS) in March 1979. The EMS was intended to decrease the
disparities in the exchange rates between the currencies of the Member States (the
system allowed fluctuation margins between 2.25% and 6%). Nevertheless, the system
proved to have numerous weak points aggravated by the instability of the US dollar. The
necessity to have a stable monetary area in the context of the completion of the single
market was reflected in the successive treaty reforms such as the Single European Act,
which pushed for further convergence between European economies. Following the
same line of evolution, in June 1989, at the Madrid European Council, Commission
President Jacques Delors presented a plan and a timetable for the creation of an
Economic and Monetary Union (EMU)8. This plan was later enshrined in the Maastricht
Treaty signed in February 1992. In the Maastricht Treaty several criteria are mentioned
which a Member State has to fulfil in order to qualify for the EMU (the so-called
‘Maastricht convergence criteria’):

z Inflation rate: not more than 1.5% above average of the best 3;
z Exchange rate: no devaluation within the Exchange Rate Mechanism (ERM) for
two or more years;
z Long-term interest rate: not more than 2% points above average of best 3;

7 Among the global Conventions are the Vienna Convention for the Protection of the Ozone Layer [Official
Journal L 297, 31.10.1988], its Montreal Protocol on Substances which Deplete the Ozone Layer [Official
Journal L 297, 31.10.1988], the UN Conventions on Biological Diversity and on Climate Change [Official
Journal L 33, 7.2.1994] and the Aarhus Convention on Access to Information and Justice.
8 The Timetable for the EMU:
March 1998: The Commission decided which countries fulfil the Maastricht criteria (Greece did not
but joined in 2001, Sweden expressed reserves, Denmark and the UK exercise opt-outs);
May 1998: The Council confirms 11 initial members of the EMU;
January 1999: The Euro is introduced for accounting;
January 2002: National notes and coins are replaced with Euros.
40
 Chapter 2

z Annual budget deficit: less than 3% GDP;

z Public debt not more than 60% GDP.

The EMU involves:

z A single currency (the Euro) which replaces national currencies and fixes a single
exchange rate with other currencies for instance the US dollar;
z A unified monetary policy with a single interest rate, a joint control of money

supply and joint control of the exchange rate;

z Free movement of capital;

z Coordinated tax policies;

z The creation of a common institutional frame such as the European Central Bank.

In terms of historical evolution, the European Council of Amsterdam, in June 1997 was
an important moment. Two important resolutions were adopted:

z The first, known as the Stability and Growth Pact (SGP), is a political agreement
laying down the rules for the budgetary behaviour of the Member States (no
excessive budget deficits). Currently, the SGP is emerging from an important
crisis. In 2004, the Commission took the Council to the ECJ on procedural
grounds after the latter failed to take measures against France and Germany for
constant defiance of the pact’s rules9. In this context of tension over the rules of
the pact, EU finance ministers found a compromise on reforms to the SGP at an
extraordinary meeting before the EU summit of heads of state and government
on 22 and 23 March 2005. In essence, the reform consists in the fact that France
and Germany have won concessions making the rules of pact more ‘flexible’. As
regards the new Member States, they are, at the present, attempting to join the
Euro zone and are making huge efforts to meet the rules of the SGP.
z The second resolution on economic growth emphasised the preoccupations of the

heads of state and government for the improvement of the employment situation
in the EU. The same trend was seen during the Luxembourg European Council
in December 1997, when a new resolution was adopted on coordinating
economic policies.

These steps reflect the determination at the level of the EU and its Member States to
push beyond a monetary union and to include a closer cooperation in additional aspects
related to budgetary, social and fiscal policies.

9 ECJ Judgment of 13 July 2004, Case C-27/04.

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Chapter 2

8. SOCIAL AND EMPLOYMENT POLICIES

8.1. Historical Evolution of Social Policy

Social policy was not one of the major preoccupations of the founding Member States.
The Treaty of Rome from 1957 only contained a few articles on issues linked to social
policy (especially the free movement of workers - Articles 39 to 42 EC Treaty). The
recognition of the importance of social affairs came with the successive treaty revisions,
especially with the Treaty of Maastricht, which strengthened the legal basis of social
policy and the adoption of the Protocol on Social Policy annexed to the Treaty. The
Protocol was fully incorporated into the Treaty with the Treaty of Amsterdam in 1997.

Accordingly, the EC can act to reach the objectives of social policy in the following
fields:
z Workers’ health and safety;

z Working conditions;

z Social security and social protection of workers;

z Protection of workers when their contract is terminated;

z Representation and collective defence of the interests of workers;

z Conditions of employment for third-country nationals;

z The integration of persons excluded from the labour market;

z The information and consultation of workers;

z Equality between men and women with regard to labour market opportunities and

treatment at work;
z Combating of social exclusions;

z Modernisation of social protection systems.

8.2. Actors and Decision-Making of Social Policy

Social Policy has elements of both ‘Community’ and ‘intergovernmental’ methods. The
general principle of decision-making in the area of Social Policy is QMV in the Council,
codecision with the EP and consultation with the Economic and Social Committee and
the Committee of the Regions. Unanimity within the Council is however required for
the adoption of legislative measures in the following areas:

z Social security and social protection;

z Protection of workers when their contract is terminated;
z Representation and collective defence of the interests of the workers;

z Conditions of employment of third-country citizens.

The fact that Member States keep having a veto power able to block the adoption of
legislative measures explains the slow development of Social Policy at EU level. In this
context, a ‘passerelle-clause’ was introduced by the Treaty of Nice in an attempt to make
progress in this field (article 137, paragraph 2 TEC). According to this clause, the
Council can decide by unanimity that in the future decisions on Social Policy issues will
42
 Chapter 2

be taken by QMV (except for the field of social protection and social security). No
progress has been made with the occasion of the drafting of the Constitution; the
provisions on the Social Policy remain practically unchanged.

8.3. Historical Evolution of Employment Policy

Even though the EU Employment Policy is supposed to be part of Social Policy, it has
an independent stand. A new employment title has been introduced in the EC Treaty
with the adoption of the Amsterdam Treaty in 1997. The next step was the organisation
of the Luxembourg Jobs Summit (November 1997), which initiated the European
Employment Strategy (EES). The EES is organised around the following components:
z The Employment Guidelines: the European Council agrees on an yearly basis

on a series of guidelines setting out common priorities for Member States’

employment policies following a proposal from the Commission;
z The National Action Plans (NAP): every Member State draws up an annual

National Action Plan which describes how these Guidelines are implemented
domestically;
z Joint Employment Report: The Commission and the Council examine each

National Action Plan and present a Joint Employment Report;

z Recommendations: The Council may issue, by QMV, country-specific

recommendations on the basis of proposals from the Commission.

Another important step of the evolution of this policy field was the Lisbon European
Council (March 2000), which set a new strategic goal for the EU for the next decade:
“to become the most competitive and dynamic knowledge-based economy in the world,
capable of sustainable economic growth with more and better jobs and greater social
cohesion”. The objective is to increase the overall EU employment rate to 70% and to
increase the number of women in employment to more than 60% by 2010. The
Stockholm Council (March 2001) and the Barcelona Council (March 2002) emphasised
that full employment is the main goal of the EU and reiterated its importance in the
context of the enlarged EU. In spite of all these high expectations in this domain, the
provisions on the EU’s employment policy remain practically unchanged in the Treaty
establishing a Constitution for Europe.

In the 1990s the ‘Open method of Coordination’ (OMC) was put forward as an answer
to slow progresses achieved as regards Social Policy developments. The OMC was seen
as a solution given the existence of too many national blockages at the EU level and the
difficulty to further broaden social competences with the classical ‘Community method’
(including the adoption of legally binding measures). Nevertheless, the OMC was called
into question by the Lisbon Strategy Review10. The most important criticism was related
to its low effectiveness in obtaining common European objectives through Member
States implementation of agreed commitments. The Kok Report from November 2004,
considered that benchmarking and peer review were too weak as incentives for Member
States policy delivery11.

10 See details on the review of the Commission: http://europa.eu.int/growthandjobs/reports/index_en.htm

11See all details on the Kok Report: http://europa.eu.int/growthandjobs/group/index_en.htm

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9. JUSTICE AND HOME AFFAIRS

9.1. Historical Evolution

The historical evolution of Justice and Home Affairs (JHA) shows that these issues have
been dealt with, for a long period of time, in a strictly intergovernmental manner.
Gradually however, the area of JHA has been integrated into the Treaties since the
Treaty of Maastricht in 1993.

Starting from 1999, six of the nine areas of JHA affairs were moved from the ‘third’ to
the ‘first pillar’ through the Treaty of Amsterdam, which created a dual situation. On the
one hand, there was a clear progress with the partial ‘communitarisation’ of JHA related
areas. On the other hand, the functioning and decision-making in this policy field
became rather complex and, too a certain extent, ambiguous given that JHA is ruled by
two working methods:

z Under the ‘first pillar’, decisions are taken according to the ‘Community method’
(i.e. the adoption of policies by the institutional triangle: Council, Commission,
EP; the central role of the Commission for proposing legislation and checking
the implementation; the possibility of QMV decision-making in the Council; the
binding character of adopted Community law; the role of the ECJ in case of
violation of Community law). The areas under the ‘first pillar’ are the following:
Visa, asylum, immigration, free movement of persons, and judicial cooperation
in civil matters (Title IV, articles 61-69 of the EC Treaty);
z Under the ‘third pillar’, decisions are taken according to the ‘intergovernmental

method’, which allows important power of manoeuvre for the Member States
since unanimity is the rule of the game. The areas under the ‘third pillar’ are the
following: judicial cooperation and police cooperation in criminal matters and
harmonisation of criminal law (Title VI, Article 29-32 of the EU Treaty).

9.2. Decision-Making

Decision-making in the area of freedom, security and justice gives a clear picture of how
the EU works in general in the system of the ‘three pillars’. Accordingly, a ‘passerelle
clause’ allows the Council, acting unanimously, to move actions in areas of the police and
judicial cooperation in criminal matters from the third to first pillar (full
‘communitarisation’ can only be possible through unanimity). This would imply more
power for the EP, judicial control for the ECJ and legislative initiative for the Commission.

The Treaty establishing a Constitution for Europe pushes the evolution in the field of
JHA towards full ‘communitarisation’ and introduces significant steps forward, in
particular the abolition of the ‘third pillar’ and the extension of the ‘Community
method’ to almost all aspects of this field. This implies the general application of
codecision (ordinary legislative procedure) and QMV. The current provisions are found
in a single chapter (Part III, Title III, Chapter IV). According to the Treaty establishing
a Constitution for Europe, the area of JHA shall remain shared competence.
44
 Chapter 2

10. COMMON FOREIGN AND SECURITY POLICY

10.1. Historical Evolution

The EU’s Common Foreign and Security Policy (CFSP) was formulated in the Treaty
on European Union (1993). The goal of the CFSP is that the EU shall ”assert its identity
on the international scene, in particular through the implementation of a common
foreign and security policy including the progressive framing of a common defence
policy, which might lead to a common defence”.

The common foreign policy covers all foreign policy issues of general interest with the
exception of the areas of the ‘first pillar’, especially as regards trade policy and
development cooperation. The common security policy refers to the Member States’
relationships with states outside the EU as well as coordination within international
organisations.

Confronted with the failures and the experience of the wars in the Balkans in the mid
1990s, the Member States agreed to further strengthen the CFSP. This trend became
obvious with the Franco-British St Malo Declaration in favour of a strong and
independent CFSP in December 1998. With the occasion of the Helsinki Summit, in
December 1999, the heads of state and government reaffirmed the need for “an
autonomous capacity to take decisions and, where NATO as a whole is not engaged, to
launch and conduct EU-led military operations in response to international crises“. To
this end, “Member States must be able, by 2003, to deploy within 60 days and sustain
for 1 year military forces of up to 50,000 – 60,000 persons capable of the full-range of
Petersberg tasks”. A series of new institutions were equally set in place such as the
Political and Security Committee, PSC or COPS, the EU Military Committee (EUMC)
and the EU Military Staff (EUMS).

As regards the changes in the Treaty establishing a Constitution for Europe, it has to be
said that the abolition of the pillar structure does not mean the elimination of the
‘intergovernmental’ nature of CFSP. At the institutional level, the text of the Treaty
establishing a Constitution for Europe introduces two significant elements:

z First, it creates the post of a Minister for Foreign Affairs (who is also one of the
Vice-Presidents of the European Commission), who will conduct and implement
the CFSP on behalf of the European Council. He/she will be responsible for
managing external relations and for coordinating other aspects of the Union’s
external action;
z Secondly, the text introduces the post of the President of the European Council who

shall guarantee the external representation of the EU on CFSP related issues.

According to the Treaty establishing a Constitution for Europe, the decision-making of

CFSP does not change. Decisions are taken prevalent by unanimity. The same is valid
for the Common Defence Policy, where any Member State can block any decision. In
addition (seen as a regress in the EU evolution), the Commission shall no longer be able
45
Chapter 2

to make proposals concerning the CFSP. It may, however, support an initiative of the
Minister for Foreign Affairs. Another interesting element is introduced: a ‘solidarity’
clause whereby the other Member States will provide assistance (including the military
resources made available by the Member States) if a Member State is the victim of a
terrorist attack or a natural or man-made disaster.

10.2. The Objectives

According to the EU Treaty, the objectives of the CFSP are to ”preserve peace and
strengthen international security”. As for the defence aspects of the CFSP, when the EU
decides to act (by unanimity), the measures it can take include the following aspects,
commonly known as the ‘Petersberg tasks’:

z Humanitarian actions and rescue operations;

z Peace-keeping operations: guarding a crisis area with military troops or police
after a cease-fire;
z International crisis management by military means.

10.3. Actors and Decision-Making

Since the CFSP is an ‘intergovernmental’ policy approach, it means the most important
players are the European Council and the Council of Ministers. The Commission may,
as any Member State, refer to the Council any question relating to CFSP and may
submit proposals to the Council - although it does not have the sole right to do so as in
Community matters. The EP receives regular information about developments and may
make recommendations.

The European Council (the heads of state and government of the EU Member States)
sets out principles and general guidelines for the CFSP and adopts common strategies
to be implemented by the EU in areas where the Member States have important interests
in common. The Council of Ministers (in this case the Ministers for Foreign Affairs of
the Member States) implements the adopted strategies by deciding on joint actions and
by adopting common positions. The Secretary-General of the Council of Ministers is
also the EU’s High Representative for the CFSP. He/she assists the Member State
holding the presidency in the formulation and implementation of CFSP decisions.
Another actor in the context of the CFSP is the ‘Troika’, a consultation group
representing the Union in international contexts. It is formed of:

z The Minister for Foreign Affairs of the Member State holding the EU presidency;
z The High Representative;
z The Minister for Foreign Affairs of the incoming holder of the EU presidency.

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 Chapter 2

11. EXTERNAL TRADE AND DEVELOPMENT POLICY

11.1. Historical Evolution of External Trade Policy

The EU is one of the most important players in international trade. The EU’s exports
rose from EUR 350 billion in the early 1990s to almost EUR 2000 billion in 200312.

In historical terms, external trade and development policy of the EU is related to the
establishment of a Common Commercial Policy. Accordingly, the EC Treaty states in
article 133: “The Common Commercial Policy shall be based on uniform principles,
particularly in regard to changes in tariff rates, the conclusion of tariff and trade
agreements, the achievement of uniformity in measures of liberalisation, export policy
and measures to protect trade such as those to be taken in case of dumping or subsidies”.

An additional article (art. 300 EC Treaty) has also been introduced for setting the
framework for external trade policy-making. According to this article, the Treaty grants
powers to the Community to conclude trade agreements with third countries on behalf
of all Member States in order to achieve greater coherence in the elaboration and the
implementation of all trade agreements with third countries. With the successive GATT
and WTO-negotiation rounds13, this international trade agenda enlarged substantially to
cover issues such as trade in services, investment rules, intellectual property rights and
environmental clauses.

11.2. Actors and Decision-Making

In international trade negotiations, the decision-making process follows a quite strict

and well-defined structure14, to a certain extent based on the ‘Community method’ of
decision-making. As stated in article 133 EC Treaty, there are 3 different stages in the
policy-making process:
z In the first stage, the most important actor is the Commission (mostly DG Trade
in cooperation with other DG’s following inter-service consultations) which
elaborates a proposal that is submitted to the Council in order to obtain a
negotiating mandate;

z Based on this proposal, the Council, usually in the foreign ministers formation,
formally determines the EU’s negotiating ‘mandate’ in the second stage and
authorises the Commission to start negotiations. A lot of preparation work in
relevant working groups (on Agriculture, Environment among others) of the
Council precedes the formulation of the mandate. The interaction between the
12 Eurostat, “Panorama of European Union Trade”, June 2003.
13 During the Uruguay Round of WTO negotiations (1986-1993), the EU was forced to give some important
concessions, notably in the field of trade in agricultural products, which resulted in successive reforms of the
Common Agriculture Policy; The Doha Round was initiated by the EU in 1999 and had a very ambitious agenda
going from market liberalisation in agricultural and industrial goods to intellectual property rights and above
all measures necessary to integrate developing countries into the world trading system.
14 We will look here at the decision-making process for the negotiation of trade agreements, which is by far the most
important part of the EU’s external trade policy. For autonomous trade measures, such as anti-dumping procedures
or the implementation of safeguard-measures, a different decision-making process prevails, with a more important
role attributed to the Commission.
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Chapter 2

Commission and the Council continues after the mandate is adopted. During the
negotiations the Commission is obliged to consult a specific committee installed
by the Council on a regular basis. This very influential Committee (the so-called
‘Article 133 Committee’) consists of high representatives of national Ministries
of Trade. This Committee provides the Commission, during the whole
negotiation process, with guidelines on how to conduct the negotiations and is an
effective control mechanism of the actions of the Commission.
z For the adoption of a trade agreement, QMV in the Council is needed for
agreements where an exclusive community competence exists. Unanimity is
needed for the so-called “mixed” agreements on issues covered by shared
competence of the EC and the Member States15.

The role of the EP in trade policy-making is quite limited. The EP is informed about the
course of negotiations of international agreements but its opinion is only important
when association-agreements with third countries have to be adopted (art. 310 EC
Treaty) or when agreements are negotiated which have institutional or budgetary
implications. In this case the EP has to give its assent to these agreements before they
can enter into force. The Treaty establishing a Constitution for Europe tries to
compensate this lack of ‘democratic legitimacy’ and accountability by proposing that
the EP has to give its formal assent for all trade agreements and not only for association
agreements.

11.3. The Instruments

Another important aspect that needs to be mentioned is the distinction between the EU’s
autonomous trade measures and the EU’s bilateral and multilateral agreements.

The autonomous trade measures represent instruments of commercial defence and

consist of antidumping-duties, countervailing duties, safeguard measures and other
trade remedies that are applied unilaterally in order to defend EU industries against
‘unfair’ trade practice of the EU’s trading partners.

Secondly, there are to be mentioned the EU’s bilateral and multilateral trade
agreements16. In recent years the EU has been very active in the negotiation of bilateral
agreements and on multi-lateral agreements within the WTO.

The EU’s bilateral agreements pursue a wide range of objectives: economic benefits,
foreign policy objectives, objectives of development aid. This results of course in a wide
range of agreements, some of them liberalising trade (Free Trade Areas), and others
limiting themselves to economic cooperation. Some agreements go clearly beyond trade
(association agreements) and others just aim to grant unilateral preferences to countries
with specific needs (e.g. the Generalised System of Preferences).

15 For the implementation of anti-dumping procedures and safeguard measures only a normal majority is needed
16 Examples of the EU’s bilateral agreements are with individual trading partners (e.g. South Africa) or with
regional groupings of countries (e.g. ASEAN)..

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 Chapter 2

11.4. Historical Evolution of Development Policy

The EU’s role as a strong actor in the international scene is not limited to its position in
international trade. Apart from the fact that the EU is a strong economic power, one
should note that the EU (and its Member States) is the world’s biggest provider in
official development aid.

The concept of Development Policy has been integrated in articles 177-181 of the EC
Treaty and determines the most important characteristics of the EU’s Development
Policy. First of all, Development Policy is an ‘additional’ policy: the EU’s action in
development aid must complete (and not replace) the Member States development aid
policies in order to achieve greater coherence, efficiency and efficacy. Secondly, the
Treaty articles set out 3 equally important objectives for the EU’s Development Policy:
harmonious social and economic development, integration of developing countries in
international trade and poverty reduction.

11.5. The Instruments

Some of these objectives are partially pursued through bilateral trade agreements, as for
instance the Economic Partnership Agreements in the framework of the Cotonou
Agreement with the ACP-countries (Africa, Caribbean and Pacific). Others are financed
by the European Development Fund (EDF): an autonomous European fund for
development aid consisting of proportional contributions from individual Member
States. In the projects financed by the EDF, the EU tries to differentiate itself from the
individual Member States in its development policy, by pursuing specific objectives and
developing its own expertise of development aid: trade capacity building, regional
integration, and support for sustainable access to social service, transport infrastructure,
food security and institutional capacity building17.

11.6. The Actors

One actor is the Commission’s DG Development, which manages and monitors the
programming of aid in the ACP countries and the Overseas Countries and Territories
(OCT). Another actor is the EuropeAid Co-operation Office. Its mission is to implement
the external aid instruments of the European Commission which are funded by the
European Community budget and the EDF. It does not deal with pre-accession aid
programmes (PHARE, ISPA and SAPARD) or with humanitarian activities18. Finally,
another actor is the Humanitarian Aid Office of the European Commission (ECHO) that
played recently an important role in the EU’s reaction to the recent Tsunami disaster in
South East Asia19.

17 The European Union’s development policy, statement by the Council and the European Commission,
January 2002
18 Europeaid website: http://europa.eu.int/comm/europeaid/index_en.htm
19 ECHO website: http://europa.eu.int/comm/echo/index_en.htm

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Chapter 2

12. CONCLUSIONS
The overview of these policies shows that the EU policy process has different modes of
operating and reacts and evolves according to both internal Member-States’ interests’,
expectations and ideas and external actors and institutional configurations. The
accession of new Member States adds to the complexity of this European policy
process. New Member States need to get accustomed to the internal functioning of the
EU in order to understand the nature of the decision-making process. In the near future,
we will witness a period of mutual learning and accommodation, which will slow down,
for a certain period, the EU’s internal institutional deepening (institutional reforms) and
further widening (enlargement).

At the beginning, the European integration process had political aims, peace, security
and stability. It was the idea to reach these political goals through economic means by
the creation of welfare and prosperity through the establishment of a customs union
first, an internal market afterwards and a monetary union at last. Today peace and
security inside the EU are taken for granted. Along the path of this integration process,
the EU became an economic giant, but remained quite often divided in the field of
international politics and international security (see the internal crisis provoked by the
Iraqi war) and therefore clearly demonstrated that it was at the same time a political
dwarf and a military butterfly.

Referring to the negative results of the referenda on the Constitution we may say that
Europe is changing and showing signs of a temporary blockage period in the history of
the EU, which will lead to new negotiations and new reflection on the next steps to be
taken on the path of European integration.

The European Union remains the most successful voluntary integration process of the
20th century. However, it is internationally perceived as unstable and internally as not
fully democratic. The paradox is, according to the referenda results, that public opinion
is afraid of globalisation and enlargement while deepening and widening of the EU are
the only valid answers to the risks of globalisation.

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 Chapter 3

CHAPTER 3
TRANSPOSITION AND IMPLEMENTATION OF EC DIRECTIVES
AND EC CONTROL OF CORRECT IMPLEMENTATION OF EC LAW
- EXPERIENCES OF FRANCE

François Brillanceau*

1. THE BASIC PRINCIPLES OF EU LEGISLATION

The transposition process of EU Directives cannot be dealt with, without taking account
of several basic principles of EU legislation. Those basic principles derive from both,
the EC Treaty and the European Court of Justice (ECJ) case law:

z Deadline

A Directive has to be transposed by the EU Member States within the deadline set by
the Directive itself, otherwise leading to an infringement procedure launched against the
Member State. Member States are not obliged to adopt transposing measures before the
deadline but, according to ECJ case law, they must refrain from taking any measure,
which may seriously compromise the result prescribed by the Directive1.

z Quality of transposition
When Member States have to transpose a Directive, the choice of the form and methods
is left to the national authorities (see wording of Article 249 of the EC Treaty). Provided
that certain conditions are met, the existence of general principles of constitutional or
administrative law may render the implementation by specific legislation superfluous.
However, the transposing measures need to be sufficiently precise and clear3. The
national measures must take the form of a legally binding instrument and, consequently,
mere administrative practises are prohibited4.

z Principles of “supremacy” and “direct effect”

In the early 1960ies, the ECJ has developed two principles, which rule the relation
between EC law and national law of the Member States: the principles of “direct effect”
and of “supremacy”. These two principles derive from the very nature of the EC Treaty,
which, according to the ECJ5, has set up a “new legal order” of international law to
which Member States and their nationals are subjects.

* Legal Adviser in European Law at the Ministries of Health, Social Affairs, Labour and Employment, Paris,
France.
1 See Case 129/96, Inter-Environnement Wallonie ASBL contre Région wallonne. The Court Cases mentioned
can be found on the Court of Justice Website http://curia.eu.int/en/content/juris/index.htm or on Celex
http://europa.eu.int/celex/htm/celex_en.htm
2 See Case C 29/84, Commission/Germany.
3 See Case C 291/84, Commission/the Netherlands.
4 See Case C 102/79, Commission/Belgium and Case C 239/95 - Commission/Belgium
5 See Case 26/62, Van Gend en Loos / Administratie der Belastingen.

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According to the principle of “direct effect“6, a provision of the EC Treaty or a

secondary legislative act (regulation, directive or decision) which confers rights on
individuals can - under certain conditions - directly be invoked by those individuals
before their national courts7. According to the ECJ case law, the national judge has the
duty to ensure effectively those rights. The idea behind the principle of “direct effect”
is first of all to protect individual rights. It also guarantees an effective implementation
of EC law in the national legal orders through national courts and individuals, which are
eager to have their rights respected. An EC provision may produce a “direct effect” only
if it is clear and unconditional8. The “direct effect” may be raised by individuals before
a national court against a Member State (so-called “vertical direct effect”)9 or against
another citizen (so-called “horizontal direct effect”). The latter case however does not
apply to provisions of Directives10.

In order for the individuals to benefit from the “direct effect” of provision of EC
legislation, there must be a guarantee that the national court will give priority to EC law
rather than to national law. According to the principle of “supremacy”, whenever EC
legislation is adopted, it will have precedence over domestic laws11. The principle of
supremacy refers to all EC law irrespective of its nature: Treaty provisions, secondary
legislation (mainly directives, regulations and decisions), international agreements and
general principles of EC law. EC law prevails over all national law, regional and local
norms and also over the Member States’ Constitutions. EC law also binds every level of
national authorities: the judge must not give effect to a national measure contrary to EC
law and the administration must not apply national measures contrary to EC law. The
legislature will have to repeal such measures.

z “Consistent interpretation” principle (“principe d’interprétation conforme”)

In case of doubt concerning the interpretation of a national legislation, a national court
is required to interpret its national law in the light of the wording of a relevant EC
Directive12. This obligation applies in cases national provisions in question were
adopted before or after the EC Directive and when the legal proceedings before the
national Court are “vertical” or “horizontal”13; it applies also even if the national
measure only applies during a transitory period or if the interpretation concerns national
case law.

6 The principle of “direct effect” should not be mixed up with the principle of “direct applicability”. “Direct
applicability” in the framework of EC law means that the Member States do not need, and shall refrain from,
intervening to give legal effect to the legislation; this means a measure which is “directly applicable” does not
need to be transposed. This obligation is clearly established for “regulations” which are, according to the
wording of the EC Treaty, “directly applicable”. Regulations become applicable ”without further enactment”
(e.g. the adoption of a national legal transposition measure) as they are already part of the Member States legal
order. Despite the fact that regulations shall not be transposed, they still need of course to be implemented.
7 See Case 26/62, Van Gend en Loos / Administratie der Belastingen.
8 See Case 26/62, Van Gend en Loos/ Administratie der Belastingen.
9 See for instance Case C 148/78, Ratti.
10 See Case C-152/84, Marshall/ Southampton and South-West Hampshire Area Health Authority.
11 See Case 6/64, Costa/E.N.E.L.
12 See Case C 14/83, Van Colson et Kamann / Land Nordrhein-Westfalen.
13 See Case C-106/89, Marleasing/ Comercial Internacional de Alimentación.

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 Chapter 3

2. THE TRANSPOSITION PROCESS OF EC DIRECTIVES IN FRANCE

The adoption of national measures in order to transpose EC Directives is necessarily

linked to the negotiation of EC Directives. Indeed, the outcome of the negotiation of a
Directive will greatly influence the task of transposing this Directive. The reason is
obvious, as a Directive that has not been properly negotiated by a Member States may
lead to great difficulties when this Member States has to transpose it. Consequently, the
transposition must be prepared, in parallel with the negotiation.

Three main consequences arise from this clear need of continuity between the
negotiation and the transposition stages:

z The civil servants in charge of drafting the transposing measures must be

involved as early as possible in the negotiation step. An appropriate co-
ordination between the different positions defended at national level is also very
important;

z It is important to identify as earlier as possible, the potential political difficulties

that may arise in the course of the transposition process. This task, which will
determine the negotiation positions, implies that an assessment of the impact of
the proposed directive with the Member State is done.

z A global vision of the technical and legal consequences of a set of provisions is

necessary, especially when ‘technical’ Directives are negotiated. Both aspects
have to be dealt with in parallel in order to avoid unrealistic provisions from a
technical or a legal point of view. A constant co-ordination between
scientific/technical and legal specialists is thus crucial.

2.1. Continuity between negotiation and transposition in practice

z Continuity from an organisational point of view

In France, the negotiation positions of the different ministerial departments are
previously discussed at an internal level by the SGCI, which is the Prime Minister
department in charge of co-ordinating the French position on EU policies. This means
that the French position defended at EU level will be previously examined internally
during inter-ministerial meetings organised by the SGCI. This requires that the
competent ministerial departments concerned by the matters covered by a proposal for
a Directive are defined as soon as the proposal is adopted by the Commission. In case
of difficulties in reaching an agreement on the French position, the Prime Minister’s
Cabinet organises a meeting in order to decide about the French position, which will
then be defended at EU level by the French Permanent Representation in Brussels.
Usually, the ministerial departments, which will be in charge of the transposition, attend
the Council of Ministers’ meetings.

In case continuity between the negotiation stage and the transposition stage appears to
be difficult to realise, it is necessary to ensure at least that the civil servant in charge of
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Chapter 3

the transposition is able to identify the negotiator of the directive. In case of doubt
concerning the exact meaning of a directive provision, he/she will be then able to obtain
necessary clarifications.

z Impact assessment of a proposal

Once a proposal for a directive is adopted by the Commission, there is a clear need to
identify the potential impact of the proposed directive from a political and legal and
other point of views. This impact assessment will be useful not only in the context of
the negotiation itself, but also in order to identify well in advance, the potential
difficulties that may arise during the transposition process.

The United Kingdom Administration has developed a very comprehensive tool in order
to measure the likely impacts of a policy change and the range of options for
implementing it14. This tool is called the “Regulatory Impact Assessment” (RIA) and
is currently used for any type of new legislation, including EU Directive proposals. In
the particular case of EU Directives, a RIA aims at defining the potential impact of a
Directive proposal and, consequently, the negotiation positions that can be taken by the
United Kingdom Government.

In France, an impact assessment is usually done within three months following the
publication of a proposal for a directive by the Commission. This “simplified impact
assessment fiche” has to be filled in by the competent ministerial departments. It will
be forwarded to the SGCI and then to the competent committees of the Parliament.

As the proposal may change in the course of the negotiation process, the “impact
assessment fiche” has to be updated regularly. The fiche should provide the following
information:

z The context in which the Directive is proposed (overview of the existing EU

legislation, reasons why the proposal is made, etc);
z The existing national legislation in the matters covered by the Directive proposal;

z The proposal’s contribution to the existing national legislation;

z The acceptable and unacceptable aspects of the proposal;

z The national regulations that would need to be modified if the Directive proposal

is adopted.

In practice, the need to identify the potential impact from a legal point of view (which
national regulations need to be amended) is rather easy to do.
The assessment of the potential consequences of the proposal from a social,
economical and environmental point of view will depend on the content of the
Directive proposal:

o In case where the content of the Directive proposal complies with already existing
14 See Website of the UK Cabinet Office and especially the following link:

http://www.cabinetoffice.gov.uk/regulation/ria/index.asp

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 Chapter 3

national legislation or does not provide for stricter obligations than those
contained in the relevant national legislation, the assessment will raise no
difficulties;
o Such an assessment becomes difficult when a proposal obliges Member States to

review their national legislation in several fields. The ongoing negotiations

concerning the “services in the internal market” directive15 have shown the need
to analyse the impact on the national authorisation systems as well as the
potential impact of the proposed “country of origin” principle.

2.2. The transposition process and its monitoring at national level

The technical work of transposition should start as soon as the Directive has been
definitely adopted, in order to deliver the transposing measures on time. The task of
transposing a Directive requires relying on specific tools in order to be able to cope with
potential difficulties (legal or administrative). Those tools are either of an organisational
nature or of a technical nature (support documents).

z Difficulties met during the transposition process and possible tools

that can be used
When transposing EC Directives, Member States frequently have problems in
identifying and solving the legal and administrative difficulties in order to deliver the
transposing measures on time:

– Legal difficulties concern the need to define what type of legal instruments
(law or decree for instance) is required in order to transpose a Directive. The type
of instrument needed will greatly influence the foreseen schedule of adoption of
the transposing measures;
– Administrative difficulties concern problems to anticipate possible conflicts
between different ministerial departments. For instance, task-sharing problems
between different ministerial departments may arise during the transposition
process.

In theory, those difficulties should be identified and solved during the negotiation
process. Sometimes however, a common position defined at national level and
successfully supported before the Council during the negotiation process may be
ambiguous because it is the result of internal compromises. In such a situation, heavy
discussions at the national level will probably start again when transposing the directive.

15 This proposal, which aims at achieving the internal market of services, is meant to facilitate the provision
of services. In particular, this proposal imposes on the Member States the obligation to review their national
legislation concerning prior authorisations (prohibition of unjustified authorisations required for establishing
oneself in another Member State). The proposal promotes a new principle in order to facilitate cross-border
provision of services, the “country of origin” principle. According to this principle, the service provider’s
national legislation prevails over the legislation of the Member State, which is ‘hosting’ the provider
(including labour legislation, legislation linked to consumer protection, etc.).
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Chapter 3

In order to cope with those difficulties, several tools are used in France16:
– The table of correspondence: Once the directive is adopted, the competent
ministerial departments involved in the transposition shall provide the SGCI with
a table of correspondence, which describes both, the provisions that need to be
transposed, and the French legislation requiring to be amended. It will also help
to determine which provisions do not need to be transposed;

– The draft transposing measures: as far as practicable, the competent

ministerial departments shall be able to define the broad lines of the transposition
measures that are needed;

– Draft schedule of adoption: each ministerial department shall be able to

describe the foreseen calendar of adoption of the transposing measures.

The three above-mentioned documents have to be delivered to the SGCI not later than
three months after the adoption of the Directive. A meeting is then organised in order to
determine the responsibilities of the different ministerial departments involved in the
transposition. In case of conflicts between ministerial departments, solutions have to be
found at the SGCI level (meetings) or else at the Prime Minister’s Cabinet level.

z The need for a monitoring of the transposition process at a national level

The monitoring of the transposition processes at national level proves to be necessary,

not only in order to avoid being late in delivering the transposing measures but also
because the internal market scoreboard of the Commission, which is regularly updated
and published, clearly shows the Member States which are fulfilling their obligations
and those which are late17.

In order to improve bad results in transposing directives on time, the French monitoring
system was modified in September 2004 by a circular letter18. The current system relies
on the need to ensure a greater involvement of the different actors at political,
administrative and parliamentary levels.
– Political level: According to the circular letter each Minister has a responsibility
in the transposing process. Consequently, the Council of Ministers periodically
examines the list of the Directives which are not transposed in due time. Each
ministerial department designates a member of Cabinet responsible for the
follow up of the transposition process.

16 As far as the transposition process is concerned, all Member States are more or less confronted with a lack
of political willingness and/or a slow and inadequate legislative process. Several other difficulties are
currently pointed out in France: compulsory consultations of specialised committees when drafting the
transposing measures which slow down the process; the competence of several ministerial departments tend
to complicate the drafting and the adoption of transposing measures; the frequent adoption of stricter rules
than the provisions of the Directive.
17 Comprehensive information can be found under the following links :
http://europa.eu.int/comm/internal_market/score/index_en.
http ://europa.eu.int/comm/secretariat_general/sgb/droit_com/index_en.htm
18 http://www.legifrance.gouv.fr/WAspad/UnTexteDeJorf?numjo=PRMX0407654C

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– Administrative level: A high ranked civil servant is designated in each ministry

in order to ensure the follow up of both the negotiation stage and the transposing
process for all directives falling under the responsibility of the concerned
ministry. Regular follow-up meetings are organised, at least, every three months
at two levels:
o The SGCI meetings involve the high ranked civil servants who are

designated or their assistants, in order to review all the ongoing

transpositions. During these meetings all difficulties met in the context of
the transposition process have to be discusses, and if, possible, solved;
o The General Secretariat of the Government (SGG) meetings involve the

high rank civil servants and the members of Cabinet designated for the
follow up of the transposition process. These meetings, which mainly
focus on the directives for which there is a delay in adopting the
transposition measures, are useful in order to lift remaining technical and
administrative difficulties.

– Parliamentary level: The new circular letter provides three types of solutions in
order to speed up the adoption process before the Parliament:
o One afternoon per month is now dedicated to the adoption of legislation

required for transposing EC Directives;

o Every three months, a law containing transposing provisions is submitted

to the Parliament;
o The possibility to organise simplified procedures for adopting transposing

measures is under assessment (however, this requires a modification of

the Constitution).

The correct and timeliness transposition of Directives into national law is also of great
concern for the Commission. In its recently published Recommendation of 12 July 2004
on the transposition into national law of Directives affecting the internal market19, the
Commission recommends to the Member States to take account of several priorities.

3. HANDLING INFRINGEMENT PROCEDURES PROVIDED BY

ARTICLES 226 AND 228 OF THE EC TREATY

In its role of Guardian of the Treaties, the Commission has to ensure that EU legislation
is correctly transposed and applied by the Member States. The Commission and the
Member States have to commit themselves to co-operate together in order to fulfil their
respective competences and obligations20. However, if such co-operation fails to reach
its objectives, the Commission can initiate an infringement procedure under Articles
226 and 228 of the EC Treaty against a Member State, which has failed to fulfil its
obligations under the EC Treaty.
19http://europa.eu.int/eurlex/lex/LexUriServ/site/en/oj/2005/l_098/l_09820050416en00470052.pdf
20 See in particular the Commission Communication of 16/05/2003 on Better monitoring of the application of

Community law (COM (2002) 725 final).

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3.1. The main features and actors of the infringement procedure under
Article 226 and Article 228 of the EC Treaty

The Article 22621 infringement procedure is an important tool to ensure the correct
application of EC law. It is initiated by the Commission against a Member State, which
has failed to fulfil an obligation deriving from EC law (EC Treaty and secondary
legislation). As regards the obligation of transposition of EC Directives, there are
different types of failure to fulfil obligations deriving from EU legislation:

z The ‘non-communication case’: This concerns the failure of a Member State to

communicate the transposing measures;
z The ‘non-conformity case’: This concerns the case where a Directive is not

correctly transposed for instance;

z The ‘bad-application’ case: This concerns the case where a Directive is correctly
transposed but not correctly applied (implemented).

The infringement procedure under Article 226 EC Treaty involves three actors (the
Commission, the Member State and the European Court of Justice) and goes along two
major formalised steps:

z A pre-litigation phase, during which a dialogue is engaged between the Member

State and the Commission in order to solve the breach.

z A litigation phase, which is initiated by the Commission and which may end in
a judgement by the ECJ. In case the Member State concerned fails to comply
with the Commission’s opinion defining the Member States infringement and the
measures the Member State has to take in order to stop the infringement, the
Commission may bring the matter before the ECJ.

An infringement case may be opened at the Commission’s services own initiative (e.g.
an inquiry has revealed a possible breach), on the basis of a complaint lodged by an
individual before the Commission or before the petition committee of the European
Parliament. In the two latter cases an assessment is made by the Commission, which
will decide about further actions and the opening of the 226 procedure.

Before the pre-litigation phase, an informal dialogue by means of an exchange of letters

may be engaged between the Commission and the Member State. This ‘inquiry step’
which is optional will help the Commission to determine whether the case concerns or
not an infringement of EC law and consequently if the Commission has competence to
deal with it and, eventually, whether the infringement – according to the Commission –
actually exists or not.

21 Article 226: “If the Commission considers that a Member State has failed to fulfil an obligation under this
Treaty, it shall deliver a reasoned opinion on the matter after giving the State concerned the opportunity to
submit its observations. If the State concerned does not comply with the opinion within the period laid down
by the Commission, the latter may bring the matter before the Court of Justice”.
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3.2. The pre-litigation phase

The main purpose of the pre-litigation phase is to give the Member State the opportunity
to comply with its obligations under EC law or to avail itself of the right to defend
against the complaints made by the Commission22. This phase ensures that essential
guarantees required by the EC Treaty in order to protect the rights of the Member State
concerned are preserved; it also helps to define the exact subject matter of the litigation
phase.

It involves two formalised steps:

z The sending of a letter of formal notice by the Commission. This letter aims at
defining the alleged infringement and gives the opportunity to the Member State
concerned to submit its observations concerning the issue at stake in the
infringement procedure23;

z The sending of a reasoned opinion by the Commission in case the explanations

given by the Member State in the reply to the letter of formal notice are not
considered satisfactory by the Commission24. Eventually, if the Commission
finds out new grounds during the infringement procedure, it will have to issue a
complementary letter of formal notice or a complementary reasoned opinion.

It is worth noting that other decisions may need to be taken during the procedure (e.g.
the need to decide to postpone the case, to decide on the authorisation of contacts, on
the size of the Court, on the closure of the case etc). Additionally, every single decision
taken during the pre-litigation phase requires a Commission decision (principle of
collegiality of the decision making process). The Commission has discretionary power
to continue or to put an end to the procedure at any time during the pre-litigation phase.

3.3. The litigation phase

Following the reply to the reasoned opinion, the conflict between the Commission and
a Member State may persist. The Commission will then decide to lodge an application
before the ECJ. The objective is to have clearly stated by the ECJ the Member State’s

22 See for instance Case C-1/00, Commission/France.

23 See the Court’s definition of the letter of formal notice (Case C 230/99, Commission/France): “(…) it
follows from the function assigned to the pre-litigation stage of proceedings for failure of a State to fulfil its
obligations that the purpose of the letter of formal notice is, first, to delimit the subject-matter of the dispute
and to indicate to the Member State, which is invited to submit its observations, the factors enabling it to
prepare its defence and, second, to enable the Member State to comply before proceedings are brought before
the Court”.
24 For the ECJ’s definition of the reasoned opinion (Case 74/82, Commission v Ireland [1984] ECR 317,
paragraph 13): “(…) In issuing a reasoned opinion, the Commission formally sets out its position with regard
to the legal position of the Member State concerned. Moreover, by formally stating the infringement of the
Treaty with which the Member State concerned is charged, the reasoned opinion concludes the pre-litigation
procedure (…)”.

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failure to fulfil its obligations25. This is in compliance with the judicial competence of
the ECJ, which has to ensure that EC law is not interpreted and applied differently from
one Member State to another and that the EC legal system remains a Community system
that is always identical for all circumstances.

If the ECJ considers that EC legislation has been infringed, the Member State has to
fulfil its obligations.

As soon as an ECJ Decision declares that a Member State has failed to fulfil its
obligations, the Commission automatically launches an action under the Article 228
procedure26. This action is based on the ground that, by failing to take the necessary
measures to put an end to the breach declared by the Court, the Member State concerned
fails to comply with the ECJ decision.

The Article 228 infringement procedure is similar to the pre-litigation phase under
Article 226 of the EC Treaty (letter of formal notice, reasoned opinion, litigation phase).
Upon request of the Commission, the ECJ may impose financial penalties on the
Member State, which has failed to fulfil the ECJ judgement.

3.4. Handling infringement procedures in France

In order to cope with infringement procedures from an organisational point of view, an

important difference has to be made between, on the one hand, the pre-litigation phase
under Article 226 and, on the other hand, the litigation phase of the Article 226
procedure and the pre-litigation phase of the Article 228 procedure:

– Pre-litigation phase under Article 226 of the Treaty: The drafting of the replies
to the Commission involves the ministerial department(s) concerned by the
infringement. The SGCI co-ordinates the replies if necessary and sends the
French position to the French Permanent Representation. The reply is then
communicated to the Commission.
–Litigation phase under Article 226 procedure and the pre-litigation phase
under Article 228 procedure: The different stakes require different procedures.
Since the issue becomes important for potential legal or financial reasons, the
content of the reply and the strategy must be carefully checked. That is why three
25 As in any national courts, the procedure before the ECJ starts by a written stage followed by an oral stage.
26 Article 228: “If the Court of Justice finds that a Member State has failed to fulfil an obligation under this
Treaty, the State shall be required to take the necessary measures to comply with the judgment of the Court
of Justice. If the Commission considers that the Member State concerned has not taken such measures it shall,
after giving that State the opportunity to submit its observations, issue a reasoned opinion specifying the
points on which the Member State concerned has not complied with the judgment of the Court of Justice. If
the Member State concerned fails to take the necessary measures to comply with the Court’s judgment within
the time limit laid down by the Commission, the latter may bring the case before the Court of Justice. In so
doing it shall specify the amount of the lump sum or penalty payment to be paid by the Member State
concerned which it considers appropriate in the circumstances. If the Court of Justice finds that the Member
State concerned has not complied with its judgment it may impose a lump sum or penalty payment on it (….) “

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actors are involved: the legal service of the SGCI (co-ordination), the competent
departments of the ministries concerned (technical expertise) and the legal
department of the ministry for foreign affairs (EU legislation specialists).

4. THE REFERENCE FOR A PRELIMINARY RULING – ARTICLE 234

OF THE EC TREATY27

The ECJ is the supreme guardian of Community legality. However, it is not the only
judicial body empowered to review the application of EC law. National courts are also
concerned by secondary legislation (regulations, directives and decisions) since those
provisions may directly confer individual rights on nationals of Member States, which
national courts must protect (principle of “direct effect”).

Two consequences arise from this situation:

z National Courts are by their nature the first guarantors of Community law;
z In order to ensure the effective and uniform application of Community legislation
and to prevent divergent interpretations, national courts may, and sometimes
must, turn to the ECJ and ask for clarifications concerning the interpretation of
Community law.

4.1. Actors and main features of the procedure

There are several actors, which may play a role in the context of the Article 234
procedure: the national courts, the ECJ, the Member State(s), the Commission and the
Parties (individuals, companies, etc.) who are involved in the dispute.

The national courts: In the context of legal proceedings which is pending before a
national court, a national court is entitled to ask the ECJ any question related to the
interpretation of EC law. ECJ case law defines the concept of a national court: it is
created and organised by a national legislation in order to exercise judicial competences,
it is independent and impartial, its rules of procedure guarantee the rights of defence and
its decisions are binding. The extent of the obligation of a national court to refer a
preliminary ruling depends on whether or not there is a possible remedy against the
national court’s decisions.
27 Article 234: “The Court of Justice shall have jurisdiction to give preliminary rulings concerning:
(a) the interpretation of this Treaty;
(b) the validity and interpretation of acts of the institutions of the Community and of the ECB;
(c) the interpretation of the statutes of bodies established by an act of the Council, where those statutes so
provide.
Where such a question is raised before any court or tribunal of a Member State, that court or tribunal may,
if it considers that a decision on the question is necessary to enable it to give judgment, request the Court of
Justice to give a ruling thereon. Where any such question is raised in a case pending before a court or
tribunal of a Member State against whose decisions there is no judicial remedy under national law, that
court or tribunal shall bring the matter before the Court of Justice”

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The ECJ: The ECJ considers that it is obliged to examine the question(s) raised, except
if the dispute does not clearly exist, or the question does not concern the interpretation
or examination of the validity of a Community provision, or if the reply will have no
impact on the solution of the dispute (e.g. EC law does not apply to the content of the
dispute which is pending before the national court).
The other actors: all parties involved i.e. the Member States, the parties in the
proceedings pending before national courts and the Commission may take part in
proceedings before the ECJ in order to take the opportunity to defend their own
interpretation of the EC law provision, which is being examined before the ECJ. The
Member States may decide not to intervene. Such behaviour is however not
recommended because a number of important principles of EC law have been laid down
in preliminary rulings.

Main characteristics of the procedure:

z The Article 234 procedure is based on judiciary co-operation: the national judge
has the exclusive right to launch the procedure for preliminary ruling;
z The parties involved in the dispute can only give their opinion before the ECJ;
z The ECJ is bound to the wording of the questions put forward by national courts.

The ECJ makes an interpretation of EC law and is not acting as an appeal court;
the ECJ is not taking the final decision in the procedure pending before the
national court;
z The reference for preliminary ruling contains the background of the case and the

question(s) raised;
z In case the ECJ considers that the question(s) raised has (have) already given rise

to a preliminary ruling, it will issue a “Reasoned Order”;

z The national court to which the interpretation of EC law is addressed is bound

by the interpretation given by the ECJ. The judge is obliged to solve the dispute
along the conclusions of the ECJ. The ECJ’s judgement also binds other national
courts where a problem of the same nature is raised;
z If an EC secondary legislative provision (directive, regulation, decision) is

declared invalid by the ECJ because it does not comply with EU legislation, the
competent institutions are obliged to take the necessary measures in order to
modify it.

4.2. Handling the Article 234 procedure in France

In France, an intervention before the ECJ within a procedure under Article 234 is always
decided if a French national Court makes the reference to a preliminary ruling. When
the questions, which have been raised by another Member State Court, concern a
national legislation similar to the French legislation, the French authorities may decide
to intervene before the ECJ.
At national level in France, three actors are involved: the legal service of the SGCI
(co-ordination), the competent departments of the ministries concerned (technical

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expertise) and the legal department of the Ministry for foreign affairs (EU legislation
specialist). In practice, the procedure is as follow:

z The reference for a preliminary ruling is forwarded by the SGCI to the

ministerial departments which may be concerned;
z If it wishes to intervene, the competent ministerial department sends a note

giving the reasons why an intervention is needed and the broad lines of the
reasoning which may be followed (either during the written stage or during the
oral stage before the ECJ);
z A meeting is organised by the SGCI in order to check whether an application

should be prepared and what should be the content of the application;

z The application is prepared by the Ministry for foreign affairs and reviewed by

the competent ministerial department and the legal service of the SGCI. It is then
sent to the ECJ.

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 SECTION 2

INTERNAL MARKET
 Chapter 4

CHAPTER 4

THE FUNCTIONING OF THE INTERNAL MARKET

Robert Hine*

1. INTRODUCTION: THE MARKET SYSTEM IN THE EU

The Lisbon summit in 2000 declared the ambition to create in the EU the world’s most
dynamic knowledge-based economy by 2010. The platform for this agenda is the
Internal Market. With the accession of Romania and Bulgaria in 2007, the EU will have
a population of 450 million mostly affluent and middle-income consumers. This
provides a home market big enough to exploit fully economies of scale in industries
where size is important, to provide scope for specialisation into a wide range of market
niches and competition to drive innovation and cost-reduction. The market system is
acknowledged as the most effective way to organise a modern, dynamic economy.
However, it is appreciated that an unregulated market has major failings, particularly
where industries are highly concentrated. Therefore governments enact rules to deal
with a wide range of consumer, environmental and other concerns. For the EU this
means a complicated balancing act between national and European level regulation, the
latter being more efficient where there are significant cross-border ‘spillover effects’
from national legislation.

2. THE EU’S REGULATORY STRATEGY FOR THE INTERNAL

MARKET

The aim of the Internal Market is to create an “area without internal frontiers in which
the free movement of goods, persons, services and capital is ensured”. The belief is that,
properly regulated, this will create the best possibility for the citizens of the EU to enjoy
a high and increasing standard of living. The Single European Act provided a firm basis
for completing the internal market by requiring more qualified majority voting (QMV)
in all areas except taxation and some aspects of social policy. This allows much faster
progress on rule making.

Market integration was to be achieved via three routes:

z Liberalisation: The Internal Market necessitated the removal of internal frontier

controls between the Member States. Cross-border transactions became easier

* Reader, Leverhulme Centre for Research on Globalisation and Economic Policy, University of
Nottingham, United Kingdom, Visiting Professor at the College of Europe, Bruges, Belgium.

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and faster, encouraging more trade and investment. This also has major
implications for the efficacy of some national regulations (e.g. national quotas on
third country trade were no longer viable). Beyond this, free movement is a legal
requirement and hence Member States are prevented from intervening in cross-
border trade by direct or indirect means (the legal basis is the Treaty, or European
Court of Justice (ECJ) rulings or EC regulations/ directives). This implies a right
to enter national markets. Measures that make intra-EC imports more expensive
than the sales of domestic products are not allowed. Art 28 (old 30) banned
measures with equivalent effect to quantitative restrictions. The ECJ interpreted
this as “all trading rules enacted by Member States which are capable of
hindering, directly or indirectly, actually or potentially, intra-Community trade”.
National discretion only exists where there is an explicit derogation in the Treaty
(on health, safety, environmental, or consumer protection grounds).

z Approximation: National laws have to be adapted in such a way and to such an

extent that cross-border trade is no longer hindered directly or indirectly. This
does not mean a complete centralisation of rules where all national rules are
replaced by EU measures. Instead approximation means a sufficient
harmonisation; the important starting point is an agreement on the goals of the
legislation. Hence EU measures should only deal with essential health, safety,
environmental or consumer protection. Any further elaboration of national rules
would be subject to regulatory competition.

z Mutual recognition: In general Member States have equivalent regulatory

objectives in safety, health, environment and consumer protection. Then
approximation should no longer be necessary and free movement can prevail.
Mutual recognition was introduced by the ECJ’s Cassis de Dijon ruling in 1979:
importing country regulations do not apply to intra-EC imports as long as the
national regulatory objectives are equivalent, even when Art 30 derogations are
invoked. This ruling therefore undermined the regulatory autonomy of the
Member States with respect to intra-EC imports and made much approximation
of rules unnecessary.

3. THE INTERNAL MARKET FOR GOODS

3.1. Creating an Integrated European Market - The EEC Customs Union

The foundations for the Internal Market were laid with the creation of the customs union
between the original six Member States over the ten years to 1968. This involved the
removal of all tariffs and quotas on trade between the member countries and the
establishment of a common trade policy, including a common external tariff. Unlike a
free trade area, in the customs union all goods entered into free circulation regardless of
origin. Empirical evidence suggests that the original EU customs union gave a
significant boost to trade between the member countries and thereby stimulated

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competition and a reduction in price-cost margins. There were surprisingly few

problems with the ending of tariff and quota restrictions on intra-EU trade. This can be
attributed to the low unemployment rates allowing those who lost jobs to be quickly re-
employed; to the similarity of the original members’ economies with relatively small
cost differences, and to the persistence of a wide range of non-tariff barriers which
continued to protect weak industries and firms.

3.2. ‘Non-Europe’ – The Fragmented Market in the Mid-1980s

Even though the customs union ended tariffs and quotas, after 25 years the EU market
was described as ‘non-Europe’. The Commission’s White Paper Completing the
Internal Market from 1985 identified a range of impediments to intra-EU trade. These
included:

z Physical barriers: it was estimated that frontier controls added 2% to trade costs
in form-filling and delays;
z Tax barriers: the system allowed exports to be free of Value Added Tax (VAT)

and excise duties (goods were taxed on entering the importing country) which
required tax checks at borders;
z Technical barriers: different national technical standards and regulations raised

costs sometimes requiring where separate product specifications for separate

markets;
z ‘Buy national’ measures: discriminatory public purchasing.

It was found that, especially in services, governments generally bought locally even
where costs were much higher, in order to protect local firms and jobs. Efficient
suppliers in all countries were thereby penalised.

3.3. The Internal Market Programme

The Internal Market programme was launched in 1985. It aimed to revitalise the EC
market in order to stimulate growth and employment and to improve European
competitiveness by creating “an area without internal frontiers” via the four freedoms
of movement (goods, services, persons and capital). In many cases, provisions already
existed in the Rome Treaty, but needed to be properly implemented. The Commission
proposed 300 practical measures to establish the Internal Market by the end of 1992
when intra-EU border controls were to be ended. The legislative programme was largely
successful: 90% of the measures were incorporated into national law by the end of 1993.
They focused on three key areas: technical standards, public procurement and tax
collection.

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3.4. Dealing with Technical Barriers: Approximation

The ‘old approach’ to technical standards involved very detailed EU measures for
individual products; progress with each was very slow because of the need for
compromises among member countries with very different national traditions.

The new approach, applied since 1985, does not require a centralisation of rules but
agreement on goals and an approximation of measures – national laws must be adjusted
where, and as far as, necessary to ensure that cross-border trade is not obstructed either
directly or indirectly. The new approach on technical harmonisation is complemented
with a ‘Global Approach to conformity assessment’.

These new approaches try to strike a balance between:

z Ensuring the free movement of goods through technical harmonisation for entire
product sectors, and
z Guaranteeing a high level of protection of public interest objectives (Article 95

EC Treaty).

The general procedure is:

z To stipulate essential health and safety requirements for groups of products;

z To set technical standards in the European standardisation bodies;
z Later to specify common but voluntary standards, which reduce information costs

for business and technical designers.

The European standardisation bodies draw up technical specifications, which offer one
route to compliance, but business and industry are given a wide choice of how to meet
their obligations. Since 1987, 25 Directives have been enacted under the new approach
(e.g. the machinery directive (98/37/EC). The key innovations are:

z Limiting mandatory requirements to essential health and safety aspects for

groups of products;
z Setting up appropriate conformity assessment procedures;

z Introducing CE marking.

3.5. Dealing with technical Barriers: Mutual Recognition

Technical regulations in the EU Member States are motivated by broadly similar

objectives regarding safety, health, environment and consumer protection. This should
mean that replacing national with harmonised EU measures is unnecessary – free
movement of goods should be allowed even if the details of domestic regulation differ
from those in the country of origin. In this way, the importing country recognises the
regulatory regime of the exporting country – hence ‘mutual recognition’.

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This principle developed from case law, the 1979 Cassis de Dijon ruling where it was
established that:

z A product lawfully produced and marketed in another MS must be allowed into

its own market, unless banning this is justified by mandatory requirements e.g.
health and safety protection,
z A country cannot apply detailed national regulations if the objective or effect of

the relevant law in the other MS is equivalent to that in the importing country. If
the regulatory objective or effect is not equivalent, then free movement can be
prevented. Art 95 EC (ex Art 100a EC) then allows approximation with qualified
majority voting in the Council.

Mutual recognition has a number of important advantages. First, the Internal goods
Market can be achieved more rapidly. Secondly, it helps to deter over-regulation by
Member States since this could disadvantage their own producers. Thirdly, it introduces
an element of regulatory competition through cross-border trade and thereby draws
attention to best practice. Although it can be justly called ‘a remarkable innovation’, it
covers at most 30 per cent of intra-EU trade. In practice, because of high information,
transaction and compliance costs, the proportion is much lower.

3.6. Public Procurement

Public procurement is a major activity (equivalent to16% of EU GDP). To combat

discrimination against suppliers in other EU countries, the public procurement
directives have established mandatory requirements on:

z Publicity: invitations to tender and contract award notices above a certain value
(ranging from approximately € 150 000 for supplies and services to nearly
€ 6 000 000 for works) must be published in the EU Official Journal (OJ);
z Remedies: The current Remedies Directives require Member States to ensure

that review procedures are available at least to any person having or having had
an interest in obtaining a given public contract and having been or likely to be
injured by an alleged infringement. Decisions of the contracting authorities,
which are in breach of the law, must be subject to effective and rapid remedies
through courts and/or administrative bodies. In all Member States, such remedies
must include, in particular, the possibility of taking interim measures (such as
suspension of the award procedure in question), the setting aside of unlawful
decisions and discriminatory specifications (technical, economic and financial)
in the invitation to tender, and the compensation of injured parties.

The good news is that the Commission has observed a large increase in published
procurement invitations and a reduction and convergence in prices paid by public
authorities for supplies, works and services. The bad news is that still only 16% of
estimated public procurement is published in the OJ.

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3.7. Fiscal Frontiers

The current system of indirect taxation is a VAT based on taxation in the Member State
of consumption. This presents some obvious problems in an Internal Market without
border controls between the Member States. The ‘interim’ arrangement involves:

z Zero-rating of exports to other MS (‘intra-community supply’);

z Collecting VAT on imports from other MS (‘intra-community acquisition’) with
the importer paying VAT at the home country rate;
z The importer providing evidence of tax payment to the exporter.

In theory goods sold to private customers in other EU countries are taxed under the VAT
system of the supplier, but cars are treated exceptionally – they are taxed in the country
of consumption. Distance sellers must register for VAT in customer’s country when
their sales are above a certain threshold.

3.8. Price Convergence

In a truly integrated market – the ultimate aim of the Internal Market programme -
prices would differ by no more than costs of transport. However, there is still a long way
to go towards this goal in the EU where average price differences remain 30% across
countries (compared with 5% within countries) - especially marked for branded
products. Indeed, in the Euro zone prices have been diverging since 1999 (standard
deviation was 13.8% in 2003 compared with 12.3% in 1998; EU15 rose to 15.5 from
14.4).

4. THE INTERNAL MARKET FOR SERVICES

Market services alone accounted for almost half the EU economy by 1990 and the
business services sector plays a key role in European integration. However, services
were neglected in the EC Treaty and little action was taken until the1980s. Services tend
to be highly regulated, especially because of problems of information. Hence opening
up the market to European competition often requires finding regulatory solutions
before free movement can be achieved.

4.1. Professional Services

Many services require face-to-face contact between supplier and user. Hence,
integrating European services markets requires the cross-border movement of users or,
more controversially, suppliers. Suppliers may enter another member country
temporarily or permanently. This raises important issues especially regarding the mutual
recognition of professional qualifications (see below) and establishment.
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National treatment is a key feature of the establishment regime. A services supplier

cannot normally be prevented from providing services in another Member State, even if
the conditions under which it supplies are different between the two territories.
Moreover, if the objectives of regulation are the same in the two countries concerned,
the freedom to supply can even override derogations under Art 46 (old 56). However,
derogations can block free movement if clearly justified by the public interest, controls
are lacking in the home country and the action is proportional.

The Commission made a major initiative to open up European services markets in

January 2004 (‘Bolkenstein Directive’). The two main elements were:

z Establishment of subsidiary: firms would no longer need to duplicate the

requirements that they already fulfil in the home country, and a single point of
contact would be established where the firm can complete the bulk of
procedures; by 2008 there would be an electronic system;
z Country of origin principle: companies have the right to provide services in all

Member States as long as they follow the laws of the home Member State.

Supporters claim that implementation of the new Directive would cut prices in the
regulated professions by 7.2%. It was estimated by Copenhagen Economics that
600,000 jobs would be created and foreign direct investment in services would increase
by 34%. Opponents fear that social and labour standards would be undermined.
However, the posted workers’ directive obliges companies posting workers to other EU
states to apply the receiving country’s rules on minimum wages, holidays and rest
periods as well as provisions on health, safety and hygiene at work, gender equality
standards and other rules.

4.2. Financial services

By the 1970s financial services firms had the right to establish in other Member States
but under host country control. Restrictive national legislation and administration could
therefore stifle competition from suppliers based in other EU countries. Major efforts to
integrate the Internal Market occurred only after the ending of exchange controls in the
1980s. The essential features were:

z That approximation of regulations was focused on the soundness of institutions

via prudential regulation and supervision, not on the details of service provision;
z Mutual recognition meant that prudential regulation was minimised – there was
home country control; in principle firms established in one Member State had a
licence to operate in all Member States under the ‘single passport’ system. In
practice, the free movement of financial services under the single passport had
limited impact. National regulators can prohibit or condition cross-border
services under the ‘general good’ clause, and the absence of accounting
standards and full tax harmonisation obstructs the opening of branches of
financial firms in other countries.

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z Financial services: banking

In1989 the Second Banking Directive introduced a passport system for banks – once
established in one EU country a bank may operate throughout the EU under home
country regulation. A host country can apply legal provisions “which are justified on the
grounds of the public good”. However, the main way in which foreign banks can
compete is by takeover (and in future the Internet); hence the controversy in 2005 over
the alleged blocking of foreign takeovers of Italian banks. Italian Finance Minister
Siniscalco declared “with rare exceptions, banking systems are still all national”.

z Financial services: insurance

The insurance sector is characterised by fairly strict regulation and supervision and high
switching costs for consumers. Solidarity and service are more important than price
competition and innovation. The ‘single passport system’ has had little impact because
the contract law is that of the insurer; in particular it is extremely difficult to sell life
assurance across borders.

z Financial services: securities

The removal of exchange controls, new technology, and the introduction of the euro have
had a major impact on securities markets. However, cross border trade has not expanded
much because of limitations of the 1993 investment services directive. Moreover,
cooperation between national supervisors is ineffective and a number of technical and
legal barriers remain. These are addressed in the Financial Services Action Plan (FSAP).

5. FREE MOVEMENT OF CAPITAL AND LABOUR

The Internal Market programme provided for the free movement of capital and persons.
The economic rationale for this is that in an integrated market, labour and capital will
move to where they have the highest return. Since the returns they earn reflect their
productivity, this ensures that output in the European economy is maximised.

5.1. Financial capital

Until 1988, some Member States retained capital and exchange controls. All restrictions
have now been removed so that interest rate differentials are very small even in the long
term in the euro zone. There remains a fiscal problem in that national taxation of savings
and capital vary. Member States must either agree to minimum tax rates or to the
exchange of information. A directive on the taxation of savings income finally became
effective in January 2005.

5.2. International securities transactions

Free movement alone is insufficient to generate an integrated market. Some minimum

approximation of prudential rules regarding international securities transactions and

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home country control (as in banking) are also needed. The Financial Services Action
Plan (FSAP) set out 42 measures to achieve this of which 93% were agreed within the
mid-2004 time limit set by Heads of State and Government: In particular, several
directives have been agreed:

z The Financial Instruments Markets Directive (also known as the Investment

Services Directive), setting rules under which investment banks can compete
with stock exchanges;
z The Transparency Directive, dealing with financial statements;

z The Directive on Takeover Bids.

Much progress has been made in financial market integration, though this varies widely
across the sub-markets.

5.3. Free movement of labour

The Treaty of Rome in Art 48 specifies “freedom of movement for workers” (achieved
by 1968), abolition of discrimination based on nationality within EC and the principle
of “national treatment”.

Hence EU workers are entitled to accept job offers throughout the EC, to move freely
to take on an offer and to remain after the job has terminated. The self-employed also
have freedom of movement. However, the EU labour market is poorly integrated,
especially because the host country controls conditions of employment, so that migrants
cannot, for example, undercut host country minimum wages. A wide range of actions
would be necessary to create a truly integrated market, including approximation of
labour market legislation (e.g. on hiring and firing) and union wide access to social
security. Mutual recognition of qualifications is also critically important.

The ‘Old Approach’ required a detailed specification of equivalents. This entailed

lengthy negotiations on details with the regulations tending to be captured by
professional associations. A better approach is to agree on objectives, set minimum EC
requirements, and then apply mutual recognition. Some progress has been made on
higher education diplomas. The ‘New Approach’ has helped for teachers.

5.4. Cross border direct investment

Mergers and acquisitions across borders within the EU increased rapidly after the
establishment of the Internal Market. However, there is relatively little EU legislation
regarding firms, which operate in two or more Member States. Existing rules deal with
parent-subsidiary taxation, the tax system for cross border mergers, and interest and
royalty payments. There are wide differences in nation corporate tax rates and attempts
over 30 years to create a ‘European Company Statute’ to facilitate cross-border
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operations have yielded only a watered down version which entered force in 2004. Only
a handful of countries have so far implemented the rules.

The internal market in property rights has made only slow progress. Art 295 TEC says
“the Treaty shall in no way prejudice the rules in Member States governing the system
of property ownership”. This gives unlimited autonomy to national patents, trademarks
etc. However, the exercise of property rights “to maintain or affect artificial partitions
within the common market” can be combated under the rules on ‘measures with
equivalent effect’. Also the European Patent Treaty from 1973 helps to cut search costs
by centralising the application and registration procedures for many European countries
in the European Patent Office, while retaining national patent laws. The Commission
proposed a Community patent in 2000, but this is still under discussion.

Relevant official documents and information can be found at the following

websites:

– European Commission, Internal Market:

http://europa.eu.int/comm/internal_market/index_en.htm

– DG Internal Market:
http://europa.eu.int/comm/dgs/internal_market/index_en.htm

– Publications European Commission on Internal Market:

http://europa.eu.int/comm/internal_market/publications/index_en.htm
– Calendar for Transposition of Directives and Progress in Notification of National
Measures
Implementing Directives:
http://europa.eu.int/comm/secretariat_general/sgb/droit_com/index_en.htm#tran
spositions

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CHAPTER 5

TRANSPOSITION AND IMPLEMENTATION

OF THE INTERNAL MARKET ACQUIS
- EXPERIENCES OF POLAND

Grzegorz Lang*

1. INTRODUCTION

This chapter gives an overview of procedural arrangements and legislative solutions

adopted to facilitate the transposition and implementation of the Internal Market acquis
in Poland. Obviously, since the Internal Market acquis encompasses a massive amount
of legislation, only selected issues will be discussed.

2. THE TRANSPOSITION AND IMPLEMENTATION PROCESS IN

POLAND

The obligation to approximate national law to EU law has been laid down in the Europe
Agreement, signed between the EC, its Member States and Poland in 1994. This
obligation became more and more important in the year just before Poland’s accession
to the EU. After 1st May 2004, the compliance with EU law is unquestionably one of the
most stable realities in the Polish legislative process.

In Poland, the obligation to verify the compliance of drafted laws with EU law is
entrusted with the Secretary of the Office of the Committee for European Integration
(UKIE). The Committee was set up in 1996 pursuant to the Law on the Committee for
European Integration. The Prime Minister chairs this Committee. The Secretary is
obliged to give opinions on compliance of a draft law with EU law. If there is no link
between a draft law and EU law, the opinion may be provided at the initial stage of the
legislative process. Otherwise, at an initial stage the Secretary is usually giving only
working ‘remarks’. However, the opinion of the Secretary is compulsory at the stage of
approving the draft by the Council of Ministers’ European Committee, and later at the
stage of approving the draft by the Council of Minister itself.

Usually, the Secretary is not responsible for preparing draft laws. However, the
Secretary was responsible for preparing a so-called ‘Horizontal Law’ in early 2004,
which concerned the screening of Polish law with a view to detect and eliminate barriers
to free movement when Poland becomes a Member State.

* Senior Specialist at the Department of European Union Law, Office of the Committee for European
Integration, Warsaw, Poland.
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The Secretary gives also his opinions during readings in the Polish Parliament, both to
governmental drafts and drafts of the Parliament or the President.

Although there is no express obligation, the Government does not accept drafts without
a positive opinion of the Secretary of the Committee. This positive opinion should be
achieved at latest when the draft law reaches the stage of the Council of Ministers’
European Committee. The formal opinion of the Secretary accompanies each revised
version of the draft law until the final voting of the draft takes place in Parliament.

3. THE 2004 POLISH LAW ON CO-OPERATION

One of the final acts of law that was adopted with the view to prepare Poland to
membership in the EU was the Law on Co-operation of Council of Ministers with the
Sejm and the Senate on matters related to the Membership in the European Union. This
law entered into force on 31 March 2004 and has the objective to include the Polish
Parliament in Poland’s activity in the legislative process in the EU. It obliges the
Government to present EU documents to the Sejm (lower chamber) and the Senate
(upper chamber).

The Government is obliged to present draft EU laws, draft positions of Poland in

negotiations in EU bodies, and other documents concerning Poland’s membership in the
EU. The European Union Committees of both chambers may give non-binding opinions
and recommendations on presented issues. When the Government does not follow the
Parliament’s position, it is obliged to explain reasons of doing so.

The Law on Co-operation provides that the Government must submit laws transposing
EU legislation no later than three months before the deadline for transposition expires.

4. DEALING WITH THE TRANSPOSITION OF “NEW APPROACH

DIRECTIVES” IN POLAND

The following part will focus on some examples of legislative techniques adopted in
Poland to facilitate the transposition and implementation of the Internal Market acquis.

4.1. The Polish ‘umbrella’ law

Article 28 of the EC Treaty provides for the freedom of movement of goods. As it turned
out, the mere statement of freedom of movement was not enough to establish a true
Common Market for goods. Similarly very detailed harmonised EC legislation did not
ensure this goal. Therefore, the Council in 1985 called for a ‘new approach’ to technical

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harmonisation1. Under this scheme, EC directives instead of providing for detailed

technical standards (‘old approach’) provide only for essential requirements, which are
subject to common conformity assessment procedures. In addition most ‘new approach’
directives envisage that compliant product must bear CE marking.

In 1999 the European Commission issued the Guide to the Implementation of Directives
Based on New Approach and Global Approach in order to improve the implementation
and application of ‘new approach’ Directives.

Although ‘new approach’ directives share a number of common features, they differ in
many respects as well. The fact that they differ posed a considerable challenge, since in
Polish legislative culture technical norms should be contained in regulations, whereas
major legal solutions should be embodied in the acts of Parliament. Hence, despite the
diversity of ‘new approach’ directives, the Polish lawmakers have chosen to adopt a
single ‘umbrella law’ with a so-called ‘enabling clause’ which makes it possible to adopt
single regulations covering one particular directive and which establishes also common
institutions (e.g. on market surveillance) which are needed for the implementation of
more than one directive.

As different groups of industrial products are governed by different ministries, the

national legislation had to find common solutions that would interfere to the least
possible extent with various administrative traditions2.

First of all, not all directives that were supposed to be transposed under the ‘umbrella’
law require CE marking. This problem was solved by including in the relevant
implementing regulations the possibility or the obligation to provide CE marking.

Not from the outset, but during inter-ministerial consultations, the Marine Equipment
Directive3 was excluded form the scheme. The primary reason was that it employs
various international documents instead of only essential requirements. Also it does not
provide for CE marking. The Construction Product Directive4 was also excluded from the
scheme (except in respect of market surveillance which is not harmonised). In this case
the formal reasons for exclusion were lack of presumption of conformity and provisions
concerning the exhibition of non-complying products on exhibitions and fairs. From the
very beginning the ‘umbrella law’ also excluded Directives concerning medical devices5.

1 Council Resolution of 7 May 1985 on a ‘new approach’ to technical harmonisation and standards; OJ C 136,
04.06.1985, p. 1.
2 For example, construction products fall under the responsibility of the Ministry of Infrastructure whereas
machinery is under the responsibility of the Ministry of Economy.
3 Council Directive 96/98/EC of 20 December 1996 on marine equipment, OJ L 46, 17.2.1997, p. 25.
4 Council Directive 89/106/EEC of 21 December 1988 on the approximation of laws, regulations and
administrative provisions of the Member States relating to construction products; OJ L40, 11.2.1989, p.12,
as amended.
5 Council Directive 93/42/EEC of 14 June 1993 concerning medical devices, OJ L169, 12.7.1993, p.1
Council Directive 90/385/EEC of 20 June 1990 on the approximation of the laws of the Member States
relating to active implantable medical devices, OJ L189, 20.7.1990, p. 17;
Directive 98/79/EC of the European Parliament and of the Council of 27 October 1998 on in vitro
diagnostic medical devices, OJ L331, 7.12.1998, p.1.
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4.2. Market surveillance

Another issue connected with the implementation of ‘new approach’ directives was
market surveillance. Market surveillance is not harmonised by EU law. However it plays
a crucial role in the proper application of EU law. As already mentioned above, the
Polish ‘umbrella’ law provides for a common model of market surveillance, even
though various goods lay within competencies of various ministries and services.

4.3 Transposition of annexes

Quite another problem in transposition of ‘new approach’ directives in the past was the
transposition of annexes to the directives. This transposition required adjustments to
Polish legislative traditions. For example, conformity procedures were not allowed to be
in the annex, but had to be in the main, substantive part of implementing regulations.
With the benefit of hindsight it should rather be recommended to plainly translate the
original texts of an annex without any alternations.

5. DEALING WITH THE PRINCIPLE OF MUTUAL RECOGNITION

During the pre-accession period most attention has been paid to the transposition and
implementation of directives. However, one should not forget more general problems of
EC compliance, namely with the principle of “mutual recognition” as set out in Casis
de Dijon case-law of the ECJ6. The principle can be summarised as allowing Member
States to attach to the manufacturing and distribution of goods certain requirements
provided they aim to protect important values (e.g. protecting consumers) and they are
proportional, which means that they do not exceed what is necessary to achieve their
objective.
As very often civil servants responsible for the transposition of directives are not the
same as those which prepare other pieces of regulations, a clear risk persists also after
accession as regards the adoption of EC-law violating regulations.
A good example in this respect is the Polish draft act on fire-fighting equipment, which
provided for domestic certification without the recognition of certificates from other
Member States and EEA-States. Due to the opinion of the Polish Office of the
Committee for European Integration, this piece of legislation is now under way to be
changed before it enters into force.

6 Case 120/78 Rewe-Zentral AG v Bundesmonopolverwaltung für Branntwein, [1979] ECR-649).

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6. THE POLISH “HORIZONTAL” LAW

During Poland’s membership negotiations at the Subcommittee on Internal Market in
March 2004 the European Commission requested the Polish Government to screen
Poland’s legislation in respect of its compliance with Internal Market jurisprudence of the
ECJ and Court of First Instance and detect any possible obstacles to the free movement.
To perform this task two inter-ministerial groups have been established: One
responsible for jurisprudence in the area of freedom of movement of goods and a second
for the area of freedom to provide services and freedom of establishment. The directors
of the departments of the Ministry of Economy headed the screening groups. The Office
of the Committee for European Integration was responsible for preparing fiches and
ensuring organisational issues.
The whole jurisprudence was screened on the basis of ‘obstacle by obstacle’ approach.
The collection of jurisprudence was compiled using Commission’s Guidelines to
jurisprudence, academic textbooks and reports of the ECJ. On the basis of each
judgement the Department of European Union Law of the Office of the Committee for
European Integration prepared a fiche. Such a fiche consisted of:
z A brief description of the case;
z An indication of the field of application (insurance, etc);
z A factual background;

z The ECJ’s or the Court of First Instance’s interpretation;

Each fiche was accompanied with a so-called “Information Card”. In response to the
card, each Ministry had to answer if there was a similar barrier existing in Polish law,
and if any legislative changes were deemed to be necessary. In total about 70 fiches were
prepared.
After this analysis the Office of the Committee for European Integration together with
other ministries prepared three reports concerning respectively the freedom of
movement of goods, the freedom to provide services and the freedom of establishment.
The outcome of the screening was sent to the European Commission.
The screening did not detect any particular barriers. Rather, it confirmed that certain
typical clauses should be included in future laws. They were later subjects of the
“horizontal law”. This “horizontal law”, officially called Law on Amendments and
Repeal of Certain Laws in Connection with the Membership of the Republic of Poland
in the European Union (20 April 2004), included over 70 changes to Polish Law.
One of the most common changes was the replacement of the expression “European
Union” or “European Community” with the expression “European Economic Area”. For
example in the Law on Insurance Intermediaries, the notion of “Member States of the
EU” was to be deemed to include “Member States of the EEA”7:
The second typical solution in the “horizontal law” was the inclusion of series of clauses

7Polish Law on Insurance Intermediaries (2002), art. 1a: “Whenever in the Law the Member States of the
European Union are used, it shall be construed to mean also Member States of European Free Trade
Agreement - parties to the agreement on European Economic Area”.
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enabling proper application of EC regulations in Poland. The law included a number of

provisions to repeal Polish provisions that repeated in essence provisions of EC
regulations. Other provisions in the “horizontal law” indicated institutions responsible
for application of regulations and provided for necessary procedures.

The third most common amendment was the introduction of so-called “mutual
recognition clauses”. These clauses are part of the Internal Market acquis and concern
especially the manufacturing and distribution of goods; they are included in
international agreements concluded by the EC with countries like Turkey.

The “horizontal law” also introduced into Polish law a standardised reference to the
implemented directive.

Other important adjustments concern for example the introduction of other

identification numbers than the Polish Personal Identification Number (PESEL), which
is a number of identification card of Polish citizens.

7. DEALING WITH STATE AID

Another Community policy, which is realised primarily by means of regulations and not
directives, is the EC policy on State Aid. Compared to other EU policies, State Aid is
entirely managed by the European Commission.

Poland’s Europe Agreement in Article 63.1(iii) and Article 63.2 provided that the impact
on trade with the Community of public aid in Poland shall be assessed on the basis of
criteria arising from the application of the rules of Articles 85, 86 and 92 of the Treaty
establishing the European Community. On the basis of this provision, the Association
Council decided to adopt implementing rules on the provisions on State aid referred to
in Europe Agreement8. Among others, the decision indicated that the President of the
Office of Protection of Competition and Consumers (OCCP) should be the monitoring
authority in Poland. Although the decision did not provide that decisions taken by the
OCCP and the European Commission are of binding nature, it introduced EU State Aid
rules in Poland.

Since accession, state aid is regulated by Community rules and is dealt with as an
exclusive competence by the European Commission. Currently, issues connected with
state aid in Poland are regulated in the Law of 2004 on Procedure in Cases concerning
Public Aid. The major procedural institution of the EC State aid law is the
“notification”. The Council Regulation of 19999 provides as follows:

8Decision No 3/2001 of the EU-Poland Association Council, OJ L215, 9.8.2001, p 39.

9Regulation (EC) No 659/1999 of 22 March 1999 laying down detailed rules for the application of Article 93 (now
Art.88) of the EC Treaty (OJ L 83, 27.3.1999, p. 1).
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Article 2
Notification of new aid

Save as otherwise provided in regulations made pursuant to Article 94 of the Treaty or

to other relevant provisions thereof, any plans to grant new aid shall benefited to the
Commission in sufficient time by the Member State concerned. The Commission shall
inform the Member State concerned without delay of the receipt of a notification.

The aid may be granted individually, and within the framework of aid scheme.
According to the Regulation 659/1999 the expression “aid scheme” means any act on
the basis of which, without further implementing measures being required, individual
aid awards may be made to undertakings defined within the act in a general and abstract
manner and any act on the basis of which aid, which is not linked to a specific project,
may be awarded to one or several undertakings for an indefinite period of time and/or
for an indefinite amount.

In Poland an “aid scheme” may be included, among others, in an Act of the Parliament
(Laws), in Acts of the Council of Ministers (Regulations and Resolutions), in
Regulations of Prime Minister and Ministries, as well as in Local laws.

Under Polish Law, the process of notifications of draft “aid schemes”, drafts of
individual aid and drafts of restructuring aid is centralised with the President of the
OCCP. Besides, the President is responsible for representing the Republic of Poland
before the ECJ and the Court of First Instance in cases linked to public aid. The
following scheme illustrates the procedure in Poland for preparing notification of aid to
the European Commission.

The first step is the preparation of an aid by the author of the scheme (public authority).
The public authority has to apply for an opinion on compatibility of an aid with the
Common Market to the President of the OCCP. At the same time, the scheme is
forwarded to the Council of Ministers. The decision to notify a scheme or not to notify
lies with the Council of Ministers. The Council of Ministers takes a decision upon

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presentation of the President of the OCCP. In case of acts of Parliament (Laws) granting
an aid, the Marshal of the Sejm forwards the draft law to the Prime Minister. The Prime
Minister then forwards the draft to the President of the OCCP. Finally, the President –
through the Permanent Representation of Poland to the European Union – notifies the
scheme to the European Commission.

Since “aid schemes” are normative acts, they are effectively subject to double control.
First they go through the usual legislative procedure, where the Office of the Committee
for European Integration examines their compliance with the EU law for European
Integration. Secondly, they are subjects of compulsory opinion of the President of the
OCCP. This double control is very often desired as quite often a legal act envisaging aid
is not limited to State aid aspects only.

8. HANDLING EC INFRINGEMENT PROCEDURES (ARTICLE 226

EC TRETAY) IN POLAND

Before the Commission is referring a case for infringement of EC law by a Member

State of to the ECJ under article 226 EC Treaty, an informal procedure is launched by
the Commission. In Poland a special process has been set up governing the conduct of
the public administration during this informal procedure.

Every ministry is obliged to provide the Office of the Committee for European
Integration with relevant information about proceedings initiated against Poland by the
services of the European Commission. Also the Office of the Committee for European
Integration is obliged to share with the relevant ministry any information about such
proceedings. Once it has been established, that the Commission is conducting
proceeding against Poland, the relevant ministry must prepare a draft position on the
alleged infringement of EC law.

When a position on the alleged infringement is agreed between the involved ministry or
ministries and the Office of the Committee for European Integration, this position
together with information on the Commission’s position are submitted to the European
Committee of the Council of Ministers for approval. The Committee is also deciding on
further steps aimed at closing the informal proceeding by the European Commission. In
2004, for example, the European Commission sent to the Office of Public Procurement
its remarks on the Polish Law on Public Procurement. Those remarks were later
analysed by both the Legal Department of the Office for Public Procurement and the
European Law Department of the Office of the Committee for European Integration.
This jointly prepared document was accepted by the European Committee of the
Council of Ministers and then sent to the European Commission.

Poland so far has had no infringement proceeding under Article 226 of the EC Treaty.
However, already before its accession to the EU Poland prepared a procedure to follow
in case an infringement procedure is launched by the Commission. The procedure was
adopted by the Council of Ministers on 28.12.2004 and can be illustrated by the
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following scheme:

According to the general rules governing diplomatic contacts in the EU, the European
Commission addresses its correspondence to the Permanent Representation of the
Republic of Poland. Then, an application of the European Commission is forwarded to
the Secretary of the Committee for European Integration. The request for observations
under 226 EC Treaty is sent to the relevant ministry. A Ministry in close co-operation
with the Department of European Law of the Office of the Committee for European
Integration is preparing a draft response to the services of the Commission.
The draft response, before it is sent to the Commission, is formally approved by the
European Committee of the Council of Ministers. The response is then handed down to
the Secretary of the Committee for European Integration, who, acting as the Agent of
Poland, sends it to the European Commission.
Since Poland has only once been involved at the oral stage of a procedure before a
Community Court, there is no extensive experience in this field. However, Poland
presented orally its view in one case concerning the accumulation of penalties for
breach of EC law. In this case the Undersecretary of State did the presentation. On
another occasion, a senior lawyer from the Department of European Union Law
presented orally Poland’s observations in the EFTA Court.
As the situation stands now, Poland will rather not resort to private law firms in the case
of direct participation in Court procedures. However, certain law firms have been
contacted to establish their readiness and competencies to assist the Polish Government.

9. DEALING WITH PRELIMINARY RULINGS (ARTICLE 234 EC

TREATY)

The first request from Polish courts for preliminary ruling under Article 234 EC Treaty
has been sent only in mid-June 2005. However, because at this stage this involves only
Member States’ courts, the Polish administration has not yet received the request to
submit observations.
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However, since the day of accession, Polish authorities receive numerous demands to
submit observations in cases of preliminary rulings requested by courts of other EU
Member States.

One example is case C-410/04 ANAV, where the Tribunale Administrativo Regionale
per la Puglia in Italy requested a preliminary ruling concerning Directive 93/36/EC on
public supply contracts. In this case the Bari Town Council awarded directly a contract
for city transport to its 100% owned company AMTAB Spa. The problem in this
preliminary ruling occurred out of an interpretation given of an ECJ judgment in Case
C-107/98 Teckal10. In this case the ECJ ruled that in accordance with Article 1(a) of
Directive 93/36, it is sufficient, in principle, if the contract was concluded between a
local authority and a person, which is legally distinct from it. This position can be
different only in the case the local authority exercises over the person concerned a
control which is similar to that which it exercises over its own departments and, at the
same time, if that person carries out the essential part of its activities with the
controlling local authority.

Another request concerned the application of Article 86 EC Treaty on special rights in

the context of public procurement. That case was particularly important for Poland
because many local authorities are also founders and sole shareholders of utility
companies. Polish law on this topic is not very precise. In particular the Law on
Communal Economy (1996) provides that: “Communal economy may be carried out by
the entities of self-government in particular in forms of budgetary enterprise or
commercial law companies”. This provision is sometimes construed as allowing
municipalities to award public contract to its companies without observing rules on
public procurement. However, the position of the Office of Protection of Competition
and Consumers and the Office of Public Procurement is that local authorities should
always follow public procurement procedures. If the ECJ would rule that municipalities
are exempted from the procedures when awarding contracts to its wholly-owned
companies, the Offices’ position would seriously be undermined.

That is why the Office of the Committee for European Integration, in close co-operation
with the other two Offices prepared Poland’s observations that municipalities should
always follow rules on public procurement, even when awarding contracts to their
entirely-owned companies.

10. IMPLEMENTING ECJ JUDGEMENTS IN EU PUBLIC

PROCUREMENT LAW

10.1. The Polish State Forest Enterprise

Directives on public procurement provide that a entity is obliged to follow public

procurement provisions in the following cases: when the entity is established for the
specific purpose of meeting needs in the general interest, when it does not have an
10 [1999] ECR I-8121.

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industrial or commercial character, when it has legal personality and when its financed,
by majority by the State, or regional or local authorities, or other bodies governed by
public law, or when its subject to management supervision by those bodies, or having
an administrative, managerial or supervisory board, more than half of whose members
are appointed by the State, regional or local authorities or by other bodies governed by
public law.

In Poland there is a special entity responsible for maintaining state forests: the State Forest
Enterprise. This enterprise is subordinated to the Ministry of Environment and does not
have any legal personality. However, after analysis of a series of ECJ judgements it turned
out that State Forests Enterprise should rather be covered by public procurement rules.
The police functions of the State Forest Enterprise and the fact, that it cannot be insolvent
show that its lack of legal personality is only accidental. In fact although the State Forest
Enterprise is a form of an enterprise, its nature is closer to a State authority as defined in
numerous ECJ judgements, beginning with Case 31/87 Beentjes. Hence, despite the lack
of legal personality – after analysis of the ECJ’s jurisprudence11 – it was decided that in
the light of principles and spirit of EU public procurement law – the State Forests
Enterprise should be covered by the EU public procurement regime.

10.2 The “Fabricom case”

The Polish Law on Public Procurement of 2004 provides for grounds of exclusion from
the proceeding to award public contract. Polish law envisages an automatic exclusion of
contractors who participated in the preparation of contracts. There is only a narrow
exception in the areas of spatial planning.

On 3 March 2005 the ECJ in Joint Cases C-21/03 and C-34/03 Fabricom ruled that a
national provision to the effect that a “person who has been instructed to carry out
research, experiments, studies or development in connection with a public works,
supplies or services contract is not permitted to apply to participate in or to submit a
tender for those works, supplies or services and where that person is not given the
opportunity to prove that, in the circumstances of the case, the experience which he has
acquired was not capable of distorting competition” is contrary to EC law and the
directives on public procurement in particular.

In order to bring Polish law into compliance with the interpretation of the ECJ, new
draft amendments of the Law on Public Procurement change the wording of the
provision in question. The new wording of the provision includes the requirement to
give contractors an opportunity to prove that their participation will not obstruct fair
competition. Thus, the interpretation given in Fabricom case will be fully reflected in
the modified Polish law.

11 Case C-44/96 Mannesmann Anlagenbau Austria and Others v Strohal Rotationsdruck [1998] ECR I-73,

paragraphs 25 and 30 to 35.

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CHAPTER 6

EU TELECOMMUNICATIONS POLICY

Jukka Kanervisto*

1. INTRODUCTION

EU Telecommunications policy aims at developing a knowledge based society, that

enables everyone to have access to information and entertainment, to get in touch with
others regardless of where they are and, by different means, to search for services and
products and buy them on-line, to have access to government services, to education and
health services and to achieve maximum benefits for users.

1.1. Regulatory Objectives of EU Telecommunications Policy

The objectives of the new regulatory framework are to encourage competition in the
electronic communications markets by removing barriers to competition, by developing
legal certainty in order to support network investments, to develop non-discriminatory
behaviour and openness and transparency of operations, to improve the functioning of
the internal market and to guarantee basic user interests that would not be guaranteed
by market forces.

The regulatory framework comprises a series of legal texts and associated measures that
apply throughout the EU Member States. The framework provides a set of rules that are
simple, aimed at deregulation, technology neutral and sufficiently flexible to deal with
fast changing markets in the electronic communications sector.

1.2. Regulatory Principles

The main regulatory principles are not only to set a legal framework for the players in
the market but also set strong obligations to market players which have been defined as
entities having Significant Market Power (SMP). Definition of SMP operators can only
be made after having a clear market definition and market analysis. Contrary to ex-post
competition regulations, telecommunications regulations are sector specific,
asymmetric ex-ante regulations, where rights and obligations of operators have been
defined before hand in the legislation.

* Consultant in Telecommunciations, Finland.

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1.3. The 1998 Regulatory Framework

Full liberalisation of telecommunications came into force in the EU in the beginning of

1998. Prior 1998, steps towards liberalisation of the telecommunications market were
taken by the introduction of Directives in specific areas of activities. A list of directives,
decisions and recommendations of the 1998 regulatory framework is summed up in
Annex 1.

2. THE 2003 REGULATORY FRAMEWORK

The 2003 Regulatory Framework, which came into force in July 2003, was simplified
by merging old directives of the year 1998 acquis into 6 main directives. In addition to
simplification of the legal structure, the focus of the development of the new framework
was convergence of communications, neutrality as regards technology and flexibility as
regards the development of the market.

Directives, Regulations, Decisions

z Directive (2002/21/EC) on a Common Regulatory Framework, OJ L 108,
24.4.2002, p.33.
z Directive (2002/19/EC) on Access and interconnection, OJ L 108, 24.4.2002, p.7.

z Directive (2002/20/EC) on Authorisation, OJ L 108, 24.4.2002, p.21.

z Directive (2002/22/EC) on Universal service and users’ rights, OJ L 108,

24.4.2002, p.51.
z Directive (2002/58/EC) on Privacy and electronic communications, OJ L 201,

31.7.2002, p.37.
z Directive (2002//77/EC) on Competition in the markets for electronic

communications services, OJ L 249, 17.09.2002, p.21.

z Regulation (2000/2887/EC) on Unbundled access to the local loop, OJ L 336,

30.12.2000, p.4.
z Decision 2002/676/EC on a regulatory framework for radio spectrum policy in

the European Community (Radio Spectrum Decision), OJ L108, 24 April 2002,

p.1.
z Commission Guidelines on market analysis and assessment of significant market

power under the Community regulatory framework for electronic

communications networks and services, OJ C 165, 11.07.2002, p.6.

The main aspects of the 2003 Acquis are summed up as follows:

2.1. Promoting competition

Promoting competition - in order to achieve economic efficiency in the interests of users

and society - is one of the main objectives of the EU regulatory framework for

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eCommunications. National regulatory authorities (NRAs) play a major role in the new
regulatory regime, together with the national competition authorities. Promoting
competition is one of the primary objectives for NRAs. The new framework contains
pro-competitive incentives, that with ex-ante regulation enable transfer from monopoly
environment to competition and ensure that once competition is effective on a specific
market, ex-ante regulation has to be withdrawn.

2.2. Market Entrance

For the provision of telecommunications services, an authorisation is needed. Based on

the experiences from the 98 regulatory regime, the authorisation regime should be light
and easy in order to remove barriers of market entrance. The 2003 framework aims at
very light authorisation regime as described shortly in the following.

z General authorisation
– There is no need to obtain an explicit administrative decision before starting the
business;
– Rights and obligation are defined in the legislative acts;
– Regulatory Authorities may ask for notification but the service provider does not
have to wait reply to this notification.

z Individual rights of use

For three types of rights and two types of obligations, individual regulatory
decisions will remain necessary in most cases, namely: rights of way, rights to
use radio spectrum, rights to use numbers, obligations related to significant
market power (SMP) and obligations relating to universal service provision.

z Administrative charges and usage fees

Member States may impose two types of levies on providers of electronic
communication networks or services, namely administrative charges and usage
fees. Administrative charges are intended to cover the costs of the national
regulatory authorities for managing the general authorisation system, assigning
of rights of use, policing competition in the market and ensuring the provision of
universal service. Usage fees may be imposed for rights to use radio frequencies,
numbers and for rights of way. Such usage fees are intended to ensure the
optimal use of these resources and should be proportionate to that purpose.

zCompliance with conditions

– Proof of compliance: Under the new Authorisation Directive it will no longer be
possible for regulators to require operators to provide proof of compliance with
the conditions under the general authorisation before they can start their
business. In principle, regulators may only require proof of compliance on a
case-by-case basis when they have received a complaint or have other reasons to
believe that conditions are not complied with.
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– Breach of conditions: When a national regulatory authority considers that a

service or network provider is in breach of a condition, he must notify this to the
provider concerned and allow one month for the provider to solve the problem
or to explain why he does not agree with the national regulatory authority’s
assessment. If the national regulatory authority does not find the provider’s
response satisfactory, a financial or other penalty may be imposed.

– Appeal: Undertakings have a right to appeal to an independent body against all

decisions taken by the national regulatory authority that effect them. However,
during the appeal the measure taken by the national regulatory authority will
remain in force.

z Transparency of regulation
– Clarity of structure: The replacement of individual licences by a general
authorisation will significantly improve the transparency of the regulatory
regime applied to the electronic communications services and networks sector.

– Publication: All relevant information on rights, conditions, procedures, charges,

fees and decisions relating to the general authorisation and to rights of use is
published in a way that makes it easily accessible for all interested parties.

– Local levels of government: To facilitate the task of undertakings who need to

install cables, masts or antennas, national regulatory authorities must make
reasonable efforts to ensure that all relevant information (rules, procedures, fees
etc.) is available through a user friendly overview, for instance by creating a
website with links to information held at local levels.

– Consultation: When a Member State intends to make changes in rights,

obligations or procedures that are applicable to providers of electronic
communications networks and services, they are obliged to consult interested
parties before they adopt any changes. Such public consultations should allow
interested parties at least four weeks to express their opinions except in
exceptional circumstances.

2.3. Market analysis

In order to find out market players that may have Significant Market Power on the
market, a market definition and market analysis have to be carried out. This is a basis
for the asymmetric ex-ante regulation, aiming to prevent SMP operators from misusing
their power in the market. Guidelines for market definition have been published by the
Commission but the final definition and market analysis has to be carried out by the
National Regulatory Authority.

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2.4. Interconnection of and Access to Networks

z Interconnection is an essential element in any multi-network environment. It

allows users on one network to communicate with users on other networks, or to
access services provided on other networks. In a newly liberalised market, terms
and conditions for interconnection to the incumbent operators network are
critical for successful market opening. All operators of public communications
networks in the EU have both a right and a duty to negotiate interconnection with
each other. In the event of a dispute, the national regulatory authority may
intervene.

z Access is a generic concept covering any situation where one party is granted the
right to use the network or facilities of another party, on either an exclusive or
shared basis. As defined in the Access Directive, interconnection is a special
form of access.

z Interoperability of services: Interconnection of networks does not guarantee

interoperability of services provided over those networks. Interoperability of
services requires the use of common standards and protocols, or else the use of
a conversion function that can map between different systems.

Member States are required to encourage the use of standards as a means of

ensuring interoperability of services and freedom of choice for users. The
Commission has published in the Official Journal of the EU (OJ) a list of
standards and/or specifications to serve as a basis for encouraging the
harmonised provision of electronic communications networks, electronic
communications services and associated facilities and services.

z Interoperability of digital television: There are technical obligations for

equipment manufacturers concerning the use of European scrambling
algorithms, and provision of SCART sockets on analogue set with a visible
diagonal greater than 42 cm. Providers of digital interactive TV services on
digital interactive TV platforms are encouraged, regardless of the transmission
mode, to use an open application program interface (API) ; providers of all
enhanced digital TV equipment deployed for the reception of digital interactive
television services on interactive digital TV platforms are encouraged to comply
with an open API.

2.5. Universal Service Obligation (USO)

When voice telephony was liberalised in 1998 to complete the overall liberalisation of
the telecommunications sector, it was agreed to maintain a safety net to ensure that for
users a set of basic telecommunication services would always be available at a
determined quality and an affordable price, even if the market would not provide it. This

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set of basic services was called ‘universal service’. The universal service incorporates
the right of:

z Connection to the public telephone network at a fixed location;

z Access to publicly available telephone services;
z Availability of a directory information service;

z Availability of public pay telephones;

z Facilities for disabled users and those with special social needs.

Requirements/obligations exist or may be set by the NRA on Quality of service,

availability of services, affordability of services, free of charge 112 emergency services
and provision of Directory services.

Ensuring the provision of a defined minimum set of services to all end-users at an

affordable price comes at a cost. Thus, there are provisions in the Universal Service
Directive which allow designated Universal Service providers to be compensated for the
specific net cost involved where it is demonstrated that the Universal Service
Obligations can only be provided either at a loss or at a net cost falling outside normal
commercial standards.

2.6. Digital Broadcasting

The mission statement of the European Commission’s DG Information Society/B1 Unit

(Policy Development and Regulatory Framework) is to develop together with sector
players (users, operators, service providers, National Regulatory Authorities and
Member States) policies for a converging market (that includes telecoms, digital radio
and TV and next generation networks) and to develop a regulatory environment that is
conducive to innovation, investment and competition, and thus to achieve for all users a
choice of communications services of high quality at fair prices.

2.7. Consumer protection

The provisions of horizontal consumer protection apply to all Services of General

Interest, including the telecommunications sector. The relevant legislation includes the
Unfair Terms in the Consumer Contracts Directive, the Distance Contracts Directive
and the Misleading Advertising Directive. The Commission also publishes a regular
update on inventory of Community acts relating to consumer affairs and consumer
health protection, which provides the basic information concerning binding and non-
binding measures relating to consumer protection. Specific provisions as defined in the
Universal Service Directive (USD):

z Tariff Transparency;
z Contracts;
z Quality of service;

z Consultation with interested parties;

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z Out-of court dispute resolution;

z Alternative dispute resolution.

2.8. Privacy protection

In 1981 the Council of Europe adopted Convention 108 for the protection of individuals
with regard to the automatic processing of personal data. In 1995 the EU adopted
Directive 95/46/EC on the processing of personal data. This Directive established the
basic principles for the collection, storage and use of personal data that should be
respected by governments, businesses and any other organisations or individuals
engaged in handling personal data. The Directive also created a working party
consisting of the independent national data protection authorities in the Member States.
In 1997 the EU adopted a Directive 97/66/EC on the protection of privacy and the
processing of personal data in the telecommunications sector, translating the principles
of the General Data Protection Directive for a number of specific privacy issues related
to public telecommunication networks and services.

As part of the new regulatory framework for the electronic communications sector, the
1997 Directive has been updated to take account of technological developments and to
ensure that the same level of privacy protection will be granted for all communications
over public networks regardless of the technology used. The new Directive 2002/58/EC
on the processing of personal data and the protection of privacy in the electronic
communications sector includes provisions on security of networks and services,
confidentiality of communications, access to information stored on terminal equipment,
processing of traffic and location data, calling line identification, public subscriber
directories and unsolicited commercial communications. The Directive had to be
transposed in national law by 31 October 2003 at the latest.

The Directive covers the following aspects: Security of networks and services,
Confidentiality of communications, Spyware and Cookies, Traffic data, Location data,
Public subscriber directories, Unsolicited commercial communications, Calling line
identification, Nuisance calls, Emergency calls and Automatic Call forwarding.

3. IMPLEMENTATION OF THE ACQUIS

3.1. Transposing the directives

In EU Member States, time for transposing Directives into national legislation is defined
in the Directive in question. Regarding accession countries, they are not Member States
yet and directives enter into force on the first day of their membership within the EU.
No obligation exists for them to follow the timelines before the membership. Therefore,
three alternatives exist to aim at reaching the EU legal level by the day of their
membership:

z One step procedure: to implement the Directives in one step;

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z Step-by-step procedure: to implement first the 1998 acquis and transpose the
2003 or later framework in a timely manner with EU membership;

z Mixture of alternatives 1 and 2.

It has to be kept in mind that the 2003 acquis is a follow up of the 1998 acquis. It has
been a useful procedure to open the market from monopoly to competition and acquire
experiences. If the step changing from the current legislation directly to the 2003
framework is considered too high, the step-by-step procedure or a mixture of the one
step and the step-by-step procedure could be considered.

3.2. Structure of national legislation

Structuring of regulations into laws and sub-laws is an item to be considered. In some

countries, regulations focus on primary laws and usage of sub-laws would be an
exception. If this is the case, adaptation of regulations to changing environment is
cumbersome because of the timely manner of law adaptation. If primary law covers only
the framework and gives mandate for the Ministries to approve secondary regulations,
the adaptation to a changing environment is much more flexible.

3.3. Roles of Authorities

z The Member State

Member State shall guarantee:
– That each of the tasks assigned to the National Regulatory Authority is
undertaken by a competent body;
– The independence of the NRA by ensuring that the NRA is legally distinct from
and functionally independent of all organisations providing electronic
communications networks, equipment or services;
– That when retaining ownership or control of an operator(s), it shall ensure
effective structural separation of the regulatory function from activities
associated with ownership or control.

z The Regulatory Authority

– The NRA shall promote competition in the provision of electronic
communications network, services and associated facilities by ensuring that
users derive maximum benefit in terms of choice, price and quality, by ensuring
that there is no distortion or restriction of competition in the electronic
communications sector, by encouraging efficient investments in infrastructure
and promoting innovation and by encouraging efficient use and ensuring the
effective management of radio frequencies and numbering resources.
– The NRA shall co-operate with the national competition authority and provide
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each other with the information necessary for the application of the Directives.
z Competition Authority
A Competition Authority is an independent Authority for the matters of
competition. Its functions are based on competition laws. A part from cases
where the consent of the Competition Authority is needed on before hand (e.g.
some mergers), interventions of the Competition Authority - contrary to ex-ante
regulations of the Regulatory Authority - normally take place in the case of
market failure. However, market supervision and market analysis of the two
Authorities include similarities. Therefore co-operation of these two Authorities
is very useful.

3.4. Main Tasks of the Regulatory Authority

The tasks of the Regulatory Authority are defined in the 2003 Directives. Main tasks
include the following:

zManaging public resources

To ensure a level playing field for all providers and users of communication
networks and services, it is important to guarantee non-discriminatory access to a
range of resources that are essential for the provision of these networks and
services, namely telephone numbers, short codes, IP addresses, Internet domain
names, protocol parameter and port numbers, radio frequencies and rights of way.

zNumbers
Numbers must be assigned to any undertaking providing or using electronic
communications networks or services within three weeks after receipt of a request.
Procedures for assignment must be open, transparent and non-discriminatory.
Short codes, e.g. carrier selection codes, and so-called golden numbers, e.g.
numbers that are easy to remember, deserve special attention as they may represent
a specific economic value. Member States may decide to assign such numbers or
codes via competitive or comparative selection procedures in which case the
assignment period may be extended until up to six weeks.

– European telephony numbering space (ETNS)

In 2000, the International Telecommunciations Union (ITU) assigned a
distinctive code - 3883 - for the ETNS, from the global country code resource,
to the twenty-four requesting countries from the European Conference of Postal
and Telecommunications Administrations (CEPT), including all fifteen members
of the EU and nine other European countries. Article 27(2) of the Universal
Service Directive requires Member States to ensure that all undertakings that
operate public telephone networks handle all calls to the European telephone
numbering space, without prejudice to the need for an undertaking that operates
a public telephone network to recover the cost of the conveyance of calls on its
network. This establishes a call connection obligation from anywhere in the EU.
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z Number portability
Since 2000 all subscribers of fixed telephone services have the possibility to
keep their telephone number if they change from one operator to another, while
remaining on the same location. Portability of so-called non-geographic numbers
must be possible both in case of a change of operator and a change of address.
As of 25 July 2003 number portability should also be available for all
subscribers to mobile services.

z Names and addresses

A domain name normally consists of a top-level domain and some lower level
domains. The Internet scheme consists of separate names and addresses. Domain
names are meant to be fairly permanent and a host, including the associated
services, will retain the same name even if it is attached to a different network.
The IP address on the other hand must reflect the point of attachment and may
therefore be temporary.

IP addresses are allocated at the regional level to the operators of larger networks
on the basis of demonstrated need by one of the RIRs (Regional Internet
Registries). End-users acquire addresses from their chosen upstream supplier.

A Framework Directive requires EU Member States to coordinate their positions on

issues related to numbering, naming and addressing to ensure full global
interoperability of services. Other than this provision, the regulatory framework does
not impose any requirements in the area of Internet naming or addressing since the
current management practices were considered to be adequate in view of the objectives
of the framework.

zRadio Spectrum
– Spectrum management
In national frequency plans, blocks of spectrum are allocated for various types of
usage, such as military communications, police and emergency communications,
TV and radio broadcasting, mobile communications, satellite communications,
navigation services etc. National frequency plans depend to a large extent on
extensive international coordination to minimise the risk of harmful interference
in border areas, to enable cross-border marketing of products that use regulated
or unregulated frequencies and to facilitate cross-border service provision based
on frequency usage.
– Unlicensed spectrum
Within the national frequency plans, some blocks are earmarked for unregulated
or unlicensed use, for instance for remote control devices, wireless
communication devices etc. Within these blocks no further assignment to
individual users is necessary because the risk of harmful interference is minimal
due to the very short range of the applications. In such case the use of frequency
is governed by the general authorisation.

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– Individual assignment
However, within most blocks, spectrum bands need to be assigned to individual
users. Where this is the case, assignment procedures are required to be open,
transparent and non-discriminatory. Moreover, such rights should be assigned
within six weeks after the request has been received.

– Limited availability
In principle, spectrum should be assigned on a first come, first serve basis.
However, if the regulator expects that demand will exceed supply within a
certain spectrum block, it may be necessary to determine a limited number of
usage rights from the outset. In such cases, prior public consultation is required
to solicit the views of users and consumers on the envisaged limitation.
Moreover, the selection criteria used for the assignment of a limited number of
usage rights must be objective, transparent, non-discriminatory and
proportionate.

z Rights of Way
Providers of communication networks need to roll out infrastructure such as
cables, masts, switches etc. and for this they usually need rights to install
facilities. Where public authorities own the land or buildings concerned, they are
required to consider without delay any request for rights to install facilities on
the basis of transparent, non-discriminatory and publicly available procedures.
Requests from providers of both public and non-public services should be
considered, but differentiated treatment of these two categories is allowed.

– Co-location and facility sharing

Digging up roads to create ducts usually creates inconvenience for the public,
masts for cables or antennas may distort the landscape. There may be good
reasons related to environment protection, public health or town and country
planning, that lead authorities to restrict rights to install facilities. If as a result
of this undertakings are deprived from possibilities to roll out infrastructure,
Member States may impose obligations on operators who already have facilities
installed to share these facilities or the locations where the facilities are installed
with newcomers.

– Declarations
Article 9 of the Authorisation Directive requires national regulatory authorities
to issue declarations to facilitate the exercise of rights to install facilities. These
declarations should confirm that the undertaking has submitted a notification as
an electronic communications service provider and clarify that any such provider
may submit a request for rights to install facilities. This declaration should avoid
any difficulties for operators who used to work under individual licenses and
who may be barred from rights to install facilities at local levels of government
if they cannot show such a license due to the new general authorisation regime.

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– Register of procedures
Article 15(2) of the Authorisation Directive is also intended to facilitate network
roll-out by requiring Member States to establish a user-friendly overview of
procedures, conditions and tariffs applicable to rights to install facilities at all
levels of government including local levels.

z Market definition and market analysis

In order to be able to determine whether telecommunications markets are
effectively competitive or not and impose, amend or withdraw regulatory
obligations accordingly, it is the task of the Regulatory Authority to carry out
market analysis on a timely manner. In the 2003 acquis, in total 7 markets have
been defined for retail level and 11 markets for wholesale level .

z Designation of operators having Significant Market Power

Based on the market definition and market analysis, it is the task of the
Regulatory Authority to define operators with Significant Market Power.

4. PRACTICAL HINTS

4.1. Financing of the NRA

No special requirement are imposed regarding the financing of the NRA. They may be
financed from the state budget, they may be self financing or a mixture of the two.
Member States may impose two types of levies on providers of electronic
communication networks or services, namely administrative charges and usage fees.
Administrative charges are intended to cover the costs of the national regulatory
authorities for managing the general authorisation system, assigning of rights of use,
policing competition in the market and ensuring the provision of universal service.
Usage fees may be imposed for rights to use radio frequencies, numbers and for rights
of way. Such usage fees are intended to ensure the optimal use of these resources and
should be proportionate to that purpose.
As an example of the Finnish Regulatory Authority, it is a self financed entity,
independent from state budget. In 2003 its fees came from Spectrum fees 21,7%, Radio
transmitter License Fees 15,7%, Numbering fees 13,9%, Domain name fees 8,9%,
Postal supervision fees 3,9% and Refund from state TV and Radio Fund. The latter is a
payment for the services collecting the TV-license fees from inhabitants of the country
(a task dedicated to the NRA).

1 Commission Recommendation of 11 February 2003 on relevant product and service markets within
electronic communications sector susceptible to ex ante regulation in accordance with Directive 2002/21/EC
of the European Parliament and of the Council on a common regulatory framework for electronic
communication networks and services, 2003/311/EC.

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4.2. Participation in the work of EU, CEPT and IRG

The active participation in the work of EU, CEPT, IRG and standardisation can provide
results in two types of benefits. Firstly, NRA will become aware on the development of
industry, secondly national characteristics, and experiences can be taken into account in
the preparation work of new norms.

4.3. Preparation of implementation in a timely manner

Transposition of directives in the national law is only a part of implementation.

Regulations have to be implemented in the telecommunications network. Many of those
regulations need extensive changes in the network, needing time for planning and
implementation(e.g. implementation of carrier selection/pre selection and number
portability). New services have to be available at the time the new regulation comes into
force. Planning and implementation of changes have to commence well prior the
deadline.

4.4. Utilisation of industry working groups

In order to be able to regulate the market, the Regulator needs a lot of information on
the market itself, on operators’ network technology, practical numbering arrangement
etc. Implementation of regulation impacts directly on the network and can be discussed
in industry working groups which are discussion forums without any decision power.
Such Working groups can be chaired by the Regulator. They can bring to the Regulator
a free of charge expertise. Another advantage is also that operators participating in
working groups become committed in the implementation of regulations.

4.5. Publication of a Supervision Handbook

Supervision of the market players in order to find out whether they follow the
regulations or not may be based on complaints received by the Regulator or by
Regulator’s own initiative. The use of the Regulator’s own initiative on an adhoc basis
makes the market vigilant and aware of the Regulator’s control power. By creation of a
supervision handbook, a transparent means can be created for an adhoc supervision. A
handbook may contain a list of tasks to be inspected, relevant regulations on which the
inspection is based, market information and problem areas defined by operators.

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4.6. Bottlenecks

In the following, some common bottlenecks are listed:

z Price control of Interconnection services

One of the major difficulties is the supervision of cost oriented pricing of
interconnection services of SMP operators. The burden of proof that charges are
derived from actual costs including a reasonable rate of return on investment shall lie
with the organisation providing interconnection to its facilities.

z Dispute Resolution and Appeal process

Regulatory decisions can be challenged and appealed. The structure and length of a
appeal procedure is of most importance.

z Available personnel resources

Efficient and sufficient expert resources on the whole regulatory field is a necessity
for an efficient and trustworthy Regulator.

Annex 1: The 1998 Regulatory Framework - List of Directives,

Decisions and Recommendations:

1. Competition
– Directive 90/388/EEC on competition in the markets for telecommunications
services, OJ L 192, 24.7. 90, p.10
– Directive 94/46/EC amending Directive 88/301/EEC and Directive 90/388/EEC
in particular with regard to satellite communications), 13.10.1994
– Directive 95/51/EC regarding Cable TV networks, amending Directive 90/388/EEC,
OJ L256, 26.10.95, p. 49
– Directive 96/2/EC on the provisions to open the markets for mobile and personal
communication to competition by abolishing all exclusive and special rights in
this sector
– Directive 96/19/EC on implementation of full competition in telecommunications
markets, OJ L74, 22.3.96, p13

2. Data protection
– Directive 95/46/EC on the protection of individuals with regard to the processing
of personal data and on the free movement of such data, OJ L 281, 23.11.1995,
p.31
– Directive 97/66/EC on the processing of personal data and protection of privacy
in the telecommunications sector, OJ L24/1 of 30/1/98

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3. Licensing
– Directive 97/13/EC on a common framework for general authorizations and
individual licences in the field of telecommunications services, OJ L117, 7.5.97.

4. Open Network Provisioning (ONP)

- ONP framework:
– Directive 90/387/EEC on the establishment of the Internal Market for
telecommunications services through the implementation of Open Network
Provision, OJ L192, 24.7.90.
– Directive 97/51/EC amending Council Directives 90/387/EEC and 92/44/EEC
for the purpose of adaptation to a competitive environment in
telecommunications, OJ L 295, 29/10/97.
– List of standards (interim issue, OJ C331/32 of 31/12/2002).

- Interconnection:
– Directive 97/33/EC on interconnection in telecommunications with regard to
ensuring universal service and interoperability through the application of the
principles of open network provision (ONP), OJ L199/32 26/7/97.
– Directive 98/61/EC amending Directive 97/33/EC with regard to operator
number portability and carrier pre-selection, OJ L268 3.10.98 p. 37.
– Commission Recommendation on interconnection in a liberalised market:
Part I: Interconnection pricing (15 October 1997),
Part II: Accounting separation and cost accounting (08 April 1998).
– Commission Recommendation of 24 November 1999 on Leased Lines
Interconnection Pricing in a liberalised telecommunications market.

- Leased Lines:
– Council Directive 92/44/EEC of 5th June 1992 on the Application of Open
Network Provision to Leased Lines, OJ L165, 19.6.92.
– Commission Decision of 7 January 1998 on amendment of Annex II to Council
Directive 92/44/EEC (98/80/EC).
– Directive 97/51/EC amending Council Directives 90/387/EEC and 92/44/EEC
for the purpose of adaptation to a competitive environment in
telecommunications OJ L 295, 29/10/97 p 23.

- Voice telephony:
Directive 98/10/EC on the application of open network provision (ONP) to voice
telephony and on universal service for telecommunications in a competitive
environment (OJ L101/24 01.04.98).

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5. Harmonisation
– Decision 92/264/EEC on the introduction of a standard international telephone
access code in the Community OJ L137, 20.05.92, p.21.
– Decision 91/396/EEC on the introduction of a single European emergency call
number, OJ L217, 06.08.91, p.31.

6. Mobile and Satellite communications

– Council Recommendation 87/371/EEC on the co-ordinated introduction of
public pan-European cellular digital land-based mobile communications in the
Community, OJ L 196, 17.7.87, p. 81 (GSM).
– Directive 87/372/EEC on the frequency bands to be reserved for the co-ordinated
introduction of public pan-European cellular digital land-based mobile
communications in the Community, OJ L 196, 17.1.1987, p.85.
– Council Recommendation 90/543/EEC on the co-ordinated introduction of pan-
European land-based public radio paging in the Community, OJ L 310,
9.11.1990, p. 23 (ERMES).
– Directive 90/544/EEC on the frequency bands designated for the co-ordinated
introduction of pan-European land-based public radio paging in the Community,
OJ L 310, 9.11.1990, p. 28.
– Council Resolution 90/C 329/09 on the final stage of the co-ordinated
introduction of pan-European land-based public digital mobile cellular
communications in the Community (GSM), OJ C 329, 31.12.1990, p. 25.
– Directive 91/287/EEC on the frequency bands to be designated for the co-
ordinated introduction of digital European cordless telecommunications (DECT)
into the Community, OJ L 144, 8.6.1991, p. 45.
– Council Recommendation 91/288/EEC on the co-ordinated introduction of
digital European cordless telecommunications (DECT) into the Community, OJ
L 144, 8.6.1991, p. 47.
– Decision 97/710/EC on a coordinated approach in the field of satellite personal
communications services in the EU, 24.3.1997.
– Decision 99/128/EC. The UMTS Decision contains provisions for a coordinated
and progressive introduction of compatible UMTS networks and services,
14.12.1998.
– Decision 2000/1215/EC: Prolongation of the S-PCS Decision until 31. December
2003, 16.5.2000.
– Recommendation to promote public wireless broadband services in Europe, OJ
L78/12, 25.3 2003.

7. Radio Spectrum
– Council Decision 97/838/EC concerning the conclusion on behalf of the
European Community, as regards matters within its competence, of the results of
the WTO negotiations on basic telecommunications services, OJ L 347,
18.12.1997.
– Directive 98/34/EC laying down a procedure for the provision of information in
the field of technical standards and regulations, OJ L 204, 21.07.1998.

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– Commission Decision establishing a Radio Spectrum Policy Group, OJ L 198/49

dated 27 July 2002.
– Recommendation to promote public wireless broadband services in Europe, OJ
L78/12 , 25 March 2003.

8. Terminal equipment
– Directive 88/301/EEC on competition in the markets in telecommunications
terminal equipment, OJ L 131, 27.5.88, p. 73.
– Directive 98/13/EC relating to telecommunication terminal equipment and
satellite earth station equipment, including the mutual recognition of their
conformity.
– Directive 99/5/EC The R&TTE Directive contains provisions related to the free
circulation and putting into service of radio communications and
telecommunications terminal equipment in the EU, 9.3.1999.

9. Television
– Directive 92/38/EEC on the adoption of standards for satellite broadcasting of
television signals, OJ L137, 20.5.92 p.17.
– Directive 95/47/EC on the use of standards for the transmission of television
signals, OJ L281, 23.11.95 p.51.

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CHAPTER 7

ADOPTING THE ACQUIS COMMUNAUTAIRE IN THE FIELD

OF INFORMATION SOCIETY- EXPERIENCES OF POLAND
Arkadiusz Plucinski*

1. INTRODUCTION
Poland joined the European Union on May 1, 2004. However, the way to achieve
membership was long and required a lot of efforts of both politicians and civil servants.
The adoption of EU law in Poland proved to be a great challenge for the whole public
administration. This chapter deals with experiences of Poland in the implementation of
the acquis in general and in the Information Society sector in particular.

2. THE ADOPTION OF THE ACQUIS COMMUNAUTAIRE IN GENERAL

IN THE PRE-ACCESSION PERIOD
The EU has stressed the importance of legal adjustments on many occasions. The
Copenhagen criteria, adopted by the European Council in 1993, stated that a Candidate
Country must be able to take over obligations stemming from the membership, which
requires also the incorporation, implementation and enforcement of the acquis
communautaire. This very broad notion of taking over the acquis, has been then developed
and prioritised in the Commission White Paper of 1995 on the preparation of associated
countries of Central and Eastern Europe for the integration in the Single Market of the EU.
In response, the Polish Government adopted the National Integration Strategy, then
replaced by the National Programme of Preparation for Membership1. On the basis of this
Programme a work-schedule on the adjustment of laws was developed. This schedule
specified deadlines for the internal acceleration of work in respect of particularly important
laws adjusting Polish legislation to the EU legislation. It was assumed at that moment that
about 180 laws had to be passed by the end of December 2002, which was declared by the
Government as the date Poland would be ready for joining the EU. It should be mentioned
however that such a list is never a complete list – due to the fact that the law of the EU
undergoes a process of permanent changes.

In Poland the process of law adjustment with EU legislation started in 1994. The legal bases
for the approximation at that time were article 682 and article 693 of the Europe Agreement4.

* Director of the European Union Law Department at the Office of the Committee for European Integration
(UKIE), Warsaw, Poland.
1 http://www.ukie.gov.pl
2 Article 68: The Contracting Parties recognise that the major precondition for Poland’s economic integration
into the Community is the approximation of that country’s existing and future legislation to that of the
Community. Poland shall use its best endeavours to ensure that future legislation is compatible with
Community legislation.
3 Article 69: The approximation of laws shall extend to the following areas in particular: customs law,
company law, banking law, company accounts and taxes, intellectual property, protection of workers at the
workplace, financial services, rules on competition, protection of health and life of humans, animals and
plants, consumer protection, indirect taxation, technical rules and standards, transport and the environment.
4 The Europe Agreement establishing an association between the European Communities and their Member

States, on the one side, and the Republic of Poland, on the other side.
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Both articles had a general and framework character and indicated that Poland was
obliged to undertake all possible measures resulting from the approximation of its
legislation to the acquis.

However, the Europe agreement, an international treaty, was not sufficient to ensure a
successful implementation of EU law in Poland. What seemed substantial was the
political will to implement EU law efficiently.

The process of harmonisation gained further speed after the conclusion of the Three
Party Agreement between the Marshal of the Sejm (the lower chamber in the Polish
Parliament), the Marshal of the Senate (the higher chamber in the Polish Parliament)
and the Prime Minister. This agreement concerned the acceleration of implementation
procedures. As a result, the extraordinary Committee for European Law (at present the
European Committee in the Sejm) and its equivalent in the Senate were established.
Both Committees were competent to adopt draft laws adjusting Polish legislation to EU
law (the so called adjustment laws). Contrary to the situation in many Member States,
where EU law is transposed by means of secondary legislation, the Polish Parliament
was engaged right from the beginning in the process of law adjustment and avoided thus
a ‘democratic deficit’.

In Poland, the accession negotiations in 1998, followed by the provisional agreement

concerning the date of accession (1 January 2003) undoubtedly contributed additionally
to the acceleration of the process of implementation of the acquis.

The European Council in Feira 2000 showed how important the relation between the
progress in negotiations and the speed and scope of law transposition is. The Council
indicated that all three factors, transposition, implementation and enforcement
determine the success of negotiations.

At that time the EU was in a quite exceptional situation of negotiating membership with
countries, which were in ‘transition’. Never before had the difference between the
current EU Member States and future Member States been so immense and never had
it concerned so many and various aspects. A good example is the telecommunication
acquis where the difference in market development, particularly in the area of universal
service, has been enormous. Therefore, meeting universal service obligations, and in
particular the requirement to meet all reasonable requests for access to the public
telephone network and to publicly available telephone services at a fixed location,
proves more burdensome in some of the new Member States than in the former EU15,
due to the lower fixed telephone penetration rate in these countries.

Adjustment of the national legal order to EU law is a ‘typical’ process of law adaptation.
By adapting laws and regulations that transpose the acquis, a country is bound to accept
nearly unconditionally the legal standards that were formulated not only without its
presence, but also within a completely different economic and social context. If one can
distinguish three phases in the adoption of the EU acquis (formulation, transposition

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and implementation), candidate countries are invited and obliged to participate only in
two of them: transposition and implementation. There is only a very small margin of
discretion left for a country to take into consideration its economic but also social
conditions while constructing a new legal reality. Certainly, there is also a degree of
flexibility provided within the acts that are to be transposed. The nature of directives
leaves Member States the discretion to choose the appropriate methods and means to
achieve the results of directives.

2. TRANSPOSITION OF THE INFORMATION SOCIETY ACQUIS IN

THE PRE-ACCESSION PERIOD

For the purpose of this paper the term Information Society acquis refers to:

z The new electronic communications package of 20025;

z The postal directive and its amendment6;
z The e-commerce directive7.

2.1. Negotiations

Poland’s negotiation position in the area of Telecommunications and information

technologies (chapter 19 of the Polish negotiating positions) which covered the
telecommunications’ and postal services’ acquis fixed the 31st December 2002 as the
date on which Poland would be prepared for the accession to the EU in this area. One
significant problem with regard to the implementation of the acquis concerned Poland’s
ability to achieve the accessibility level of universal telecommunication services.

5Directive 2002/21/EC of the European Parliament and of the Council of 7 March 2002 on a common
regulatory framework for electronic communications networks and services (Framework Directive), OJ L 24
April 2002, 108, 33; Directive 2002/20/EC of the European Parliament and of the Council of 7 March 2002
on the authorisation of electronic communications networks and services (Authorisation Directive), OJ L.. 24
April 2002, 108, 21; Directive 2002/19/EC of the European Parliament and of the Council of 7 March 2002
on access to, and interconnection of, electronic communications networks and associated facilities (Access
Directive), OJ L 24 April 2002, 108, 7; Directive 2002/22/EC of the European Parliament and of the Council
of 7 March 2002 on universal service and users’ rights relating to electronic communications networks and
services (Universal Service Directive), OJ L 24 April 2002, 108, 51; Directive 2002/58/EC of the European
Parliament and of the Council of 12 July 2002 concerning the processing of personal data and the protection
of privacy in the electronic communications sector (Directive on privacy and electronic communications), OJ.
L.. 31 July 2002, 201, 37; Decision 676/2002/EC of the European Parliament and of the Council of 7 March
2002 on a regulatory framework for radio spectrum policy in the European Community (Radio Spectrum
Decision), OJ L 24 April 2002, 108, 1; Commission Directive 2002/77/EC of 16 September 2002 on
competition in the markets for electronic communications networks and services (Competition Directive), OJ
L 17 September 2002, 249, 21.
6 Directive 97/67/EC of the European Parliament and the Council of 15 December 1997 on common rules for
the development of the internal market of Community postal services and the improvement of quality of
service; Directive 2002/39/EC of the European Parliament and of the Council of 10 June 2002 amending
Directive 97/67/EC with regard to the further opening to competition of Community postal services
7 Directive 2000/31/EC of the European Parliament and of the Council of 8 June 2000 on certain legal aspects
of information society services, in particular electronic commerce, in the Internal Market (‘Directive on
electronic commerce’), OJ L 178, 17/07/2000.
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Harmonisation of Polish law with the acquis was based on the Telecommunication Law
and secondary legislation prepared by the competent Ministry (at that time it was the
Ministry of Posts and Telecommunications). These laws created a complete regulatory
structure in full accordance with the acquis. The competent Ministry also had to prepare
the Polish Postal Law, in order to achieve full conformity of the Polish postal services
market with EU requirements. The above-mentioned chapter was provisionally closed
on May 19, 1999.

The Directive on e-commerce was adopted by EU institutions on 8 June 2000 and

Member States had to bring into force the laws, regulations and administrative
provisions necessary to comply with this Directive before January 17, 2002. Poland’s
negotiation position in the area of “Freedom to provide services” was adopted by the
Council of Ministers of the Republic of Poland on July 13, 1999; therefore it did not
include any position on e-commerce directive. Nevertheless, Poland accepted and
obliged itself to implement the acquis in the area of “Freedom to provide services” by
31 December 2002, fully recognising and taking into consideration the objectives laid
down in articles 52 and 59 of the EC Treaty, and particularly the non-discriminatory
principle.

As a result of negotiations, basically no transitional measures were provided in Poland’s

Accession Treaty in the areas concerned. However, at the end of the accession
negotiations in December 2002 chapter 19 was re-opened and only one transitional
period was granted. By way of derogation from the second subparagraph of Article 7(1),
of the Postal Services Directive 97/67/EC, Poland may apply a weight limit of 350
grams for reserving services to universal service providers until December 31, 2005.
During this period, this weight limit does not apply if the price is equal to, or more than,
three times the public tariff for an item of correspondence in the first weight step of the
fastest category8.

2.2. Transposition

General remarks

Since 1994 the obligation to deliver an opinion on the conformity of draft laws with the
acquis is binding. The Office of the Committee for European Integration (UKIE) has
played the main role in this field. It coordinates works of all ministries and institutions
directly engaged in the process of Poland’s integration with the EU. The most powerful
task, which this office is responsible for, is the obligation to issue an opinion on
compliance of Polish draft legislation with EU law. Its intervention helped many times
to maintain or bring back the Community wording of Polish provisions and since
accession to the EU it helps to keep the necessary deadlines fixed for the transposition
of the various EU legislative acts.
8 Accession of the Czech Republic, Estonia, Cyprus, Latvia, Lithuania, Hungary, Malta, Poland, Slovenia and
Slovakia (2003) OJ L 236 of 23 September 2003 (Annex XII).
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When transposing the Information Society acquis the procedure of law assessment was
also applied: The process of adaptation of EU law started in each ministry where the
appropriate draft law was created. Then, the lawyers from the Committee for European
Integration (UKIE) assessed the draft law. When the draft law was sent to the
Parliament it had to be examined three times during the legislative procedure by the
Committee for European Integration: after the first reading, after the second reading and
after the resolution of the Senate. Approximately 100 opinions on conformity were
presented when adapting both primary and secondary telecommunication, postal service
and e-commerce legislation (out of a total of 17 048 issued opinions in the years 2001-
2005).

z Telecommunications

The time–frame for the process of harmonisation and implementation of EU law was
determined by the date fixed by the Government of Poland as the date on which Poland
would be prepared to access the EU: the 31 December 2002. Taking into account that
the Polish telecommunication market has been fully monopolised by the incumbent
TPSA (its market share was above 93 %) the requirement to adjust to the acquis by 31
December 2002 was the main driving force in liberalising the Polish telecommunication
market. Although accession to the EU took place later (1st May 2004) all necessary
legislation had been already put in place or was under preparation.

The primary basis of the current telecommunication regulatory regime resided in the
new Telecommunications Law of 2000, which entered into force in January 2001. The
Telecommunications Law 2000 partly transposed EU Directives of the ‘old’
telecommunication regime as EU institutions only adopted the new electronic
communications package later in 2002. The purpose of the Telecommunications Law
2000 was to facilitate market entry for new operators, to put in place a policy framework
for interconnection, as well as to assure universal access to telecommunication services
throughout the country and to protect the users’ interests. This law created an
independent regulatory body separate from the ministry and from operators. The law
also ended the system of providing tenders or authorisations for local, long-distance,
and mobile telecommunication services at the end of 2001.

On March 7, 2002, the most important elements of the new regulatory framework for
electronic communication networks and services were adopted at the EU level. The
whole package consists of a number of directives of the European Parliament and the
Council under Article 95 (harmonisation), one Commission directive under Article 86
(liberalisation) and a number of secondary legislative texts, of which the most important
one (the Recommendation of the European Commission on market definition in the
electronic communication sector) was approved on February 11, 2003.

The four most important directives (framework, authorisation, access and universal
service) were implemented into Polish law before July 24, 2003. EU Member States
were obliged to apply their new legislation starting from July 25, 2003. The
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implementation date of the Data Protection directive was the 31st October 2003.
However, at this time the Candidate Countries disposed of a little more time, since they
only needed to implement this new package from the date of their accession to the EU.
However, Poland was not fully ready with the implementation on this date.

In general, the success of Poland’s transition to the new EU regulatory framework was
due to the fact that important aspects of the old EU legislative framework have been
completed prior to accession (Telecommunications Law 2000). This approach ensured
that the basic ‘starting conditions’ for liberalisation and harmonisation were in place as
quickly as possible; in particular the regulatory obligations on Significant Market Power
operators as established in the old EU legislative framework were in force and could be
maintained until the market analysis process had been completed. This approach
ensured also the establishment of independent national regulatory bodies capable of
ensuring the effective implementation of the framework upon accession.

The new Polish Telecommunication Law transposing the new EU regulatory framework
for electronic communications was published in August 2004 after a hard and long
debate in the Parliament; it entered into force on September 3, 2004. A significant
amount of secondary measures necessary to ensure full transposition and effective
application of the EU directives still needs to be adopted; the Ministry of Infrastructure
is currently working on the drafts. Until the new executive ordinances are adopted, those
issued under the Telecommunications Law 2000 remain in force.

z Postal Acquis

Regarding the implementation of the postal services acquis, the Polish Postal Law
adopted on 12 June 2003 fully implemented the provisions of the EU postal services
Directive 97/67/EC. However, there has been a delay in the transposition of Directive
2002/39/EC. This may be explained (although not justified) by the fact that the
Directive was adopted at a relatively late stage in the accession process and just after the
new Polish law transposing Directive 97/67/EC has been adopted. The amendment to
the Polish Postal Law was finally adopted on 13 March 2004 and entered into force on
the date of Poland’s accession to the EU. Apart from adjusting to the requirements of
directive 2002/39/EC and a granted transitional period, the amended Polish Postal Law
removed other existing incompatibilities that had been raised in bilateral contacts with
the European Commission. They concerned e.g. the exclusion from the reserved area for
the incumbent hybrid mails (transferred by electronic means) and postal orders.

z E-commerce

Directive 2000/31/EC of the European Parliament and of the Council of June 8, 2000
on certain legal aspects of information society services, in particular of electronic
commerce in the Internal Market was implemented in Polish legislation by the Act of 18
July 2002 on e-commerce services. The Act also amended certain provisions of the
Polish Civil Code. The Act was published on September 9, 2002 and entered into force
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6 months later, on March 10, 2003. The Act incorporated also provisions of Directive
98/48/EC (defining the information society) as well as provisions of Directive
2002/58/EC (‘privacy’ directive). The provisions of Polish law were compliant with the
assumptions adopted by Candidate Countries in the initiative eEurope+2003.
The European Commission in its last Regular Report on Poland’s progress towards
accession in 2003 raised the non-compliance of the mentioned Act with several articles
of Directive 2000/31/EC (articles 2, 3, 8, and 9 to 11). However, definitions included in
article 2 of the Directive have been transposed into the legislative glossary of the Act on
e-commerce. Article 8 of the Directive is not subject to the transposition by virtue of a
mandatory legislative act since the issue remains within the scope of internal regulations
of the self-government of individual regulated professions. Articles 9 to 11 concerning
the approach to agreements and the method of submitting electronic offers were totally
implemented by the Act on the amendment of the Polish Civil Code Law of February
14, 2003.

3. TRANSPOSITION OF THE INFORMATION SOCIETY ACQUIS

AFTER POLAND’S ACCESSION TO THE EU

z Telecommunications

Although Poland fully implemented the binding acquis in this area only in August 2004
(one year after the deadline for transposition) the Commission did not launch any
infringement proceeding under article 226 EC Treaty against Poland. However, it did so
by the end of October 2004 against Belgium, the Czech Republic, Estonia, Greece and
Luxembourg.

As the Commission services were examining the conformity of Polish implementation

measures with the EU Directives, four substantive infringement proceedings were
launched in March 20059. Amongst others, they concern the key issue of the role of the
National Regulatory Authority when carrying out market analysis, and in particular the
remedies that should be available to them. In particular, one letter of formal notice states
that the Polish telecom law does not fully transpose Article 4 of the Framework
Directive which concerns “appeals and dispute resolution”.

According to this directive, pending the outcome of an appeal, the decision of the
National Regulatory Authority (NRA) shall stand, unless the appeal body decides
otherwise. According to Polish law an appeal normally has suspensive effect, unless the
NRA decides otherwise on a case-by-case basis.

9 Information on infringement proceedings can be found at:

http://www.europa.eu.int/comm/secretariat_general/sgb/droit_com/index_en.htm
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Another letter of formal notice calls for the correct transposition of “mobile number
portability”, i.e. the right of each subscriber for mobile services to retain the number
independently of the undertaking providing the service. Although it has been formally
introduced into the Polish system with the adoption of the new law, the relevant
provision of the law seems to exclude pre-paid customers of mobile services from its
scope.

Last but not least, the Commission stated that the “single European emergency
number” (112) free of charge is not ensured in Poland for fixed network subscribers,
and access to it is only possible for mobile end-users.

After finishing the internal governmental consultations, the European Committee of the
Council of Ministers in Poland adopted its position and sent it out to the Commission
where it currently undergoes examination. It is very likely that the Commission will
continue its proceedings by issuing reasoned opinions under article 226 TEC and that
the cases eventually will be referred to the European Court of Justice.

z Postal Acquis

All Polish postal primary legislation is in place since the date of Poland’s accession into
the EU including one transitional period. As a result only necessary secondary
legislation needed to be adopted. Poland has now implemented the overall EU postal
service framework with all fundamental elements:

– The provision of a universal postal service for all users comprising at least one
delivery collection five days a week;
– The maximum part of the market reserved for the Universal Service Provider:
350g of weight or three times the basic tariff of an item of correspondence (and
50g/ 2.5 *basic tariff as of 2006);
– The authorisation procedures, which include individual licenses;
– A reasonable and good access of all users to the postal network which is
transparent and non discriminatory;
– Cost-based tariffs including special tariffs, for universal services;
– Cross-subsidies from the reserved area to the competitive area limited to the
fulfilment of universal service obligations; transparent and separated cost
accounting;
– Quality of service targets for cross-border mail (85% for D+3, 97% for D+5 for
the fastest standard category of service);
– Adequate consumer protection measures, particularly with regard to complaints
and redress procedures;
– National Regulatory Authority established, independent from the postal
operators.

Although, almost all Member States have transposed the Postal Services Directive, there

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are still some conformity issues, which can be tackled by the Commission. These are
mainly in the areas of licensing and authorisation, complaint and redress procedures,
price control and the separation of accounts.

z E-commerce directive

The Commission also raised some doubts as regards the complete implementation of the
e-commerce directive by Poland; however no formal proceedings where launched and
the Commission simply asked for some clarification. At this moment, it seems that some
of the Commission’s remarks would be accepted as justified. As soon as the official
position of the Polish government is ready, it will be submitted to the Commission.
However, one point is worth mentioning here: the e-commerce directive covers
competences of several main ministries in Poland and responsibilities are split between
various governmental bodies; therefore it is crucial to gather a common position.

4. CONCLUSIONS FOR FUTURE EU MEMBER STATES AS REGARDS

THE SUCCESFUL IMPLEMENTATION OF INFORMATION SOCIETY
ACQUIS

On 1st May 2005 we were celebrating the first year of Poland’s membership within the
EU. This gives the opportunity to attempt an assessment of the pre-accession period and
of the first months of membership in the EU and especially as regards Poland’s
experience in the implementation of the EU acquis. Therefore, it is worth drawing the
following remarks/conclusions, which refer in particular to the example of
implementation of the Information Society acquis:

z Firstly, a country has to choose either a ‘centralised’ or a ‘decentralised‘ system

of law adjustment. Obviously, the choice is to be made by the national
administration, but the decision should take into account the ‘maturity’ of the
national administration and its capability to act in a responsible way.
Irrespectively of the choice made, a great degree of involvement on the side of
each competent ministry is required. In a ‘centralised’ system of monitoring of
the correct law transposition it is for practical reasons better if the system is
independent from the line ministries. At a later stage it is also very useful as a
tool to coordinate and deal smoothly with infringements, which concern various
areas.

z It is very important to have a detailed timetable of actions to be taken. It should

include a full and in advance well-planned list of necessary transposition
measures. In a ‘centralised’ system it is easier to monitor them regularly and
control their execution.

z Setting clear priorities and making strategic choices is needed in transposing

EU law. There are areas of law, which have an enormous influence on other
spheres of law. Therefore, it is important to put them in line with the acquis first.
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These areas are, amongst others, market surveillance, state aid (especially in
postal services sector), and competition policy.

z A flexible legislative technique is of crucial importance, even though this is a

purely national issue. Nevertheless, it may to a great extent determine the speed
and success of transposing the acquis. It is less troublesome to implement the
acquis by secondary legislation. Also special attention has to be paid to
constraints, which can cause the national Constitution. Conflicting situations
may occur as regards competences of regulatory bodies and powers that they
may use to impose on individuals generally binding obligations.

z Concordance tables are very useful tools within the process of law
transposition. The Commission started requiring them to accompany the
notification of national transposition measures. They are also very useful when
dealing with infringement procedures.

z Consultation with all market players is also very important. Their opinions have
to be taken into account right from the beginning of the implementation process.

z Bilateral contacts with the European Commission should not be

underestimated. They will help avoid numerous misunderstandings during the
process of alignment and after the accession in the process of future
infringements. The Commission is just another administration and it is better to
telephone or drop an email rather than write and answer formal letters.

It is important to remember that local circumstances must be taken into consideration

and that it will take time to identify the most appropriate method for a successful
implementation of the acquis. Therefore, the present analysis can neither be complete
nor reveal the scale of necessary changes. However, on top of the points mentioned
above there is a prevailing condition for a successful implementation of the acquis in
general: the political will and determination of the policy makers. If there is high
awareness of EU affairs both on the political and administrative level it can save a lot of
energy and make the whole process of law implementation a successful one.

It is also worth remembering that although before the accession there is an enormous
work to be done by the central administration of a Candidate Country, it is also
necessary to reflect and plan the ‘after-accession’ actions when it comes to influencing
the EU decision-making process.

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CHAPTER 8

EU TRANSPORT AND INFRASTRUCTURE POLICY

AND EXPERIENCES OF THE SLOVAK REPUBLIC IN
IMPLEMENTATION

Roman Horvath*

1. HISTORICAL DEVELOPMENT OF EUROPEAN COMMON

TRANSPORT POLICY

Transport policy has almost exclusively been a national issue in the past. Even though
the Treaty establishing the EEC, signed in March 1957, provides a legal basis for the
creation of a Common Transport Policy, for nearly 30 years the European Conference
of Transport Ministers (ECMT) - which was held within the framework of the OECD -
remained the main institution to co-ordinate pan-European transport policy initiatives.
In the 60ies, the EEC Transport Policy was described primarily as a dismal story of false
starts, of politically inapt Commission proposals, of persistent Council inaction, of
divided government views, and of apparent drift in the direction of more nationally
oriented policies.

The new era for common transport policy started in 1985. The Commission published
the White Paper on the Completion of the Internal Market, which put a strong focus on
the market aspects of transport. At the same time the European Court of Justice (ECJ)
has given a ruling on the 22nd May 1985, which stated the Council’s failure to adopt the
measures laid down in the Treaty (Case 13/83, Parliament against Council) and the EC
institutions’ obligation to act in the field of transport. As a result, between 1985 and
1992, a wide range of measures and initiatives were brought towards aiming at the
completion of the internal market through the elimination of regulatory barriers,
including transport policy.

On 2nd December 1992, the EC’s first White Paper on the future development of the
common transport policy put an emphasis on the opening up of the transport market.
Ten years later, on 12th September 2001, the White Paper on European transport policy
for 2010: time to decide was published as a basic strategic document for the common
Transport Policy. Its main slogan is “sustainable mobility”: to strike a balance between
economic development and the quality and safety demands made by society in order to
develop a modern, sustainable transport system for 2010. The White Paper focuses on
intermodality, interoperability, environment, road safety, services for passengers,
revitalisation of railways, urban transport, major infrastructure projects and accession
of the EU to international transport organisations to achieve stronger influence on their
decisions.

* State Advisor, Ministry of Transport, Posts and Telecommunications of the Slovak Republic.
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In the EC Treaty, Title V (Articles 70 – 80) is devoted to Transport Policy. According to

this title, the main fields of EC action are among others:

– The establishment of common rules applicable to international transport to or

from the territory of a Member State or passing across the territory of one or
more Member States;
– The conditions under which non-resident carriers may operate transport services
within a Member State;
– Measures to improve transport safety.

The title also underlines the principle of non-discrimination and the prohibition of state
aids except aids that meet the needs of coordination of transport or represent the
reimbursement for the discharge of public service obligations. In the Treaty establishing
a Constitution for Europe Articles III-236 – 245 in Part III are devoted to Transport
Policy. The wording of these articles is almost the same as in the currently applicable
EC Treaty. The only change concerns the extension of the qualified majority vote within
the Council to all measures adopted within the field of Transport Policy.

2. THE ACQUIS COMMUNAUTAIRE IN THE FIELD OF TRANSPORT

POLICY AND THE MEASURES FORESEEN IN THE 2001 WHITE
PAPER

Measures adopted under the Transport Policy form the second largest part of the acquis
communautaire, after measures adopted under the Common Agriculture Policy. For this
reason, the following section enumerates only the most important parts of the acquis
communautaire in the field of Transport Policy.

2.1. Inland Transport

- Road Transport
The current acquis communautaire in this field is focused on the following aspects:

– Market access and competition (access to the professions; opening up the goods
and passenger market – international and cabotage);
– Safety of passengers and goods; roadworthiness of vehicles; tunnels; transport of
dangerous goods;
– Harmonisation of legislation, including tax harmonisation (charging of
infrastructure costs), technical harmonisation (maximum authorised dimensions
and weights, roadworthiness tests), administrative harmonisation (driver’s legal
obligation, vehicle registration) and social harmonisation (specially as regards
working time).

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According to the 2001 White Paper, in the field of road transport, the EU and the
Member States have to:

– Harmonise driving times with an average working week of not more than 48
hours (except for self-employed drivers);
– Harmonise the national weekend bans on lorries;
– Introduce a driver attestation in order to check that the driver is lawfully
employed;
– Develop vocational training;
– Promote uniform road transport legislation;
– Harmonise penalties and the conditions for immobilising vehicles;
– Increase the number of checks;
– Encourage exchanges of information;
– Improve road safety and halve the number of road deaths by 2010;
– Harmonise fuel taxes for commercial road users in order to reduce distortion of
competition on the liberalised road transport market.

Since the adoption of the 2001 White Paper main achievements have been made in the
field of driver attestations, the harmonisation of driving times (Directive 2002/15/EC)
and the development of vocational training. On 21st April 2005, the EU transport
ministers approved the so-called ‘Eurovignette directive’ on infrastructure (road)
charging.

- Rail Transport
As regards rail transport, the current acquis communautaire is focused on:

– Market access and competition (access to infrastructure and occupation;

allocation of infrastructure capacity; revitalising and liberalisation of railways);
– Safety (standards and monitoring; transport of dangerous goods);
– Harmonisation of legislation - technical harmonisation (interoperability of
trains).

The declared objective of the 2001 White Paper is to maintain in 2010 the modal share
of rail transport at the same level of 1998 and thus reverse the decline of rail transport
observed over the last 30 years. The Commission announced its intention to table a set
of new proposals (railways packages) to improve access to the railway network for
freight transport and to amend existing directives on the interoperability of conventional
rail systems and High-Speed Rail systems, as well as to create a European Railway
Safety and Interoperability Agency.

The first rail package (Directives 2001/12/EC, 2001/13/EC and 2001/14/EC) is fully
effective in the Member States since March 2003 and comprises a series of measures
relating to the opening-up of the international freight:

– A regulatory independent body other than the railway undertaking in each

country has to be set up and ensure fair and non-discriminatory access conditions
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for all railway undertakings;

– Access rights to the Trans-European rail freight network have to be guaranteed
for all licensed rail operators;
– Charges for the use of infrastructure have to be set in a transparent and non-
discriminatory manner guaranteeing the competitiveness of international freight
transport;
– Transparent and fair rules and procedures have to be defined for the allocation of
train paths;
– The current high level of safety has to be maintained after the opening of
international rail freight markets.

The second railways package was proposed in 2002 and became effective in 2004.
This package comprises several directives and a regulation:

– Directive 2004/49/EC on safety on the Community’s railways (amending

Directive 95/18/EC and Directive 2001/14/EC) aiming to develop a common
approach to safety and establish a common system for the issue, content and
validity of safety certificates;
– Directive 2004/50/EC adapting and amending former interoperability directives
(Directive 96/48/EC and Directive 2001/16/EC);
– Directive 2004/51/EC (amending Directive 91/440/EEC) extending
infrastructure access rights to freight services within a Member State and
opening the rail freight markets, including cabotage, by 1st January 2007;
– Regulation (EC) No 881/2004 establishing a European Railway Agency.

The European Railway Agency has been set up in May 2004 and is located in Lille/
Valenciennes (France). Its aims are to develop common safety standards and devise and
manage a system for monitoring safety performance and to manage in the long-term the
system for establishing, registering and monitoring the technical specifications for
interoperability. The agency, with a staff of around 100 persons, has a pivotal role in
moving forward the work on approximating the technical railway systems. The agency
has no decision-making powers as such, but can make proposals to the Commission.

The third railways package consists of 4 proposals, put forward by the Commission in
March 2004:

– A proposal for a directive on the certification of locomotive and train drivers

engaged in the carriage of passengers and goods in the Community;
– A proposal for a regulation on international rail passengers’ rights;
– A proposal for a directive on opening up the market for international rail
passenger transport services by 1st January 2010;
– A proposal for a regulation on the quality of rail freight services including the
possibility of compensation in cases of non-compliance with contractual quality
requirements for rail freight services.

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- Inland Waterways
The current acquis communautaire on inland waterways contains rules on:

– Market access and competition (access to the profession, opening up the goods
and passenger market – international and cabotage, correcting measures -
reabsorbation existing overcapacity, competition rules);
– Safety issues (River Information Services);
– Harmonisation of legislation including the mutual recognition of professional
qualifications.

2.2. Combined Transport

Combined transport is focused on reducing road transport by bringing together rail,

inland waterway and sea transport. In its 2001 White Paper the Commission proposed
to take measures which should make the market shares of the modes of transport return,
by 2010, to their 1998 levels. One measure to achieve this objective is the establishment
of the Marco Polo Programme with its adoption on 22 July 2003.

The Programme’s objective is to reduce road congestion and to improve the

environmental performance of the freight transport system within the Community and
to enhance intermodality, thereby contributing to an efficient and sustainable transport
system. To achieve this objective, the Programme supports actions in the freight
transport, logistics and other relevant markets. These actions should contribute to
maintain the distribution of freight between the various modes of transport at 1998
levels by helping to shift the expected aggregate increase in international road freight
traffic of 12 bilion t/km per year to short sea shipping, rail and inland waterways or to
a combination of modes of transports in wich road journeys are as short as possible. All
segments of the international freight transport market are within the scope of the
Programme.

The Programme runs from 2003 to 2006 with a budget of 100 € million for the EU25.
On 15th July 2004 the Commission presented a proposal (COM (2004) 478) to
establish a second, significantly expanded Marco Polo Programme from 2007 onwards.
Marco Polo II includes new actions such as motorways of the sea and traffic avoidance
measures. The programme, which has a budget of € 740 million for 2007-2013, has
been extended to countries bordering the EU. The final form of Marco Polo II will
depend on the outcome of the negotiations with the European Parliament and the
Council.

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2.3. Air Transport

Of all forms of transport, air transport has seen by far the most impressive growth in the
European Union over the last twenty years. In terms of passenger-kilometres, traffic
increased by an average of 7.4% a year between the year 1980 and 2001, while traffic
at the airports of the 15 Member States increased five-fold since 1970. Estimates are that
air traffic will grow by 4% a year over the next 15 years, leading to a nearby doubling
of traffic by 2020.

The current acquis communautaire in the field of air transport is focused on:

– Rules on market access (harmonised access, liberalisation of tariffs, access to

market and to professions, access to the ground-handling market, seat booking
systems);
– Rules on competition and fares (agreements and business practices, controls on
state aid, tariffs, allocation of timetable slots, airport charges);
– Rules on air-traffic and safety rules (air traffic control, traffic management,
equipment and systems, interoperability, air safety, air security, accident
prevention and dealing with accidents)

The Single European Sky1 is an ambitious initiative to reform the architecture of

European air traffic control to meet future capacity and safety needs. The objectives of
the proposed legislation are to improve and reinforce safety, to restructure the European
airspace as a function of air traffic flow, rather than according to national borders, to
create additional capacity and to increase the overall efficiency of the air traffic
management system (ATM).

The legislative package has been adopted in March 2004 and comprises four regulations
covering the essential elements for a seamless European Air Traffic Management
System2:

– Regulation (EC) No 549/2004 laying down the framework for the creation of the
Single European Sky (the framework Regulation);
– Regulation (EC) No 550/2004 on the provision of air navigation services in the
Single European Sky (the service provision Regulation);
– Regulation (EC) No 551/2004 on the organisation and use of the airspace in the
Single European Sky (the airspace Regulation);
– Regulation (EC) No 552/2004 on the interoperability of the European Air Traffic
Management network (the interoperability Regulation).

EU/US negotiations will seek to replace existing agreements between individual

Member States and the US with a single comprehensive EU/US agreement, establishing
an Open Aviation Area between the two territories. On 21st April 2005, the EU transport
ministers supported an effort of the EC to continue negotiations with USA.

1 For a short description of a Single European Sky:

http://www.europa.eu.int/comm/transport/air/single_sky/doc/2004_simple_european_sky_presentation_en.pdf
2 Official Journal of the European Union L96 - 31/03/2004

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Improved air traffic and aircraft positioning and communication technologies, such as
GALILEO,3 offer opportunities for significant improvements in the efficiency and
safety of air travel.

2.4. Sea Transport

The European Union is very dependent on maritime transport:

– Over 90% of its external trade and some 43% of its internal trade goes by sea;
more than 1 billion tonnes of freight a year are loaded and unloaded in EU ports.
– Maritime companies belong to European Union nationals control one third of the
world fleet, and some 40% of EU trade is carried on vessels controlled by EU
interests.
– The maritime transport sector - including shipbuilding, ports, fishing and related
industries and services - employ around 2.5 million people in the European
Union.

The current acquis communautaire in the field of maritime transport is focused on:

– Rules related to market access and competition (freedom to provide services,

competition rules);
– Rules related to traffic and safety.

After the Erika disaster on 12 December 1999, the EU considerably reinforced its
legislative arsenal to combat flags of convenience and give Europe better protection
against the risks of accidental oil spills.

Two sets of legislative proposals were tabled by the Commission: the Erika I package
(March 2000) and the Erika II package (December 2000). These packages have two
objectives:

– To tighten existing legislation on port State control and the monitoring of

classification societies;
– To propose new measures to speed up the phasing-out of single-hull oil tankers,
improve controls on shipping in European waters, establish a European
Maritime Safety Agency and create a supplementary fund for compensation for
oil pollution damage (COPE Fund).

The European Maritime Agency was established in 2002. The Agency provides
technical and scientific advice to the Commission in the field of maritime safety and
2 For more information on Gallileo:
http://www.europa.eu.int/comm/dgs/energy_transport/galileo/intro/challenge_en.htm
http://www.europa.eu.int/comm/dgs/energy_transport/galileo/doc/galileo_leaflet_en.pdf

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prevention of pollution by ships in the continuous process of updating and developing

new legislation, monitoring its implementation and evaluating the effectiveness of the
measures in place. Agency officials closely cooperate with Member States’ maritime
services.

Since the Prestige accident (November 2002), essential measures have been taken to
tighten up the rules in the EU:

Since October 2003 single-hull tankers carrying heavy fuel oil are no longer allowed to
enter or leave ports in the Member States;
Under the new international rules adopted by the International Maritime Organisation
(IMO) at the instigation of the EU, ageing single-hull tankers, like the Erika and the
Prestige, carrying heavy fuel oil will be prohibited from sailing off the EU’s coasts and
all over the world from 4 April 2005 at the latest4.

3. TRANS-EUROPEAN NETWORKS

The idea of Trans-European Networks (TEN) emerged by the end of the 1980s in
conjunction with the proposed Single Market. The Treaty establishing the European
Union provides a sound legal basis for the TEN. Under the terms of Chapter XV of the
EC Treaty (Articles 154, 155 and 156), the European Union must aim to promote the
development of TEN as a key element for the creation of the Internal Market and the
reinforcement of Economic and Social Cohesion. This development includes the
interconnection and interoperability of national networks as well as access to such
networks.

According with these objectives, the Community is developing guidelines covering the
objectives, priorities, identification of projects of common interest and broad lines of
measures for the three sectors concerned (Transports, Energy and Telecommunications).
The European Parliament and the Council approve these guidelines after consultation of
the Economic and Social Committee and the Committee of the Regions. The final
version of the current guidelines is the European Parliament and Council Decision
884/2004 (amending Decision 1692/96). The annex contains an updated list of projects
including dates for completing the work on every project.

3.1. Financing of Transport TEN

The basic financial rules for transport TEN (TEN-T) are set in Council Regulation
2236/95 on general rules for granting Community financial support, which contains
provisions for developing Private-Public Partnerships (PPP) as well. The Council

4 For more information on the actions taken since the accident of the Prestige:
http://www.europa.eu.int/comm/dgs/energy_transport/publication/memos/2004_11_maritime_security_en.pdf

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Regulation has been amended by Regulation 1655/99, which covers the period 2000-
2006. It committed M€ 515 (million) for TEN-T, of which more than 55% is reserved
for railways transport and less than 25% for road transport. An amendment to the rules
has been adopted with the European Parliament and Council Regulation 807/2004.

So far, a large number of TEN projects of common interest have benefited from
financial support of the Community budget through the TEN-budget line as well as the
Structural Funds and Cohesion Fund. The European Investment Bank (EIB) has also
greatly contributed to the financing of these projects through loans. Currently a new
proposal of financial rules is discussed with a substantial higher co-financing and € B 1
for guaranties on loans for the 2007- 2013 period.

3.2. Transport TEN and Central and Eastern European countries

Since 1990, three pan-European transport conferences (Prague, 1990; Crete, 1994 and
Helsinki, 1997) were held between the European Commission, UN, ECMT (OECD),
the EU Member States and the countries of Central and Eastern Europe. 10 pan-
European multimodal transport corridors and 4 pan-European areas have been approved
during these conferences. The corridors were created:

– To assure a linkage between main transport networks of the accession (third)

countries and the EU Member States;
– To eliminate congestions on transport network in that period and in the nearest
future;
– To increase the quality of all transport modes;
– To decrease a number of accidents and an impact on environment.

In addition, a process of global assessment of infrastructure needs of the acceding

countries, the so-called TINA process (Transport Infrastructure Needs Assessment in
Central and Eastern Europe) was launched. The aim was to define TINA networks in
the countries of Central and Eastern Europe in the same manner as in the Decision
1692/96 (on TEN guidelines) and to transform the Helsinki ‘corridor approach’ into a
real transport ‘network approach’. The final report was produced in October 1999. In
those countries, which acceded to the EU in May 2004, the TINA network has been
integrated into TEN-T.

3.3. Public-Private Partnerships

Besides technical problems the lack of money is the main reason for slow completion
of TEN-T. The EC has started to focus on Private-Public Partnerships (PPP) as a
possible solution. PPP arrangements are driven by the effort to limit public funds to
cover investment needs and to increase the quality and efficiency of public services.

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In 1997 the Commission issued a Communication on the financing of trans-European

transport network projects by partnerships between the public and private sectors
(COM (97)0453] final). In March 2003 DG REGIO of the Commission issued
Guidelines for successful Public – Private Partnership and in June 2004 a Resource
book on PPP case studies. In April 2004 DG MARKT of the Commission has raised a
public discussion with the Green Paper on PPP and Community law on public contracts
and concessions.

4. EXPERIENCES OF THE MINISTRY OF TRANSPORT, POSTS AND

TELECOMMUNICATIONS OF THE SLOVAK REPUBLIC IN
TRANSPOSING AND IMPLEMENTING THE EU TRANSPORT
POLICY ACQUIS

4.1. The EU Co-ordination in the Slovak Republic

At the beginning of the negotiation process, European integration units were created for
the co-ordination at every central body of the Slovak state administration. Before the
accession of Slovakia to the EU, the co-ordination of the negotiations’ process was
organised according to the negotiating chapters. Every negotiating chapter had its own
working group. At the Ministry of Transport, Posts and Telecommunications of the
Slovak Republic (MTPT SR) two working groups were set up, one for Chapter no. 9 on
Transport Policy and one on Chapter no. 19 on Telecommunication and Information
Technologies. The working groups consisted of experts of the MTPT SR and experts of
other involved ministries and governmental bodies. The whole negotiation process was
co-ordinated on central level by the Office of the Government and by the Ministry of
Foreign Affairs.

After accession of Slovakia to the EU, the scheme of co-ordination has been changed in
order to take account of the needs resulting from the position of a full Member State.
Co-ordination groups were created instead of working groups, one per executive
(central) body of state administration. As before, co-ordination groups consist of experts
of the MTPT SR and experts of other involved ministries and bodies. The EU
coordination process is co-ordinated at central level by the Office of the Government
and by the Ministry of Foreign Affairs, which has taken the lead. As the Treaty
establishing a Constitution for Europe proposes deeper involvement of national
parliaments into the EU legislative process, the Slovak Parliament is informed of the
whole EU agenda. The Slovak Parliamentary EU Affairs Committee is functioning as a
co-ordinating body of the Slovak Parliament. Its members and experts may participate
in the EU coordination process from the beginning and may report positions of the
Slovak Parliament to bodies involved at all levels, including the Government. At
present, a specific information system is being created to support the process.

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4.2. Experiences gained with the Transposition and Implementation of EU

Transport Policy Acquis

The Slovak Republic closed negotiations on chapter no. 9 Transport Policy

provisionally in April 2002. The Slovak Republic has not asked for any transitional
period. However the EU put forward transitional arrangements concerning the gradual
reciprocal access to the EU cabotage market for Slovak operators in the road haulage
sector for a maximum duration of five years (2 years renewable once for again 2 years
and again renewable for one year).

The last monitoring report of the European Commission on the state of preparedness of
the Slovak Republic for EU membership from September 2003 stated that transport was
not a problematic area, although in certain areas the Slovak Republic just partially met
the commitments and requirements and needed to make enhanced efforts in order to
complete its preparations for accession. This included mainly road transport and
particularly the social acquis and in the technical field areas like speed limitation
devices, technical roadside inspections of commercial vehicles, digital tachographs and
transportable pressure equipment. The report also stressed that co-ordination between
relevant enforcement authorities needed to be improved considerably and the
administrative capacity to be further strengthened. In addition, the legal alignment in the
areas of rail transport (a Railways Regulatory Authority needed still to be established)
needed to be accomplished and full membership of the Joint Aviation Authorities in air
transport to be achieved.

The main tasks of harmonisation have been finished by amendments of existing

legislation at the turn of 2004/2005. There are still some leftovers and transposition
deficit (about a dozen of directives) and the European Commission has sent several
letters of formal notice as a first step within the infringement procedures under the EC
Treaty. So far, the European Commission has not objected any improper transposition
of directives into the Slovak legislation in the transport sector.

The Slovak Republic does not have any framework act on transport. The basic document
for the transport sector is entitled The Principles of the State Transport Policy of the
Slovak Republic. It has been approved by the Government in 1993 and updated and
specified in 2000. At present, The Transport Policy of the Slovak Republic for 2015 is
being finalised. There are 4 acts regarding road transport and infrastructure, 3 acts
regarding railways and single acts on air transport, inland navigation and maritime
transport. They have been amended several times and supplemented by decrees.
Technical provisions are sometimes transposed by decrees of the MTPT SR and
governmental ordinances. At the date of accession, international agreements in transport
were fully harmonised with the acquis communautaire (except the Open Skies
Agreement with the USA). Regarding road infrastructure (motorways and expressways),
a statement is submitted to the Government every year with a forecast for the coming 4
years.

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The main problems concerning the harmonisation of the Slovak legislation with the
acquis communautaire during the pre-accession period were:

– The huge amount of the acquis in the transport sector;

– The lack of full involvement and interest of all relevant players;
– The fact that a lot of bodies felt threatened by the implementation of the acquis
communautaire;
– The general lack of money and experience.

The MTPT SR has tried to go ahead gradually and to gather experience through
twinning projects financed by Phare and to involve all competent partners into the
implementation process.

Another important aspect of difficulties was the proper translation of the acquis
communautaire. The Central Translation Unit (CTU) of the Office of the Government
was not able to ensure a proper translation of the transport policy acquis communautaire
into Slovak language. As a result, the Transport Research Institute has accomplished this
task for the MTPT SR whereas the CTU has provided the final revision of the
translation. This has significantly speeded up the process of the harmonisation, as
initially many Slovak experts on particular transport modes were not familiar with the
EU official language.

5. PUBLIC-PRIVATE PARTNERSHIPS IN THE SLOVAK REPUBLIC

The Slovak Government has promised to establish an East-West motorway connection

by 2010. At the same time, the Government wants to launch the euro currency on 1st
January 2009, which obliges Member States to fulfil the criteria of the Stability and
Growth Pact and mainly to reduce substantially the state budget deficit. As there is not
enough money available to finance the promised motorway connection by 2010 with the
state budget, the Slovak Government is trying to focus on PPP.

In June 2004 the MTPT SR chose a consultancy company to advise on the East-West
motorway connection. The consultancy and MTPT SR agreed that a 93.96 kilometres
long section (split into 8 parts) could be devoted to PPP. The consultancy proposed some
technical changes that should result in savings of about 10% of costs and 8 projects
combined into 5 packages. It recommended the DBFO (Design, Build, Finance, Operate
and Transfer) instead of the BOT method (Build, Operate, Transfer). According to the
consultancy, the possibility for concessionaires to design the motorway could reduce the
costs of maintenance and should speed up the process. The consultancy proposed to
award concession for 25-30 years (the Act on Public Procurement permits 30 years).
The MTPT SR would be the awarding body on behalf of the Government. Currently, the
Ministry of Finance of the Slovak Republic published a Communication on the creation
of conditions for PPP. This communication asks for the preparation of the state policy
for PPP and expresses the need of the Ministry of Finance to monitor the use of public
money for PPP. The Government will take soon a final decision on this document.
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Relevant official documents and information can be found at the following

websites:

– DG Transport and Energy of the European Commission:

http://www.europa.eu.int/comm/transport/index_en.html

– European Maritime Safety Agency: http://www.emsa.eu.int/

– European Aviation Safety Agency: http://www.easa.eu.int/home/index.html

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CHAPTER 9

EU ENERGY POLICY AND

ITS TRANSPOSITION AND IMPLEMENTATION IN ROMANIA
Lavinia Ileana Andrei*

1. HISTORY OF THE EUROPEAN ENERGY POLICY

Since the beginning, energy was at the very heart of the European construction. Two out
of the three European communities set up in the 1950ies concerned specific types of
energy. Everything started on May 9, 1950, when French Foreign Minister Robert
Schuman announced a plan, conceived by French businessman-turned-advisor Jean
Monnet, proposing to pool European coal and steel production under a common
authority. The Schuman Declaration was regarded as the first step towards achieving a
united Europe - an ideal that in the Europe’s history so far had been pursued only by
force. Belgium, the Federal Republic of Germany, Italy, Luxembourg and the
Netherlands accepted the French proposal, and all 6 countries signed the European Coal
and Steel Community (ECSC) Treaty in Paris on April 18, 1951. A High Authority was
set up, to which member governments transferred a significant part of their sovereign
powers in the field of coal and steel production. The ECSC proved to be so successful
that coal and steel trade between the Six increased by 129 percent in the first five years.

Encouraged by the success of the ECSC, the Six tried to pursue integration in the
military and political field. After the rejection of the European Defence Community by
the French Parliament in 1954, European leaders decided to continue the unification of
Europe on the ‘economic path’. At a historic meeting in Messina, Italy, in June 1955,
the project to create a ‘common market’ was launched. Two European treaties were
negotiated: The European Economic Community (EEC) with the objective to merge
separate national markets into a ‘single market’ that would ensure the free movement of
goods, people, capital and services with a wide measure of common economic policies,
and the European Atomic Energy Community (EAEC or Euratom) to foster the use of
nuclear energy for peaceful purposes. The Six signed the treaties creating these two
Communities on March 25, 1957 in Rome. Often referred to as the Rome Treaties, they
were ratified the same year and came into force in January 1958.

2. THE CURRENT EU ENERGY POLICY

More than 40 years after setting the framework for the European Communities, energy
policy continues to play a crucial role in European integration. The most recent
revisions of the EC and EU Treaties still have not yet managed to include a separate

*President of the Foundation TERRA MILENIUL III, Romania.

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chapter on energy. However, Energy Policy has been incorporated in the list of
objectives of the EC Treaty (Art. 3u) and Energy Policy measures can be adopted on the
basis of various legal provisions in the Community Treaties.

Overall Energy Policy measures can be adopted on the basis of articles in the EC Treaty
which are linked to the Internal market (articles 94 and 95) and on the basis of article
100 (supply difficulties). Measures closely linked to Energy Policy can also be adopted
under the Title “Environment” (Title XIX ; Art. 175, §2). In addition the EC Treaty
mentions the Trans-European networks, which includes also energy infrastructure (Title
XV, Arts. 154, 155 and 156 in connection with Art. 158).
As regards Coal, the ECSC Treaty has expired in 2002.

As regards nuclear energy, the EAEC (Euratom) Treaty, in particular articles 40-76
enable the adoption of measures on investment, joint undertakings and supplies. Articles
92-100 of the EAEC Treaty can be used to adopt measures related to the nuclear
common market.

The Treaty establishing a Constitution for Europe proposes for the first time to
introduce a chapter on Energy Policy (Art. III-157).

EU energy policy was still directed towards the long-term energy objectives first set out
in 1995 in the Commission’s White Paper on Energy Policy for the EU (COM (95) 682),
followed by the Green Paper Towards an European Strategy for the security of energy
supply (COM (02) 769 and COM (02) 321). The Commission, the Parliament and the
Council highlight that Energy Policy must form part of the general aims of EU
economic policy based on market integration and deregulation:

z Public intervention must be limited to what is strictly necessary to safeguard the

public interest and welfare;
z Sustainable development;

z Consumer protection; and

z Economic and social cohesion.

However, beyond those general aims Energy Policy must pursue particular aims that
reconcile competitiveness, security of supply and protection of the environment.

Apart from these general objectives, the EU has set various sectoral objectives, which
mark out the framework for EU Energy Policy:

z Maintaining the percentage of solid fuel (coal) in total energy consumption (in
particular by making production capacity more competitive);
z Increasing the ratio of natural gas in the energy balance;

z Establishing maximum safety conditions as a prerequisite for planning,

construction and operation of nuclear power stations;

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z Increasing the share of renewable sources of energy.

While the EU has achieved undeniable success in pursuing the above objectives, the
success rate of the various Member States in achieving these objectives is still very
unequal.

The common EU Energy Policy revolves around two axes:

z The functioning of the internal energy market;

z The security of energy supplies.

2.1. The Internal Energy Market

A competitive energy market helps efficient energy use. In the past, national gas and
electricity markets were separate ‘islands’ within the EU, with supply and distribution
in the hands of monopolies. Now, those markets have been opened up to competition.

z Opening of electricity and gas markets

In the energy sector the completion of the internal market requires the removal of
numerous obstacles and trade barriers, the approximation of tax and pricing policies and
measures in respect of norms and standards and environmental and safety regulations.
Following the Directives adopted in 1990 and 1991 on transit of electricity and gas, a
further opening of the electricity networks for large industrial customers (‘Third Party
Access’, TPA) was agreed on 25 July 1996 (Directive 96/92). Directive 98/30 for the
gas market was adopted on 22 June 1998. The Commission reports annually to the
Parliament on the implementation of these two directives.

The energy markets in electricity and gas will be fully open to competition by 2005
(2007 for household customers) as decided by two Directives adopted in 2003
(Directive 2003/54 on the opening up of the electricity market and Directive 2003/55 on
the opening up of the gas market). Regulation 1228/2003 on the conditions for access
to the network for cross-border exchange in electricity completes these two Directives.
According to EC legislation, national regulatory authorities are in charge of supervising
public service obligations and ensuring the security of supply and tariff formation.

z Labelling of the source of energy

In the future, the source of electricity will have to be accurately labelled. In order to
strengthen competition in the internal electricity market and to promote investment in
energy infrastructure and security of supply, the Commission has launched new
initiatives in 2003 (COM (03) 740 and COM (03) 743) and has also proposed a new
Regulation on access to gas transmission networks (COM (2003) 741).

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z Taxation of energy products

Directive 2003/96 has introduced a new EU system for taxation of energy products. The
proper functioning of the internal market and the achievement of the objectives of other
EU policies require minimum levels of taxation at EU level for most energy products,
including electricity, natural gas and coal. In addition, the taxation of energy products
and, where appropriate, electricity is one of the instruments available to achieve the
objectives of the Kyoto Protocol. This Directive widens the scope of the EU minimum
rate system, currently limited to mineral oils, to all energy products, chiefly coal, gas
and electricity.

z Consumer protection
Consumers not only have the right to choose their supplier; they also have a right to gas
and electricity supply at reasonable prices. Consumers on low incomes or those who live
in remote areas need not fear being cut off or charged excessive prices because the
supplier has decided they are too small or too far away to bother about. Heat and power
for these groups are seen as a public service and there will always be a default supplier
to provide a service.

2.2. Security of EU Energy Supply

The European Union is a key actor on the international energy market as the largest
importer and as the second largest consumer of energy in the world. Energy is a major
economic and geopolitical factor. However, the European Union is dependent on
imports for half of its energy supplies, while this dependence could even reach 70% by
the year 2030. For natural gas, dependence could reach 70 %, for oil 90% and for coal
even 100%. Most likely, enlargement will reinforce these trends, despite the fact that
certain new Member States and some candidate countries are producers of primary
energy (e.g. Poland produces coal and Romania produces oil and gas).

This situation calls for the adoption of various measures, which the European
Commission specifies in its 2001 Green Paper Towards a European strategy for the
security of energy supply. According to the Commission, measures in the energy sector
should aim at a more stable flow of energy, ultimately underpinning the Union’s efforts
to ensure peace, stability, security and prosperity. In this, the EU’s enlargement process
has a key role to play.

3. SECTORAL ASPECTS OF EU ENERGY POLICY

3.1. Coal and other solid fuels

The objective in this field is to promote the use of coal and make domestic production
capacity more competitive to achieve a notable increase in solid fuel consumption.

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Large quantities of coal are being imported, as imported coal is significantly cheaper
than domestic coal. The respectively large subsidies needed in Germany and Spain are
facing increased resistance from buyers, consumers and suppliers of other sources of
energy. The question of whether the EU should permit the continuation of coal subsidies
beyond 2006 and what level of production should be permitted for coal-producing
countries is currently the subject of controversy.

3.2. Hydrocarbons

EU Energy Policy objectives are to substitute crude oil by other forms of energy while
also encouraging prospecting (offshore exploration etc.) and the exploitation of
indigenous hydrocarbons. Security of supply is to be encouraged by diversifying
sources and by EU rules on obligatory reserves: Member States must keep 90 days’
stocks of the main petroleum products based on the previous year’s figures.

3.3. Nuclear energy and nuclear fuels

Nuclear energy is still accorded a key role in EU Energy Policy objectives. However,
the 1986 Chernobyl disaster has made nuclear energy highly controversial.
Abandonment of nuclear power is at the earliest a medium-term prospect. In any event
greater efforts have to be made to improve the safety standards of nuclear power
stations. Despite the EAEC Treaty, the Commission’s powers are far from adequate. For
example, no uniform standards for safety and discharges exist and no EU consultation
procedure concerning power stations sited near frontiers has been set up. There are also
no clear EU provisions for the storage and transport of nuclear fuels or nuclear waste
and difficulties persist in establishing basic standards of radiation protection. There is
no adequate EU system of information and monitoring in cases of nuclear malfunctions
and no emergency procedures in case of disaster has been agreed upon.

In the Green Paper on energy security, nuclear power was grouped (together with coal,
oil, gas and renewable sources of energy) as a ”less than perfect” energy option. The
question was raised how the EU could develop fusion technology and reactors for the
future, reinforce nuclear safety and find a solution to the problem of nuclear waste. As
nuclear safety could no longer be considered from a purely national perspective and in
preparation for enlargement, the Commission proposed in January 2003 a new approach
to safety of nuclear facilities and nuclear waste (COM (03) 32).

3.4. Renewable sources of energy and energy efficiency

Promoting renewable energy is one of the main objectives of EU Energy Policy. As

stated above, the aim is to double the renewables’ share of total energy consumption to
15% by 2010 and to increase renewable energy sources for the internal electricity
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market to 22,1% of the total energy produced (Directive 2001/77). Decision 1230/2003
on Intelligent Energy for Europe contains concrete measures to promote renewables and
increase energy efficiency. Sub-programmes have been set up supporting sustainable
development projects and projects expanding cooperation between the EU and
developing countries for renewable energy sources. The framework programme
amounts to € 200 million and covers the period 2003-2006, although both, the
Commission and the EP argued for much more money. Directive 2002/91 on the energy
performance of buildings (in particular insulation, air conditioning, the use of renewable
energy sources) was adopted in 2003. This Directive sets up a method for the calculation
of the energy performance of buildings and minimum requirements for new and existing
large buildings, and energy certification.

With its proposed Directive of July 2002 (COM (02) 415), the Commission wants to
push ahead the development and use of cogeneration, or combined heat and power
production (CHP). This proposal, which has given rise to controversial discussions in
both the Council and the EP, has been adopted by the EP and the Council in February
2004 (Directive 2004/8/EC). The Directive is a key component of the EU’s strategy for
energy efficiency and energy savings and for contributing to the reduction of CO2
emissions. It also aims at improving security of energy supply. It provides for a
regulatory framework for the promotion and development of the simultaneous
generation in one process of heat and electrical and /or mechanical power. The Directive
includes provisions concerning the electricity grid system and tariff issues, as well as on
the definition of power-to-heat ratio and co-generation units. By introducing
harmonised provisions throughout the Community, it aims at overcoming current
divergences whereby some Member States already have support schemes and targets for
co-generation whilst others still have no provisions on electricity production from co-
generation.

In December 2003 the Commission proposed a new directive (COM (03) 739) to boost
energy efficiency in the EU and to promote the market for energy services (such as
lighting, heating, hot water, ventilation etc.)

4. RESEARCH, DEVELOPMENT AND DEMONSTRATION

PROJECTS

The EU framework programme of research encompasses many energy R&D and

demonstration projects to support the EU’s Energy Policy objectives. These projects are
designed to improve the acceptance level, competitiveness and scope of the application
of traditional energy (e.g. reactor safety and management of radioactive waste;
gasification and liquefaction in the case of coal), encourage the adoption of new forms
of energy (alternative energy sources, new technologies for a sustainable energy supply,
nuclear fusion) or support energy saving and rational use.

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5. GREEENHOUSE EFFECT AND INTERNATIONAL COOPERATION

The EU has stressed its commitment to combat the greenhouse effect and to support
international cooperation in this field. However, the 1992 proposal for a carbon dioxide
and energy tax (COM (92) 0226) has not yet been implemented, due to the strong
opposition of a number of Member States and industrial sectors and a lack of support
from the main competitors (the USA and Japan). The importance of an agreed action
plan to reduce greenhouse gases (particularly CO2) became clear at the UN Kyoto
conference in December 1997 and the latest follow-up conference in Milan in
December 2003. The EU has promised to reduce its CO2 emissions by 8% from 1990
levels by 2008-2012. After a long and controversial debate in July 2003, the Directive
on greenhouse gas emissions (2003/87) was accepted. It will create the largest
emissions trading scheme in the world from 2005.

6. CANDIDATE COUNTRIES AND ENERGY POLICY ACQUIS

Implementing the acquis by the applicant countries requires not only adequate
legislation but also well functioning institutions. This includes the setting up and
functioning of regulatory bodies as required in the electricity and gas directives and a
nuclear safety authority.

Key elements of the acquis in the energy sector cover both primary and secondary
legislation in the topics of EU Energy Policy as listed above. Candidate countries need
especially to:

z Decide on an overall energy policy with clear timetables for restructuring the
sector;
z Prepare for the internal energy market (mainly the gas and electricity Directives;
the Directive on electricity produced from renewable energy sources);
z Improve energy networks in order to create a real European market;
z Prepare for crisis situations, particularly through the constitution of 90 days of oil
stocks;
z Address the social, regional and environmental consequences of the restructuring
of mines;
z Waste less energy and increase the use of renewable energies such as wind, hydro,
solar and biomass in their energy balance;
z Improve the safety of nuclear power plants in order to ensure that electricity is
produced according to a high level of nuclear safety;
z Ensure that nuclear waste is handled in a responsible manner; and prepare for the
implementation of Euratom Safeguards on nuclear materials.

7. ROMANIA’S ACCESSION NEGOTIATIONS WITH THE EU ON THE

ENERGY CHAPTER

Accession negotiations between Romania and the EU started on 13th March 2002 at the
Accession Conference. Chapter 14 on “Energy” was closed on 30th June 2004. Romania
declared to accept fully the acquis communautaire in the field of “Energy” in force on

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31 December 2000. Romania also declared that it will apply the acquis communautaire
on energy upon accession, with the exception of Council Directive 68/414/EEC
(amended by Council Directive 98/93/EC) imposing an obligation to the Member States
to maintain minimum stocks of crude oil and/or petroleum products for which it
requests a transition period until 31 December 2011. Romania declared that it is
prepared to further examine the development of the acquis communautaire in the energy
field, entered into force after 31 December 2000 and to systematically inform the
Accession Conference or the Association Council on the legislation and the measures
adopted for the implementation of the new acquis or, if the case may be, on the
difficulties that might arise in transposing the new acquis.

In the implementation of the Community acquis in the field of energy, Romania stated
to take into account the environment acquis in the fields of air pollution control,
industrial pollution control and pollution risk management, the obligations assumed by
signing the Kyoto Protocol to the UN Framework Convention on Climate Change,
ratified by Law No. 3/2001, the Energy Charter Treaty, ratified by Law No. 14/1997 and
the EURATOM Treaty. The time limits for the transposition and application of the
specific energy directives with relevance to environment protection shall be co-
ordinated with those regarding the transposition of the environmental acquis.

8. TRANSPOSITION AND IMPLEMENTATION OF EU ENERGY

LEGISLATION IN ROMANIA

In 2003, Romania adopted the National Energy Strategy on a medium–term through the
Romanian Energy Roadmap, establishing an action plan to strengthen the sector and
integrate it on the EU energy market.

Regulation, authorisation and control in the electricity and gas sectors are done by
ANRE (National Authority for Energy Regulation) and ANRGN (National Authority for
Natural Gas Regulation).

As regards the electricity sector, starting with January 2004, the level of market
opening achieved 40%. The eligibility ceiling for consumption was reduced from 40
GWh/year to 20 GWh/year. Prices and tariffs for electricity are regulated by ANRE in
a transparent manner and published in the Official Monitor (OM). The Energy Roadmap
also contains measures for restructuring and privatisation of the energy sector. The
restructuring of SC Electrica SA in 2002 opened the door for the privatisation of the
organisations newly set up. As a consequence of the restructuring process in the
thermo–electrical sector, 6 big companies are now operating on the market.

As regards the gas sector, in January 2004, the gas market has been opened up to 40%.
The eligibility ceiling of consumption was reduced from 4 million mc/year to 3 million
mc/year. On 1st September 2003 the crosscutting subsidies for the residential and non-

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residential sectors were abolished. Regulating prices and tariffs for gas is done by
ANRGN in a transparent manner and published in the OM.

In the coal sector a large restructuring process aims at the modernisation and
refurbishment of the mining sector.

In the energy efficiency sector all the directives were transposed and will be
implemented except the ones regarding the energy efficiency in buildings and
promotion of bio-fuel for transport, which should be transposed until the end of 2005.

Relevant official documents and information can be found at the following

websites:

– European Commission, Directorate General for Enlargement:

http://europa.eu.int/comm/enlargement/index.htm

– Briefing paper n° 43 of the Task Force Enlargement, European Parliament:

http://www.europarl.eu.int/enlargement/briefings/43a1_en.htm

– Activities of the EU in the field of Energy:

http://europa.eu.int/pol/ener/index_en.htm

– Existing EU Energy legislation:

http://europa.eu.int/eur-lex/lex/en/repert/index_12.htm

– Activities of the EU in the field of Environment:

http://europa.eu.int/pol/env/index_en.htm

– EU business, independent online business information service about the

European Union: Energy policy in EU:
http://www.eubusiness.com/guides/energy

– Emission trading in EU:

http://www.climnet.org/EUenergy/ET.html#IntroET

– European Economic and Social Committee:

http://www.esc.eu.int/pages/en/home.asp

– Delegation of the European Commission in Romania:

http://www.infoeuropa.ro/ieweb/jsp/default.jsp
– Emerging Markets Online:
http://www.emerging-markets.com/reports/R138/default.asp

– Euractiv, independent media portal:

http://www.euractiv.com/Article?tcmuri=tcm:29-117935-16&type=News

– Information on EU funding opportunities:

http://www.eucenter.org/funding.php
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 SECTION 3

EU COMMON AGRICULTURAL POLICY

 Chapter 10

CHAPTER 10

THE EU COMMON AGRICULTURAL POLICY

Laurent Van Depoele*

1. INTRODUCTION
The recent negative results of the referenda on the Constitutional Treaty in France and
the Netherlands have also indicated that civil society has problems with the agricultural
sector in general and with the Common Agricultural Policy (CAP) of the EU in
particular. Agriculture seems to have become a ‘dirty’ word. Even the European
Commission in its financial perspectives presented in February 2004 was putting the
agricultural expenses directly under the budget heading “preservation and management
of natural resources”. The taxpayers are of the opinion that they have to pay too much
for this common policy. Consumers want food safety (security of food supply is no
longer an issue) and quality. Environmentalists are accusing the farming sector for a lot
of land and water pollution. Free traders want total liberalisation of trade, open borders
and no export subsidies. But what is most astonishing is that even farmers seem to
contest the CAP: some 67% of the French farmers have voted against the Constitutional
Treaty in the referendum of 29 May 2005.

What is wrong with the CAP? In terms of employment farmers are representing some
5 to 6% of the active population; 60% are part-time farmers and 55% are older than 55
years. Since the 1 May 2004 (date of accession of 10 new Member States) we have
around 10 to 11 million farmers in the EU-25. The contribution of agriculture in the total
GDP per country is still decreasing. Consequently one could assume that agriculture is
only a marginal issue in political life of the EU. This is however completely wrong.
Agriculture and Regional Policy were very important issues in the enlargement
negotiations. Agriculture has a great institutional presence in the EU because of its
nearly exclusive community competence and farmers and their national as well as
European organisations operate very effectively at European level. They also have very
powerful supporters such as the landowners, the financial institutions, the agro-food
sector, etc. How can we explain the pre-eminent role of agriculture in the EU?

2. WHY AND HOW IS AGRICULTURE DEALT WITH IN THE ROME

TREATY?

Three reasons may explain why agriculture has been included into the Treaty of Rome.
First, the drafters of the Treaty had the experience of two world wars and were

* Professor in European Politics at the Catholic University of Leuven, Belgium; Visiting Professor at the
College of Europe, Bruges, Belgium.
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convinced of the importance of food supply and food security. At the time of drafting
the Rome Treaty the six members were only self-sufficient in food production for some
81%. Secondly, from a political point of view, France with around 28% of the active
population in the agricultural sector defended, together with Italy, the necessity of a
specific treatment of the agricultural sector in the Treaty as a compensation for the
advantages the envisaged creation of a customs union would give to the more
industrialised states such as the Federal Republic of Germany. The third factor was
indeed the high number of farmers at that moment in most Member States and thus
representing an important voting power.

The objectives of the CAP were laid down in art. 39 of the Treaty establishing the EEC
in 1957 (today art. 33 of the Treaty establishing the European Community (TEC)) and
envisaged higher agricultural productivity, a fair standard of living for the farmers,
market stability, regular supplies and reasonable prices for consumers. At the Stresa
Conference in July 1958 on the introduction of the CAP the then Commissioner for
Agriculture Sicco Mansholt succeeded in convincing the 6 to formulate, in addition to
the Treaty obligations, three basic principles for the CAP:

z Market unity: free movement of agricultural products inside the Community and
the fixing of common agricultural prices;
z Community preference: products of Community origin should have preference

over low-price imports from third countries (origin of agricultural levies for low-
price imports);
z Financial solidarity: all expenditures following the introduction of common

market organisations have to be covered by the Community budget.

On the basis of these objectives and principles a system was fixed in which the prices
were the central component of the common market policy. Prices played three roles:
high prices are guiding production and lead to “higher agricultural productivity” (art. 33
TEC), trigger intervention mechanisms and secure common external protection. The
intervention price, which is a certain percentage lower than the “ideal” or target price,
is the price at which intervention offices in the Member States must buy the products
from their farmers when they bring the products to storage. For fruit and vegetables
which can not be stored there is a withdrawal price. By this system the Commission
hoped to be able to guarantee a “fair standard of living” to the farmers as well as
“regular supplies” and “market stability” (art. 33 TEC).

Taking into account the principle of financial solidarity, the European Agricultural
Guarantee and Guidance Fund (EAGGF) was established which rapidly absorbed 70
to 80 % of the Community budget. Farmers quickly discovered the benefits of the
common market organisations for their products through the guarantee of a minimum
price and the protection from world market prices through the agricultural levies. When
they wanted to export their products to the world market, where prices are generally
much lower than inside the Community, they could sell at those low prices and received
export refunds paid by the EAGGF.

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3. THE NECESSITY OF CAP REFORMS

In the 80’s the deficiencies of this system became obvious. The guaranteed price to
farmer led to overproduction and surpluses. It was the period characterised by butter and
milk powder mountains and wine lakes to which the tax-payer had of course to
contribute financially. The farmers, once they had discovered the system contrary to the
basic economic principles of supply and demand and that consequently they were paid
even for products for which there was no market outlet, they tried to increase their
production by all means (insecticides, pesticides, etc..) and taking very little or no care
at all of the environment and the quality of their products. The consumer became
unhappy because of the relatively high internal prices and quite often the lack of quality
products. This last point became crystal clear for all consumers at the outbreak of the
“mad cow disease”. Finally problems started with the outside world on the international
trade aspects of the CAP. Indeed exporting countries became really upset with the
system of having to pay levies when importing their low-price agricultural products in
the EU or when competing on the world market with EU products which were heavily
subsidised by export refunds. It became inevitable that these questions were raised in
the mid-80’s at international level particularly during the Uruguay round of the GATT,
which became the World Trade Organisation (WTO) in 1995.

3.1. The first CAP reforms in the 80ies and 90ies

Taking into account the internal problems with civil society having their doubts about
the CAP (tax-payers, consumers, environmentalist ), the external pressure in the
Uruguay-round and the perspective of enlargement, the EU had no other choice than to
reform the CAP.

Firstly the concept of multifunctionality was introduced meaning that a farmer is more
than a producer of food but that he is equally responsible for the environment, the
landscape, the quality of rural life. Since the farmer is producing also a ‘public good’ he
should be remunerated by the EU budget for this. Here we can find a ground for the
introduction of direct payments, which became first applicable through the McSharry
reform of 1992. These direct payments were equally an answer to the criticism raised in
the GATT negotiations where the EU agreed to decrease the internal price support and
the export subsidies. By this decrease the farmer should lose a lot of money because the
guaranteed price was decreased more to world market prices. Direct payments were
therefore seen as a 80% compensation for the loss of income, knowing that according
to art. 33 TEC the EU still has the obligation to care for “a fair standard of living for the
farmers”.

3.2. The Agenda 2000 and the Fischler reform of 2003

The Agenda 2000 reform continued along the lines of the McSharry reform: more direct
payments to the farmers and reduction of the intervention price.

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The most fundamental reform was the one introduced by Commissioner Franz Fischler
and adopted by the Council in 2003. The basic element is the introduction of a Single
Payment Scheme (SPS) or single farm payment, which is a payment per year to
producers, replacing most existing direct aids, independently of what they produce and
is based on the average payments they received in the period 2000-2002. This is the
principle of decoupling, which is a clear shift from production support to producer
support. This allows farmers freedom to produce to market demands and promotes
environmentally an economically sustainable agriculture. It furthermore simplifies the
CAP for farmers and administrators and also strengthens the EU position in the WTO
Doha-round negotiations. For the new Member States the SPS is called Single Area
Payment Scheme and allows payments of uniform amounts per hectare up to a national
ceiling resulting from the accession agreements.

The second basic principle of this reform is cross-compliance, which is a move in

favour of environmentally sustainable agriculture. This principle is linking the SPS to
the respect of environment, food safety, animal and plant health and animal welfare
standards and to the requirement to keep all farmland in good agricultural and
environmental condition. For the new Member States only “good agricultural and
environmental conditions” are mandatory.

The third principle is modulation. In order to finance the additional rural development
measures all direct payments (SPS and other still existing direct aids) will be reduced
by 3% in 2005, 4% in 2006 and 5% as from 2007 onwards. However direct payments
under 5.000 euros per farm per year will not be reduced.

The modulation reductions will not apply in accession countries until direct payments
reach EU levels. The fact that money should be transferred from direct payments to rural
development measures is a clear illustration of the present two-pillar system of the CAP.
The first pillar is dealing with market-related measures and direct aids to the farmers
and as far as they still exist for some products with public intervention and export
refunds. The second pillar is dealing with rural development measures (see below, point
3 of this Chapter) and agro-environmental and early retirement schemes, forestation of
agricultural land and compensatory allowances in the less-favoured areas of the EU.
Pillar 1 measures are 100% financed from the EU budget through the European
Agricultural Guarantee Fund “EAGF” which replaces the EAGGF-Guarantee
section as approved by the Agricultural Council of 30 May 2005 while pillar 2 measures
will be co-financed by the European Agricultural Fund for Rural Development
”EAFRD” which replaces the EAGGF-Guidance section.

Finally the 2003 reform established also a fourth principle which is called financial
discipline and which installs a mechanism for further reductions in payments when the
overall ceilings on CAP expenditures, as fixed in the Brussels European Council in 2002
for the period 2007-2013, are in danger of being breached.

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4. RURAL DEVELOPMENT AS THE SECOND PILLAR OF THE CAP

Since the end of the 80’s and in particular since the Communication of the European
Commission on The future of rural society in 1988 the awareness raised that if one should
keep rural society as a fundamental part of the European model of society, a multitude of
economic and social activities in rural areas had to be promoted beyond agriculture and
forestry in order to contribute to sustainable development. Rural areas are described as
territorial entities with a coherent economic and social structure of diversified economic
activities and may include villages, small cities and regional centres1.

The move to a Single Market made it more imperative than ever to reduce the disparities
between backward regions facing structural handicaps and to create more successful
and prosperous regions within the European Community. Consequently the
commitment to achieving cohesion was laid down in the Single European Act of 1987.
The Maastricht Treaty (1993) not only strengthened this commitment but equally the
legal basis for EU rural development policies, anchoring them firmly in the context of
EU efforts to achieve economic and social cohesion by adding the words “including
rural areas” to Article 130 A2. In 1997 the Agricultural Council recognised that “the
maintenance of a living rural fabric, which reflects the pattern of European society, is
an important objective”. It should also be noted that in the Treaty establishing a
European Constitution the notion “economic and social cohesion” has been enlarged to
include also the notion “territorial cohesion” (Part III, art.III-116)

4.1. The economic structure of rural areas

The significance of agriculture as a source of employment and as a percentage of the

national economy declines, while agriculture remains the primary land use. Studies on
regional and cohesion policies indicate that population and economic activity have
moved to urban centres and that there is often an unevenly distribution of economic
activities over the EU’s territory. Hence the need for territorial cohesion or a more
polycentric economic development.

Net population growth has been in urban places, while in rural areas the decline in farm
population, has in many cases been offset by an increase in rural population who are not
engaged in agriculture, and in some place not engaged in any economic activity at all
(in-migration of retirees). Therefore, the shift in the demographic structure of the rural
population (ageing) not always reflects the growth of non-farm employment
opportunities in the manufacturing and service sector.

As long as agriculture was the dominant rural industry, support to agriculture was
provided also in the expectation that enhancing the sector would in turn create direct and

1 Terluin, I. J. Rural regions in the EU. Exploring differences in economic development, de Nederlandse
Geografische Studies, Utrecht, Groningen, 2001.
2 Now art. 158 TEC.

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indirect employment effects that would benefit the rural population. Since agriculture is
no longer the engine of economic development in rural areas the rural development
policy needs a strong, direct focus on enhancing employment in off-farm and non-farm
activities. However, despite important economic and demographic challenges,
sustainable development has been observed in certain rural areas. Rurality is therefore
not necessarily synonymous to decline, and is also no longer synonymous to agriculture.

While there are many threats, there are also new opportunities for rural areas. For many
of these economic activities, such as tourism, food production and forestry, rural areas
remain dependent on natural resources and a healthy natural environment. Growing
environmental concerns on the part of the population could also bring new opportunities
to the countryside. If we want to preserve a high diversity of plant and animal species,
we must not only set aside rural areas for natural parks and biosphere reserves, but also
develop viable economic solutions for the population living there. Rural areas might
also benefit from the growing need to develop renewable energy sources, from wind and
solar parks, to biomass production.

Natural and cultural heritage of rural areas should also be a major objective of rural
development policy. Historic sites, cultural and social traditions, cultivated landscapes,
wildlife and flora, recreational areas, eco-systems, settlement patterns, are all elements
that cannot be transferred or recreated elsewhere and are considered by the OECD3 as
rural amenities. Some of these amenities are marketable, but most may be considered as
public goods, which are provided by some rural inhabitants but used mainly by urban
people.

Rural development is a multi-dimensional and multi-sectoral process. It not only

includes the ongoing changes in agriculture in forestry, but also the developments in
rural industry. The changes in Europe’s economy from material- and production-based
industry, to information- and knowledge-based services will bring new business to the
countryside. Many jobs are becoming location-independent. In some parts of the EU,
we see already the introduction of ‘new’ economy, such as micro-business, software
business and high-tech production sites. This kind of ‘off-farm activities’ are extremely
important for the new Member States in full process of restructuring their agricultural
sector in order to avoid depopulation of their often beautiful countryside.

4.2. The proposed rural development regulation for 2007-2013

The EU’s rural development policy evolved as part of the development of the CAP, from
a policy dealing with the structural problems of the farm sector to a policy addressing
the multiple roles of farming in society and, in particular, challenges faced in a wider
rural context. Rural development regulations went parallel with the Structural Funds
regulations as far as the following periods are concerned: 1989-1993, 1994-1999 and
2000- 2006.
3 The contribution of amenities to rural development, OECD, Paris, 1994.

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At this moment the draft regulation for rural development in the period 2007-2013 is on
the table of the Council. The Commission’s ideas are very clear. From the proposal we
see that rural development policy will be concentrated on three basic axes:

z The first one aims at improving the competitiveness of farming and forestry
and foresees the possibility of financing amongst others measures aiming at
improving the human potential and restructuring the physical potential;

z The second axis is dealing with environment and land management and
includes agro-environmental measures, animal welfare, forestation of
agricultural land, and natural handicap payments for less favoured areas (e.g.
when farmers have to work on steep slopes);

z The third axis deals with the wider rural development and illustrates the real
multi-sectoral approach with measures aiming at increasing the quality of live
in rural areas by financing measures such as diversification of the rural economy,
services, renovation of villages, restoration of rural heritage.

Finally the draft regulation also wants to mainstream the local development
strategies, which were learned from “Leader” experience. Small local development
projects based on the bottom up approach may be financed in each of the three above-
mentioned axes. According to the Commission’s proposal for the financial perspectives
for 2007-2013 an average of some 11 to 12 billion euros may be available yearly for
rural development to which also the modulation system will contribute.

4.3. The initiative LEADER

LEADER (Liaison Entre Actions de Développement de l’Économie Rurale – Links

between Actions for the Development of Rural Economy) is a Community Initiative,
which is a special financial instrument of structural policy, which the European
Commission proposes to the Member States on its own initiative. LEADER represents
a bottom-up approach based on the selection of the best local development plans of local
actions groups representing public-private partnerships. The EU supports operating
costs (around 2 billion euros for the period 2000-2006) of local action groups, co-
operation projects between them and experimental pilot projects. It also supports
capacity building and prepares the ground necessary for the preparation of local
development strategies. LEADER is designed to help rural actors improve the long-term
potential of their local region. It is aimed at encouraging the implementation of
integrated, high-quality and original strategies for sustainable development. As such
LEADER will no longer exist after 2006 as a Community Initiative; however the
Leader-philosophy will be maintained in the rural development programmes as it
proved to be vital to increase the participation of citizens in local development
decisions.

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5. SOME CONCLUSIONS

The CAP has undergone fundamental changes compared to its origins in order to
answer to the needs of civil society as well as international actors. Listening to the
recent discussions in the European Council on the financial perspectives 2007-2013, we
may be sure that the 2003 reform was not the last one. The debate on the CAP will
continue for many years to come.

Rural development policy, which has to be regarded as a European priority, is designed

to support the rural communities in which agriculture, although no longer the dominant
force in rural areas, still plays an important role. Farmers should be helped in the
adjustment process to the reformed CAP in particular in the new Member States and the
EU candidate countries.

Socio-economic vitality of rural areas needs local employment beyond agriculture, such
as micro-business, small and medium sized enterprises, craftsmen, and artisan activities.
Europe’s emerging communication infrastructure also offers new possibilities in very
remote rural areas. Information-related services, such as banking, high-quality health
services, university education, and professional training (distance learning), might come
to these areas and make them more attractive.

Bibliography:

– The contribution of amenities to rural development, OECD, Paris, 1994.

– Terluin, I. J. Rural regions in the EU. Exploring differences in economic

development, de Nederlandse Geografische Studies, Utrecht, Groningen, 2001.

Relevant official documents and information can be found at the following

websites:

– European Commission, DG Agriculture

http://europa.eu.int/comm/agriculture/index_en.htm

– Committee of Professional Agricultural Organisations in the European Union:

http://www.cogeca.be/en/copa.asp

– WTO, Trade in Agriculture section:

http://www.wto.org/english/tratop_e/agric_e/agric_e.htm

– European Parliament, Committee on Agriculture and Rural Development:

http://www.europarl.eu.int/committees/agri_home.htm

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CHAPTER 11

IMPLEMENTATION OF THE COMMON AGRICULTURAL

POLICY IN POLAND

`
Katarzyna Okon*

1. INTRODUCTION

Since 1 May 2004 Poland is one of the 25 members of the European Union. Prior to
2004 as EU candidate country, Poland was obliged to adjust its policies, economy and
law to those of the EU. This was the pre-condition for Poland as well as other candidate
countries in order to incorporate their markets into the internal market of the EU; this
implied applying the mechanisms of EU policies from the very first day of the
accession, including the mechanisms of Common Agricultural Policy (CAP).

The process of EU integration appeared to offer some great opportunities to Polish

agriculture: access to the EU market, the expansion of the agro-food sector, and the
availability of free capital flow and financial support. However EU integration also
meant significant threats to Polish agriculture: enormous costs of adaptation and of
modernisation of the sector in order to meet the conditions for operating in the EU and
minimise the gap in the level of development between Polish agriculture and the more
modernised agro-food sector in the EU.

Since agricultural Community law constitutes the majority of legislation adopted by EU

institutions, Poland’s ability to implement and apply this law has constituted one of the
key considerations in the pre-accession process. Community agricultural law – with the
exception of the field of veterinary and phyto-sanitary legislation – consists mostly of
regulations; the legislation was therefore directly applicable at the date of accession and
did not call for transposition on the part of the candidate countries. In the veterinary and
phyto-sanitary fields Community legislation consists mostly of very detailed directives.
The substantial task of any candidate country is to implement the Community
legislation, which means, on the one hand, to transpose directives and assure on the
legal level the application of the regulations and, on the other hand, to assure the
application of Community provisions by the national institutions, the farmers or food
business operators in practice. The emphasis in the preparations for accession was
therefore on the candidate country’s ability to implement and enforce the Community
acquis.

In order to present both aspects of implementing the CAP in Poland, the first part of this
chapter will discuss the problems of the situation of Polish agriculture influencing the

*Senior Specialist, Head of Agricultural Unit, Office of the Committee for European Integration, Warsaw, Poland.
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application of CAP mechanisms. Since those problems inevitably were taken into
account during the accession negotiations on agriculture, the results of those
negotiations will be briefly presented as well. In the second part of the chapter the
problems concerning the implementation of Community agricultural law will be
discussed.

2. AGRICULTURE IN POLAND IN THE PRE-ACCESSION PERIOD

In the pre-accession period Polish agriculture was (and in fact still is) an important
sector of the Polish economy: out of the total population of 38.2 million, 14.6 million
(38.2%) inhabit rural areas; the share of agricultural labour in the entire active
population in 2003 was ca. 18% and the share of agriculture in the GDP amounted to
approximately 3 %. Utilised Agricultural Area (UAA) was ca. 16.2 million ha, i.e. it
accounted for 51.7% of Poland’s total area.

A significant part of farmers, in particular those owning small area farms, are involved
in agricultural production applying traditional methods, mainly or exclusively to ensure
food supplies for their families.
As regards ownership of agricultural land, before the transition to a market economy
in 1989, most of the land in the CEECs was owned by large collective farms or state
farms. In Hungary for example, 80% of the land area was in the hands of collective
farms with an average size of 4,000 ha. In the Czech Republic, 60% of the land was
owned by collective farms and a further 38% by state farms, with an average size
respectively of 2,500 and 9,500 ha. However, in the case of Poland, which was an
exception to the general picture, only about 23% of the land was in the hands of
collectives or in state farms and 77% was owned by very small holdings with an average
size of under 7 ha.

At present Polish farmland is utilised by numerous entities varying with regard to

ownership, farm size as well as type and scale of production: Almost 95% of
agricultural land is used by the private sector, of which 87% by private agricultural
holdings (family farms). The public sector, owning 5% of agricultural land, comprises
“State Treasury farms” and state legal persons, self-governments and agricultural
holdings of mixed ownership with a dominating state-owned stake.

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*As of June 2004

Source: GUS

A characteristic feature of Polish agriculture, composed of ca. 1 850 000 agricultural

holdings in total in 2003, is the large differentiation of farm size from one hectare to
several thousand of hectares. The latter can be found in the private and public sectors
alike. The largest agricultural holdings were established on the former state-owned
farms. The problem of farm fragmentation occurs solely in the sector of private
agricultural holdings.

The farm structure differs significantly on a regional basis. In the northern and western
part of Poland farm structure is dominated by large enterprises while the other regions
are characterised by small-scale farming. In southern Poland the average farm size is 3.3
ha of UAA, whereas in the northwest it amounts to over 20 ha of UAA. In 2000 in the
EU-15 there were 6.7 million agricultural holdings, the biggest number in Italy (more
than 2 million), Spain (nearly 1.3 million), Greece (ca 800 000) and France (644 000).
The average farm size in the EU in 2000 was 18.7 ha; however, in certain EU countries
it was even smaller than in Poland (Greece (4.4 of UAA), Italy (6.1 of UAA)).

Enlargement of the existing farms is a permanent process supported by preferential

credits. However, due to the low profitability of agricultural production and the lack of
capital, the pace of agrarian structure change is too slow, and land prices remain at a
relatively low level.
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As regards the education level in the farming sector, the number of people with tertiary,
post-secondary or secondary education is much lower in rural areas than in towns.
However compared to the EU-15 average, the structure of agricultural holding users in
Poland is more favourable. The number of agricultural holding users with tertiary
education almost doubled in 7 years (from 2.6% in 1996 to 5.1% in 2002). The
percentage of users with post secondary, secondary vocational and general secondary
education rose considerably, whereas that with primary, not complete primary and
without school education fell (from 49.7% in 1996 to 34.8%).

A reduction of employment in agriculture, an increase in labour efficiency and

elimination of hidden unemployment in agriculture are major issues to be resolved in
Polish agriculture, in order to improve, among others, incomes of farmers’ families. At
the same time abandoning farming or finding a new job is extremely difficult due to
high unemployment in Poland and will require the commitment of ample funds in the
long term.
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According to the General Population and Housing Census and the Agricultural Census,
conducted in Poland in 2002, 10 474 500 people, i.e. 27.4% of Poland’s population,
lived in households connected with a farm (area of more than 10 ares) user. Eighty per
cent or 8 504 900 people were inhabitants of rural areas. This implies that 58.2% of the
total rural population was connected with farming through a common household.

The agricultural sector is unable to fully absorb its labour force; app. 70% of the
agricultural population are only part time workers. As compared to the results of the
1996 General Agricultural Census, the number of people in agricultural holdings fell by
1 084 700 or 9.4%. The number of persons living of work in agricultural holdings is
constantly decreasing, whereas that of people maintained by farmers or with non-
gainful sources of income (mainly old age and disability pensions) is increasing.

Against other social groups, the pay for work in agriculture is much lower. As
compared to the remuneration of employees in other sectors of the economy, farmers
earned 36% less. A representative survey of household budgets shows that a share of
income generated from hired labour and self-employment remains at a low level in
farmers’ households. The level of farms’ incomes and the share of particular categories
in the total income vary, mainly depending on the area size and the type of production.

Almost half of all farms are commercially oriented as they produce mainly for the
market. The farms make up a considerable part of total housing resources. Similarly as
in other countries, farm owners in Poland have various sources of income.

Source: GUS

Land productivity in Poland is much lower than in the EU-15, which is determined by
soil quality, the climate and a lower usage of agrochemicals for agricultural production.

Food production by organic methods in the clean and safe environment, without
mineral fertilisers and synthetic plant protection substances, free of antibiotics, growth
hormones or genetically modified organisms is systematically increasing. However, the
potential of such production related to the clean environment is not fully exploited,
primarily due to a relatively low support for organic farms, while production costs are
high.

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Due to low profitability of agricultural production and difficulties in selling agricultural

commodities produced on farms, there was a growing tendency to leave agricultural
land fallow and idle. According to the General Agricultural Census conducted in 2002,
the total area of arable land left fallow and idle was 2.3 million ha, which accounted for
17.6% of its total area. In 2003 the area of fallow and idle land diminished to 1.8 million
ha. Reduction of plant production and disadvantageous price relationship of agricultural
products result in a systematic decrease in the share of agriculture, forestry and hunting
in GDP.

As rye and potato type soils dominate, Poland is a leading producer of rye and potatoes: the
2nd largest producer of rye in the world and in Europe and the 6th largest producer of
potatoes in the world and the 2nd in Europe. As regards meat production, in particular pork,
as well as milk and hen eggs Poland ranks among the 15 biggest producers in the world and
in Europe. In 2003, the total agricultural production was valued at PLN 56.3 billion (Euro
12.8 billion) and was by almost 10% lower than in 1990. Plant production fell by 21.2%,
whereas the value of animal production increased by 2.2% in the period in question.

Between 1990 and 2003 commercially-oriented production fluctuated from 62.5% in

1990 to 50.1% in 1995 and to 64.9% in 2003. A large part of agricultural production is
used for self-supply on farms and internal usage for the purposes of animal production
(animal feeding stuffs). Despite a fall in the value of plant production, its share in the
total production continues to be higher than that of animal production, whereas in the
case of commercial production the situation is reverse.

Source: GUS

3. ACCESSION NEGOTIATIONS ON AGRICULTURE

Poland applied to become member of the EU in 1994. The negotiation process started
on 31 March 1998, when the first sitting of the International Accession Conference took
place. After the meeting screening sessions began to determine the extent to which
Polish law was in accordance with Community law, followed by the two parties
developing position papers for each negotiation position. The negotiation positions on
agriculture were presented on 16 December 1999 and the negotiations themselves
started on 14 June 2000.

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3.1. Poland’s requests in the accession negotiations

In its negotiating position, Poland declared to introduce, by 31 December 2002, the

legal and institutional arrangements enabling the application of CAP instruments. The
most important Polish requests in this chapter included the following:
That Polish agriculture will be covered by the CAP (compensatory payments)
and that Polish farmers will participate in the benefits offered by price, income
and structural instruments;

That Poland will be assigned production quotas at a level reflecting the natural
potential for environment-friendly agricultural production and guaranteeing
stable sources of income for the farm population;

That the Polish market for food and farm produce will be incorporated into the
European Single Market area.
The weightiest negotiating problems had to do with production quotas for milk, white
sugar and isoglucose, potato starch, dry fodder and tobacco inputs. Poland proposed to
apply, over 2-3 years after accession, a mechanism whereby the milk and dairy products
failing to meet the EU standards on micro-organism and somatic cell content would be
allowed to trade domestically and on third countries’ markets. The longer period for Polish
milk suppliers’ adjustment to the EU’s quality standards (transcending the accession date)
would help keep dairy cattle production at many farms, which is so important for Polish
agriculture.

Poland also requested that beef (whose production at meatpacking plants not always
meets all EU veterinary requirements) be admitted for trading locally and on third
countries’ markets. In Poland there are many small and medium meat-processing
establishments, which are fairly important to local labour markets. They supply meat
products adapted traditions and tastes of local communities. Some of them met EU
standards before accession. At the same time many other establishments were adjusted
to those standards and requirements. However, it was realised prior to Poland’s
accession, that some of the industries were unable to meet all technical and sanitary
standards. Since their closure would have painful consequences of both social and
economic nature, it was necessary to apply a solution enabling spreading the
transformation process of those plants over time. Therefore, Poland requested timely
limited access to national market as well as export outside EU of meat products
produced by those plants.
In certain cases, Polish regulations ensured a higher level of phyto-sanitary protection
than EU legislation, particularly in respect of the list of harmful organisms subject to
obligatory control and special phyto-sanitary requirements. Poland was of the opinion
that abandonment of the protection level existing on its territory as well as renunciation
of standards applied to goods imported from other countries would lead to a sudden
deterioration of plant and plant products health and, in turn, to considerable losses for
the Polish economy.

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Poland demanded also access to direct payments upon accession. The position paper
pointed to the enormous financial challenges, which the introduction of the necessary
set of CAP instruments (prior to the requested accession date) was going to pose. Poland
was therefore seeking support for the establishment of the Integrated Administration
and Control System and for its operation in the first three years after accession. Once
Poland is an EU member, this system will perform the basic functions enabling effective
administration and control of direct-payment flows into the Polish budget.

A major condition to be met by Poland prior to accession was to ensure an adequate

level of external border control. The elimination of internal borders was contingent on
the total and effective introduction and strengthening of the system of veterinary and
phyto-sanitary control.

3.2. Agreements reached in the accession negotiations

The accession negotiations were completed during the Copenhagen European Council
12-13 December 2002, when the heads of state and the governments of the former 15
EU Member States and the ten candidate countries reached agreement on a formula for
enlarging the EU to encompass ten new Member States as from 2004. Following the
decision of the Copenhagen Summit, Cyprus, the Czech Republic, Estonia, Hungary,
Latvia, Lithuania, Malta, Poland, the Slovak Republic and Slovenia should join the EU
on 1st May 2004.

As far as agriculture is concerned the following was agreed:

The 10 new Member States will gradually phase in EU agricultural direct

payments between 2004 and 2013. Direct payments will start at 25% in 2004,
30% in 2005 and 35% in 2006 of the present system and increase by 10
percentage steps to reach 100% of the then applicable EU level in 2013;

In response to Poland’s postulates, in the last stage of negotiations this offer was
enhanced through the reallocation of some funding committed to rural
development in the amount of 25% of this allocation in 2004, 20 % in 2005 and
15 % in 2006;

Also in response to Poland’s position, the EU agreed to increase topping-up

ceilings for direct payments in the year 2004 up to 55% of the level in the current
Member States, 60% in 2005, and 65% in 2006;

Jointly with other candidate countries Poland negotiated two solutions to be

applied solely in the new Member States: support for semi-subsistence farms,

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and support for farmers adapting to EU standards. The programme targeted

at semi-subsistence farms aims to encourage the modernisation of farms and
their adjustment to requirements of market-oriented production, which will
result in increased agricultural returns. The programme will allow farmers to
undertake new activity or expand the farming activity they already pursue, invest
in their farms, improve financial liquidity and alleviate the adverse outcomes of
the transitional period. As a result of negotiations, financial support by virtue of
this facility finally reached the level of EUR 1250 - the initial offer was at a level
of EUR 750 - for 5 years. If - after 3 years - the objectives of the farm’s
development plan are not attained, the money already expended will not have to
be repaid. The aim of support for farmers adapting to EU standards is to assist
farmers in adjusting to EU requirements in environmental protection, food safety
and quality as well as animal welfare. This support will be available for 5 years
after Poland’s accession and will consist of a grant of EUR 200, i.e. approx. PLN
800, per hectare in the first year. The level of this payment will diminish as the
farm adapts to EU requirements.

Certain rural development measures have been adapted or created in order to reflect
better the requirements of the new Member States in the first years of accession. This
means that for a limited period, new Member States will be able to use rural
development funds for schemes specifically designed to help restructuring of the rural
sector. In order to tackle structural problems in the rural areas of the new Member
States, an enhanced rural development strategy was agreed worth € 5.1 billion for the
years 2004-06, broadened in scope and - in comparison to the funds available for the
existing EU countries - financially more important. From Day 1 upon accession, a range
of rural development measures (early retirement of farmers, support for less favoured
areas or areas with environmental restrictions, agri-environmental programmes,
afforestation of agricultural land, specific measures for semi-subsistence farms, setting
up of producer groups, technical assistance, special aid to meet EU standards) will be
co-financed at a maximum rate of 80% by the EU. Additional rural development
measures will be financed from the Structural Funds (EAGGF Guidance sector).
Rather than applying the standard direct payment scheme applicable in the current EU,
the new Member States have the option, during a limited period, of granting their
farmers CAP direct payments in the form of a decoupled area payment (a simplified
payment scheme). An annual financial envelope will be calculated for the new Member
State according to agreed criteria and then divided between the utilised agricultural area.
Poland has decided on that simplified system.

Another Polish negotiation achievement was the EU consent to increase by 1.5 million
tonnes the delivery sub-quota for the milk quota granted to Poland, to a total level of
9.38 million tonnes. Poland will also have a transitional arrangement of one year for the
allocation of milk quota to individual producers and consequently be exempted from the
payment of additional levies in the first quota year.

Certain food establishments operating in some candidate countries have been granted

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a transitional period in order to upgrade to fully meet EU requirements. These include

52 premises in the Czech Republic, 54 in Hungary, 97 in Latvia, 57 in Lithuania, 7 in
Malta, 721 in Poland, 56 in Romania, 5 in Slovenia and 12 in Slovakia. As long as those
establishments benefit from this transitional period, products originating from those
establishments shall only be placed on the domestic market or used for further
processing in domestic establishments also mentioned above. These products must bear
a special health mark. All establishments not subject to a transitional period will have
to comply with the acquis on accession and their products will be able to be freely
marketed within the EU.

For certain EU compliant dairies in Poland until 2006 (56, using separate production
lines) the delivery of EU non-compliant raw milk has been accepted under the
condition that the products must be specially marked and may not be marketed in any
form in any other EU country.

Certain establishments have been granted a transitional period in order to upgrade to

fully meet structural requirements for hen cages (only the slope and height of the
cages).

As far as phyto-sanitary issues are concerned for a period of 10 years from the date of
accession Poland shall limit the potato varieties planted in Poland to varieties fully
(laboratory and field) resistant to Synchytrium endobioticum (Schilbersky) Percival, the
causal agent of potato wart disease. Poland has also a transition arrangement for the
market placing of certain plant protection products until 31 December 2006.

Poland may allow marketing until exhaustion of stocks of forest reproductive material
accumulated before 1 January 2004 that does not meet all the provisions of the
Directive.

Poland negotiated a 3 year transitional arrangement to set criteria for the preliminary
recognition of producer organisations in the fruit and vegetables sector at 5 producers.

Poland received also a 5-year transitional arrangement to set the threshold for the
recognition of a producer group in the tobacco sector at 1% of the guarantee threshold
for all production regions in Poland.

It has been agreed that Poland under certain conditions laid down in the acquis may use
the term “Polish fruit wine” and that Poland may use the name “Polish wine”.

Poland negotiated also a transitional arrangement of five years for the marketing of
drinking milk, which does not comply with the EU fat content requirements. Such milk
may be marketed only in Poland or exported to a third country.

Poland negotiated also so-called “safeguard clause” applied when in specific

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agricultural sectors difficulties arise. Difficulties must be serious and liable to persist or
could bring about serious deterioration in the economic situation of a given area. Taking
into account the specific problems of the agricultural sector in Poland, the measures
taken by the Commission to prevent market disturbances under the general economic
“safeguard clause” may include a system of monitoring of trade flows between Poland
and other Member States.

4. IMPLEMENTATION OF AGRICULTURAL LAW INTO POLISH LAW

Since Community agricultural law constitutes the majority of legislation adopted by the
EU institutions – according to statistics ca. 90% of legislative activity of EU institutions
is devoted to agriculture (ca. 3 thousand acts a year) – Poland’s ability to implement and
apply the acquis communautaire has constituted a key consideration in the pre-
accession process.

According to provisions of the Europe Agreement which came into force on 1st
February 1994 the major pre-condition for Poland’s economic integration into the
Community was the approximation of the country’s existing and future legislation to
that of the Community. Poland had to use its best endeavours to ensure that future
legislation is compatible with Community legislation. The approximation of laws shall
extend in particular to the “protection of health and life of humans, animals and plants
and consumer protection”.

Beside this, the Commission set the short term and long term goals for agriculture in
Poland. Among the short term goals figured the need to establish a coherent structural
and rural development policy, to adopt veterinary and phyto-sanitary requirements, and
upgrade food-processing establishments (milk and meat sectors). The development of
the capacity to implement and enforce the CAP and alignment with the agricultural
acquis were among the medium-term goals.

Since the Europe Agreement it was broadly recognised in Poland that bringing Poland
closer to the legislation of the EU has not only a normative dimension, but also a
dimension linked to ‘civilisation’: it would allow integrating the Polish society,
including farmers and producers of food into the common social-economic organism of
the united Europe which is the EU.

Nevertheless the process of normative adaptation of the Polish agricultural law to the
law of the EU started not long before accession, and is dated at the turn of the years
1999/2000. The delays in implementing the EU agricultural law were often caused by a
number of challenges concerning the difficulty to reconcile normative solutions of the
Polish with the Community legal system. On one hand the adaptation of Polish law to
the European standards must be taken in accordance with principles of the Constitution
of the Republic of Poland and with the rules of the functioning of a democratic state of

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law; on the other hand those principles and rules should not impede the proper adoption
of Community agricultural law into Polish law.
In order to assure that implementation of legal acts is in line with Community law (i.e.
with the provisions of implemented legal act as well as with general principles of law)
the Resolution No. 16/94 of the Council of Ministers provided, that each draft of a legal
act prepared as a bill to be submitted by the Government to the Parliament had to be
scrutinised taking into consideration their compatibility with EU legislation.

Assessment of draft legal acts for compatibility with EU law became a significant
instrument of a proper influence on employees of ministries and central offices in the
process of adjusting the law. From March 1994 (that is from the time when the Law took
effect) to mid-1998 over 2,500 opinions were issued on the compatibility of drafts of
various legal acts with EU law. In the course of the procedure established by a
resolution, around 50 acts were recognised as being incompatible with EU law and
withdrawn from further work of the administration.

On the other hand however, weak points of the above-mentioned resolution have also
surfaced. As only newly created legal acts were assessed, the already existing legislation
was not covered by a control mechanism with an opinion on compatibility. In addition
only government draft laws were subject to control. As a result a large part of new legal
acts (about one third) was excluded from assessment for compatibility. Drafts that have
passed the ‘test’, were also subject to changes incompatible with EU law when they
reached the Sejm, like other acts passed by the Polish Parliament.

In this respect, the procedure of compatibility assessment was replaced by the Law No.
13 of the Council of Ministers of February 25, 1997 Regulation of Cabinet work, which
extended the scope of procedure to draft normative acts and assumptions or theses of a
draft law, in case they have to be agreed and approved by the Council of Ministers. In
addition the European Integration Committee (a governmental organ, the Chairman of
which is a member of the Council of Ministers) has been established by a Law of August
8, 1996; it has been obliged to assess the compatibility with EU law of all governmental
draft normative acts: laws, ordinances, orders or decisions of the Government.

However, what stood in the way of carrying out the scrutiny of bills submitted by the
Government to the Parliament was a controversy connected with the issue of interfering
of a Government institution (that is the European Integration Committee) in decisions
of a sovereign Parliament, especially when an opinion on compatibility would have a
binding character.

In order to uphold cohesion of the Polish legal system, in March 1997 a Team of Experts
for Harmonisation of Law was appointed as part of the European Integration Committee

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by its Head. The task of individual experts was to prepare in the area of a given field of
law indispensable legal changes that will - in a coherent and comprehensive way - lead
to compatibility of Polish law with EU legislation.

Despite the above mentioned measures the European Commission opinions reflected in
its monitoring reports on Poland’s preparations for membership on the legal as well as
administrative or institutional adjustments in Polish agriculture were not very
optimistic. In its report in 1998 the Commission noted that significant further progress
was required in the alignment of Polish legislation and in the economic integration of
the agricultural and rural sectors. Current provisions for a rural development policy fell
far short of the requirements facing Poland in preparing for accession. The restructuring
of the agro-food industry required further efforts in order to become more competitive.
The upgrading of veterinary and phyto-sanitary facilities to EU standards remained a
core priority. Considerable progress was required in the establishment of sectoral
market organisations, and in enforcing those laws, which have been passed. Significant
efforts were required to strengthen administrative capacity in particular relating to the
management of the CAP administration and in the veterinary administration at the
central level.

One year later, in 1999, the report stated that certain progress was made in the adoption
of the acquis, notably in the veterinary and phyto-sanitary fields. The planning and
budgetisation of the necessary institutional structures at the national and regional level
remained outstanding. In particular, the essential modernisation of veterinary and phyto-
sanitary facilities was not budgeted. In summary, the short-term priorities of the 1998
Accession Partnership have only partially been met.

According to the report from 2000, Poland made limited progress in adopting the
acquis. Still substantial work remained to be done at both legislative and institutional
level: clarifying the role to be played by the institutions that would be implementing
the EAGGF, setting up the Integrated Administration and Control System (IACS)1 as
required by EU legislation and introducing product-promotion policies, aligning the
management system for the market-organisation regimes with EU legislation. No
further progress has been done in the task of aligning veterinary and plant-health
legislation.

In the 2001 report the Commission noted, that the preparations for the implementation
of the Common Agricultural Policy were reinforced, in particular with regard to legal
adjustments. A significant number of laws relevant to agriculture was adopted. Efforts
for the practical implementation of a number of mechanisms of the CAP were launched
and a series of concepts for the implementation of CAP mechanisms was developed.
However, the level of preparedness as well as actual implementation and enforcement
of Community mechanisms in the field of agriculture remained low in general, in
particular with regard to some key instruments such as the IACS.

1IACSis an anti-fraud and expediture control mechanism for payments made to farmers under de EU's
Common Agricultural Policy
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As regards horizontal issues, there was no major change in Poland’s agricultural policy.
The status of the Agency for Restructuring and Modernisation of Agriculture (ARMA)
and Agricultural Market Agency (AMA) as future paying agencies and main institutions
for the management of the CAP was confirmed, and their administrative capacity were
further prepared. Co-ordination between both bodies, ARMA and AMA had to be
assured. The implementation of the IACS started later than anticipated, and faced
considerable obstacles. The adoption of the Veterinary Act was a first step towards
implementing the system. A detailed strategy for the implementation of IACS across the
whole territory of Poland remained to be developed. Basic elements such as the animal
identification and registration system or the land parcel identification system were not
sufficiently developed. Poland made also some progress in legal harmonisation with
regard to common market organisation but here remained much to be done to implement
these legal provisions.

According to the report from October 2002 some efforts were made by Poland to align
its legislation. However, little progress was made in strengthening administrative
capacity and veterinary legislation. In the area of horizontal measures, both paying
agencies, ARMA and AMA, were on track for assuming their designated roles. Very
serious efforts were urgently needed for Poland to be able to build up an operational
IACS by accession.

In order to be ready for membership, Poland needed to give urgent attention to

completing legislative alignment, notably with regard to the veterinary and phyto-
sanitary acquis. Of equal importance was the strengthening of administrative capacity
in all areas to ensure the effective implementation of the acquis. It must have been
ensured that the IACS would be in place if Poland was to be in a position to administer
and control efficiently the CAP support schemes.

In the last report from November 2003 it was stated, that Poland was essentially
meeting the commitments and requirements arising from the accession negotiations,
among the horizontal issues as regards quality policy, organic farming, the Farm
Accountancy Data Network (FADN) and state aid; among the Common Market
Organisations (CMOs) as regards arable crops, sugar, fruit and vegetables, wine, sheep
and pig meat; and in the veterinary field as regards animal disease control measures and
zootechnics.

Poland was partially meeting the commitments and requirements for membership in the
areas of trade mechanisms; the CMOs for milk, beef meat and eggs and poultry; rural
development; in the veterinary field as regards veterinary control system in the internal
market (with the exception of movement control of animals), trade in live animals and
animal products, common measures, animal welfare, animal nutrition; and phyto-
sanitary issues (with the exception of potato ring rot and wart disease). Unless efforts
were accelerated in these areas, there was a risk that functioning systems would not be
in place at accession.

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There were serious concerns about Poland’s preparations to set up its Paying Agencies
and to implement the IACS. For veterinary issues, urgent attention had to be paid to the
adoption and implementation of four basic veterinary acts. Serious concerns remained
regarding TSE, animal products, movement control of animals, and with regards to plant
harmful organisms (control of potato ring rot and wart disease). Urgent progress was
needed in public health (in the upgrading of agro-food establishments). The report
stated clearly “unless immediate remedial action is taken, Poland will not be in the
position to implement the acquis in these areas by the date of accession.”

As already mentioned the process of the normative adaptation of the Polish agricultural
law to the law of the EU started relatively not long before accession. When looking
closer to the most important acts implementing EU agricultural law it can be noticed
that the serious works on implementation of Community law in the area of agriculture
started in fact very late, at the turn of the years 1999/2000:
z In 1997 the Law on Eradication of Animal Diseases, Veterinary Checks and State
Veterinary Inspection was adopted. Since even several amendments to this act
did not ensure the complete implementation of veterinary acquis, the law was
gradually repealed and replaced by veterinary laws from 2003-2004;

z Between 2000 and 2002 several Laws on Market Organisations were adopted.
Because they implemented Community regulations, the acts were either
amended or repealed with the effect from 1.5.2005;

z In 2000 the Law on Commercial Quality of Agro-food Products, the Law on

Health Conditions for Food and Nutrition, and the Law on Fertilizers and Soil
Improvement were adopted;

z In 2001 the Law on Early Retirement Measures in Agriculture and the Law on
Organic Farming were adopted. For the same reasons as the Laws on Market
Organisations they were repealed with the effect from 1.5.2004. The same year
the Law on Forestation of Agricultural Land and the Law on Animal Nutrition
were adopted;

z In turn of the years 2002/2003 several acts were prepared and adopted: the Law
on Rural Development, the Law on Financing Polish Agriculture from the
Guarantee Section of EAGGF, the Seed Law, the Law on Legal Protection of
Plant Varieties and the Law on Plant Protection;

The Veterinary Laws were gradually adopted in the years 2003 and 2004. Shortly
before accession the Law on Organic Farming and the Law on the Protection of
Geographical Indications were adopted.

As mentioned before the implementation of EU law was a pre-condition for Poland’s

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integration to the EU. However, from the perspective of a country, which became a full
member of the EU, it can be said with full certainty that the successful integration
requires not only the implementation of EU legal achievements and adjusting legislation
to EU law but also a proper and effective functioning of state administration structures
and courts. This can be achieved first of all thanks to the appropriate preparation of civil
servants who are to implement and apply EU legislation.

Bibliography:

– Agriculture and food economy in Poland, Ministry of Agriculture and Rural

Development, Warsaw 2004, available under:
http://www.minrol.gov.pl/DesktopDefault.aspx?TabOrgId=1210&LangId=0

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CHAPTER 12

THE TRANSITION OF THE ROMANIAN AGRICULTURE

AND RURALITY TO THE EU COMMON AGRICULTURAL
POLICY

Cosmin Sãlãºan*

1. INTRODUCTION

The integration of the Romanian agriculture and rurality into the Common
Agriculture Policy (CAP) is not an option but has become compulsory with the
signature of the Accession Treaty between Romania and the EU in April 2005. As a
result, the period of 2005-2007 will be crucial for the transition of the Romanian
agriculture and rurality. This period is extremely short given the number of tasks to
accomplish and the number of important changes to occur in the very near future. The
general frame under which we can place this ‘emergency’ transition consists of a rural
area dominated by agriculture which is over-populated, rather aged with a fragmented
property background, which has a low performance that is non-commercially oriented
and which has a very important share of subsistence households. Even if this picture
is not very optimistic as it may appear to certain observers, it represents the reality to
deal with when considering the future European dimension of the Romanian
agriculture.

2. AN EFFICIENT TRANSITION: WHO, HOW AND WHEN?

It is well defined what exactly the Romanian agriculture and rurality needs to achieve
in order to comply with the EU requirements. Therefore the reflection should now orient
more towards: Who, How and When?

The expectations from the CAP are different according to the involved actors. The
national administration needs to prepare an accelerated transition strategy.
However, when pointing this out we address the application and the transposition
of this strategy and not its formulation, which is already completed. There is also a
clear need to identify and rank priorities and to prepare an updated working plan that
should actively involve all stakeholders with the most important dimension:
commitment.

* Senior Lecturer in General Management and Extension Services at the Faculty of Agricultural Management,
Banat’s University of Agricultural Sciences and Veterinary Medicine, Timisoara, Romania.
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An important specific effort concerns the increasing awareness of the farmers. In

order to advance in this process the farmers need complete and coherent information
about the transformations to be undertaken, about their unique farming option for the
future as commercial farmers or about the alternative of continuing subsistence
agriculture. For both options farmers need advice, guidance and support, including
specific activities concerning training, counselling, basic analysis and decision-
making instruments. Whether they choose to become market-oriented farmers and
operate as any other business, or whether they shift to another activity, maintaining or
not their subsistence households, they need more than others all the support that can
be granted.

The administration on all its levels will need to accelerate the upgrade and update
efforts for their staff by integrating training sessions and systematic evaluations
under their human resources management and development policy. The objective
should be:

z To perform a structural tuning and adjustment in order to improve the structural

performance and/or create appropriate bodies where needed, such as specific
agencies or regional structures, and

z To develop adequate working instruments in order to increase the effectiveness of

the administration’s actions.

Specific efforts will need to be spent on interfacing and communicating, both direct and
indirect:

z Direct communication towards the primary target - represented by rural

communities and, more specifically, farmers – and to the broader public unaware
of the actions and the efforts spent inside central administration structures, but
also towards the other administrative bodies, such as other ministries in charge
with activities in the field of rural or agriculture.

z Indirect communication should be oriented to the outside and aim at increasing

the transparency of the entire transition process. An important dimension to be
mentioned here is represented by the inner communication, including
information-flow management that has to be improved urgently.

Finally, opening consultations and dialogue, directly or within the available media can
greatly contribute to ensure the success of the entire transition process.

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3. THE NON-AGRICULTURAL DIMENSION OF THE ROMANIAN

RURALITY

Several figures can prove to be helpful in broadening the understanding and the
importance of the rural area as a living environment, with far more dimensions than
agricultural production. In this respect, the agricultural area is 50% larger compared
to the EU average and Romania will be the 9th largest state once it becomes a
Member State of the EU. In terms of resources, it presents a large and unexploited
potential. The population of Romania is mainly employed in agriculture, however
more than 40% are unpaid family workers and more than 50% are self-employed
persons.

A very useful comparison can be made between Romania and the EU average (referring
to the former EU 15).

Other essential characteristics of the rural world in Romania refer to the human
resources potential, which is relatively poor and lacking entrepreneurial spirit. In
addition, there is a low presence of vocational training, a resistance to adopt an
associative approach and a generally very low level of involvement and participation
in community life.

The current situation is mainly due to a long period of isolation and a constant
widening gap between the rural and the urban living areas, in all dimensions:
economical, social, and cultural. One of the largest issues to address is the level of
education. A very clear picture of the human resource potential in rural areas can be
achieved when analysing the relevant statistics: Over 7% has not graduated from
primary school, about 50% do not follow a high school education and less than 3%
have a university diploma, while the dropout rate is growing. Certainly, the elements
mentioned earlier are largely responsible for this situation; yet there is a critical need
for a coherent strategy with clear priorities to be implemented in order to improve the
situation.

The critical situation of infrastructure in rural areas has a severe impact on any
economic initiative and on the local people’s motivation to remain in these areas. Only
half of the villages have direct access to the main road network; about 17% of the rural
localities are connected to water supply systems; approximately 3% of the villages have
a sewerage network of less than 3 km and about 5% of the villages are connected to the
natural gas distribution network.
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The major weak points of the Romanian rural areas are described in the following
figure:

At the same time, the financial perspectives of the CAP for Romania are clearly
indicating that the ‘rural development‘ pillar of the CAP, will count for about 60% of
the total budget allocated for agriculture and rural development after the accession, at
least for the first three years after Romania’s accession to the EU.

Currently, Romania’s rural areas are areas of mono-activity, with a weak

diversification of the economic environment, even for the up- and downstream
agriculture industries. This is mainly due to the low productivity level in agriculture.
The low education level weights heavily on the entrepreneurial spirit, as already
mentioned above. Under these circumstances, especially with the CAP in view, the only
valid option for the agricultural active population is to shift into commercial farming.
This means to start farming as a business, or to continue producing agricultural goods.
However this would need to be done on new bases: more market oriented and in
accordance with specified quality requirements. This process may prove to be painful
for farmers, as the market will regulate their existence and wealth. They will need to
spend more efforts to produce in accordance with new quality standards, to improve
their production capacities, to comply with conditions according to new regulations and
they will have to compete on the same common market with other operators from the
EU.

This change will release an important labour mass, estimated to over half of the current
active population in agriculture. This population will need support in order to reorient
professionally and to start new activities, which can generate sufficient income for their
families. An important part of the subsistence households today will be maintained and

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will continue to operate even if their production will not be marketed and will not
represent the main activity of those respective families. Several open questions remain:
Where will the situation balance? How many commercial farms will appear?
Moreover, what will be the remaining share of the subsistence farms? Any attempt of
answer is hazardous.

The availability of infrastructure remains crucial for rural development. Even if its
performance will not improve considerably on the short run, a national master plan has
to be set up, with regional connections and implications to be taken into account. No
economic development in the rural areas can be achieved unless the infrastructure
improves.

4. CHALLENGES FOR THE PRESENT AND THE FUTURE

The Government will need to spend an internal sustained effort to become a EU

administration. Reforms need to be based on structural assessment and the creation of
agencies or other bodies, parallel to a communication/information policy and a human
resources development policy. One of the mid term challenges for the central
administration is represented by the future decentralisation process that will lead not
only to a reshuffling of personnel but also to an important transfer of the decision-
making process to the regional level.

The farmers will have to make their choice between supplementing their income level
with other activities as main revenue source or become ‘real’ farmers, which means
‘economic operators’ who remain on the market. Considering the transitory
specifications negotiated with the EU, the payments to farmers, including all types of
direct financial transfer (direct payments, state aids) will not be sufficiently high in
order to protect the ‘natural’ economic consolidation of the farms. The pressure of the
open common market will affect most of the small producers, which will not necessarily
give up their activity but will seek a professional recognition and representations in
order to defend their interests.

The economic environment will grant a large share to a focused support for non-
agricultural activities and diversification based on quality assurance and food safety
regulations. After Romania’s accession to EU, Romanian agricultural products will not
benefit any more from import/export protection mechanisms when coping with
competition from EU countries. This competition and ultimately the consumers will
determine the transition process of the Romanian agriculture and rurality.

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 SECTION 4

EU REGIONAL DEVELOPMENT AND

COHESION POLICY
 Chapter 13

CHAPTER 13

EU REGIONAL DEVELOPMENT AND COHESION POLICY

Charalampos Koutalakis*

1. INTRODUCTION

One of the most debated issues in the recent and forthcoming EU enlargements is the
financing of the new Member States. Given the limited size of the EU budget, regional
development and cohesion policies face a number of fundamental challenges. The
economic and social disparities within the EU amplify. The weak socio-economic
conditions in the majority of new Member States or candidate countries means that they
will have priority over other regions in the allocation of future financial commitments.

Although the centre of gravity of cohesion policy shifts to new Member States from
Central and South Eastern Europe, pre-existing disparities within the old Member States
of the EU will not vanish. Structural weaknesses are evident not only in the less
developed regions of the EU but also in urban agglomerations or sub-urban areas within
the most developed regions. The accommodation of diversity in developmental needs
and priorities is definitely the most pressing issue determining the course of future
reform initiatives regarding not only budgetary matters but also the institutional design
of the delivery system of structural assistance programs.

Beyond the currently ongoing negotiations on the size of budgetary commitments for
the next programming period (2007-2013) there are serious considerations regarding the
effectiveness and efficiency of policy interventions in new Member States. The latter as
latecomers to the EU face a number of fundamental challenges regarding their ability to
take full advantage of opportunities to reduce their socio-economic disparities with
older Member States.

First, they never had the possibility to influence EU regional development and cohesion
policies according to their preferences and policy traditions. Second, they often lack
adequate institutional structures and capacities to effectively implement structural fund
interventions especially at the sub-national level. This double disadvantage for
European latecomers has led to concerns about their absorption capacity of EU financial
inflows.

This contribution seeks to provide an overview of the evolution of regional development

cohesion policies at the EU level, the financial instruments and their fields of
application, the fundamental principles governing their implementation, and detailed
requirements attached by the Commission for the absorption of structural assistance
programmes at all levels of government (national, regional, local).
* Chair of European Integration, Otto-Suhr Institute for Political Science, Free University of Berlin,
Ihnestr.22, 141 95 Berlin, Germany. Email: koutalak@zedat.fu-berlin.de ; Internet: http://www.polwiss.fu-
berlin.de/projekte/koutalakis/
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2. FROM ROME TO MAASTRICHT AND BEYOND – THE

EVOLUTION OF EU REGIONAL DEVELOPMENT AND COHESION
POLICY

Apart from a general reference to the need to consolidate economic unity between
Member States, the founding Treaty of Rome (1957) provides no explicit mandate for
the adoption of an EC regional development and cohesion policy. It is not only that
founding Member States with the exception of southern regions of Italy had no
significant economic and social disparities. It took eighteen years for regional policy to
gain momentum in EC political agenda in the light of the first enlargement including
Member States (UK and Ireland) with considerable economic and social development
problems coupled with a slow down of economic development due to the oil crisis in
the seventies.

The early regional development policy had an explicit re-distributional character. A

European Regional Development Fund (ERDF) was adopted in 1975 to contribute to
developmental projects decided by national government. Soon it was realised that this
minimalist concept has serious shortcomings. A large number of projects were co-
financed by the ERDF according to a national quota system with no explicit long term
development priorities and multiplier effects.

The necessity of a radical reform of the delivery system was crystallised after the
southern enlargement with the inclusion of Greece (1981), Spain and Portugal (1986),
all lagging behind considerable the then EC GDP average.1 Greece negotiated with the
Commission the introduction of southern-specific economic instruments to
counterbalance competitive economic pressures from the accession of Spain and
Portugal both with similar economic orientation of primary and secondary sectors of
their economies. The Introduction of Integrated Mediterranean Programmes (IMP) for
the 1986-1992 period provided for the first time the opportunity to the Commission to
experiment with innovative approaches regarding both the policy contents and the
methods and requirements attached to their implementation. In accordance to
endogenous development economic theories, policy interventions were directed towards
the endowment of local productive actors to improve the quality of human capital
(development of labour skills, matching skills with labour demands), improvement of
accessibility to markets through infrastructure projects, innovation through support of
research and technological development and structural change.

The adoption of the Single European Market Programme in 1986 and the conclusion of
the Single European Act in 1988 signified a new era for regional development policies
in the EC. The abolition of barriers to trade and the free movement of persons, capital
and services were accompanied with considerations regarding the ability of less
favoured regions to cope with competitive market pressures. It was the first time that
Community institutions were given an explicit mandate to pursue regional development

1 At the period of their accession southern Member States had comparable levels of economic development
to the new Member States or current candidate countries (Greece 49.2%, Spain 53.8% and Portugal 29.1%).

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through an explicit article in the new Treaty that elevates economic and social cohesion
and the need to reduce “disparities between the various regions and the backwardness
of the less favoured regions” (Art 130a TEC) as the main objective of the EC.

Successive EC Treaties of Maastricht (1992) and Amsterdam (1994) reconfirmed the

centrality of these objectives. These developments were accompanied by the
introduction of novel financial instruments doubling the budgetary allocations devoted
to the various structural funds (Delors I package, that was later in 1994 replicated
through a second Delors package).

However, the most interesting development was associated with the institutionalisation
of significant innovations in the delivery system of structural interventions providing
considerable leverage to the Commission to pursue genuine European developmental
objectives. As it will be demonstrated in the following section these developments had
significant repercussions for the balance of power between national governments, sub-
national actors and EC institutions and stimulated the emergence, not always consensual
though, of a more cooperative multi-level governance system of policy making.

3. THE STRUCTURAL FUNDS AND THEIR FIELD OF

APPLICATION

Before analysing the fundamental principles governing the application of structural

funds it is essential to provide a more detailed reference to the various financial
instruments and the policy measures and actions directed towards the alleviation of
socio-economic disparities between European regions. Currently there are six
distinctive financial instruments pursuing a broad range of policy objectives directed
towards the promotion of economic and social cohesion.

a) The European Regional Development Fund (ERDF), created in 1975, is the main
vehicle of regional development policies. Its main aim is to promote economic and
social cohesion by correcting the main regional imbalances and to contribute to the
development and conversion of regions. Its scope of operations includes the following
developmental objectives:

z Productive investment to create and safeguard sustainable jobs;

z Investment in infrastructure;
z Development of the endogenous potential by measures for the support of local

development and employment initiatives and the activities of small and medium-
sized enterprises. Such assistance is aimed at services for enterprises, transfer of
technology, development of financing instruments, direct aid to investment,
provision of local infrastructure and aid for structures providing neighbourhood
services
z Investment in education and health.

b) The European Social Fund (ESF), created in 1957, is one of the oldest financial
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instruments at the disposal of EC institutions directed towards the facilitation of free

movement of persons into the European labour market. Currently, its main aim is to
promote employment through:

z Developing active policies to combat unemployment, preventing long-term

unemployment and providing support for those entering or re-entering the job
market;
z Promoting social inclusion and equal opportunities for all;

z Developing education and training as part of a policy for lifelong learning;

z Promoting a skilled and adaptable workforce, fostering innovation in work

organisation, supporting entrepreneurship and job creation, and boosting human

potential in research, science and technology;
z Improving the participation of women in the labour market.

c) The European Agricultural Guarantee and Guidance Fund (EAGGF), created in

1962, is one of the oldest and budgetary most significant instruments since it
concentrates approximately 40 percent of the EC budget. It is divided into the Guarantee
and Guidance sections with the first attracting the bulk of financial commitments since
it seeks to assist the EC Common Agricultural Policy (CAP) through

z Expenditure on agricultural market organisations;

z Rural development measures that accompany market support;
z Veterinary expenditure and information measures relating to the CAP;

The Guidance section has a more explicitly territorial dimension seeking to promote
the development of rural areas within the less favoured regions of the EC through policy
interventions directed at providing:

z Investment in agricultural holdings (modernisation, reduction in production costs,

product quality and the environment);
z Aid for the setting up of young farmers and vocational training;

z Aid for early retirement;

z Compensation for less-favoured areas;

z Agri-environmental measures;

z Processing and marketing of agricultural products;

z Development and optimal utilisation of forests;

z Development of rural areas through the provision of services, support for the

local economy, encouragement for tourism and craft activities;

d) The Financial Instrument for Fisheries Guidance (FIFG), created in 1993, with
the main aim to contribute to a sustainable balance between fisheries resources and their
exploitation, to increase the competitiveness of structures and the development of viable
enterprises in the sector, to improve the value-added to fisheries and aquaculture
products and revitalise areas dependent on them through financial assistance directed
towards the:

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z Adjustment of the fishing industry;

z Fleet modernisation;
z Aquaculture development;

z Protection of marine areas;

z Fishing port facilities;

z Processing and marketing of fishery products;

z Product promotion;

e) The Cohesion Fund, created in 1992, was one of the new generations of financial
instruments. Its aim is to help the countries qualifying for its assistance (at the time it
was set up Spain, Portugal, Ireland and Greece were included) to meet the convergence
criteria for the Economic and Monetary Union and at the same time continue to invest
in infrastructure. Its actual operations are directed toward the strengthening of the
capacities of certain Member States to embark upon swift harmonisation of their
domestic regulatory regimes to certain EC policies imposing considerable adaptation
costs. It includes two fundamental policy objectives, namely:

To assist the achievement of the objectives of the Community’s environmental policy

through the financing of large scale environment projects;
To assist the improvement of transport infrastructure through financing projects to
establish or develop transport infrastructure and improve access to the Trans-European
Transport Network (TEN).

f) The Community Initiatives (CIs), were initially introduced by the 1988 reforms of
the structural funds’ regulations. Their distinctive characteristic is that they provide the
Commission with discretion to act independently from central governments, directing
structural assistance on specific policy areas that it regards as important or essential for
the promotion of economic and social cohesion. Despite their limited financial
significance in relation to the instruments presented above, the CIs have been employed
by the Commission as flexible mechanisms that allow experimentation with innovative
measures and actions that substantially diverge from those incorporated into mainstream
policy programmes.2 The remarkable discretion given to the Commission to unilaterally
determine the content of CIs has provided the former opportunities, though limited, to
expand its policy agenda to policy areas in which there is no explicit treaty mandate (e.g.
urban policy). However, the most profound policy innovation in the area is the
Commission’s strategy to promote targeting at the local rather than the regional level.
Successive reforms of structural fund regulations have altered the number of
programmes adopted in the framework of the CIs from initially twelve during the 1988-
1994 period to thirteen for the 1994-1999 and currently only four as an attempt to
promote coherency and coordination of developmental efforts.

These programmes focus on:

z Transnational, cross-border and interregional cooperation (INTERREG);

z Economic and social conversion of cities and urban areas in crisis (URBAN II);
2 Their total budget amounts for approximately 9% of the total budget devoted to structural funds

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z Rural development connected to the reform of the CAP (LEADER+);

z Fighting inequalities and discrimination in the labour market (EQUAL).

4. THE PRINCIPLES AND OBJECTIVES

These heterogeneous financial instruments are coordinated through a number of

principles governing the selection of eligible areas and the process of policy
formulation, implementation, monitoring and evaluation of policy interventions at all
levels involved in the process (EU, national, regional, local). These principles have first
emerged in the 1988 reforms of the structural funds and have been reconfirmed and
enriched with novel elements in all successive reforms.

In their current form they include:

a) The principle of geographical concentration of structural assistance in priority

areas. Structural assistance targets geographical areas identified by a combination of
economic and demographic criteria (GDP per head and population) in order to increase
their effectiveness. The number of priority areas has altered over time. In the first
programming period (1988-1994) there were six priority areas. Agenda 2000 included
significant reforms to the delivery system of structural assistance aiming at improving
their efficiency and effectiveness as a response to the then anticipated eastern
enlargement of the EU. Priority areas were reduced to only three. These are:

Objective 1: Promoting the development and structural adjustment of regions whose

development is lagging behind (for regions below the 75% threshold of the EU GDP per
capita);

Objective 2: Supporting the economic and social conversion of areas facing structural
difficulties (Industrial and rural areas with high long-term unemployment and or high
poverty levels);

Objective 3: Adapting and modernizing policies and systems of education, training, and
employment.3

b) The principle of programming. This principle signifies the departure from the
financing of individual projects and requires the elaboration, at the EU, national and
regional levels, of multi-annual development programmes that include a set of
interconnected measures and actions that address all facets of territorial development
3 At the current proposals of the Commission for the 2007-2013 programming period geographical
concentration is re-organised in three priority areas with slightly different content. These are:
a)The convergence of countries and regions (regions with GDP below the 75% of the EU average) and the
regions concerned by the statistical effect, which is 33% of the population of the Union. This objective
will be financed by ERDF, ESF and the Cohesion Fund;
b)Regional competitiveness and employment: reinforce attractiveness and ensure that socio-economic
changes are anticipated in other regions, financed by ERDF and ESF);
c)European territorial cooperation: Cross-border, trans-national and inter-regional (ERDF).
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needs in a comprehensive way. In regional policies multi-annual programming includes

the elaboration of Community Support Frameworks that specify the broad objectives at
the EU level and their specification through Regional Operational Programmes and
Horizontal Sectoral Programmes.
c) The principle of partnership. This principle is the most significant policy innovation
of the 1988 reforms of the structural funds’ regulations with significant repercussions
for the balance of power between different levels of government involved in the process.
The relevant regulations define partnership as close co-operation and consultation
between the Commission, the Member State concerned and the competent authorities
designated by the latter at the national, regional, local or other levels.

In practice, partnership establishes an administrative process whereby the involved

authorities and the social partners at all levels of government cooperate in order to
formulate regional development plans, operationalise them and monitor their
implementation.

Since 1988, partnership has been viewed as a major procedural arrangement used by the
European Commission to challenge the ways in which territorial development policies
are formulated and implemented at the domestic level. The principle opened
unprecedented opportunities for a wide range of sub-national governmental and non-
governmental actors to participate in the policy process.

In the evolution of the partnership principle, the 1999 revision of structural funds’
regulations provides for a radical redefinition of the division of responsibilities between
all actors involved in the implementation process. This includes the reform of the
principle of partnership with a dual aim. First, to establish a more clear division of
responsibilities between the Commission and the Member States in the implementation
process. Second, to promote the ‘deepening and broadening’ of the principle of
partnership with the more active participation of regional and local representatives as
well as the social partners at all stages of implementation (programming,
implementation, monitoring and control and evaluation).

In this context, the Commission’s proposals provide wider responsibilities to the

Member States regarding the application of the main principles governing the
implementation of the structural funds in order to improve efficiency, effectiveness and
transparency. The Commission retains only a supervisory role in the process. It
guarantees that structural interventions are in accordance to community interests
through its involvement in strategic programming, monitoring, evaluation and financial
control, and ensures that the relevant assistance contributes to the reduction of regional
disparities (Article 130a TEC).

d) The principle of additionality. In line with the subsidiarity principle, additionality

sets up a co-financing framework between the EC and national funds, in order to prevent
European development policies from becoming mere substitutes of national
development efforts. In practice, additionality is verified in three stages of the policy
process:

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–Ex ante: in the framework of negotiations for the specification of national and
regional support framework programmes. At this stage co-financing obligations
between the Commission and Member States are agreed;
– Mid-term: normally three years after initial approval. At this stage contractual
obligations are monitored and additionality is confirmed. Member States have
limited flexibility to revise prior agreements due to negative economic
circumstances. However, some revisions of the targeted level are possible in
cases where the economic situation has resulted in developments of public
revenues which differ significantly from those expected at the time of ex ante
verification. This is applied in cases where there is at least 5 percent fall in public
revenues. It is essential to note that in cases of unjustified discrepancies between
initial co-financing agreements the Commission has the right to initiate
suspension of new financial commitments until national contribution reaches the
level provided in the initial agreements;

– End of the period, where overall additionality is confirmed. This final

verification serves as the basis for the negotiations between the Commission and
national authorities for the next programming periods.

e) The principle of efficiency and effectiveness, which includes a wide range of issues
related to monitoring, evaluations and financial controls of structural fund operations.
Its main aim is to establish mechanisms that guarantee the efficient, effective and
transparent use of structural funds.

The Monitoring procedure has two components. First is the on-going monitoring that
takes place on an annual basis through cooperation between the Commission and
Managing Authority for management questions and the Commission and control
authorities for financial control questions. The results are presented in annual, mid-term
and final implementation reports that provide an overview of progress regarding:

z Financial implementation of assistance for each measure (expenditure and

payments received);
z Progress in relation to quantified indicators and targets;

z Relevant changes in socio-economic conditions;

z Steps on effectiveness (monitoring, evaluation, management, use of technical

assistance information and publicity system);

z Steps on compatibility with Community policies. This includes the verification

by a clearly designated department (delegation by the Managing Authority) of

compatibility of practices and procedures employed for the application of
structural fund programmes with EC legislation on public procurement, state
aids, eligibility rules, information and publicity requirements, environmental
legislation, equality of treatment and overall compatibility with broad EU
objectives of sustainable and competitive ‘knowledge economy’ and the EU
employment strategy. Moreover, for the Cohesion Fund, conditionality
requirements are linked to the respect of the Maastricht criteria of macro-
economic convergence. In cases where Member States fail to comply with one
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or more of the above criteria the Commission can initiate the process of
temporary suspension of financial commitments.

The Evaluation procedure takes place in three different steps.

– Ex-ante as part of the formulation of national and regional development plans.

At this stage planning authorities are reporting the effects of structural fund
assistance with emphasis on their impact on employment, environmental impact
and gender equality;

– The Mid-term evaluation is undertaken by the designated managing authorities

for each programme using independent experts. The aim is to assess the effects
of structural assistance and suggest alterations to programmes in cases where
certain measures and actions have failed to achieve their anticipated outcomes;

– The Ex-post evaluation, at the end of the programming period serves, as the main
feedback mechanism to the Commission and national authorities for
reprogramming.

The Management and Financial Controls establish efficient systems for financial control
in order to prevent and correct irregularities and ensure compliance of structural
assistance programmes and processes used for their application with EU law. These
include the establishment of adequate systems of reporting based on common
methodologies for electronic exchange of information that secure prompt exchanges of
data for Financial Plans and Payments.

The accounting principles provide either for separate accounting systems of EU and
national contributions to the programmes or adequate coding so as additionality to be
easily verifiable. National control authorities are obliged to provide information to the
Commission regarding aggregate financial data and aggregate data on progress of
measures, namely performance indicators three times per year in order to justify claims
for payments. Based on the quality of this information the Commission is responsible
for controlling the efficiency of systems of financial control through on-the-spot checks
and initiating suspension or cancellation of payments.

5. CHALLENGES AND OPPORTUNITIES FOR THE NEW EU

MEMBER STATES

In July 2004 the European Commission adopted the legislative framework for the
reform of cohesion policy for the period 2007-2013. The new framework regulations
reconfirm the fundamental principles governing the implementation of structural fund
programmes but place considerable emphasis on a more simplified and targeted
approach by providing considerable leverage to national authorities to define the main
developmental objectives while reserving for the Commission competencies related to
financial controls, transparency and accountability issues. Although the exact financial
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commitments have not yet been finalised, the Commission proposals provide for the
allocation of € 336.3 billion over seven years. The aim of the programmes will be to
boost competitiveness and growth in an enlarged Union according to the Lisbon and
Gothenburg strategies for sustainable economic development and competitiveness.

Despite the relatively limited financial commitments directed to the new Member States
comparing to previous enlargements the principles presented above and the new
framework of operations for the 2007-2013 represent a unique opportunity for new
Member States to modernise and rationalise their domestic structures and patterns of
policy making and strengthen domestic institutional capacities to absorb EU financial
assistance.

The EU structural policies generate all enabling factors for effective institutional
reform. They provide economic assistance, normative templates of reference,
institutional structures for the diffusion of best practices and drawing lessons from the
experience of other EU partners and incentives for institutional adaptation through
precise conditionality requirements attached to the absorption of financial assistance.

These incentives relate first, to the adaptation of the content of regional development
policies pursued at all levels of government to include a more comprehensive approach
that combines physical planning, social and economic development.

The second type of incentives is linked to the adjustment of instruments used in

territorial development policies to include not only legalistic regulations but also
incentives for the development of human resources, the revitalisation of urban areas and
the modernisation of local economic base.

Thirdly, we can mention the incentives for the adjustment of the institutional structures
for the formulation and implementation of regional development policies at all levels of
government. At the central level, the EU regional development policies challenge the
fragmented patterns of policy-making and the lack of established links of inter-
ministerial co-operation. At the local level, sub-national actors find themselves exposed
to challenges for the adaptation of their institutional apparatus in order to develop
organisational capacities and acquire resources in terms of finance, experience and
expertise to facilitate effective implementation.

Finally, the EU regional development policies challenge the fragmented structures of

territorial governance, tending towards a more co-operative approach to policy-making
through the formulation of effective local partnerships with other local actors having an
interest in territorial economic and social development.

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Bibliography

– Ian Bache, The Politics of European Union Regional Policy. Multi;Level

Governance or Flexible Gatekeeping?, Sheffield Academic Press, Sheffield,
1998;

– Commission of the European Communities, Agenda 2000 for a Stronger and

Wider Union, Office for Official Publications of the EC, Luxembourg, 1997;

– Hubert Heinelt and Randall Smith, Policy Networks and European Structural
Funds, Avebury, Aldershot, Brookfield USA, Hong Kong, Singapore, Sydney,
1996;

– Liesbet Hooghe, Cohesion policy and European integration: building multi-level

governance, Oxford U P, Oxford, 1996;

– Barry Jones and Michael Keating, The European Union and the Regions,
Clarendon Press, Oxford, 1995.

– Charalampos Koutalakis, Cities and the Structural Funds. The Domestic Impact
of EU initiatives for Urban Development, Bruyllant, Brussels, 2003.

– Martin Rhodes, The Regions and the new Europe: Patterns in core and periphery
development, Manchester University Press, Manchester and New York, 1995.

All information regarding the current regulations and the Commission’s proposals for
the next programming period can be found at:
http://europa.eu.int/comm/regional_policy/index_en.htm

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CHAPTER 14

IMPLEMENTATION OF REGIONAL DEVELOPMENT POLICY

- EXPERIENCES OF THE SLOVAK REPUBLIC

Silvia Matúšová*

1. LESSONS LEARNED FROM THE PRE-ACCESSION EU

ASSISTANCE TO SLOVAKIA

The preparation of Slovakia for EU membership was facilitated by the pre-accession

instruments. The pre-accession assistance aimed at capacity building, harmonisation of
legislation and economic development (PHARE programme), environment and
transport building (ISPA) and support to agricultural and rural development (SAPARD).

In principle, the pre-accession programmes have contributed to progresses in

coordination, programming, monitoring, evaluation and financial management, and to
the improvement of administrative capacities for project cycle management (project
implementation). The Aid Coordination Unit (administrative body) managed by the
National Aid Co-ordinator started the coordination of EU assistance at national level in
1996 and gradually developed the relevant expertise in this field. The positive effects
include also the gain of experience and the increase of the absorption capacity. The
implementing agencies dealing with PHARE, ISPA and SAPARD projects have
gradually been set up and specialised in handling individual projects. These agencies are
the Central Financing and Contracting Unit, the Regional Development Support
Agency, the National Agency for Development of SME’s, the Implementation Agency of
Environmental Investment Project, the Slovak Railroads Implementing Agency, the
Slovak Road Administration Implementing Agency, and the SAPARD Paying Agency.
The National Fund operating within the Ministry of Finance has specialised in the
financial management of EU funds in the Slovak Republic.

As for the absorption capacity, Slovakia has been able to use up to 95 % of PHARE
funds since 1998, up to 95 % of SAPARD funds since 2002 and up to 120 % of ISPA
funds since 2000.

Regarding the implementing agencies, the administrative staff increased during the
entire pre-accession phase. However the low remuneration of administrators made it
difficult to recruit staff with required know-how and professional experience. This
caused problems of efficient programming and sound implementation. In particular,
young administrators have changed to the private sector shortly after gaining sufficient
experience in the public sector.

* Director, Department for EU Affairs, Section for European Affairs, Office of Government of the Slovak Republik
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The monitoring of the project implementation status was carried out by the National
Coordination Unit and external monitoring and assessment experts. The interim
evaluation on the level of achieved outputs of selected PHARE projects was done in
2001-2002 by contracted EU evaluators in co-operation with the National Evaluation
Representative. However, no overall evaluation of the pre-accession instruments has
been done by national authorities or independent evaluators. Therefore it is difficult to
determine with certainty the real economic impact of EU pre-accession assistance on
the overall economic development of Slovakia.

The absence of evaluation of the use of EU funds in the pre-accession period has proved
to be a weak point in the formulation of a coherent regional policy strategy that could
have served as a basis for negotiations in chapter 21.

2. THE PUBLIC ADMINISTRATION REFORM IN SLOVAKIA

One of the basic measures which were necessarily carried out in connection with the
preparation of the country for the Structural Funds and the Cohesion Fund was the
decentralisation and the modernisation of the public administration. The public
administration inherited from the previous regime was characterised by a high degree of
centralisation and a low degree of engagement of regions in the decision-making
process related to development plans and programmes.

EU legislation does not contain any binding provisions which would outline the
principles of public administration. The basic features of an operational public
administration from the point of view of chapter 21 (Regional Policy) are determined
by two factors. Firstly, the public administration must be capable to manage the
administration of EU funds in compliance with the given rules. Secondly, the public
administration has to respect the principle of subsidiarity.

The Strategy for Public Administration of 1999 was the first step for the modernisation
of the public administration in Slovakia. It included the following legislative and non-
legislative actions:

z The amendment of the Constitution of the Slovak Republic in 2001 created the
basis for the implementation of the public administration reform;
z The Act on Self-governance of Upper-tier Territorial Units (2001) legalised the
establishment of 8 self-governed regions in the country and identified their
competences, the relations towards the state administration bodies, the
municipalities and other legal subjects as well as the financing;
z The Act on the Transfer of some Competences from the Local State
Administration to Municipalities and Upper-tier Territorial Units (2001) has
provided the legal framework for the transfer of more than 300 competences
from district and regional offices on municipalities and self-governed regions,
including the competences in the field of spatial planning and regional
development;
z Among other acts and amendments in the framework of the public administration
reform, the most significant amendments concerned the amendments to the Act

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on municipality governance, to the Act on Budgetary Rules, to the Act on

the Property of Upper-tier Territorial Units, and the amendment to the
Act on the Property of Municipalities.

3. THE INSTITUTION BUILDING AND ADMINISTRATIVE CAPACITY

BUILDING IN REGIONAL POLICY IN SLOVAKIA

In the pre-accession period the building of capacities was explicitly stressed in several
Commissions’ reports on Slovakia’s preparedness to fulfil obligations in order to be
ready for EU membership. The overall requirement of the Commission consisted in
asking the public administration to demonstrate the capacities for implementing the
acquis. The strategic priority was the increase of the quality of public administration,
structures and competences for cohesion and regional policy which were supposed to be
fully operational and able to apply EU regulations and procedures for structural funds.

The Slovak government adopted in 2002 a decree referring to the advancement of the
building of managing and administrative structures for EU funds on central and regional
levels; this concerned mainly the units of administration and management of structural
funds in the Ministry of Finance and the units for the preparation of operational
programmes (in all relevant ministries) as well as the monitoring committees. This
meant the inclusion of a new specialised agenda taking account of the EU methodology
and the EU requirements (preparation of operational programmes, establishment of
implementation system, setting up rules and procedures for the selection of the projects,
for the cash flows and the mechanisms of co-financing, the financial control, the
corrective measures) and stressing the need for strengthening the human capital in line
ministries and central administration bodies and the training of civil servants.

The process of institution building did not mean only the establishment or the
restructuring of national institutions through changes in legislation. It also involved
creating an institutional capacity based on the selection of proper civil servants, their
training and preparation, the provision of financial, material and technical means,
operational management, control and evaluation capacities development, especially in
the process of learning by doing.

Based on the Act on Competences of Central Administration Bodies, the regional

development and the co-ordination of regional policy came under the responsibility of
the Ministry of Construction and Regional Development. As the Regional Policy itself
represents a broader area which also covers other sectors, the overall development of
Regional Policy, the development of programming documents and the implementation
of Regional Policy are shared by other ministries in Slovakia (Ministry of Environment,
Ministry of Agriculture, Ministry of Transport, Posts and Telecommunications, Ministry
of Finance, Ministry of Economy, Ministry of Labour, Social Affairs and Family and
Ministry of Education).

The inter-ministerial coordination was implemented via the Governmental Council for

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Regional Policy, via the regular inter-ministerial co-ordination meetings and via the
Preparatory Committee for Structural Funds of the EU. The latter committee had co-
ordinated the elaboration of the National Development Plan. After the accession to the
EU it was transformed into the Committee for Structural Funds and Cohesion Fund and
serves as the body co-ordinating the management and the implementation of the
National Development Plan.

The regional and local levels were represented by self-governing bodies. The
development of concepts and strategies became the competence of these regional bodies
which were set up in 2002 and started to produce the programmes of economic and
social development of the regions. These bodies also coordinate the activities of all
stakeholders of regional development; they carry out the monitoring and evaluate the
development on the territory of the region. Pursuant to the Act on the Support of
Regional Development the municipalities together within the region have to elaborate
the programme of economic and social development.

The ‘principle of partnership’ as leading principle of Regional Policy means the

collaboration of all stakeholders (i.e. the state administration bodies, the regional self-
governing bodies, the enterprises, the non-governmental organisations and others) in the
process of programming, implementation, monitoring of measures of regional policy.
The ‘principle of partnership’ was embedded in the process of establishment of the
National Monitoring Committee which also supervised the preparation of the National
Development Plan. After the accession to the EU the committee was transformed into
the Monitoring Committee for the Community Support Framework.

At present, 24 regional development agencies operate in Slovak regions. They represent

the institutional co-ordination with respect to the ‘principle of partnership’. Regional
development agencies fulfil the tasks of facilitators in regional development, mainly in
regions lagging behind. They co-ordinate the investment activities and the regional
development programmes by utilising the assistance from EU funds.

4. HARMONISATION OF THE LEGISLATION RELATED TO

REGIONAL POLICY

Besides the legal norms associated with the public administration reform, other norms
and pieces of legislation were modified and amended. The EU Regional Policy is
covered by a set of regulations which are binding for EU Member States and directly
applicable. This has led to changes and modifications in Slovak legislation with the
purpose to put away obstacles and to enable the full use of EU funds:

zThe amendment to the Act on State Aid specifies the conditions for the provision
of state aid in sensitive sectors, regional aid and the state aid for small and
medium size entrepreneurs;
z The Act on the Financial Control of Administration Bodies extends the
competences of the administrators of the state budget and the administration

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bodies for financial control; the competences include now the control of EU
funds;
z The amendment to the Act on Budgetary Rules legitimises the administration of
the EU financial means. The EU funds are included into the budgetary process
and are administered as the financial means of the Slovak state budget;
z The amendment to the Act on the Supreme Audit Office has extended its
competences with reference to the use of EU structural funds. The Supreme
Audit Office is entitled to control the government and the ministries, other central
administration bodies and subordinated legal subjects, municipalities and upper
tier territorial units, and other institutions;
z The Act on the Support of Regional Development specifies the competences in the
area of regional development in compliance with EU legislation, including the
basic principles of economic and social cohesion in the EU (programming,
principles of ‘partnership’, ‘additionality’);
z The Act on Financial Control and Internal Audit modifies the system of financial
control in public administration, sets general principles of financial management
in public administration and identifies the tasks of public administration bodies
during the control of the administration of public means, i.e. the financial means
of the state budget as well as EU financial means. The Act also sets the basic
rules, aims and ways of financial control and internal audit;
z The Act of State Treasury sets up a system of state treasury. The act stipulates the
issues of ex-ante financial control in the process of payment of expenditures.

Other significant acts and amendment to acts included the Act on Public Procurement,
the Act on Competition, the Act on Spatial Planning, the Act on Accountancy, and the
Act on State Statistics.

5. THE NEGOTIATIONS OF SLOVAKIA ON CHAPTER 21

Chapter 21 – Regional Policy and the Coordination of Structural Instruments – was

opened on 30th March 2001 and preliminarily closed on 29th July 2002. The chapter
was ranked among the most difficult negotiations chapters, as it included the overall
complex topic of the preparation for the use of the financial means from Structural funds
and the Cohesion Fund. This chapter referred to the development of programming
documents and to the institutional set-up and the establishment of entirely new
administrative structures on the central and regional levels which had to demonstrate the
capability to manage and to administer EU funds.

The weak point of Slovakia in the negotiations was the lack of a well elaborated and
coherent Regional Policy strategy. Since the existence of the Slovak Republic as an
autonomous country from 1 January 1993, the country had to overcome the heritage of
the previous regime of centralised economy. From the aspect of Regional Policy and the
administrative division of the country, Slovakia had to find a new territorial architecture,
to legitimise the new self-government structures and to complete changes in regional
structures. The basic principles of an integrated Regional Policy were defined in 1991,
but the first Integrated Plan of Regional Development (a prerequisite for the application
of pre-accession assistance) was adopted by the Slovak Parliament as late as in 1999.
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The National Plan of Regional Development (NDP) required by the EU as a pre-

condition for the programming and the implementation of post-accession assistance was
adopted in 2001, when the decentralisation of the public administration was initiated.
The municipalities obtained the competence for regional planning as late as 2002.

In respect to the NDP, the Slovak Government adopted a governmental resolution in

June 2002 on the Content and the Organisation of the Elaboration of the NDP and set
the deadline for the end of 2002. After rounds of assessment by the European
Commission, a set of recommendations was included into the re-drafted NDP
document, which was adopted by the Government in March 2003 and declared eligible
for further negotiations. The negotiation position of the European Commission on the
Community Support Framework and the NDP was received by Slovakia on 24 July
2003. The position conveyed the following demands for the accomplishment of the
Slovak NDP:

z The need to strengthen strategic elements, to identify a clear strategy based on

principles of growth poles, to consider inter-regional differences, economic
growth and competitiveness of regions, to stress balanced development in
economic and social fields;
z The clarification and the precise description of the national policies and their

relations to structural funds;

z The simplification and the concentration of goals of the NDP and the Sectoral

Operational Plans (SOP), the elaboration up to a detailed level, the clear

identification and the expression of priorities as a key issue;
z The necessity to confirm the availability of co-financing for 2004-2006 for all

activities that will be supported by funds;

z The Roma community must be integrated into every SOP and OP;

z The conditions for smooth implementation must be in place (administrative

capacities, legislation, notification of state aid schemes, project pipeline - before

1 January 2004).

In September 2003 the Slovak Government presented the strategic goal for the NDP: to
achieve 54 % of the GDP per capita compared with the EU average by 2006.

Negotiations started in a period when Slovakia had to settle the contradictory proposals
on the territorial and administrative division of the country, the struggles over the
division of competences in Regional Policy between the central government and the
municipalities; at the same time the negotiators had to stick to the schedule of
negotiation.

At present, the outcome of negotiations in chapter 21 is considered with certain

criticism which is linked to aspects of restrictions in agricultural and rural development
(i.e. the food sector is excluded from EU funding in favour of agrarian-processing
subjects as determined by EU regulations on Cohesion and Regional Policy) as well as
restrictions in industry (i.e. exclusion of mining and steel industries from EU funding).

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The positive outcome of the negotiation was the pressure on the adoption of relevant
legislation. The negotiations also accelerated the understanding of national authorities
about the necessity to define the relevant architecture and to build administrative
capacities and to make them operational.

The negotiations confirmed that after accession to the EU, the regions of the Slovak
Republic, from the point of view of structural policy instruments, will be considered as
Objective 1 regions (with the exception of the Bratislava region). This decision defined
the way of programming and the way of use of EU funds for the development of regions
and rural development. The rural development strategy has become part of the regional
development strategy.

6. THE NATIONAL DEVELOPMENT PLAN AND THE REGIONAL

DEVELOPMENT IN SLOVAKIA FOR THE PERIOD 2004-2006

The main areas for support of regional development during the first three years
of Slovakia’s membership in the EU (period 2004-2006) are defined in the NDP.
The main aim of the NDP is to increase the competitiveness of lagging regions
by respecting the sustainable development and by lowering the difference in
GDP per capita in Slovakia compared to the EU average. The NDP has defined
the framework for the EU assistance allocated by Structural Funds and the
Cohesion Fund of the EU.

The starting point for the strategy defined in the NDP was the SWOT analysis1
based on the relevant EU regulations. The SWOT analysis defined the main
characteristics of the Slovak economy for the programming period 2004-2006.
The situation of the Slovak economy was characterised by the following key
disparities and main determinants of development:

6.1. Key disparities

z Low economic effectiveness of regions;

z High imbalance between the offer and the demand of labour;
z Low level of the fixed capital in regions;

z Structural problems in entrepreneurial sector;

z Insufficient quality of labour market operation;

z Insufficient level of technology and innovations;

z Insufficient level of traffic service and environmental loads;

z Insufficient use of growth potential of regions;

z Decreasing quality of life especially with rural population;

z Insufficient functionality of research and education.

1SWOT analysis= Strenghts, Weaknesses, Opportunities, Threats analysis

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6.2. Main determinants of development

z Stable business environment in favour of investments;

z Structural changes increasing the overall productivity of stakeholders;
z Development of SMEs;
z Improvement of the labour market operation;
z Increase of adaptability of work force;
z Modernisation and development of basic infrastructure;
z Modernisation of educational system;
z Mobilisation of growth potential of regions.

6.3. Global objectives

Having identified the key disparities as well as the main determinants of development,
the following step was to develop the country’s strategy in full respect of the legal
framework for interventions from EU funds. The strategy had to respect also the
condition of sustainable development and was focused on the following global
objectives:

z The growth of competitiveness of industrial production and services;

z The growth of employment based on qualified and flexible work force;
z The development of multifunctional agriculture and rural development;
z The development of infrastructure supporting the balance of regional

development.

The implementation of the global objectives was elaborated into the system of priorities
and measures in the framework of the Community Support Framework (CSF) and
relevant Sectoral Operational Programmes (SOP). Other strategic documents for the
regional development harmonised with the NDP include the Single Programming
Document for NUTS II (Bratislava Objective 2 and Objective 3 region), the documents
for the INTERREG IIIA programme and the Strategy for Cohesion Fund.

The key role is played by the public finance from the EU and the Slovak Republic
(public and private funds) which provide the financing and the co-financing of the
individual areas of regional development. The ratio of co-financing is dependant on the
type of the recipient of the financial assistance (i.e. public administration bodies, non
profit organisations, enterprises) and from the intervention objectives (Objective 1,
Objective 2, Objective 3 for the period 2004-2006). From the point of view of the
growth potential of regions, the financial support from EU funds, as defined by strategy
documents, focuses on the following areas:

z Human resources;
z The affect on the level of relations among the production factors;
z Fixed capital;
z Infrastructure.

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The assistance focusing on human resources development foresees the increase of

education and the qualification level and the development of key competences with the
main aim to increase chances on the labour market and to achieve the overall goal to
make better use of the human potential of regions. The goal can be achieved by
measures increasing the employability, decreasing the social exclusion (target groups as
long-term unemployed, Roma ethnic minority, handicapped persons, etc.), as well as
measures increasing the equal opportunities for men and women and measures
increasing harmony between family life and work.

The support of the relations among the production factors with respect to the GDP
focuses mainly on:

z The improved operation of the labour market (labour market services promoting
employability);
z The growth of competitiveness in industries and services (including the interlink

between the knowledge based potential and the business practices, the more
effective use of energy sources and the better utilisation of natural and cultural-
historic potential for tourism development);
z The development of basis for multifunctional agriculture and the activities

associated with rural development (e.g. improved productivity and marketability

of agricultural products, diversified agricultural activities, renewed agricultural
production potential damaged by natural calamities, developed municipalities
and preserved rural heritage).

The support of the fixed capital focuses mainly on:

z The support of investments in industrial production (extension and modernisation

of existing industrial branches);
z The support of investments in tourism development (construction and

reconstruction of objects facilitating the frequency of tourist visits of the region);

z The support of investments in agricultural enterprises (e.g. modernisation and

procurement of technology equipment, construction and reconstruction of

storage houses).

The intervention support in infrastructure focuses on:

z The modernisation and development of transport infrastructure (e.g. accessibility

and provision of transport services);
z The improvement of environmental infrastructure (e.g. construction on behalf of

the security of health of population and preservation, protection and renewal of

environment);
z The construction and development of local infrastructure (e.g. construction and

reconstruction of objects and the increase of their standard in the area of

education, public health, social services and culture as well as information
society development).

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6.4. Expected results

In compliance with the above mentioned strategic documents for the use of financial
assistance from EU funds and the ex-ante evaluation of the strategy, it is realistic to
expect that by the end of the programming period 2004-2006 the present growth
potential of regions will be used more effectively and even that it will be further
developed. It can be foreseen that the human potential in regions will be better used, that
the unemployment rate will decrease, the fixed capital in regions increase and the spread
of the fixed capital in regions together with structural changes will become more
effective. With respect to the level of production determinants in relation to the GDP, a
growth of the labour productivity is expected.

Generally speaking, the assistance from the EU funds will support the regional
development; it will contribute to the economic growth, to the creation of jobs and to
the increase of the competitiveness of regions. At the same time it would represent the
break-through in the implementation of the economic policy of the Slovak Republic,
being for the first time founded on the principles of strategic planning.

At present, the view prevails that the National Development Plan was designed in a too
complicated way and even though it was reduced from original 11 operational
programmes to 4 in the final version, it remained rather unintelligible for those
applicants who have little experience in project development. Some of them also
showed little understanding in principles of EU funding and the necessity of national
co-funding.

Bibliography:

– Tarschys, Daniel; Eriksson, Jonas: Chapter 1, Background and Objectives, In:

From Policy Takers to Policy Makers, Adapting EU Cohesion Policy to the Needs
of the New Member States, Swedish Institute for European Policy Studies,
Stockholm, 2005.

– The National Development Plan of the Slovak Republic for the period 2004-
2006: www.build.gov.sk

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CHAPTER 15

REGIONAL DEVELOPMENT POLICY IN ROMANIA –

INSTITUTIONAL TRANSFORMATIONS AND FUTURE
CHALLENGES

Daniela Luminiþa Constantin*

1. INTRODUCTION

The regional dimension of transition strategy and reform in Romania has had to be
integrated in a complex outlook, combining the need for local identity, self-reliance and
development with the challenges and opportunities of globalisation processes seen at
both national and international level, with the aim of the future integration in the
European Union’s structures in view.

The elements of the structural reform, namely the institutional and legislative
framework for the market economy, the reform of enterprise structures, the physical
structure for a competitive economy, human capital and attitudes have entailed specific
concerns at regional level in terms of restructuring regional economies, regional policy
instruments in an acute shortage of financial means context, regional institutional
framework and the question of decentralisation, the impact of European integration, the
new role of local communities, etc.

As many researchers have noticed, the experience of former socialist countries shows
that transition has deepened regional disparities because market forces gradually freed
up replaced the factors that used to control the economy1. The speed of reform has been
finally responsible for slower or faster increase in regional disparities. But the basic
question is whether after a period of growing interregional disparities a process of
“spatial economic convergence” will start in longer run.

This question has got a major significance for Romania in the process of accession to
the European Union, considering the fundamental objective of economic and social
cohesion that particularly focuses on regional development policy via its horizontal
dimension.

In this paper the institutional dimension of the Romanian regional policy will be mainly
discussed in the context mentioned above.
* Professorof Regional Economics at the Academy of Economic Studies of Bucharest, Romania.
1 GreenPaper. Regional Development Policy in Romania, Romanian Government and European Commission,
Phare Programme, 1997.
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2. FIRST STEPS IN THE 1990s

Despite its undeniable importance for the complete success of transition, the regional
dimension of the corresponding Romanian strategy and reform was paid little attention
for many years starting with 1990. Only in 1995, when the strategy of preparing
Romania for accession to the European Union was elaborated as a document
accompanying the application for the EU membership, the government had to admit that
the problems of regions, of local communities represent key elements for the realism
and coherence of this strategy, necessary to be considered for bridging the gap between
words and facts in the debated about decentralisation, local administrative autonomy on
the one hand and those about European integration, trans-border co-operation, spatial
networks, etc. on the other hand. Accordingly, two special chapters of the afore-
mentioned strategy focused on regional issues, representing the background of
subsequent decisions and actions. These chapters were referring to the development
strategy by county and Bucharest municipality and the strategy for land use, urban
development and physical planning. They combined the concerns with transition and
reform processes at regional level with the actions that have to be undertaken for the
future integration in the European Union’s structures.

The elaboration of this strategy was followed by a programme for regional policy
analysis and development established within the framework of PHARE by the European
Union and the Romanian Government. This programme was implemented by the
Department for Local Public Administration of the Romanian Government, assisted by
a team of foreign advisors. A Regional Policy Task Force oversaw the programme
activities with representatives from key ministries and regional authorities. One of the
main tasks of this programme was the preparation of the so-called Green Paper,
including the proposals formulated by the Task Force to the government in order to
design and implement the regional policy in Romania. The proposed policy had three
essential objectives:

To prepare Romania for EU membership and to get eligible for support from the
EU structural funds;
To reduce regional disparities among Romanian regions;
To integrate public sector activities in order to reach higher development of the
regions2.

The Commission’s 1997 Green Paper also aimed at responding to the overall
requirements related to improving the framework for a decentralised regional policy,
proposing a “specific territorial and institutional structure” for regional development
policy. These proposals were subsequently considered by the Romanian Parliament and
included in the Regional Development Law, adopted in 1998 (Legea 151, 1998)3.
2 Green Paper. Regional Development Policy in Romania, Romanian Government and European Commission,

Phare Programme, 1997.

3 As will be mentioned further in this paper, at present The 151/1998 Regional Development Law has been

replaced by the 315/2004 Law. Though, the provisions that are to be discussed in the next paragraph have
remained unchanged.

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As a result, eight development regions have been created and intended to serve as “the
framework for conceiving, implementing and evaluating regional development policy as
well as for collecting the statistical data corresponding to the NUTS 2 level of the
EUROSTAT” (Legea 151, 1998). Each region includes up to seven counties, associated
on a voluntary basis (the total number of counties is 41, plus Bucharest municipality,
corresponding to the NUTS 3 level).

The eight regions “are not administrative-territorial units and do not have judicial
personality” (Legea 151, 1998).

The structure of the 8 development regions is as follows:

z Region 1 North-East (Bacau, Boto?ani, Iasi, Neamt, Suceava, Vaslui)

z Region 2 South-East ( Braila, Buzau, Constanta, Galati, Tulcea, Vrancea)
z Region 3 South - Muntenia (Arges, Calarasi, Dambovita, Giurgiu, Ialomita,

Prahova, Teleorman)
z Region 4 South-West - Oltenia ( Dolj, Gorj, Mehedinti, Olt, Valcea)
z Region 5 West (Arad, Caras-Severin, Hunedoara, Timi?)

z Region 6 North-West (Bihor, Bistrita-Nasaud, Cluj, Maramures, Satu Mare, Salaj)

z Region 7 Centre (Alba, Brasov, Covasna, Harghita, Mures, Sibiu)

z Region 8 Bucuresti-Ilfov (Bucuresti, Ilfov).

Apart from the Bucuresti-Ilfov Region the size of the other seven regions varies from
1,959 thousand persons (West Region) to 3,647 thousand persons (North-East) Region4
(according to March 18, 2002 census) in terms of population and from 32,034 km2
(South-West) to 36,850 km2 (North-East) in terms of surface.

3. INSTITUTIONS FOR REGIONAL DEVELOPMENT AT NATIONAL

LEVEL

From the institutional perspective, the central unit, of a decision role, responsible for the
elaboration and implementation of the regional development policy objectives is the
National Council for Regional Development (NCRD), subordinated to the
Government of Romania. In short, the current tasks of this institution are to (Legea
315/2004):

z Endorse regional development strategy and policy as well as the National

Development Plan;
z Approve the criteria and priorities regarding the use of the National Regional

Development Fund (NRDF);

z Present and ask the Government’s approval for the priority programmes funded

by the NRDF;
4 Even though the population of the North-East Region exceeds the upper limit established for the NUTS 2
regions of the EU a recent declaration of the Delegation of the European Commission in Romania agrees that
the current eight-region structure is considered compatible with the EU rules.
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z Analyse the use of the funds allocated from the NRDF to each region, make
proposals that envisage the employment of the pre-accession instruments,
examine the accomplishment of the regional development objectives, including
the external co-operation ones, endorse and approve the projects proposed by
regional development agencies in order to be financed from regional
development programmes;
z Analyse and approves the activity reports presented by the National Committee
for PHARE Programmes Co-ordination (for the economic and social cohesion
component).

In the beginning (1998), in accordance with the good practice supported by the EU in
the other transition countries, the National Regional Development Agency (NRDA) was
set up as the executive, operational body of the NCRD. Though, despite the good results
recorded by the NRDA, further transformations came up quite soon. Thus, after the
general elections organised by the end of 2000, the main part of the NRDA was
transformed into the General Regional Development Directorate of the Ministry of
Development and Forecasting (newly set up) in January 2001. Then, in June 2003, on
the occasion of the Government restructuring, the Ministry of Development and
Forecasting was entirely abolished and new institutions had to take over its
responsibilities in regional development field such as: the Ministry of European
Integration (main responsibility for co-ordinating regional development process;
subsequently the National Development Plan Unit has been transferred to the Ministry
of Public Finance), Ministry of Public Administration and the Interior (disadvantaged
areas, subsequently transformed into assisted areas), Ministry of Economy and
Commerce (industrial parks, subsequently transferred to Ministry of Public
Administration and the Interior, etc.). This simple presentation can serve as a good
example for explaining why so many times Romania has been severely criticised by the
EU for institutional instability and delays in institutional reform.

Coming back to the point, at present the Ministry of European Integration, subordinated
to the Government of Romania, is the institution enabled at national level with the tasks
and responsibility of elaboration, promotion, co-ordination, administration,
implementation and monitoring of the regional development strategies and policies in
Romania as well as of the economic and social cohesion programmes. It also provides
the secretariat work for the NCRD (Legea 315/2004). The question that has been raised
quite often is which will be the operational institution that will deal with regional
development policy after Romania’s accession to the EU. Most of opinions converge to
setting up a National Regional Development Agency5.

5 In
Poland, for example, the National Regional Development Agency was set up in 1994 and since then it has
been working without any interruption up to present.
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4. DECENTRALISATION AND INSTITUTIONS AT REGIONAL

LEVEL

The idea of decentralising parts of the responsibilities for regional development policy
to regional/local level led to the establishment of regional councils and regional
development agencies, with specific responsibilities towards the NCRD and NRDA
(and the institutions that followed it) on the one hand and the region on the other hand.

The regional councils are the decisional units at regional level, without judicial
personality, working based on partnership principles in order to co-ordinate the
elaboration and monitoring of the activities entailed by regional development policies.

The executive, operational body at regional level is the Regional Development Agency
(RDA), as non-governmental, non-profit organisation, of judicial personality. Its main
tasks refer to:

z The elaboration of the regional strategy, plan and programmes as well as funding
of administration plans;
z Ensuring the implementation of regional development programmes and funding
of administration plans in accordance with the decisions adopted by the regional
council and current legislation;
z Obtaining allocations from the National Regional Development Fund for
financing the approved regional projects;
z Providing the technical and financial management of the Regional Development
Fund;
z Ensuring the implementation, the technical and financial monitoring and the
control of the projects financed by the EU within the regional development
programmes, etc.

Since the RDAs have a non-governmental organisation status - unlike the corresponding
institution at national level, a governmental one – many mismatches, barriers against a
good communication between the two levels appeared in the first years. At present, at
least a part of them have been removed as a result of the action of the new Law of
Regional Development (No.315/2004) that specifies in a more clear, comprehensive and
coherent way the objectives, institutional competencies and specific instruments for
regional development within a larger context of higher harmonisation of the Romanian
legislation with the European one.

5. OBJECTIVES FOR REGIONAL DEVELOPMENT – THE

NATIONAL DEVELOPMENT PLAN

The concept of regional development in the new circumstances, of the market-based

mechanisms, has been clearly defined by the NCRD from the very beginning and
concentrates on the following issues:

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z Diminishing the existing regional imbalances;

z Revitalising the disadvantaged areas;
z The prevention of occurring new regional imbalances;
z Ensuring the correlation between regional and sectoral policies;
z Stimulating interregional co-operation at national and international level.

The NCRD has also approved the strategic principles for regional development at
national level that focus on:

z Promoting market economy principles in all regions;

z Supporting regional competitiveness and sustainable growth;
z Supporting the well-balanced development of the national territory and of the
locality network;
z Increasing the institutional, decisional, financial capacity of each region to
support its own development process;
z Promoting sustainable development principles;
z Creating equal chances in terms of access to information, R&D, education and
long-life learning.

At local level they envisage questions related to: decreasing economic and social inter-
and intra-regional disparities as well as urban-rural disparities, core-periphery
disparities, etc.; preventing the arising of new problem-areas; coordinating local
initiatives with national and EU priorities; policy differentiation in accordance with
various areas particularities.

The framework described above has created the appropriate conditions for the
elaboration, starting with 1999, of the National Development Plan (NDP) for 2000-
2002, 2002-2004, 2004-2006 and, at present, for 2007-2013.

Basically, the NDP is meant to deal with two priority issues6:

zFirst, to demonstrate the existence of significant structural weaknesses, justifying

the need of support from the EU;
z Second, to demonstrate that Romania, as future Member State, has the
administrative capacity for an effective management of the structural funds.

As the document employed in order to underlie Romania’s demand for community

financial support in the catching-up process, the NDP represents the main instrument of
the economic and social cohesion policy.

Relating to this purpose, the 2004-2006 NDP has establishes the following national
priorities:

z Increasing the productive sector competitiveness and its attractiveness to foreign

investors;
6 Frentz, G., “Planul National de Dezvoltare – instrument pentru realizarea coeziunii economice si sociale In
Romania”, in D. Ailenei, D.L. Constantin, D. Jula (coordnatori), Avantaje competitive si dezvoltare regionala Lucrarile
celui de-al Treilea Simpozion al Asociatiei Romane de Stiinte Regionale, Editura Oscar Print, Bucuresti, 2004.

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z Improvement and development of transportation, energy and environmental

protection infrastructure;
z Human resources development, increasing the employment rate and combating
social exclusion;
z Rural economic development and agriculture productivity increase;
z Supporting the balanced participation of all Romanian regions in the social-
economic development process.

For each of these priorities the coherence and compatibility with national and EU
policies have been carefully addressed in institutional, legislative and policy measures
terms. The European Commission’s analysis has revealed that the 2004-2006 NDP is a
document that offers a more adequate response to the EU requirements by expanding
the fields of interest, increasing the depth of the socio-economic analysis, correct
quantifying of the objectives and measures as well as of the financial efforts needed to
reach the priority objectives7.

The 2004-2006 NDP has also recorded an important step forward in implementing the
partnership principle: as a result of a government decision (Hotararea Guvernului
Romaniei nr.1323/2002) the Inter-institutional Committee for the Elaboration of
the National Development Plan has been set up8, offering the legal basis for
developing the inter-institutional and partnership structures at national and regional
level9. This is a consultative body including representatives of ministries, RDAs, central
public institutions, research institutes, universities, various economic and social
partners. Thus, a more clear perspective has been outlined with regard to the role of the
ministries in charge with specific regional development issues, the role of RDAs and
other institutions involved in the NDP elaboration. The presence of regions’
representatives in this committee makes possible a larger inter-institutional co-
ordination, not only an inter-ministry one and creates the background for sectoral-
regional correlation10. Though, many efforts have to keep concentrated on increasing the
transparency and flexibility of the NDP elaboration so as to make these institutions
work effectively.

6. THE NEW INSTITUTIONAL FRAMEWORK IN THE PERSPECTIVE

OF ACCESSION TO THE EU

As the programming document that builds up Romania’s access to the structural-type

funds in the pre-accession period and to the structural funds after accession to the EU,
the NDP responds to both ‘internal necessities’ and ‘external requirements’, revealing
the philosophy of the EU support via pre-accession instruments, which has a twofold
7 Managing Authority for Community Support Framework: http://amcsc.mfinante.ro.
8 At each region’s level a Regional Committee for the Elaboration of Regional Development Plan has been
also set up.
9 The partnership principle is applied in all phases of the programming cycle: the plan elaboration, the

financial programming development, implementation, monitoring and plan evaluation.

10 Frentz, G., “Planul National de Dezvoltare – instrument pentru realizarea coeziunii economice si sociale In

Romania”, See footnote 6.

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significance11: on the one hand the financial aid is viewed as a way of reducing

economic and social disparities between the candidate and the EU member countries;
on the other hand, working with pre-accession instruments, creating the institutional
framework for measures implementation, action monitoring and impact evaluation
allow the candidate countries’ authorities to get used to European Commission’s
procedures and, thus, to be prepared for the administration of the much higher amounted
financial funds after accession to the EU.

Indeed, for the 2007-2013 programming period the EU’s annual financial support for
Romania (via European Regional Development Fund, European Social Fund and
Cohesion Fund) is expected to be three times bigger than in the pre-accession period
(when PHARE, SAPARD and ISPA instruments have been employed).

From an institutional viewpoint the Government of Romania has responded to the new
challenges generated by the post-accession period designating the institutions, the units
in charge with the implementation and administration of the EU financial assistance via
structural instruments (Hotararea de Guvern 497/2004). The definitions of the
programming documents (Community Support Framework, Operational Programmes,
Complement Programme) have been introduced in the Romanian legislation on this
occasion, at the same time with those of the key-actors, institutions that will deal with
the implementation of the structural instruments (Management Authority, Monitoring
Committee, Payment Authority).

The Management Authority for the Community Support framework will be the
Ministry of Public Finance, which will co-ordinate the implementation of the EU
assistance. Each Operational Programme will have its own management authority, as
follows: the Ministry of European Integration for the Regional Operational Programme,
the Ministry of Economy and Commerce for the Sectoral Operational Programme on
Economic Competitiveness, the Ministry of Transportation, Constructions and Tourism
for the Sectoral Operational Programme on transportation and energy infrastructure, the
Ministry of Environment and Water Management for the Sectoral Operational
Programme on environment infrastructure, the Ministry of Labour, Social Solidarity and
Family for the Sectoral Operational Programme on human resources development, the
Ministry of Agriculture, Forests and Rural Development for the Sectoral Operational
Programme on agriculture, rural development and fishing.

The Ministry of Public Finance will also act as the Payment Authority for the
European Regional Development Fund, the European Social fund and Cohesion Fund.

Monitoring Committees have been established for the Community Support

Framework, for each Operational Programme as well as for the Cohesion Fund, aiming
to co-ordinate and control the effectiveness and quality of implementing the EU
assistance and its economic and social impact.

11Nica, N., “Politica de dezvoltare regionala între necesitaea interna si cerinta externa. Filosofia sprijinului
european pentru dezvoltare regionala”, in D.L. Constantin (coordonator), Probleme actuale ale dezvoltarii
regionale în Romania. Lucrurile Primului Simpozion al Asociatiei Romane de Stiinte Regionale, Editura
Oscar Print, Bucuresti, 2002.
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7. CHALLENGES FOR POST–ACCESSION PERIOD

Undoubtedly, preparing the regional development strategy and the NDP, creating the
legal and institutional framework represent major steps for Romania in the European
integration process but the most difficult time for most strategies and plans is when they
must be turned into action. Their success will depend on lots of factors that cannot be
extensively discussed in this paper. Though, some reflections are to be briefly presented,
as resulted from the debates within the Seminar on Regional Development and
Cohesion Policy - “Initial training in European Affairs for Civil Servants from the
Central Public Administration”, which took place at the European Institute of Romania
in June 2005.

One of the crucial questions for Romania’s regional development in the perspective of
accession to the EU will be the increase of its capacity to absorb the Structural
Funds and to what extent it will be reflected by the amelioration of regional disparities
not only in Romanian but also in the European context. As many studies have already
pointed out interregional disparities in Romania are neither bigger nor smaller than in
many other European countries12. For example, the ratio between GDP per capita in
most developed Romanian region (Bucuresti – Ilfov) and that in the least developed one
(North-East) is 2.87. But, if the ratio between the average GDP per capita in Romania
and the EU-25 average is considered (0.27) as well as the ratio between the GDP per
capita in the most developed Romanian region and the EU-25 average (0.59) and the
ratio between the least developed Romanian region and the EU-25 average (0.20) things
appear to be completely different. This provides an important explanation for the very
intense negotiations undertaken on Chapter 21 – “Regional Policy and Co-ordination of
Structural Instruments”: a EU of 27 is expected to record an initial 5% increase in GDP
and an 18% drop of the average GDP per capita13. Under these circumstances the EU
has had to ensure that the financial assistance provided to Romania will be effectively,
rationally used and all institutions involved are fully committed to offer a promising
response to the three new priorities of the economic and social cohesion policy, namely
convergence, regional competitiveness and employment and European territorial co-
operation.

Creating conditions for a higher capacity of absorption of structural funds means that in
the process of putting policies into practice all principles – programming, partnership,
additionality, monitoring, evaluation and control are applied in compliance with the EU
rules and the European Commission’s proposals with regard to efficiency, transparency
are entirely understood and carefully observed. They refer to “the intervention of the
Commission in controlling and monitoring in proportion with the degree of assurance

12 Though, the situation is by far much worse when the intra-regional disparities are taken into consideration.
For example, there are many cases of big differences between counties within the same region in terms of
unemployment rate.
13 Matusova, S., “Obligations of EU Member States and the Implementation of the Regional Development and

Cohesion Policy”, presentation at the Seminar on Regional Development and Cohesion Policy, “Initial
Training in European Affairs for Civil Servants from the Central Public Administration”, European Institute
of Romania, June 2005.
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given by the Member State and the financial stakes involved, payments conditioned by
the commitment of the Member States on the reliability of the country’s management
and control systems, clarification of the mechanisms for financial correction in case of
irregularity, conditionality of the Cohesion Fund linked to the respect of convergence
programmes (temporary suspension of commitments, but restitution possible)”14.

For Romania a very sensitive issue remains an effective and efficient way of targeting
in the process of employing the financial assistance based, above all, on a very
objective, transparent ex-ante project evaluation so as to make sure that the projects of
the highest multiplier effects (not only direct, but also indirect and induced ones and
not only in short run but also in mid- and even longer run) and good chances of
implementation in the required period will be selected. This can create the basis for a
healthy regional competition and for a rational vertical and horizontal co-operation at
the same time.

The co-operation between central and local administration for carrying out
programmes of national interest or local projects exceeding the own funding capacity
can be considered in this context, as well as the need of co-ordination between local
authorities with regard to their development policies. This co-ordination is required
since the benefits of such policies will spill over into neighbouring counties/localities
and “acting independently will lead to under-funding of local development, unless the
free-rider problem can be overcome” 15.

In a broader sense the idea of supporting co-operation and partnership structures should
get a stronger support in Romania, as a guarantee of bridging the gap between words,
declarations and facts. If the so-called ‘transactional approach’ is applied both central
and local administration institutions will be able to define the general norms (‘rules of
the game’) and act for removing the obstacles to a greater and more flexible integration
among various economic actors through the provision of ‘public goods’, such as
information, infrastructure, services, and strategic initiatives based on public-private
cooperation16.

The advantages of creating true territorial networks, as it happens at a large scale

throughout EU countries, should be also very seriously considered. They create links,
relations, exchanges between business firms (especially small and medium ones),
banks, universities, research institutes, training centres, consulting firms, chambers of
commerce, associations of producers, local public administration, a series of economic,
social and ecological benefits being expected by the actors involved in network
cooperation and the region itself such as: increasing the use of synergetic effects
through cooperative planning, reducing the time of reaction to regional structural

14 Koutalakis, C., “Regional Development Policies”, presentation at the Seminar on Regional Development and

Cohesion Policy, “Initial Training in European Affairs for Civil Servants from the Central Public Administration”,
European Institute of Romania, June 2005.
15 Armstrong, H., Taylor, J., Regional Economics and Policy, Blackwell, 2000.
16 Cappellin, R. (1998), “The Transformation of Local Production Systems: International Networking and Territorial

Competitiveness”, in European Research in Regional Science 8/1998.

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problems, development of new services and products, higher support to regional

initiatives, creativity and cultural identity, improving the integration of the
environmental dimension into regional development by ex-ante assessment, indicators,
choice of projects, etc.17.

Networks and partnerships can also have an important role for raising the public
awareness and supporting the involvement of local communities in promoting local
development projects in accordance with their major interests. Indeed, the modern
approach in analysing local government is a behavioural approach; behaviour simply
means what people do, as opposed to what they say they do or what they are supposed
to do, in legal and institutional terms18. Especially in the case of Romania this issue has
a special relevance since the long communist period had a very bad influence on the
local communities’ behaviour as well as on the whole society: the way of perceiving the
democratic values and attitudes have been perverted to a great extent, so that the
transition to a democratic society has to face enormous challenges in order to transform
the wrong mentalities and attitudes. Therefore in our opinion the behavioural challenges
– participation, communication, mentalities, attitudes – even more than financial
constraints – are crucial elements for the real success of regional strategy and policy19.

8. CONCLUSION

In conclusion, the policy measures meant to improve the frame conditions for overall
regional development should constitute a coherent ‘package’ including economic,
legal, infrastructure, cultural and socio-political elements. The aim of the package must
be the definition of a ‘regional profile’20, stressing and taking advantage of the specific
feature of each local area.

This conclusion brings about a new perspective on regional competition as well,

especially for Central and East European countries, confronted with the new EU
requirements. As pointed out by international experience, in an increasing regional
competition there will be always winners and losers, but “it is important to recognise the
difference between absolute and relative winners (and losers)”21. It is an important
lesson to be learnt by Romania in underlying the regional policy in the context of the
European cohesion fundamental objective.

17 Sprenger,R.U. (2001), Inter-firm Networks and Regional Networks, NSS ADAPT, Bonn.
18 Stayner,J.,
Understanding Local Government, Martin Robertson, Oxford, 1980.
19 Constantin, D.L., “An Institutional and Cultural Perspective on Romanian Regional Policy”, in G. Atalik,

M.M. Fischer (eds), Regional Development Reconsidered, Springer Verlag, 2002.

20 Funck, R.H. and Kowalski, J.S. (1997), “Innovative Behaviour, R&D Development Activities and

Technology Policies in Countries in Transition: The Case of Central Europe”, in Bertuglia, C.S., Lombardo,
S., Nijkamp, P. (eds), Innovative Behaviour in Space and Time, Springer-Verlag.
21 Nijkamp, P. (1997), “Northern Poland regional development initiative and project. Some theoretical and

policy perspectives”, Department of Spatial Economics, Free University of Amsterdam, mimeo.

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Bibliography

– Armstrong, H., Taylor, J., Regional Economics and Policy, Blackwell, 2000;

– Camagni, R., “Competitiveness and Territorial Cohesion: The New Challenges

for EU 25”, paper presented at the 17th European Advanced Studies Institute in
Regional science, Split, Croatia, June 28 – July 4, 2004;

– Cappellin, R. (1998), “The Transformation of Local Production Systems:

International Networking and Territorial Competitiveness”, in European
Research in Regional Science 8/1998;

– Cojanu, V. (coordinator), Specific Requirements of the EU Structural Instruments

and Policy Implications for Romania, Pre-Accession Impact Studies (PAIS) II
Series, the European Institute of Romania, Bucharest, 2004;

– Constantin, D.L., “An Institutional and Cultural Perspective on Romanian

Regional Policy”, in G. Atalik, M.M. Fischer (eds), Regional Development
Reconsidered, Springer Verlag, 2002;

– Constantin, D.L., Folescu, A., ”The Impact of the EU Enlargement on Romania’s

Regional Policy: The Role of Structural Funds”,paper for the 44th Congress of
the European Regional Science Association, Porto, August 2004;

– Frentz, G., “Planul Naþional de Dezvoltare – instrument pentru realizarea

coeziunii economice ºi sociale în România”, în D. Ailenei, D.L. Constantin, D.
Jula (coordnatori), Avantaje competitive ºi dezvoltare regionalã. Lucrãrile celui
de-al Treilea Simpozion al Asociaþiei Române de ªtiinþe Regionale, Editura
Oscar Print, Bucureºti, 2004;

– Funck, R.H. and Kowalski, J.S. (1997), “Innovative Behaviour, R&D

Development Activities and Technology Policies in Countries in Transition: The
Case of Central Europe”, in Bertuglia, C.S., Lombardo, S., Nijkamp, P. (eds),
Innovative Behaviour in Space and Time, Springer-Verlag;

– Green Paper. Regional Development Policy in Romania, Romanian Government

and European Commission, Phare Programme, 1997;

– Hotãrârea Guvernului României nr. 1323 din 20 noiembrie 2002 privind

elaborarea În parteneriat a Planului National de Dezvoltare;

– Hotãrârea Guvernului României nr. 497 din aprilie 2004 privind stabilirea
cadrului instituþional pentru coordonarea, implementarea ºi gestionarea
instrumentelor structurale;

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– Koutalakis, C., “Regional Development Policies”, presentation at the Seminar on

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204/2001;

– Legea 315/2004 privind dezvoltarea regionalã În România, în Monitorul Oficial

577/2004;

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Regional Development and Cohesion Policy”, presentation at the Seminar on
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– Nica, N., “Politica de dezvoltare regionalã între necesitaea interna ºi cerinþa

externã. Filosofia sprijinului european pentru dezvoltare regionalã”, în D.L.
Constantin (coordonator), Probleme actuale ale dezvoltãrii regionale In
Romania. Lucrãrile Primului Simpozion al Asociaþiei Române de ªtiinþe
Regionale, Editura Oscar Print, Bucuresti, 2002;

– Nijkamp, P. (1997), “Northern Poland regional development initiative and

project. Some theoretical and policy perspectives”, Department of Spatial
Economics, Free University of Amsterdam, mimeo;

– Sprenger, R.U. (2001), Inter-firm Networks and Regional Networks, NSS

ADAPT, Bonn;

– Stayner, J., Understanding Local Government, Martin Robertson, Oxford, 1980;

– Tondl, G., “Will the New EU Regional Policy Meet the Challenges of
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SECTION 5

EU ENVIRONMENTAL POLICY

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 Chapter 16

CHAPTER 16

EU ENVIRONMENTAL POLICY

Hans Bruyninckx*

1. INTRODUCTION

The importance of understanding EU environmental politics and policies reaches much

beyond the narrow adoption of EU directives and their impact on national policies.

It has to be clear that the weight attributed to environmental policy nowadays is closely
intertwined with the place of countries and the EU in global processes of production and
consumption. Indeed, we defend the point of view that environmental policy is not
taking place in the margins of modern society, but has gradually moved into the centre
of what largely defines our society: its system of production and consumption and the
externalities it creates. Besides a number of social and economic externalities, it is
increasingly obvious that there are massive environmental consequences associated
with what we produce, how we produce it and what happens during and after
consumption.

Another reason to pay close attention to environmental policy evolutions of the EU is

that it is becoming an ‘exporter’ of policy views and instruments. Indeed, several other
countries and regions look for inspiration at the EU.

Moreover, the EU as a unique political identity, with all the recent criticism that is has
befallen, is still a source of inspiration for other countries that wish to integrate.
Examples include the countries in Central- and South America and in Asia.

The EU represents the most developed system of international environmental policy-

making. Moreover, it is the only comprehensive institutional entity with legally binding,
enforceable environmental norms. In that sense it goes much beyond any other
environmental regime that is described in the traditional literature on international
environmental policy making.

And last but not least, the EU is gradually growing into a role of global leadership on
environmental issues. Due to its size and the importance and history of a number of
Member States in international environmental politics this is not surprising. However,
given the position of the United States since the 1980’s, leadership in global
environmental dynamics has rarely come from the other side of the Atlantic.
To the contrary, self chosen isolationism and the adamant defence of economic interests
*Associate Professor ofInternational Environmental Policy and Sustainable Development at the Catholic
University of Leuven (Belgium)

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over environmental protection has probably pushed the EU in this role of global
leadership more than it wanted to at some times.

2. HISTORY: FROM A FOOTNOME TO FULL COMPETENCY

During the period from 1957 till 1972, the European institutions paid relatively little
attention to environmental issues. There are several reasons for this ‘neglect’. First, the
goals of the new institutions were clearly stated in article 2 of the EC Treaty, namely
“continued and balanced growth”. The European integration process was aiming at
economic growth and political stability. Environmental issues were not mentioned in the
EC Treaty and also politically unimportant during the first two decades.

This changes quite rapidly during the 1970’s. As public opinion started to pay more
attention to environmental issues, and the United Nations organised its Stockholm
conference on the human environment (1972), hence founding the UN Environmental
Programme, the political leaders of the EU realised that new initiatives were necessary
to capture this new theme in the regular functioning of the EU. During the Paris Summit
in 1972, the EU officially recognised the need to develop an environmental policy. The
next year became pivotal in this process. A new Environment and Consumer Protection
Commission was established, as well as a Committee on Environment in the European
Parliament. But probably the most important step was the development and
implementation of the first Environmental Action Programme (1973-1976) in which
some of the foundations of the EU approach to environmental policy were established.
These included – in a sort of embryonic shape - the ‘polluter pays principle’, the
‘precautionary principle’, and environmental policy integration. Later, in 1981, the
Directorate General for the environment (DG XI) was established. This DG would play
a central role in the further development of a comprehensive system of environmental
legislation, of institutionalisation of environmental issues in the broader functioning of
the EU. Another key decision came from the Court of Justice. In a 1985 decision
(240/35) it clearly stated that environmental protection was one of the “essential
objectives of the EU”.

As in most OECD countries the 70s and early 80s are the period during which the basic
environmental legislation on the large compartments of the environment is established
(water, air, species protection, etc.). It is interesting in hindsight that at that moment EU
and national legislation still developed rather independently. Some countries were
clearly taking the lead and pushing the EU (Netherlands, Denmark and Germany) others
lagging behind and stepping on the brake (Italy, France, Belgium).

The period between 1987 and 1992 further established a full fleshed and mature EU
environmental policy. The Single European Act (1987) recognised the environment as a
legal competency of the EU by adding Title VII to the EC Treaty. As the importance of
the theme increased, so did the budget, the impact on general EU policy making and the
need to further develop the policy domain. Another important shift was the gradually
increasing role of interest groups in the formation of EU environmental policy. It is
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important to notice that these changes took place with large public support as the
environmental theme consistently scored very high on the list of important topics for
public policy according to the Eurobarometer, (while slipping on that ranking in the last
years as we might mention). During the 2nd, 3rd and 4th Environmental Action
Programmes the comprehensive nature of EU environmental policy was further
established. By 1992, there was hardly an element of environmental or nature protection
policy that was not covered to some extent by EU directives. It can be said that EU
directives were in fact the main driving force of national environmental policy in most
EU countries.

The Maastricht Treaty (1992) and the Amsterdam Treaty (1997) further consolidated
environmental priorities by formulating the main mission of the EU as a “harmonious,
balanced and sustainable development” (Art 2 Preamble). This should lead to a high
level of protection, prevention and precaution, source based policies for which polluters
must pay, and strong integration of environmental considerations in all other policies of
the EU. In line with the international trends (especially the UN dynamic of the UNCED
meeting in Rio 1992 and the WSSD meeting in Johannesburg in 2002) the last two
Action Programmes have put the emphasis on sustainable development and not just on
narrow environmental goals. This last point also underscores the fact that EU
environmental polices have become part of the globalisation of environmental issues
and norms. The EU has assumed a form of global leadership on issues such as
biodiversity, desertification, forest protection and last but not least global warming. The
difference in approach between the EU and the USA on these issues has also become a
part of an interesting diplomatic ‘game’ involving shifting coalitions of countries on
different topics.

As a conclusion of this brief historic overview, we have to recognise that over a period
of about 30 years, environment has become one of the important policy domains of the
EU, and, in addition, that the EU has become a major player in environmental policies.
This has led to adaptation of institutions, budgets and even policy priorities in the EU.

3. INSTITUTIONS AND ACTORS

Most descriptions and discussions on the institutions of EU environmental politics

emphasise the formal institutions, rules and procedures. This is understandable as it is
already rather complicated to grasp the complexity of how these institutions function.
However, at the beginning of this part, it seems important to stress the fact that
environmental policy making at the level of the EU (and at the national level as well for
that matter) is much more dynamic than what this formal approach suggests. As Mc
Cormick puts it:

“…it is important to understand the formal policy system, but much more important to
appreciate the cumulative role of informal meetings, exchanges of favours, unspoken
understandings,… the sharing of intelligence in hallways and cafeterias …”1.

1JohnMcCormick, Environmental Policy in the European Union, Palgrave Publishing, Basingstoke,

Hampshire, 2001.
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In terms of formal institutions we will therefore only discuss those institutions that are
typical for the environment, as the role of the ‘traditional institutions’, like the
Commission, the Council and the Court of Justice in environmental policy-making is
quite similar to their role in other policy areas. If we concentrate on those institutions
typical for “environmental policy”, we should also discuss the role of DG XI (DG
Environment) of the European Commission and the European Environmental Agency.

3.1. The role of DG XI of the European Commission

When discussing the role of DG XI several issues stand out. One is the rather strong
shift in policy style it has undergone. Until 1991, it was very much a top down
administration, focussing on the ‘production’ of basic environmental legislation. Things
changed rather strongly – when considering the resilience of bureaucracies for strong
change - during the following period. More emphasis on participation, on networking,
and subsidiarity was evident. This shift can be associated to a certain extent with the
consecutive leadership of the two commissioners for Environment, namely Bjerregaard
(Denmark) and Walstrom (Sweden). These two committed, competent and progressive
women brought with them a more Scandinavian environmental policy attitude and an
openness that was hitherto unknown. In addition, they worked together especially
during the last several years with a number of top bureaucrats in DG XI who had a
similar understanding of purpose and direction. The combination of political
opportunity for the theme and strong leadership largely explains the enormous flight
forward of the EU’s environmental policy.

3.2. The role of the European Environmental Agency

Underestimated by outsiders has been the impact of the European Environmental

Agency. Conceived during the late eighties, and finally established in 1994, this EU
body, located in Copenhagen, has been dedicated to provide sound, independent
information on the EU environment. It has become the main information source for
those involved in developing, adopting, implementing and evaluating environmental
policy. The wealth of comparative information on all aspects of policy making is
unparalleled, as is the weight of its periodic reporting on different aspects of the policy.

3.3. The role of other EU institutions

Other institutions that have lesser-known competencies in environmental matters

include the Committee of the Regions, the Economic and Social Committee and the
European Investment Bank. Their importance represents the belief that environmental
policy has to be embedded in socio-economic debates, that although environmental
issues are increasingly framed as global, there are many regional differences and
opportunities, and that large public investments should consider environmental aspects.
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Some of these aspects come together in for example European Structural Funds or in
Cohesion Funds. These two financing mechanisms have indeed played a significant role
in funding infrastructures for the environment and in integrating environmental
concerns in other publicly financed projects.

3.4. Environment Policy and civil society

In the more theoretical literature on environmental policy making, the term governance
is supplanting government or traditional policy making. Governance is then referring to
the shift in the setting of societal rules and norms and their implementation, from an
exclusive competency of the state and its institutions to a more dynamic process of
interaction between state, market and civil society. The inability of the state to respond
to all challenges, the reasoning in terms of efficiency and effectiveness and the fact that
globalisation is changing the position of the state and of other actors are factors that
contribute to this shift according to the literature. We observe the reflection of this shift
in development of more market based policy instruments, of systems of voluntary
agreements between companies or sectors and the state, of labelling schemes that are
mainly conceived and negotiated between NGOs and producers.

This different orientation also - and almost by definition - means that the relationship
between the EU institutions and national states on the one hand and actors representing
the markets (producers in first instance) and civil society (pressure groups, NGOs,
citizens-consumers) are becoming more central to effective environmental policy
making. It is therefore important to point out that the EU indeed has multiple formal and
informal relations with both types of actors. The European Economic and Social
Committee is the formal place where employers and employee organisations meet to
discuss issues related (also) to the environment. However, the nexus of interaction is
much more located in numerous meetings between representatives of the EU
directorates and representatives from various organisations. Brussels has several
thousand professionals representing major labour unions and employers’ organisations
and industrial branches. The EU has in that sense triggered a major lobbying movement
in Europe that is now much more like the system that exists in Washington DC in the
USA. However, one should not underestimate the sort of two-level game that is played
on environmental matters. Lobbying takes place at the national level to influence the
impact that can be exerted by the national government on EU policymaking process.
This happens alongside the European level attempts to influence outcomes. Later,
during the implementation phase, national lobbying concerning implementation
modalities, distributional issues and use of instruments remains important.

At the level of civil society, the main activity comes from the so-called Green 9. They
represent the nine most prevalent environmental movements, organised at the European
level. This includes WWF, Greenpeace, Friends of the Earth, Birdlife International and
the European Environmental Bureau. They have no formal standing in the EU
institutions, yet they are informally extremely important in the process of policy

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formation. Through multiple contacts with the Commission (which also subsidises a
number of them quite substantially) the voice of civil society representing the interest
of the environment is part of the process. The most interesting organisation from the
point of view of broad policy view and impact is probably the European Environmental
Bureau. With more than 140 member organisations from 30 countries, representing
more than 15 million members, it is by far the largest federation or umbrella
organisation of environmental movements in Europe. The explicit role of the EEB is to
“protect and improve the environment of Europe and to enable the citizens of Europe to
play their role in achieving this goal”. The call for citizen participation is worth
highlighting, especially given the debate about the democratic deficit of the EU. Indeed,
one of the strong aims of the Green 9 is to improve the participatory nature of EU
environmental policy making and implementation. Given the subsidiarity principle,
citizen involvement can take place at different levels. What they expect from the
Commission is that the principles of participation are increasingly an integral part of
policies. With reference to the Arhus Convention, which explicitly outlines the rights of
citizens to participation and information, environmental movements have emphasised
this issue strongly during the last years.

4. FROM ENVIRONMENTAL POLITICS TO SUSTAINABLE

DEVELOPMENT: INTEGRATING LISBON AND GOTHENBURG

Since the United Nations Conference on Environment and Development in Rio de

Janeiro in 1992, sustainable development has become the guiding principle of several
large policy domains. Indeed, almost all important policy documents in areas as diverse
as energy, development, transport, scientific research and environment are currently
referring to sustainable development as either the overall objective to which the specific
policy should contribute, or on which the policy should be based (as in ‘sustainable
energy’ or ‘sustainable transport’). It is fair to say that more then in any other policy
domain this has been the case for environmental policymaking. In essence this means
that long term thinking, integrated policy making, stakeholder participation and other
principles have become an integral part of environmental policy making. Yet, it also
means that in balancing economic, social and environmental objectives, environmental
policy making has put itself squarely in the middle of broader policy objectives.

This is not entirely new since the EU has for a long time been the main proponent of
environmental policy integration. This entails the incorporation of environmental
objectives into all stages of policy making of non-environmental policy sectors, with
specific recognition of this goal as a guiding principle for the planning and execution of
policy. In fact, this goes a long way in the direction of fundamental principles of
sustainable development. Also, sustainable development has been one of the guiding
principles since the Maastricht Treaty and as such part of most EU policymaking.

A more formal engagement on sustainability has been taken during the discussions that
have produced the so-called Lisbon strategy and Gothenburg strategy. Whereas the
agreement reached during the Lisbon Summit, outlined a strategy to make the EU the
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most competitive economy worldwide by 2010 (a date that has been deemed unrealistic
by now), under the Swedish presidency an environmental dimension was added to this
strategy. At the level of the EU both objectives have been combined in a sustainable
development strategy. However, at this moment, few indicators point in the direction of
what should be the bottom line of this strategy, namely a gradual decoupling of the
economy. This means that the creation of wealth, or in other words our economic
performance, should be decoupled from the impact on the environment. Improving
efficiency in the use of natural resources – energy and others - and more radical shifts
in technology (e.g. our energy regime) form the backbone of this strategy. Only in that
way can we decrease the negative impact, which we have as EU on the state of the
global environment. It is also an essential element of global solidarity as it frees up
space for development in the South, without putting untenable stress on the global
ecosystem.

Crucial parts of this policy from the point of view of the environment are the following.
First, living up to the Kyoto agreements regarding global warming and taking the lead
in the negotiations that have to result in longer-term post-Kyoto targets. Linked to this
goal is the development and increasing use of renewable energy sources. It is clear that
this will probably be the most daunting challenge for the next decades as the current
energy system has too many negative externalities, while new technologies are still
largely in the stage of development. Third, a serious and critical analysis of the Common
Agricultural Policy (CAP), structural funds, and of transport policies in line with
sustainable development goals. For the CAP this also includes the very difficult debate
about quota, preferences and prices and their impact on the global market for
agricultural products. It is obvious that there is also a strong North-South dimension to
this debate, as farmers in the developing countries have the hardest time to enter the EU
market with their products. Equally important is more democratic control and
participation on these policies. Finally, a serious commitment from businesses in light
of sustainable development objectives is mandatory if the policy objectives are to stand
any chance at success. As the main actors in production processes, the creation of
employment, in technology development and innovation, and also in pollution, it is
primordial that companies are involved and take the lead in matters of sustainability.
The terminology and the know-how of how to do this largely exist. Terms such as
corporate social responsibility, triple bottom line management, sustainable
entrepreneurship, etc. are well known in the business community and receive much
verbal attention from the official representatives, yet have not resulted in much
fundamental change.

Short, in principle the EU environmental policy is today part of a much more

fundamental and larger objective, namely creating and contributing to a more
sustainable global society. The EU has assumed global leadership in the debates that
accompany this challenge, in the absence of any USA commitment in these matters.
More important than the discourse, however, will be the actual results of policies in the
direction of more sustainable development.

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5. THE IMPLEMENTATION ISSUE

One of the issues that have received much attention in the evaluation of the EU’s
environmental policies is the so-called implementation gap. Indeed, the difference
between the objectives of the Environmental Action Programmes and their results has
often been very significant. This factual input, has produced several questions:

z One, why has the system of European governance fallen short in dealing with
environmental problems?
z Two, why have commitments often failed to be implemented in more effective
ways?
z And three, if the current system doesn’t function well, what can be done about
it?

Although it is obvious that we cannot deal with all these issues in this short chapter, it
is interesting to look at some of the arguments that drive the debate on these questions.

A very general remark, but therefore not less valid, is that societal evolutions have often
outrun environmental policies. A classic example is the improvement of air quality due
to environmental policies, which is annihilated because of the enormous increase in
transportation – both private cars and trucks – which results in an overall worse air
quality in several respects. In other words, environmental policies have to be evaluated
in the context of changing patterns of production and consumption. As long as our
energy use, our total material input and our transportation patterns are not really
changing, it will be very difficult, if not impossible to de-couple.

Other reasons for the implementation gap have to be found in the policy process itself.
According to careful analysis and studies, numerous policies fail from the start, because
they are poorly conceived. They are vague, don’t take pragmatic implementation issues
into account, are not well discussed with stakeholders, etc. Even more fundamental is
that the most environmentally progressive proposals often fail or are diluted during the
bargaining process. This leads to suboptimal results from an environmental perspective.
Also important, despite the phenomenal work performed by the European
Environmental Agency, is the lack of good knowledge, data, tools, good practices, etc
that would contribute to more adapted and hence adoptable policies. Of equal
importance is the piecemeal, ad hoc and isolated fashion in which policies are often
developed. The EU has always been a strong proponent of integrated environmental
policy making and long term planning, but the actual application of these principles in
its own policies has proven a serious challenge.

Without exaggerating, however, it is fair to claim that the main problems are situated at
the level of the Member States. They have to implement EU directives, yet often fail to
do so in terms of time and effectiveness. Some countries are better than others in this
respect, yet the problem is generally present. The EU institutions can hardly be blamed
for this, as it is the clear and univocal responsibility of the Member States. Yet, the stick-
behind-the-door of EU implementation regime is the obligatory nature of its directives,

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or in other words the compliance mechanism. The Commission, and also citizens and
organisations have the right to use the legal tools of the EU to demand implementation
when it is failing. The Commission can do this through the infringement procedure, the
penalty procedure and the preliminary ruling, before it resorts to a full-fledged case in
front of the European Court of Justice. Citizens and organisations have the unique right
(in international environmental issues) to take their state or other actors to court at the
EU level. One of the main problems with this otherwise extremely advanced system is
that it functions very slowly. It takes an average of over six years before the Commission
receives a complaint and an actual judgement by the Court. This time lag signifies a loss
in implementation timing, possible further environmental degradation and damage to
ecosystems and human health. It also partially undermines the credibility of the
implementation system and of the policy-making capacity of the EU itself.

In terms of actual environmental outcomes of the EU policies, the European

Environmental Agency gives a mixed picture at best. A number of problems have
improved. Examples include the quality of surface water, the air quality for some
substances (acid rain for example), the gradual designation of wilderness and nature
protection areas, etc. On the other hand, a number of problems have deteriorated and
remain huge challenges, even though the EU has devoted much policy attention to them.
These include the decline of biodiversity, global warming, the deterioration of fish stock
and air pollution problems linked by ever increasing traffic. In other words, the claim
by some that the worst environmental issues have been solved, or that it is time to relax
a little bit on environmental policies, given the growing global economic competition,
is a false claim. It is based on at best an incomplete understanding of the issues, or at
worst, a cynical believe in the old ideology of unlimited and uninhibited economic
growth.

6. CONCLUSION

The previous chapters have demonstrated several key elements of the EU environmental
policy. We will briefly revise and rephrase them in this concluding part.

z First, it is obvious that the environment as a policy theme has been through
fundamental changes during the last decades. From a non-issue at the conception
of the European project of integration and cooperation, it has become one of the
most visible and strongest policy areas. This has been partly due to broader
changes, especially during the 1970s and 80s, in how citizens and scientists think
about environmental problems, but is our conviction that it goes beyond that. The
EU has also become an important independent actor in those changes. As a
strong promoter of policy principles such as the polluter pays principle and
precautionary principle its impact has been enormous on other actors.

z Second, the EU environmental policy has developed from an addition to the

national policy to the main source or at least point of reference of national
policies. This has been especially new and challenging for those countries, which
have been described as laggards in environmental policy making. Indeed, for

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countries such as Portugal, Greece, Italy, Spain and Belgium, EU regulation has
often meant a serious step beyond what they would have done on their own
initiative.

z Third, if one really wants to understand the formation and functioning of EU

environmental policy making it is not enough to know the formal institutions and
their functioning rules and norms. Of equal importance is an understanding of
the social forces that co-shape the policy by influencing national governments,
the Commission, the European Parliament, and other parts of the formal
institutional structures. Employers’ organisations, labour unions and
environmental movements play the largest role here. They represent the actors
described in more recent approaches to environmental governance. The least
formally visible, yet important role in this game is played by lobbyists for the
industrial branch organisations and representatives of the European
environmental movement. We have also pointed at the importance of strong
individuals at the top of the institutions. With two strong Scandinavian
Commissioners, the environment has faired well. What Mr Dimas, the current
Greek Commissioner will bring remains to be seen.

z Fourth, although a very large number of directives has been made and
implemented, serious implementation problems remain. The design of good and
effective directives has proven to be a serious challenge. The same is true for the
actual implementation. The blame for the latter is clearly situated with national
governments, which have been lacklustre in implementation. Yet, even with
strong and efficient implementation we come to the conclusion that the state of
the EU environment is still problematic. Some of the most fundamental issues
regarding biodiversity, global warming and energy regime are not solved, and
will most likely not be solved by the standard policy approaches.

This last remark is also at the same time an open door for future EU environmental
policy. Innovation, a term often linked to the Lisbon strategy on the competitive position
of the EU in the global economy, will be just as much needed to solve environmental
problems. In fact, it is our strong conviction that the two are intertwined. Strong
economic performance will depend on our ability to find solutions for the negative
externalities associated with our current system of production and consumption. That is
in the end sustainable development.

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Bibliography:

– John McCormick, Environmental Policy in the European Union, Palgrave

Publishing, Basingstoke, Hampshire, 2001.

Relevant official documents and information can be found at the following

websites:

– European Environment Agency: http://www.eea.eu.int

– European Commission: http://europa.eu.int/comm/index_en.htm

Directorates-general at the European Commission:

– Environment: http://europa.eu.int/comm/dgs/environment/index_en.htm

– Energy and Transport:

http://europa.eu.int/comm/dgs/energy_transport/index_en.html

– Fisheries: http://europa.eu.int/comm/dgs/fisheries/index_en.htm

– European Parliament Environment Committee:

http://www.europarl.eu.int/committees/envi_home.htm

– European Consultative Forum on the Environment and Sustainable

Development: http://europa.eu.int/comm/environment/forum/home.htm

– Institute for European Environmental Policy: http://www.ieep.org.uk

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CHAPTER 17

ADAPTING THE ROMANIAN SYSTEM FOR THE

PROTECTION OF THE ENVIRONMENT TO EU STANDARDS –
OUTCOMES AND FUTURE CHALLENGES

Cristina Maria Arion*

1. INTRODUCTION

The Fifth EU enlargement is seen in many respects as being unlike the previous ones.
Environmental issues have added yet another dimension of complexity to the process,
as the Center and Eastern Europe Countries (CEEC) presented the EU with an
environmental situation rich in contrasts: on the one hand, a unique reservoir of
wilderness areas in regions where the ecosystems were preserved; on the other, a series
of environmental hot spots.

The environmental situation in Romania is far from being ideal. A recent evaluation of
this situation1 offers a mixed picture of the problems Romania is currently facing. The
issue of environmental protection in Romania is a sensitive one and the issue of local
pollution caused by heavy industries, transports and agriculture seems to weight heavily
in the balance.

Recent reports present an alarming picture of the state of the environment in Romania:
the levels of air pollution are quite high, intensive utilisation of pesticides in agriculture
has polluted soils and water, and the latter has also been affected by wastewater. Urban
waste dumping is another area of concern, as the Romanian government acknowledges
that most urban wastes are stocked on sites that do not benefit from any system for the
protection of the environment2. As for industrial wastes, although subjected to relatively
strict regulations, the application of these rules is largely insufficient and does not
provide adequate protection. Last but not least, noise pollution affects the quality of life
in urban areas.

Following a brief account of the evolution of environmental issues in the EU

* Lecturer in European and International Law, University Paris-Sud, Jean Monnet Faculty, Paris, France.
1 Ministerul apelor si al protectiei mediului, Romania curata. Program concret pentru sanatatea mediului,
Bucuresti, aprilie 2002 (www.mappm.ro).
2 According to sources in the Romanian Ministry of Environment and Waters, only half of the Romanian

population has access to an organised garbage collecting system, while industrial and mining waste often lies
in improvised dumps. See the aforementioned program Romania curata and Razvan Amariei, “Romania
Confronts Environmental Problems”, South-East Times, March 1st, 2005.
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enlargement process, the main phases of the adjustment of the Romanian system of
environmental protection to EU standards will be summarised. Our examination of the
issue will conclude with a few remarks on the challenges Romania is still facing in the
area of environmental protection.

2. ENVIRONMENTAL PROTECTION IN THE EU ENLARGEMENT

PROCESS: AN ISSUE OF INCREASING IMPORTANCE

2.1. The Environment: Just Another Area of Legislative Approximation?

The EU approach to environmental protection in the framework of the eastward

enlargement seems to have followed the same tortuous path as the relations between the
CEEC and the EU in general.

After an initial phase of hesitation as to the future form of the relations between the
CEEC and the EU, the conclusions of the European Council of Copenhagen3 have set
accession to the EU as the final goal of the mainly economic cooperation established at
the beginning of the 1990s.

It is only later on, in preparation for the Essen summit4, that the EU integrated the
dispersed efforts of assisting the CEEC into a coherent framework: the pre-accession
strategy, based upon the EC association agreements (Europe Agreements), structured
dialogue with the European institutions and financial aid through the PHARE
programme.

In a similar way, the issue of environmental protection was initially treated in relation
to the internal market requirements and without due reflection on the concrete impact
of the assimilation of the environmental norms in the candidate countries or on the
strategy to be followed in this respect.

Environmental protection was nevertheless considered as a priority. In the Copenhagen

summit conclusions, the European Council “underlined the importance of the
approximation of laws in the associated countries to those applicable in the Community,
in the first instance with regard to distortion of competition and, in addition, in the
perspective of accession, to the protection of workers, the environment and
consumers”5.

In the Europe Agreements, as illustrated by the agreement concluded with Romania6, a

specific provision deals with the environment. Article 81.1 of the said agreement states
the obligation of the Parties to “develop and strengthen their cooperation on
3 Bull. E.C., no. 6/1993.
4 The broad lines of the pre-accession strategy can be found in the preparatory paper of the EC Commission,
The Europe Agreements and Beyond : A Strategy to prepare the Countries of Central and Eastern Europe for
Accession, COM (94) 320 final, 13 July 1994.
5 Bull. E. C., no. 6/ 1993, I. 13.
6 Official Journal L 357 , 31 December 1994, p. 2 - 189.

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environment and human health, which they have judged to be a priority”. This provision
mentions certain areas of environmental protection (para 2) and the forms of
cooperation to be instituted according to the agreement (para 3), such as the exchange
of information and experts, transfer of clean technologies, training programs,
cooperation at the regional level, and joint research activities.

The environment is also singled out as one of the areas where the approximation of laws
should be pursued according to article 70 of this Europe agreement. Furthermore, article
72.2 mentions sustainable development as one of the guiding principles of the policies
to be adopted by Romania in order to promote the economic and social development of
the country and echoes the “integration principle” present in the EC treaty in its article
174. More precisely, Article 72.2 states that “these policies should ensure that
environmental considerations are also fully incorporated from the outset and that they
are linked to the requirements of harmonious social development”.

In addition to these specific provisions, environmental considerations are integrated in

sensitive areas covered by the agreement, such as water management (article 82),
transports (article 83), energy (article 79) or nuclear safety (article 80).

Despite all this, at the beginning of the enlargement process, there was no particular
strategy concerning environmental issues. Instead, these were mainly dealt with in the
broader framework of legislative approximation.

One of the first steps taken in preparing the candidate countries for accession was to
identify the parts of EC legislation that had to be rapidly translated into national law. It
should come as no surprise that internal market rules were identified as parts of the
acquis that were of utmost importance in the Commission’s White Paper on the
Preparation of the associated countries of Central and Eastern Europe for integration
into the internal market of the Union7. These parts of EC legislation indirectly touched
upon environmental issues as they covered mainly product standards, but this
represented only roughly 50% of the environmental acquis8.

It is interesting to note that in Agenda 20009 the Commission observed that none of the
candidate countries would be able to adopt and implement the whole of the
environmental acquis at the time of its accession to the EU. The position adopted by the
Commission can be regarded as surprising as it stands at odds with the obligation of
integral transposition of the European acquis, which was always presented as a sine qua
non condition for accession. It amounts thus to a softening of this obligation10 at a time

7 COM (95) 163 final, 3 mai 1995.

8 Communication from the Commission on Accession Strategies for the Environment: Meeting the Challenge
of Enlargement with the Candidate Countries of Central and Eastern Europe, COM (1998) 294, 20 May 1998,
p. 7.
9 COM (97) 2000, p. 67.
10Alexander Carius, Ingmar von Homeyer, Stefani Bär, “The Eastern Enlargement of the
European Union and Environmental Policy: Challenges, Expectations, Speed and Flexibility” in Katharina
Holzinger and Peter Knoepfel (eds.), Environmental Policy in a European Union of Variable Geometry? The
Challenge of the Next Enlargement, Basel, Helbig&Lichtenhahn, 1999.
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when the negotiations with the candidates from the “Luxembourg group”11 had not even
started.

It could, nevertheless, be seen as a realistic position that can be justified by the extent
of the challenges posed for the candidate countries by the requirements of
approximation and implementation of the environmental acquis.

2.2. A More Coherent Framework for Dealing with Environmental Issues

in the Accession Process
The Commission document Agenda 2000 established the basis for a more structured
approach of the process of enlargement. This document introduced the enforced pre-
accession strategy based upon a new key element in the preparation of the candidate
countries, viz. the partnerships for accession: bilateral instruments signed individually
by each of the candidates and the EC Commission. A National Program for the
Adoption of the Acquis (NPAA) accompanies the partnerships for accession and must
be implemented by every candidate country.

The EC Commission suggested in this context that the transposition of the framework
directives, as well as the development of detailed harmonisation and implementation
strategies for the sector specific directives concerning the environment, should be the
short-term priorities of the NPAAs.

The year 1997 is important for the treatment of the issue of environmental protection in
the accession process, inasmuch as the first signs of a certain ‘differentiation’ can be
identified as this area comes to be progressively promoted by the EC institutions. A
Guide To The Approximation of European Union Environmental Legislation12 was
adopted in order to highlight particular aspects of EC legislation on environmental
matters.

This is a first step of an approach designed to render more coherent the treatment of
environmental protection in the framework of the enlargement to the CEEC. It was
prompted by the evident lack of preparation of the candidate countries. The first studies
on the preparedness of the CEEC countries conducted in 1996 revealed that extent of
the work that remained to be done13.

They showed14, for instance, that in Romania only 38% of the framework directives
have been introduced into national law. Compared to other candidate countries such as
11 This is a commonly used formula designating Hungary, Poland, the Czech Republic, Estonia and Slovenia

plus Cyprus and Malta: the countries that started accession negotiations in March 1998 following the
Commission’s recommendations at the Luxembourg summit in July 1997.
12 SEC (97) 1608.
13 Regional Environmental Center, Approximation of European Union Legislation: Case Studies of Bulgaria,

Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovak Republic and Slovenia,
Szentendre: Regional Environmental Center, 1996, p. 149.
14 Ibid, p. 8.

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Hungary, Poland and Slovakia, this represented a relatively slow pace of legislative
approximation.

Drawing lessons from the past enlargements, in which the issue of environment has not
played a very important role15, the Commission in 1998 finally adopted a specific
strategy16 that stressed the importance of this matter in the pre-accession process and set
the priorities of legislative approximation.

In this document, the Commission identified the challenges facing the candidate
countries in adapting their systems of environmental protection to EU standards. The
first - and most obvious - challenge is, of course, the legislative one17. The second
challenge is linked more generally to the administrative capacity of the candidate
countries to ensure effective implementation of the environmental acquis.

It should be recalled in this respect that in the framework of the pre-accession strategy,
the environment benefits from the same support mechanisms as other areas of EC
activity. Technical support is also available through the TAIEX bureau and the twinning
projects, which latter expressly designate environmental protection as a priority.

In 1999, an additional form of support was established: the so-called ‘PEPA’ program
for “Priority Environmental Program for Accession”. The main role of PEPA is to
support the development of implementation plans for directives requiring particularly
heavy investment and to ensure that countries have a clear set of priorities concerning
the projects to be implemented in the following years18.

The third challenge identified by the Commission is the financial one. Since January 1st
1999, a special form of financial support has been available in the framework of the
enforced pre-accession strategy through the ISPA program19. Half of the resources of
this fund are attributed to financing investment projects in the area of environmental
protection. The financing is dedicated in priority to areas (such as air quality control,
water and waste management) in which the CEEC countries were facing serious
problems according to the evaluations conducted by the Commission and which require
particularly heavy investment.
15 As was demonstrated in the case of Spanish accession, the mere engagement of a country to adopt and implement
the environmental acquis is not in itself sufficient to ensure effective compliance with European legislation after
accession. Cf. Atle Christer Christiansen, Kristian Tangen, “The Shadow of the Past: Environmental Issues and
Institutional Learning in EU Enlargement Processes”, The Fridt Jof Nansen Institute, FNI Report, no. 1/2001, 45 p.
On the other hand, environmental issues were central to the enlargement to the EFTA countries, but in a quite
different manner, since the environmental standards in these countries were generally higher than those of the EU.
Furthermore, the participation of these countries in the Economic European Area had equally prepared them to
implement most of the rules concerning the environment. See in this respect, Danish Ministry of Environment, The
Environmental Challenge of EU Enlargement in Central and Eastern Europe, Thematic Report, December 2001.
16 Communication from the Commission on Accession Strategies for the Environment: Meeting the Challenge of
Enlargement with the Candidate Countries of Central and Eastern Europe, COM (1998) 294, 20 May 1998.
17 Ibid., p 2.
18 Communication from the Commission, The Challenge of Environmental Financing in the Candidate Countries,
COM(2001) 304 final, 8 June 2001.
19 The funds provided via the ISPA program are distributed according to the principle of co-financing and only
account for 85% of the total budget of the projects in question. Cf. “New EU Instrument To Attract Fresh Funds For
Environmental Investment” Enlarging the Environment, Newsletter from the European Commission on
Environmental Approximation no 15/ August 1999.
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Furthermore, the LIFE program20, originally directed toward the financing of the
environmental projects of EU Member States, was extended also to the CEEC countries.

It should also be noted that the participation in community programs, which was
presented in Agenda 2000 as an important element of the pre-accession strategy, became
effective for the first time in the area of environmental protection, as on the basis of
bilateral agreements with the EC the candidate countries participated in the European
Environmental Agency21.

Besides the general challenges, the Commission identified a number of sector specific
challenges in its Communication. It was thus underscored that most of the CEEC will
encounter difficulties in meeting the EC standards of air quality and, furthermore, that
this was largely due to excessive emissions from stationary sources such as power plants
and local district heating installations22.

Another area of concern was that of waste management. The Commission identified the
directives dealing with the incineration and management of municipal and hazardous
wastes as representing the greatest challenge for the CEEC23.

As far as water management is concerned, the Communication underlined the necessity

of pursuing investments for improving the quality of drinking water and the
management of wastewater, with a special emphasis on the nitrates utilisation
standards24.

Concerning industrial pollution control and risk management, the Commission insisted
on the transposition and implementation of the Seveso directive25, which in its opinion
required more attention, as this would considerably reduce the risks of major accidents
from industrial installations throughout the region26.

The overall evaluation of these specific points showed that, as a rule, much remained to
be done to integrate the acquis. The Commission emphasised, however, that the
approximation of the acquis is not a priority in itself, but must be adapted to the
particular necessities of each candidate country27.

20 Council Regulation (EEC) no 1973/92 of 21 May 1992 establishing a financial instrument for the
environment (LIFE), Official Journal L 206, 22 July1992, p.1-6 and subsequent modifications.
21 Concerning Romania’s participation see Council Decision 2001/584/EC of 18 June 2001 on the conclusion of the
Agreement between the European Community and Romania concerning the participation of Romania in the
European Environment Agency and the European environment information and observation network, Official
Journal L 213, 7 August 2001.
22 Communication from the Commission on Accession Strategies for the Environment: Meeting the Challenge of
Enlargement with the Candidate Countries of Central and Eastern Europe, COM (1998) 294, 20 May 1998, p. 5.
23 Ibid.
24 Idem, p. 6.
25 Council Directive 96/82/EC of 9 December 1996 on the control of major-accident hazards, Official Journal L 10,
14 January 1997, so-called Seveso II Directive, replacing Council Directive 82/501/EEC on the major-accident
hazards of certain industrial activities, Official Journal L 230, 5 August 1982, adopted in reaction to the industrial
accident from Seveso, Italy.
26 Communication from the Commission on Accession Strategies for the Environment: Meeting the Challenge of

Enlargement with the Candidate Countries of Central and Eastern Europe, COM (1998) 294, 20 May 1998, p. 6.
27 Idem, p. 8.

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It was also underscored in the Commission’s Communication that the fact of identifying
certain areas as requiring particular attention did not mean that these parts of the acquis
were inherently more important than other parts, but was based rather on the recognition
that all the candidate countries had considerable problems in the areas in question28.

Thus, in its Communication the Commission adopts a twofold approach to

environmental protection issues in the framework of the enlargement process. A global
assessment of the problems and priorities common to all the candidate countries is
supplemented by case by case attention, in accordance with the requirement that the
NPAA reflect country-specific priorities, to the particular environmental needs and
problems of each country.

These two complementary criteria are at the heart of Commission’s annual reports on
the progress of the candidate countries.

In its 1999 annual report29, the Commission emphasised that, globally, none of the
candidate countries was fully prepared as far as environmental legislative approximation
was concerned and that all of them would face serious difficulties in the near future. One
year later, the Commission acknowledged the progress accomplished by some of the
candidate countries and underlined the efforts that still had to be made by all candidates
as regards the administrative capacity to implement the environmental acquis30. This
last observation can be found also in the 2001 report31, which was adopted after
negotiations with most of the CEEC countries on the chapter devoted to environmental
maters in the acquis (Chapter 22) had already been closed.

The EC institutions seemed to favour a flexible approach to chapter 22, since in spite of
the problems repeatedly emphasised all along the process, the negotiations were closed
relatively easily32 and the institutions accepted more or less lengthy transitional periods
for the application of specific directives. The question of whether what has been
achieved are not just “easy successes on paper”33 can be legitimately raised, as the
capacity – both in terms of resources and of administrative preparation - of the new
Member States to implement the acquis seems to be lacking.

28 Idem, p. 6.
29 European Commission, Composite paper - Reports on progress towards accession by each of the candidate
countries, COM (1999) 500, 13 October 1999.
30 European Commission, Composite paper - Reports on progress towards accession by each of the candidate

countries, COM (2000) 700, 8 November 2000.

31 European Commission, Strategy Paper: Making a Success of Enlargement. Report on the progress towards

accession by each of the candidate countries, COM (2001) 700, 13 November 2001.
32 Marc Maresceau, “Pre-accession” in Marise Cremona (ed.), The Enlargement of the European Union,

Collected Courses of the Academy of European law, vol. XII/1,Oxford University Press, 2003, p. 23, and
especially note 38.
33 Ibid.

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3. ADAPTING ROMANIAN ENVIRONMENTAL LEGISLATION: KEY

PHASES OF THE ACCESSION PROCESS

3.1. Delayed Beginnings of an Environmental Protection System

The extent of the challenge posed by EU accession in the sphere of
environmental protection can be explained by a rather slow crystallisation of
Romania’s environmental policy.

Romania adopted its environmental legislation relatively late. While much of the
damage to the environment had its origins in Romania’s communist past, even after the
transition to democracy, the country did not make environmental protection a top
priority.

While it is true that environmental protection officially became an area of public action
in 199034 when the first ministry of environment was created, the basic legislation
stating the principles of environmental policy was adopted only much later. Not until
December 1995 did the Romanian parliament adopt the Environmental Protection Law35
providing the basic framework for the protection of the country’s environment.

Indeed, Romania was, alongside Macedonia, one of the last former communist
countries to adopt ‘second generation’ environmental legislation36 making the protection
of the environment a major public interest objective. ‘Second generation’ environmental
legislation is founded on the concept of sustainable development, comprising the
prevention, polluter-pays and precautionary principles. Its stated aims are the protection
of the biodiversity, international cooperation and public participation.

According to Romanian law, the main tools for achieving these objectives are the
elaboration of integrated policies, environmental impact studies and enhanced planning
and implementation procedures.

By virtue of article 5 of the Environmental Protection Law, the state recognises the right
to a healthy environment and guarantees access to information concerning
environmental conditions. It, furthermore, recognizes the right of citizens to associate
in environmental protection organisations. A series of additional rights include the right
to consultation on all environmental issues, the right of access to administrative or
judicial authorities, and the right to adequate compensation for environmental damages.

The attention given by the Environmental Protection Law to conformity programs as

34 Institutul European din Romania, Politica mediului, Micromonografii - Politici Europene, p. 30

(www.ier.ro).
35 Legea protectiei mediului, nr. 137 din 29 decembrie 1995, Monitorul Oficial al României, Partea I, nr. 304

din 30 decembrie 1995.

36 Steven Stec, “Romania- New Law Ends Era”, CEELI Law report, Bulletin, spring 1996, Central and East

European Law Initiative of the American Bar Association.

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tools for gradually inducing industries to comply with international standards is one of
its novel aspects: the legislation imposes a requirement of obtaining environmental
permits. It likewise introduces a ban on waste imports and strict controls on hazardous
substances.

As far as the basic principles of environmental legislation are concerned, Romania

seemed to comply with the fundamental principles of the EC environmental policy
stated in article 174 TEC (formerly 130 R)37. It is, however, the implementation of
environmental legislation that has raised a whole series of problems ever since the
adoption of the first informal report on the preparation of the CEEC countries38. This
assessment would be later confirmed by the evaluations of the European Commission.

3.2. Slow Pace of Approximation and the Issue of Formal Compliance

One of the main issues identified by the informal evaluation referred to above was the
lack of financial resources. Other problems highlighted were the lack of strategy in
approaching environmental issues, a slow legislative process, delays in the
establishment of coordination structures for EU accession, and overlapping
administrative competencies in the implementation of the environmental acquis.

The most sensitive question, and it would become a sort of recurrent theme, concerned
the implementation of the acquis, which at that time was considered to be too hesitant.

The European Commission’s first evaluation of Romania’s membership application39

would confirm these problems, as well as the gap separating Romania from the
countries in the ‘Luxembourg group’ in the matter of environmental protection. Indeed,
Romania was the only candidate country for which the Commission expressly stated
that environmental issues should be given priority.

Leaving aside areas requiring heavy investment and substantial administrative

involvement40, with respect to which Romania, like the other candidates, could only
meet EC standards in the long run, legislative approximation was also slow in the other
areas.

After the change in the European approach to enlargement represented by the adoption
of the enforced pre-accession strategy, the candidate countries had to identify their
short-term and mid-term priorities for action and to adopt their NPAA for achieving
them.

37 Simona Hancu, Ioan Hortopan, Mihai Lesnic, “Country Reports: Romania” in Approximation of European
Union Legislation: Case Studies of Bulgaria, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland,
Romania, Slovak Republic and Slovenia, Szentendre: Regional Environmental Center, 1996, p. 97.
38 Ibid. This report analyses in a detailed manner the state of legislative approximation in Romania until 1996.
39 European Commission’s Opinion on Romania’s Application for Membership of the European Union,

COM(97) 2003 final.

40 These areas are sewage sludge, drinking water, waste management and atmospheric pollution.

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Romania has experienced some difficulties also in this respect, as the adoption of the
NPAA was delayed. The Commission observed that in the area of environmental
protection, the legislative approximation was proceeding slowly and without a real
strategy or a coherent vision41. On the institutional level, the reforms conducted were
not considered sufficient and the Commission suggested strengthening the authority of
the competent ministry.

Another important aspect of the adjustment to EU standards involved the financing of

environmental policies. Thus, Romania had to adopt rules instituting an environmental
fund42.

The same slow pace of legislative approximation will be recorded in 200143, the only
notable progress being the adoption of the NPAA.

The year 2002 brought signs of a positive evolution: Romania opened negotiations on
chapter 22 in June and the Commission provided for the first time a more optimistic
evaluation of the approximation of environmental legislation44.

A new initiative in the field of national environmental protection was Romania Clean.
A Concrete Program for the Health of the Environment45. Adopted in April 2002, this
policy document presented itself as an instrument for systematising the national efforts
for EU accession. A detailed action plan for legislative approximation for the years 2002
and 2003 was attached as an appendix. The report’s main contribution, however, lays in
the policy that it established in view of ensuring effective public participation in
environmental matters. It thus met a requirement stated in the Commission’s regular
reports. A partnership between the different components of civil society and the local
authorities was therefore instituted in order to promote public awareness of
environmental protection.

The decision to sign the accession treaty with the eight CEEC, plus Cyprus and Malta,
was taken at the Copenhagen European Council of December 2002. Thereafter, the
preparations of Bulgaria and Romania for accession would receive individualised
treatment in the Roadmaps for Bulgaria and Romania46, which summarise the progress
that needs to be made in view of accession in 2007. This document concentrates on a
few high priority areas, including environmental protection.

41 European Commission’s Regular Report on Romania’s progress towards accession, COM(2000) 710 final.
42 Legea nr. 73/2000 privind Fondul pentru mediu, Monitorul Oficial, Partea I, nr. 347 din 29 iunie 2001. For
an acount of the problems related to the creation of this fund, see Luminita Chivu, Constantin Ciutacu, Fondul
de mediu in Romania, Societatea Academica din Romania, Centrul pentru politica publica, working paper nr.
24, aprilie 2001.
43 European Commission’s Regular Report on Romania’s progress towards accession, COM(2001) 700 final

- SEC(2001) 1753.
44 European Commission’s Regular Report on Romania’s progress towards accession, COM(2002) 700 final

- SEC(2002) 1409.
45 Previously cited.
46 Roadmaps for Bulgaria and Romania, COM (2002) 624, 13 November 2002.

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In 2003, the next assessment of Romania’s application by the Commission47 confirmed

the positive evolution of legislative approximation in the field of environmental
protection.

However, the 2003 report emphasised that Romania was concentrating too much on
legislative approximation and formal compliance with the obligations stemming from
the acquis to the detriment of effective implementation. The Commission noted,
nonetheless, that some attempts to develop strategic planning had been made in certain
areas, such, for instance, as waste management.

The 2003 report also criticised the institutional structure set up to implement
environmental legislation. Taking note of the merger of two previously independent
ministries (agriculture, on the one hand, and environment, water and forestry, on the
other), the Commission criticised this approach as bringing about instability and a
confusion of competencies in a context already burdened by insufficient administrative
capacities.

The Commission also insisted on the necessity of restructuring the local environmental
protection agencies that, according to the Romanian legislation, were to play a key role
in the implementation, surveillance and control of environmental rules.

The Commission’s next regular report48 underscored that Romania has made good
progress in the area of environmental protection since its application for membership
was first reviewed in 1997.

According to the Commission’s 2004 assessment, Romania had achieved a generally

satisfactory level of legislative alignment. It emphasised, however, that In order to be
ready for membership, particular attention still had to be paid to completing the
transposition of certain aspects of horizontal legislation and sector-specific directives
concerning air quality, waste management, water quality, industrial pollution,
chemicals, noise, nuclear safety and radiation protection.

Also on the positive side, the report noted that Romania had taken decisions to
strengthen its administrative structures. But it stressed that there was still much to be
done with respect to the establishment and completion of necessary implementing
structures: including further strengthening administrative capacity at national, regional
and local levels and improving the coordination between different administrative levels
as well as with other relevant authorities.

Finally, the Commission noted that the recruitment procedures in environmental

administration seemed to be well on track and that, provided sufficient budgetary
resources continued to be allocated to the environment sector, this should considerably
increase the performance of the public services.
47 European Commission’s Regular Report on Romania’s progress towards accession, COM(2003) 676 final

- SEC(2003) 1211.
48 European Commission’s Regular Report on Romania’s progress towards accession, COM (2004) 657 final.

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The necessity of putting credible strategies into practice in order to implement

effectively the environmental acquis is a recurrent theme in the Commission’s
assessment. This evaluation regards the full implementation of European legislation as
a major challenge for Romania, including in terms of investment. According to the
Commission’s 2004 report, additional efforts are required in order to implement fully
EC legislation in key sectors such as air quality, waste management, water quality,
nature protection, the issuing of integrated permits, and chemicals.

The issue of formal compliance with EU environmental acquis continued to be singled

out by the Commission, even though the negotiations on this chapter were soon to be
closed.

4. OUTCOMES OF THE NEGOTIATIONS AND FUTURE

CHALLENGES
Like with the other CEEC countries, Romania’s negotiations with the EU on the
environmental chapter were conducted relatively quickly. As the Commission
constantly recalled, only limited aspects of the EC legislation could be subjected to
transitional periods and only if the candidate state presented a credible timetable for full
compliance with EU standards.

According to the accession treaty signed in Luxembourg on 29 April 200549, Romania

enjoys the benefits of various transitional periods concerning water quality, air quality,
waste and incineration installations50.

Concerning air quality, the requirements of EC legislation will be progressively

implemented during the first three years after accession. The global objective of
recuperation and disposal of most categories of waste should be attained by 31
December 2011. By January 1st 2007, Romania must be able to recycle 32% of the total
volume of wastes, and this figure should rise to 48% by 2010 (with several exceptions
for certain categories of waste, such as glass, the integral recycling of which will not be
possible before 2013). Romania will also have to tackle the issue of certain particularly
problematic incineration facilities by 2008-2009. The longest transitional period
obtained by Romania concerns water quality, which should meet EU standards by 2017.

49 The text is available in Romanian on the homepage of the Ministry of European Integration:

http://www.mie.ro. A summary of the result of the negotiations can be found in Report on the Results of the
Negotiations on the Accession of Bulgaria and Romania to the European Union, Prepared by the
Commission’s Departments, February 2005, report no. 5859/05.
50 Romania has requested transition periods for ten directives (on the control of volatile organic compound

emissions resulting from the storage of petrol, packaging and packaging waste, the landfill of waste, waste
electrical and electronic equipment, urban waste water treatment, discharges of dangerous substances into
surface water, the quality of water intended for human consumption, integrated pollution prevention and
control, emissions of certain pollutants into air from large combustion plants and incineration of waste) and
for one regulation (on the supervision and control of shipments of waste). See on these aspects, Ministerul
Integrarii Europene, Document de pozitie in negocierile asupra capitolului 22 – Protectia mediuluiui
inconjurator, (www.mie.ro ).
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These transitions periods were accepted by the EU in areas where compliance with its
standards requires the most substantial financial investment by Romania.

However, also in the longer run, environmental protection as a whole will continue to
pose a serious financial challenge to Romania. According to the initial studies
conducted by the European Commission51, the necessity to comply with European
environmental protection standards will require from Romania a financial effort on the
order of 3 to 4% of GDP, amounting to nearly 20 billion euros for the next twenty years.
This seems, moreover, to have been an underestimate, as recent assessments by the
same sources indicate a total of 29.3 billion euros52.

These figures provide an indication of the extent of the environmental problems from
which Romania still suffers and of the complexity of the environmental issues related to
its EU accession. Most of the funds Romania will have to allocate to environmental
protection will be dedicated to improving water quality, which seems to be the most
serious environmental problem.

Romania is to take up the financial challenge by mobilising three major sources of

funds: direct state budget financing (approx. 7 billion euros), financing by private
operators (9 billion euros) and internal and external financing programs (13 billion
euros)53. It is thus expected that Romania will rely heavily on EU funding and this is
another compelling reason for strengthening administrative capacity. Studies have
shown54 that Romanian institutions are not always prepared to carry out the technical
preparations required to obtain funding from financing programs like ISPA. Romania
should therefore seek assistance – both technical assistance and co-financing support –
for the years to come to in order to meet its investment needs.
As far as the other challenges identified by the Commission are concerned, only one of
them seems to have been effectively solved by Romania and this is the issue of
legislative approximation. Nevertheless, it should not be forgotten that most of the
efforts that have been made in this respect over the last years amounted to concentrating
on the formal and technical aspects or the acquis without real strategic reflection on
environmental policy. Truly national priorities must also be reflected in the conception
and application of this policy, which is not only about complying with standards55.

The third challenge identified by the Commission, the administrative capacity to

implement fully the environmental acquis, seems the most difficult to address and needs
particular attention. This is an issue that affects other areas of the acquis as well. But
due to the technical nature of the subject matter, it is a particularly vexed question in the
51 Guvernul Romaniei, Programulu National de Aderare la UE, mai 2000.
52 See Antoaneta Etves, “Miliarde de euro pentru intrarea aerului românesc
in Uniunea europeana”, 22 iunie
2005, www.euractiv.ro .
53 Ibid.
54 Danish Ministry of Environment, Romania’s Road to Accession: the Need for Environmental Focus,
Thematic Report, February 2003, 104 p, (http://www.mst.dk/udgiv/Publications/2003/87-7972-717-
4/html/kap01_eng.htm), p. 89.
55 Cristina Arion, “Provocarile europenizarii în protectia mediului: cateva refletii pornind de la cazul
României” in Ana-Maria Dobre, Ramona Coman (coord.), România ?i integrarea european? , Institutul
European, 2005.

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context of environmental protection.

As recent studies have indicated56, the problems affecting Romania’s capacity to

implement the acquis are serious. Administrative capacity, training of personnel,
monitoring equipment, inspection and enforcement are as a general rule inadequate for
the successful implementation of the acquis. In addition, poor communication at the
central level between competent ministries, and between local and central authorities is
a major obstacle to effective action.

All these issues should be addressed as a matter of priority. The insufficiencies in the
effective implementation of the environmental acquis are considered important enough
to have justified the recent issuance of a warning letter by the European Commission57.
In the opinion of the Commission, shortcomings in implementation could delay
Romania’s accession.

Relevant official documents and information:

Official Documents:

1. EC Documents:
– Council Regulation (EEC) no 1973/92 of 21 May 1992 establishing a financial
instrument for the environment (LIFE), Official Journal L 206, 22 July1992, p.1-
6;
– Conclusions of the European Council of Copenhagen, June 1993, Bull. E.C., no.
6/ 1993;
– Europe Agreement establishing an association between the European Economic
Communities and their Member States, of the one part, and Romania, of the
other part, Official Journal L 357, 31 December 1994, p. 2 – 189;
– Communication from the Commission, The Europe Agreements and Beyond: A
Strategy to prepare the Countries of Central and Eastern Europe for Accession,
COM (94) 320 final, 13 July 1994;
– Commission, White Paper on the Preparation of the associated countries of
Central and Eastern Europe for integration into the internal market of the
Union, COM (95) 163 final, 3 May 1995;
– Council Directive 96/82/EC of 9 December 1996 on the control of major-
accident hazards, Official Journal L 10, 14 January 1997 (Seveso II Directive)
replacing Council Directive 82/501/EEC on the major-accident hazards of
certain industrial activities, Official Journal L 230, 5 August 1982;
– European Commission, Agenda 2000, Vol. 1: For a Stronger and Wider Union,
56 ECOTEC, Administrative Capacity for Implementation and Enforcement of EU Environmental Policy in

the 13 Candidate Countries. A Final Report to DG Environment, www.eea.eu.int.

57 “EU/Romania: Bucharest Warned to Act on Accession Problem Areas”, European Report, 15 June 2005.

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Vol. 2: The Challenge of Enlargement, COM (97) 2000, Bull. E.U., Supplement
1997/05;
– European Commission’s Opinion on Romania’s Application for Membership of
the European Union, COM (97) 2003 final, July 1997;
– Working Document of the Commission, Guide To The Approximation of
European Union Environmental Legislation, SEC (97) 1608;
– Communication from the Commission on Accession Strategies for the
Environment: Meeting the Challenge of Enlargement with the Candidate
Countries of Central and Eastern Europe, COM (1998) 294, 20 May 1998;
– European Commission, Composite paper - Reports on progress towards
accession by each of the candidate countries, COM (1999) 500, 13 October
1999;
– European Commission, Composite paper - Reports on progress towards
accession by each of the candidate countries, COM (2000) 700, 8 November
2000;
– European Commission’s Regular Report on Romania’s progress towards
accession, COM (2000) 710 final, 8 November 2000;
– European Commission, Strategy Paper: Making a Success of Enlargement.
Report on the progress towards accession by each of the candidate countries,
COM (2001) 700, 13 November 2001;
– Communication from the Commission, The Challenge of Environmental
Financing in the Candidate Countries, COM (2001) 304 final, 8 June 2001;
– Council Decision 2001/584/EC of 18 June 2001 on the conclusion of the
Agreement between the European Community and Romania concerning the
participation of Romania in the European Environment Agency and the
European environment information and observation network, Official Journal L
213, 7 August 2001, p. 20;
– European Commission’s Regular Report on Romania’s progress towards
accession, COM (2001) 700 final, 13 November 2001;
– European Commission’s Regular Report on Romania’s progress towards
accession, COM (2002) 700 final, 9 October 2002;
– European Commission, Roadmaps for Bulgaria and Romania, COM (2002) 624,
13 November 2002;
– European Commission’s Regular Report on Romania’s progress towards
accession, COM (2003) 676 final, 5 November 2003;
– European Commission’s Regular Report on Romania’s progress towards
accession, COM (2004) 657 final, 6 October 2004;
– Report on the Results of the Negotiations on the Accession of Bulgaria and
Romania to the European Union, Prepared by the Commission’s Departments,
February 2005, report no. 5859/05.

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2. National Documents:
– Guvernul Romaniei, Programul National de Aderare la UE, mai 2000
(www.gov.ro );
– Ministerul Apelor si al Protectiei mediului, Romania curata. Program concret
pentru sanatatea mediului, Bucuresti, aprilie 2002 (www.mappm.ro);
– Legea protectiei mediului nr. 137 din 29 decembrie 1995, Monitorul Oficial al
Romaniei, Partea I, nr. 304 din 30 decembrie 1995;
– Legea nr. 73/2000 privind Fondul pentru mediu, Monitorul Oficial al Romaniei,
Partea I, nr. 347 din 29 iunie 2001;
– Ministerul Integrarii Europene, Document de pozitie in negocierile asupra
capitolului 22 – Protectia mediuluiui inconjurator, ( www.mie.ro);

Studies and monographs:

– Razvan Amariei, “Romania Confronts Environmental Problems”, South-East
Times, March 1st, 2005;
– Cristina Arion, “Provocarile europenizarii in protectia mediului: cateva reflectii
pornind de la cazul Romaniei” in Ana-Maria Dobre, Ramona Coman (coord.),
Romania si integrarea europeana , Institutul European, 2005;
– Rainer Arnold, Kirstyn Inglis – “European Environment Law” in Arnold Ott,
Kirstyn Inglis (coord.), Handbook on European Enlargement, T.M.C. Asser
Press, The Hague, 2002, pp. 641 – 677;
– Alexander Carius, Ingmar von Homeyer, Stefani Bär, “The Eastern Enlargement
of the European Union and Environmental Policy: Challenges, Expectations,
Speed and Flexibility” in Katharina Holzinger and Peter Knoepfel (eds.),
Environmental Policy in a European Union of Variable Geometry? The
Challenge of the Next Enlargement, Basel, Helbig&Lichtenhahn, 1999;
– Luminita Chivu, Constantin Ciutacu, Fondul de mediu in Romania, Societatea
Academica din Romania, Centrul pentru politica publica, working paper nr. 24,
aprilie 2001;
– Atle Christer Christiansen, Kristian Tangen, “The Shadow of the Past:
Environmental Issues and Institutional Learning in EU Enlargement Processes”,
The Fridt Jof Nansen Institute, FNI Report, no. 1/2001, p. 45;
– Danish Ministry of Environment, The Environmental Challenge of EU
Enlargement in Central and Eastern Europe, Thematic Report, December 2001
(http://www.mst.dk/homepage );
– Danish Ministry of Environment, Romania’s Road to Accession: the Need for
Environmental Focus, Thematic Report, February 2003, 104 p,
( h t t p : / / w w w. m s t . d k / u d g i v / P u b l i c a t i o n s / 2 0 0 3 / 8 7 - 7 9 7 2 - 7 1 7 -
4/html/kap01_eng.htm);
– Institutul European din Romania, Politica mediului, Micromonografii - Politici
Europene, p. 30 (www.ier.ro);
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– Marc Maresceau, “Pre-accession” in Marise Cremona (ed.), The Enlargement of

the European Union, Collected Courses of the Academy of European law, vol.
XII/1,Oxford University Press, 2003, pp. 9-42;
– « New EU Instrument To Attract Fresh Funds For Environmental Investment »
Enlarging the Environment, Newsletter from the European Commission on
Environmental Approximation no 15/ August 1999;
– Regional Environmental Center, Approximation of European Union Legislation:
Case Studies of Bulgaria, Czech Republic, Estonia, Hungary, Latvia, Lithuania,
Poland, Romania, Slovak Republic and Slovenia, Szentendre: Regional
Environmental Center, 1996, p. 149;
– Anne Marie Sciberras, “Challenges for the Accession Countries in the EU’s
Environmental Field”, Eipascope, no. 3/2002 (http://www.eipa.nl);
– Steven Stec, “Romania- New Law Ends Era”, CEELI Law Report , Bulletin,
spring 1996, Central and East European Law Initiative of the American Bar
Association.

Internet Information Sources:

– European Commission, DG Enlargement Page on Romania:
www.europa.eu.int/comm/enlargement/romania/index.htm;
– European Commission Delegation in Romania: www.infoeuropa.ro;
– Ministerul Integrarii Europene: www.mie.ro;
– Ministerul Apelor si al Protectiei Mediului: www.mappm.ro;
– Institutul European din Romania: www.ier.ro;
– Euractiv: www.euractiv.ro;
– Regional Environmental Centre for Central and Eastern Europe: www.rec.org;
– United Nations Commission for Europe, Environmental Performance Review for
Romania: www.unece.org/env/epr/studies/romania/welcome.htm.

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SECTION 6

EU ECONOMIC POLICY AND EMU

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CHAPTER 18

ECONOMIC AND MONTERAY UNION

Kenneth Dyson*

1. HISTORY OF EMU

The history of the Economic and Monetary Union (EMU) goes back to the Hague
Summit of the leaders of the original 6 founder members in 1969, where the French
President Georges Pompidou launched the idea (which earlier had been raised by
Giscard d’Estaing as Finance Minister, but rejected by President De Gaulle). This is
characteristic of a long-standing driving role by French political leaders on EMU. The
outcome was the Werner Committee on EMU, which reported in 1970. It was the first
of two committees on EMU (the second was the Delors Committee in 1988-89), and it
is historically interesting to contrast them. The Werner Report was Keynesian rather
than monetarist in inspiration; for instance, it did not speak of the requirement of an
independent European central bank and gave great attention to a balance between an
economic pillar with fiscal authority and a monetary pillar involving co-ordination of
the national central banks.

The report shared the fate of Keynesianism in the 1970s. The mounting tensions within,
and break up of, the Bretton Woods exchange-rate system, the inflationary shock of the
1973 oil crisis and consequent ‘stagflation’ (the combination of high inflation and high
unemployment) undermined the credibility of Keynesianism and prepared the way for
a new economic paradigm based on monetarism. Hence the Werner blueprint for EMU
was soon dead. No less seriously, German negotiators were suspicious of French
seriousness of purpose. They argued – from their own historical experience of German
currency union in the nineteenth century – that a monetary union would not work
without a political union (and a test of this was a fiscal authority at the EEC level). This
was the so-called ‘coronation’ theory of EMU: that monetary union was the final point
in a process of economic and political union that would ensure a framework of solidarity
to make it sustainable. French negotiators showed that they were not willing to
contemplate the shift of sovereignty over fiscal policy to the EEC level. Hence German
negotiators lost confidence. The main legacy of this episode was a system of exchange-
rate co-ordination called the ‘Snake’. However, neither France nor Italy were able to
sustain membership.

The next main achievement was the consequence of Franco-German leadership by

Chancellor Helmut Schmidt and President Valery Giscard d’Estaing: the Exchange-Rate
Mechanism (ERM) of 1979. This was seen by them as a first stage in a process of
* Professor, Cardiff University, Bradford University, United Kingdom.
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creating EMU by establishing a ‘zone of economic stability’ in Europe. It was envisaged

as a system of exchange-rate co-ordination based on an artificial European unit of
account. However, as negotiated technically by the central bankers, it turned out to be a
Deutsche Mark centred system, a so-called ‘D-Mark’ zone. Parities were set in terms of
the Deutsche Mark. This meant that the German Bundesbank was in effect setting the
monetary policy parameters for the ERM members. The design made sense in that
Germany had the most stable and credible EEC currency. Hence linking to it ensured
economic stability. However, it also implied a privileged German role. Strikingly, the
Bundesbank insisted from the outset that it would set monetary policy only with
Germany in mind, not with the ERM in mind. So, if a currency had problems, it was a
matter for the individual Member State to take corrective action, not the Bundesbank.

The ERM is vitally important in the history of EMU. It was the training ground for
EMU: a stage in which Member States could demonstrate their preparedness for EMU
by their ability to sustain a parity without tensions or devaluation (a formula to be taken
up in the Maastricht convergence criteria for entry). The ERM itself evolved. A key date
was the French ERM crisis of March 1983: when President Francois Mitterrand’s
reflationary economic policy ran into crisis, he opted to stay in the ERM and to shift to
a policy of competitive disinflation. French policy was to ensure that the Franc was as
stable as the Deutsche Mark, and this required a firm anti-inflationary policy stance.
Further testing of French resolve with the January 1987 ERM crisis persuaded French
negotiators that a new determined effort was required to achieve EMU.

The key move came, as with Schmidt and the ERM, from Germany. It was always
recognised that strategically everything depended on Germany if there was to be EMU.
Germany had the strongest and most stable currency in the EEC. The Deutsche Mark
was of enormous symbolic importance in post-war identity building for Germans; it was
an object of pride. German Foreign Minister Hans-Dietrich Genscher used the German
Presidency of the EEC in early 1988 to re-launch the idea of EMU as timely now that
the Single Market programme had begun. EMU was the logical complement of the
Single Market, its completion by eliminating exchange-rate risk and making prices and
costs transparent.

Chancellor Helmut Kohl took this up and worked on it with European Commission
President Jacques Delors (who had been French Finance Minister during the 1983 ERM
crisis and was a long-standing advocate of EMU). The Hanover Summit of 1988 was
used to establish the Delors Committee on EMU. This was a politically skilful move.
Delors ensured a pro-EMU leadership; the remit was that the Committee was to
consider only how EMU was to be achieved, not whether (which was a matter for heads
of state and government); and, crucially, the membership was made up largely of the
national central bank governors. They were co-opted in order to bind them in to the
process of creating EMU and thus prevent them from becoming technical and highly
persuasive critics.

Delors concentrated on ensuring a unanimous report. This process is of vital long-term

importance. Political leadership of EMU was acquired at a price: the all-important

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institutional and policy details of EMU were delegated to technicians, especially the
central bankers. Hence it was in major respects an ‘EMU for central bankers’. The core
principle enshrined in the Delors Report of 1989 was German – that the new European
central bank must be independent and have just one single mandate, to secure price
stability. There was reference to fiscal rules to bind national governments, and three
stages of EMU were proposed. The major input of ideas came from the Bundesbank.
The Delors Report was accepted at the Madrid Summit, with stage one of EMU to begin
in June 1990 and an intergovernmental conference (IGC) on EMU to follow.

The process of creating EMU was accelerated, and political leadership strengthened, by
German unification in 1989-90. Kohl was determined to ensure continuity in Germany’s
European policy and demonstrate this by actively pursuing the main European project
at hand, EMU. In his phrase, borrowed from Konrad Adenauer, ‘German unification and
European unification are two sides of the same coin’. Hence it was decided to bring
forward the IGC on EMU and to have a parallel IGC on political union (which was
strongly pushed by the Germans), beginning in December 1990. The difference between
the two IGCs was that the IGC on EMU had been very carefully prepared by the Delors
Committee and much technical work in the EC Monetary Committee and the
Committee of EC Central Bank Governors. The latter Committee drafted the Statute of
the European System of Central Banks (which was untouched by the IGC) as well as
the Statute of the European Monetary Institute which was to prepare stage three of EMU
from 1st January 1994. The Maastricht convergence criteria and the excessive deficit
procedure were worked out in the EC Monetary Committee.

The EMU provisions of the Treaty on European Union that emerged at the Maastricht
Summit in December 1991 were in most respects unsurprising:

A three-stage process;
An independent European Central Bank (ECB);
Convergence criteria to assess whether a state was ready to enter;
Opt-outs for Britain and Denmark;
An excessive deficit procedure;
A process of macro-economic policy co-ordination (the Broad Economic Policy
Guidelines).

The surprising element was the agreement to a final deadline for stage three: if not 1996,
then 1st January 1999 at the latest. This was wholly consistent with Kohl’s central aim
– to use Maastricht to make EMU and European integration ‘irreversible’. It was also in
essence a monetarist construction, far removed in guiding economic philosophy from
the Werner Report. It was also not consistent with the ‘coronation’ theory in that
progress with political union was slight. This last issue was to become critical given
further slow progress with the Amsterdam and the Nice Treaties and then the crisis of
ratification with the European Constitutional Treaty. EMU lacked a secure framework
of solidarity. Hence doubts about its sustainability remained.

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2. THE REASONS BEHIND EMU

EMU originally emerged out of the debate about the sustainability of the post-war
Bretton Woods system of exchange-rate co-ordination based on the US dollar. This
system suffered essentially from a US policy of ‘benign neglect’. Its demise would
clearly destabilise the trading and investment patterns that had been at the heart of
European integration with serious effects on output and jobs. French policy makers in
particular used this argument to suggest that Europe needed its own ‘monetary
personality’. Behind this argument was a resentment at US monetary and economic
power and a desire to see an independent Europe. Similarly, French views on EMU were
based on an anxiety about Germany’s growing economic and monetary power within
Europe and some evidence that it was a less pliant partner. These two themes – the
structural power of the US and of Germany – were behind Pompidou’s launch of EMU
at the Hague Summit in 1969. For French and other policy makers the ERM was an
expression of German/Bundesbank power; the solution was either exit or a transfer of
German monetary power to a European central bank in which Germany would be just
one voice amongst others. Power was, in short, never far from the surface in debates
about EMU.

However, there were also technical arguments. Most EU economies were highly trade-
dependent; imports and exports accounted for a very large proportion of GDP. The trade
potential was limited by exchange-rate risk and uncertainty, even with the ERM in
which rates could be changed whether by agreement or crisis. Moreover, the potential
gains of the European Single Market were not fully exploited. EMU offered a reduction
of transaction costs: no more barriers of exchange-rate risk and uncertainty; no
commissions to pay on foreign-currency exchange; and transparency of prices and
costs. EMU would ‘complete’ the single market.

There was also a desire to escape from the tensions and conflicts of the ERM. The
solution seemed to lie in sharing power in a currency union. However, this solution
begged further questions about the conditions of a successful currency union – notably
economic convergence and political solidarity. In the absence of those conditions EMU
could prove a source of tensions and conflicts rather than a solution to them.

3. THE INSTITUTIONAL FRAMEWORK

Central to the institutional framework of EMU is an asymmetry between monetary

policy, fiscal policy and structural policies to improve competitiveness. However, they
are bound together by a policy paradigm of sound money and finance on which the
Treaty provisions rest. This paradigm has a number of key theoretical elements:

The neutrality of money

According to monetarism, in the long-term monetary policy does not affect
output and employment. Hence it can be targeted strictly and solely on price
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stability. This shapes the mandate of the European Central Bank. It also gives
birth to the argument that economic growth and employment are determined by
supply-side conditions, notably how competitive product, service, capital and
labour-markets are.

Inflation is a phenomenon of expectations.

According to monetarism, effective anti-inflation policies depend on building
and maintaining credibility with market actors. They expect and anticipate that
the central bank will be tough on inflation. Hence they are disciplined in their
behaviour. Credibility depends on ‘binding hands’. This is achieved by making
the central bank independent and by putting in place strict fiscal rules. The
design of the ECB and of the Stability and Growth Pact reflect this belief. For
EU members that seek Euro Area entry this requirement is met by participation
in ERM2, the new exchange-rate mechanism that ties the national currency to a
parity and fluctuation band with the euro.

The political business cycle

Governments have an incentive to lower taxes and increase spending as elections

approach. The result is inflationary policies that, following the election, are
replaced by disinflation. Hence politics generates a business cycle of boom and
bust that destabilises the economy. The solution is an independent central bank
and strict fiscal rules.

Monetary policy is solely a matter for the European System of Central Banks, which
groups together the ECB and the constituent national central banks. The ECB governing
council is responsible for monetary policy and consists of the ECB president, vice-
president, directors and the (currently) 12 national central bank governors. Their prime
role is setting the interest rate for the Euro Area as a whole. Here the voting rights take
the form of ‘one man/one vote’. There is no qualified majority voting as in the Council
of Ministers. This is designed to demonstrate that members are not there to represent
their states but to reflect on the Euro Area as a whole. Monetary policy is ‘supra-
national’.

One important institutional features of the ECB is its independence. Independence is

very important for two reasons. First, members of an independent central bank do not
have to be re-elected. Politicians, on the other hand are tempted to boost economy in
short term in order to get political popularity even if this conflicts with promises to
control inflation. Moreover, empirical research generally shows a negative correlation
between various indexes of central bank independence and the level of inflation. The
ESCB is considered to be highly independent. The Treaty of Maastricht states that
neither the ECB, nor a national central bank, nor any member of their decision-making
bodies shall seek or take instruction from any of the Community institutions or any
government of a Member State.
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The role of the Central Bank shows the highly ‘supra-national’ character of the EU’s
monetary policy framework. In contrast, fiscal policies remain the responsibility of the
Member States. It is, however, recognised that the fiscal policy of one state spills over
into other states. Moreover, with the loss of the national exchange rate on entering
EMU, the discipline of foreign exchange markets on national fiscal policies is lost.
Hence a new discipline is required. Otherwise, states could be tempted to ‘free ride’,
engaging in fiscal expansion and exporting the effects to the rest of the Euro Area
through higher interest rates for all. Similarly, the ECB monetary policy needs to be
supported by fiscal policy. The solution was the excessive deficit procedure in the
Treaty. This spells out basic rules and procedures. However, these were given greater
specification in the Stability and Growth Pact, negotiated between 1995 and 1997 on the
initiative of the German government. This puts in place a set of fiscal rules that can be
described as ‘hard’ co-ordination in that the rules are fairly precise and sanctions are
available for those states that repeatedly fail to meet them. The Pact has proved highly
controversial and was amended in 2005 (see below).

Structural policies to improve competitiveness are vital in the EMU because entry states
lose their two main mechanisms for economic adjustment – the exchange rate and the
interest rate. Hence they are left with just fiscal policy (which is constrained by rules),
flexibility and mobility in labour markets, improved education and training, and more
competition in product, service and capital markets. The result is a common interest in
employment policy and structural reforms to markets and to welfare states. At the heart
of this has been the Lisbon process, agreed in 2000, with the objective of creating the
world’s most advanced, knowledge-based economy by 2010. Here again, responsibility
remains with the Member States. However, in contrast to fiscal policy, co-ordination is
‘soft’ and takes the form of the Open Method of Co-ordination. It is based on agreeing
broad policy guidelines rather than rules, peer review, and ‘benchmarking’ best practice
in improving growth and employment. It lacks firm, binding national targets, any
‘naming and shaming’ of states, and any sanctions. This pillar of EMU has proved even
more controversial, in part because of domestic resistance to market liberalisation and
in part because the Lisbon process has been discredited by slow progress and a growing
gap in productivity performance between the US and the EU/Euro Area.

4. THE ECB AND MONETARY POLICY

The ECB is modelled on the German Bundesbank, but is even more independent;
indeed, it can claim to be the most independent central bank in the world. The ECB is
independent on all dimensions: in defining what price stability means as an objective;
in its instruments (it has sole responsibility for interest rates and open market
operations); in its personnel (who must be drawn from the central banking profession);
and in its finances (its capital comes from member central banks which are themselves
independent). Most important is ‘goal’ independence. The ECB originally defined its
price stability target as inflation “below 2 per cent”. This reflected its absolute priority
to establishing its credibility as an inflation fighter when it had no history as an
institution on which to draw. It could not assume that it could simply borrow (and
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squander) the credibility of the Bundesbank. In 2003 this target was redefined as “below
but close to 2 per cent”.

The ECB has been very successful in locking in market expectations of Euro Area
inflation very close to its target. In this sense it has gained credibility. Aggregate
inflation has remained close to its target. It has revised its monetary policy strategy in
2003 to reflect the lack of short-term predictive value of the money supply ‘pillar’ of the
strategy for inflation. Greater stress is now laid on the economic ‘pillar’, which includes
a range of variables like exchange rate, fiscal policies, wages, and forecast inflation. The
money supply ‘pillar’ remains in part because it is seen as of value in capturing asset
price inflation and longer-term threats from excessive credit and in part to reassure those
who wish monetary policy to be based on a single clear rule.

The ECB has not escaped criticisms, especially from British economists and policy
makers. One criticism is that the inflation target should be a political decision, and the
central bank accountable for meeting this target (as with the Bank of England). There is
a lack of democratic accountability. Another criticism points to a lack of transparency.
The minutes of ECB governing council meetings are not published; members do not
express their own views. This job is left to the ECB president, especially in his press
conference after council meetings and in testimony before the European Parliament.
Finally, it is argued that ECB policy is too inflexible because it lacks a ‘symmetrical’
inflation target. It does not set a target with an upper and lower boundary, but speaks of
“below 2 per cent”. This very strong disinflationary bias could prove costly to growth
and employment; inflation can be too low to facilitate growth.

5. EVALUATION OF EMU AFTER 5 YEARS

Despite the criticisms made of it, the ECB monetary policy has contributed to making
the euro a credible currency by resolutely containing inflationary pressures. At the same
time interest rates have been at an historical low for most Euro Area states, which earlier
had to set their own interest rates at a higher level than German rates because they
lacked credibility. The result has been expansionary monetary policy for most Euro Area
states. There have also been some negative effects in asset price inflation, especially the
property markets in Italy and Spain. However, Germany – with just about the lowest
inflation rate – has experienced much higher real interest rates than its competitors. Low
interest rates have also meant an enormous relief on the debt servicing costs of states
like Italy: the higher the public debt, the greater the relief.

However, a series of problems have emerged:

First, the main economy of the Euro Area is locked into economic stagnation. It
has not proved a main beneficiary of EMU. On the other hand, German exports
to the Euro Area states have grown enormously since 1998, showing that it has
gained. Impressively, Germany has substantially reduced its unit labour costs
over the same period, reflecting substantial domestic structural changes, so that
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by 2005 it had regained a significant competitive advantage after starting with an

overvaluation of the Deutsche Mark on entering the Euro Area. Despite these
achievements, unemployment remains very high, and growth very low. The
explanations are domestic rather than to be found in the Euro Area.

Secondly, though the formation of the Euro Area witnessed convergence in

inflation rates and fiscal deficits, this process ceased after 1999. The last five
years saw divergence in these indicators. Moreover, EMU did not prove a force
promoting convergence in growth and employment rates; again, divergence was
more evident. On the one hand, Ireland, Finland and Spain enjoyed expansion;
on the other, France, Germany, Italy and the Netherlands generated dismal
figures.

Thirdly, by 2005 some big problem states were beginning to emerge and
questions to arise about whether they could sustain membership. Led by Italy,
they included Greece and Portugal. Italy had been deprived of the traditional
instrument that it had used to restore lost competitiveness, devaluation. Its
competitive position deteriorated after 1999. In consequence of poor growth, it
proved incapable of reducing its fiscal deficits and resorted to creative
accounting to hide the true position. Its debt position was twice the level in the
Maastricht criterion (60 per cent of GDP). By 2005 Italian politicians were
beginning to contemplate euro exit, even though it would lead to a huge increase
in debt servicing costs. Italy was the Achilles heel of the Euro Area. It can be
argued that the costs of euro exit are higher for problem cases like Italy than for
more successful states.

6. THE STABILITY AND GROWTH PACT

The Pact is central to the credibility of the Euro Area and is designed to ensure that
Member State fiscal policies support rather than undermine the ECB monetary policy.
Hence the ECB has a very strong interest in the Pact, and was a critic of its reform in
2005. The Pact has proved less effective than the Maastricht convergence criteria in
enforcing fiscal discipline for the simple reason that the convergence criteria were
backed by the sanction of exclusion from joining EMU; hence Italy and others worked
hard to address fiscal problems in 1996-97. However, after entry fiscal performance
diverged rather than converged. Some Member States, especially smaller, displayed
considerable discipline: Austria, Belgium, Finland, for instance. Larger states like
France, Germany and Italy repeatedly breached the limits.

The Pact takes over the convergence criteria of deficits no higher than 3 per cent of GDP
and public debt at 60 per cent of GDP. It identifies the central objective as fiscal
positions “close to balance or in surplus” over the economic cycle and deficits no higher
than 3 per cent. This is designed to ensure that debt comes down towards 60 per cent.
However, it was premised on trend growth rates that held when the Maastricht Treaty
was being negotiated. Since then nominal growth rates have fallen. In consequence,
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deficits should be lower to achieve the required target. For states like Greece and Italy
with huge debt levels persisting surpluses would be required. However, they are running
deficits outside 3 per cent. Hence there is a chronic fiscal problem in parts of the Euro
Area. With lower nominal growth rates France and Germany too are accumulating
rather than defraying debt.

In September 2003 the Pact hit a crisis when France and Germany persuaded ECOFIN
to halt the excessive deficit procedure that the Commission wished to apply to them.
This blow to the authority of the Commission was a blow to the credibility of the Pact.
It was revised in 2005 to allow more ‘temporary’ exceptions, to take a looser view of
when economic conditions might allow a higher deficit, and to prolong the length of
time that states had to correct deficits. There were some improvements. More stress was
laid on a ‘pro-cyclical’ Pact; states were to be under greater pressure to cut debt during
periods of economic expansion. Also, states with debt levels below 60 per cent were
given more flexibility over deficits. More stress was to be laid on the debt criterion. This
change meant that Italy became a key test case of the credibility of the reformed Pact.
If Italy were to avoid the excessive deficit procedure, the new Pact would lose any
serious credibility. The EU needs to enforce a more differentiated approach to fiscal
surveillance, targeted on states with the highest debt.

7. EURO AREA ENLARGEMENT

Britain and Denmark have ‘opt-outs’ from EMU negotiated at Maastricht (though
Denmark was unlike Britain a long-standing member of the ERM and now ERM2).
Sweden has not officially negotiated an ‘opt-out’, but a referendum in September 2003
showed the clear resistance of the Swedes to join the euro-zone. Accession states are
given only one option: to become ‘Member States with derogation’ which means that
they are expected to prepare for entry. However, no timetable is attached, and each state
remains responsible for its own entry strategy. Some states (about six of the 2004
entrants: Estonia, Latvia, Lithuania, Cyprus, Malta, Slovenia) are targeting 2007; others
approximately 2010 (Bulgaria and Hungary); whilst Romania targets 2014.

Euro Area entry depends on meeting a series of conditions. Two should be met on EU
accession: freedom of capital movement and independence of the national central bank.
The next issue is ERM2 entry: six states have joined since 2004 - Estonia, Latvia,
Lithuania, Cyprus, Malta, Slovenia. They have established a central parity with the euro
and must keep their currencies within the fluctuation band “without severe tensions”
and “without unilateral devaluation” for at least two years. This is a market-test of
convergence. The other Maastricht convergence criteria to be met relate to: inflation (a
tough test based on the three best-performing EU states); fiscal; deficit (3 per cent of
GDP); public debt (60 per cent); and long-term interest rates (again a market-based
test). These are tests of “nominal” convergence; they do not deal with growth rates or
employment, for instance. They raise the question of whether “real” convergence can
and should be sacrificed for the sake of meeting the Maastricht criteria.

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Accession states have three strategic options: they can defer euro entry and focus on real
convergence, infrastructure development and the welfare state (as seems to be the case
in the Czech Republic, Hungary and Poland); they can use EMU accession to lock in or
anchor a pre-existing framework of domestic discipline (as in the three Baltic States,
Bulgaria and Slovenia); or they can use it to enforce an absent domestic discipline.

Bibliography:

– Paul De Grauwe, “Living with the Euro: A Provisional Balance Sheet.

Discussion Paper”, Robert Schuman Centre, European University Institute,
Florence, 2003;

– Kenneth Dyson, “Economic and Monetary Union in Europe: a Transformation of

Governance”, in B. Kohler-Koch and R. Eising (eds.), The Transformation of
Governance in the European Union, Routledge, London and New York, 1999,
p.98-118;

– Kenneth Dyson (ed.), European States and the Euro: Europeanisation, Variation
and Convergence, Oxford University Press, Oxford, 2002.

Relevant official documents and information can be found at the following

websites:

– European Central Bank: http://www.ecb.int/home/html/index.en.html

– European Commission, DG Economic and Financial Affairs:

http://europa.eu.int/comm/economy_finance/index_en.htm

– Economic and Financial Affairs Council: http://ue.eu.int/emu/en

– European Commission’s website of the euro: “The Euro, our currency”

http://europa.eu.int/comm/economy_finance/euro/our_currency_en.htm

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CHAPTER 19

IMPLEMENTING THE EMU ACQUIS –

EXPERIENCES OF SLOVENIA

Matej More*

1. INTRODUCTION

Slovenia joined the EU on the 1st of May 2004. At the same time Slovenia also became
a member of the European Monetary Union (EMU), although a member with
derogation. Due to various predominantly economic reasons, Slovenia aspires to
become a full member of the EMU and adopt the euro as its own currency at the earliest
possible time, with a current target date of 1st of January 2007. That is why Slovenia,
together with Estonia and Lithuania, joined the exchange rate mechanism II (ERM II)
on 28 June 2004 and is now progressing towards nominal convergence which involves
important legal, administrative and technical preparations for the changeover from the
present national currency, the Slovenian tolar to the euro.

This paper gives an overview of the implementation of the major parts of EMU acquis
as experienced by Slovenia and its plans to complete the implementation process, which
is still an ongoing one. As the implementation of EMU acquis is a rather lengthy
process, which goes in stages, the relevant acquis will be first recalled by these main
stages. Indeed, the implementation starts already at the pre-accession stage, continues
when a country becomes a member of the EU, and is reinforced later when the country
joins ERM II. Implementation is fully completed with the changeover to the euro. The
acquis that a country has to transpose and implement at each stage will be reviewed
focusing on Slovenian experiences, problems and difficulties, especially on those,
which might also be typical to other candidate countries, like Romania.

2. THE DECISION TO JOIN THE EU IS ALREADY A DECISION TO

JOIN THE EMU

When a country decides that it wants to become a member of the EU it must be aware
that it has also decided for membership in the EMU. The cases of the United Kingdom
and Denmark which have so-called ‘opt-out clauses’ - enshrined in the protocols to the
EC Treaty - might be misleading as the candidate countries might think that they do not
need to join EMU if they do not want to. The Copenhagen Council stated clearly that
membership of the EU requires that “a candidate country has the ability to take on the
obligations of membership, including adherence to the aims of political, economic and
monetary union”. Within this context, there is no possible ‘opt-out clause’ from any
obligations given to new Member States including obligations derived from the EMU
acquis.
* Secretary in the Cabinet of the Minister of Finance of the Republic of Slovenia.
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Slovenia, like other countries joining the EU on 1st May 2004, has no ‘opt-out clause’
from any obligation given to new Member States. That means that with the accession to
the EU, Slovenia assumes the obligation to accept all EMU acquis and ultimately, when
it reaches the necessary state of preparedness, will adopt the euro. As a result, the
adoption of the euro is a ‘must’ for new Member States; however they have the freedom
to decide on the appropriate moment when to adopt the euro.

3. THE EMU ACQUIS

The EMU basically means three things. First, it means a common currency for all
members of the EMU1. Member States have to give up their own national currencies and
adopt the euro as a common currency. Parallel to that, they lose their monetary
sovereignty. As they do not have their own currency any more, they also lose monetary
and exchange rate policy as economic policy tools. Instead, the monetary policy of those
Member States becomes a single monetary policy of the whole euro zone i.e. all
Member States of the EMU. Member States, of course, participate in the creation of a
single monetary policy through the ESCB (European System Of Central Banks) and the
ECB (European Central Bank) according to their Statute2. However, it is no longer their
own monetary and exchange rate policy they could cope with when dealing with
specific economic problems of their own country, but it becomes the monetary policy of
the whole euro zone pursuing common interests of all Member States. These are two
very obvious elements of the EMU, of which every Member State of the EU is aware.

In addition to that, the EMU also means something else. It is a high degree of
coordination and convergence of economic policies. In order to have an effective
monetary policy it needs to be supported by other economic policies and in particular
by fiscal policy which is formally still in the domain of the Member States of the EU.
However, fiscal policy becomes a matter of common concern: according to the EMU
acquis it needs to be coordinated among Member States in order to achieve a high level
of convergence of economic policies. As a result, adherence to the EMU does not only
mean giving up its own currency and monetary and exchange rate policy but it also
means loosing autonomy in conducting economic policies, and in particular fiscal
policy.

The EMU principles are already enshrined in the EC Treaty, in Title VII “Economic and
Monetary Policy” (articles 98 to 124). These principles are further elaborated in the
Statute of the European System of Central Banks and of the European Central Bank, and
in several Council Regulations and Decisions3. In addition, there are several
Commission Recommendations mostly dealing with technical aspects of the
introduction of the euro.

The EMU acquis consists mostly of so called ‘primary legal sources’ which are directly
1 When this chapter refers to the EMU and its members, only full membership is considered i.e. only Member States
without derogations and which have already adopted the euro. The other Member States of the EU are always
referred to as EMU members ‘with derogations’.
2 Protocol on the Statute of the European System of Central Banks and of the European Central Bank; Protocol
annexed to the Treaty establishing the European Community.
3 European Commission, Compilation of Community Legislation on Economic and Monetary Union, July 2004.

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applicable and need not to be transposed into national legislation. In this respect the
EMU acquis implementation differs from most of the other chapters of the EU acquis
where the first step of implementation of the acquis implies a rather extensive
transposition of EU directives into national legislation. In the field of the EMU acquis,
the implementation is less focused on legal convergence i.e. transposition of the EU law
into national legislation, but much more on coordination of economic policies in order
to achieve nominal convergence, a precondition for an adoption of the euro.
Nevertheless, there is a requirement in the area of legal convergence: national legislation
needs to be made compatible with Treaty articles 101, 102,108,109 and the Statute of
the ESCB. Provisions of these articles need to be transposed into national legislation.

4. IMPLEMENTATION OF THE EMU ACQUIS IN THE PRE-

ACCESSION STAGE

As we have already mentioned, the implementation of the EMU acquis is a process in

several stages. Countries which are on the way to join the EU and later to join the EMU
are not supposed to implement all the acquis at once in the pre-accession stage, as it is
the requirement for the other chapters of the acquis. Treaty provisions that lead to the
adoption of the euro apply only to the EU Member States. Candidate countries must first
join the EU before they can be eligible for the euro. The implementation of the most
important parts of the EMU acquis and the subsequent adoption of the euro is supposed
to be done by candidate countries after they have joined the EU. Nevertheless, Slovenia
and other countries, which made part of the last EU enlargement in May 2004, were
required to start actively preparing to fulfil EMU obligations already at the pre-
accession stage.

First of all, the candidate countries of the last EU enlargement had to carry out
economic reforms to become functioning market economies in order to meet the so-
called economic criteria and to be able to sustain competitive pressure from the EU
market. This precondition opened the way to negotiations for EU membership. As for
the EMU acquis they already had to implement specific parts, in order to demonstrate
the capacity to take on the EMU acquis. This related to the process of legal convergence:
Slovenia was required to make its national legislation compatible to the Treaty and the
Statute provisions regarding:

The independence of the central bank;

The prohibition of any direct financing of the public sector; and
The prohibition of privileged access of the public sector to financial institutions.

On the other hand, there was the requirement to complete liberalisation of capital
movements according to the Treaty provisions. Although liberalisation of capital
movements is not a specific part of the EMU acquis, it is an important precondition for the
EMU. Slovenia and the other candidate countries were expected to fully liberalise capital
movements already at this early stage.

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In the negotiation process candidate countries might have asked for certain transitional
arrangements in the form of transitional periods or certain transitional measures for
those parts of the acquis that countries were obliged to apply but might be unable to
apply. This, of course, had to be duly proved as justified during negotiations in order to
be accepted by the EU. Slovenia in this respect did not ask for any transitional
arrangements, neither in respect of capital movements nor in respect of legal
convergence.

4.1. Liberalisation of Capital Movements

Liberalisation of capital movements is one of the four basic freedoms and a corner stone
of a single market. It is also an important element of a functioning market economy. As
such it is a basic precondition for the adoption of the euro. Without a full liberalisation
of not only current account transactions but also capital account transactions it is not
possible to speak about equilibrium exchange rate. Possible restrictions on capital
account affect the exchange rate. In such a situation a country does not necessarily know
at which stage its national currency values should be converted in euro.

This is why the liberalisation of capital movements had to be done already before
accession to the EU. The principles of capital account liberalisation are enshrined in EC
Treaty provisions (articles 56 to 60). The EC Treaty requires full and complete removal
of all restrictions on capital movements and payments between Member States and
between Member States and third countries. Freedom of capital movements is an
absolute freedom that goes beyond the principle of non-discrimination. The EU opted
for unilateral liberalisation of capital movements towards the whole world. In addition
to that, countries - once members of the EU - are no longer allowed to use safeguard
measures in the case capital movements threaten the exchange rate and monetary
stability (so called ‘monetary clause’). Once candidate countries remove all restrictions
on capital flows and payments and enter the EU they have to sustain all pressures from
the market, without any administrative intervention.

Liberalisation of capital movements is without any doubt a very positive development

and can contribute towards better integration of the EU economy in the world economy
and to higher growth. If not well prepared and achieved too early - without the
fulfilment of basic preconditions - it might be contra-productive and potentially lead in
extreme cases also to financial crisis. The Asian crisis in the mid 1990’s is one of the
examples for that. The most important preconditions are financial and macroeconomic
stability of the country in a way that its inflation and interest rates are not substantially
higher then in it’s neighbour countries. On the other hand, a robust financial sector,
especially banking sector, which is able to manage risks to which the sector is exposed
by capital inflows and outflows is the other major precondition that has to be fulfilled if
capital liberalisation is to be accomplished successfully.

Slovenia was very aware of the risks of too quick liberalisation of capital movements.
That is why it opted for a very gradual approach. Slovenia was occasionally criticised
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by the EU of being too slow. The Slovenian approach was focusing on macroeconomic
stabilisation and building up of prudential capacity of the financial sector. The
Association Agreement with the EU, negotiated in 1995 and ratified and entered in force
in the beginning of 1999, set pace of the liberalisation steps. It required immediate
liberalisation of direct investment and credit operations and gave a four years
transitional period for portfolio investment and real estate investment. Comparing the
association agreement to the ones of other countries, there is an impression that the
Slovenian Association Agreement with the EU was to some extent stricter. Namely, it
had also provisions regarding liberalisation of capital movements requiring Slovenia
also to fully remove restrictions on real estate transactions – long time before becoming
a full member of the EU. As a result, Slovenia removed last restrictions regarding very
short-term capital flows in the mid-2003, approximately one year before its entry into
the EU.

During the liberalisation of capital flows Slovenia was facing constant pressure on
exchange rate appreciation. With capital account of balance of payments in surplus and
current account close to balance, the supply of foreign currency constantly outweighed
demand and the Slovenian tolar was appreciating in real terms. The Bank of Slovenia
was preventing too high appreciation by intervention on the foreign exchange market
and with a sterilisation of monetary effects of its foreign exchange intervention. On two
occasions the Bank of Slovenia also administratively intervened by curbing foreign
portfolio investment (introducing custody accounts on non-resident investment in
domestic securities) and domestic borrowing abroad (introducing non-interest bearing
deposit on resident borrowing abroad). Nevertheless, the slow pace of liberalisation
seems to help keeping main macroeconomic aggregates in balance and completing
liberalisation in an orderly way without any major problems or even currency crisis.
However, too slow liberalisation also meant that the domestic financial sector,
especially the banking sector, remained too much and for a too long period protected
from outside competition. This gave a modest incentive to structurally adjust and
improve its competitiveness. In addition to that, interest rates also remained on a high
level for long time. Faster opening up would have brought them earlier down to
European levels. This would have been beneficial for the Slovene economy.

4.2. The Independence of the Central Bank

Article 108 of the EC treaty requires each Member State to ensure at latest at the date
of establishment of the ESCB independence of their central banks. This implies the
obligation to make their legislation compatible with EMU acquis comprised in the
Treaty, and the Statute of the ESCB and the ECB. As for the candidate countries they
were already in the pre-accession stage required to adopt the principles of independence
of their central banks. Only an independent central bank can effectively pursue a policy
of stable prices as the major goal of their monetary policy and thus contribute to the first
Community objective of “sustainable non inflationary growth” (article 2 of EC Treaty).

Looking at the Treaty and the Statute, the concept of independence is a rather elaborated
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concept. Although, following the German model of the Bundesbank, Slovenia granted
independence to the Bank of Slovenia already in its Constitution, it turned out that the
independence of the Bank of Slovenia was not fully in line with the EMU acquis.

The Slovene Constitution, in its article 152, is granting independence to the Bank of
Slovenia stipulating that it is independent in carrying out its tasks and reports only to
the Parliament. On the basis of this constitutional provision the first Law on the Bank
of Slovenia was adopted in 1992. When starting negotiating with the EU, Slovenia was
quite confident of having legislation on the central bank in line with the EMU acquis.
Looking more deeply it discovered that the legislation is incompatible in more or less
all criteria for independence as stipulated by the EMU acquis. The EMU acquis is
stipulating four criteria for the independence of the central banks of the Member States:

Functional independence. This basically means that a central bank should have
only one major objective of monetary policy: stability of prices. The Slovene
legislation from 1992 sets two major goals for the Bank of Slovenia: stability of
prices and liquidity in domestic and external payments. These two goals, which
might be on certain occasions even conflicting objectives, were clearly not in line
with the EMU concept of functional independence;

Institutional independence. In carrying out tasks regarding monetary policy, a

central bank shall not seek or take instruction from external bodies (be it a
Community institution or body, the national government or any other body). At
the same time nobody has the right to approve, suspend, annul or defer the
central bank’s decisions. These decisions are final;

Financial independence. A central bank should be in the position to avail itself

of the appropriate financial means to ensure that its tasks can be properly
fulfilled. In the Slovene legislation of 1992 the Parliament has been given the
power to approve the budget of the Bank of Slovenia. This is clearly not in line
with the EMU acquis as a right to ex ante control of the budget may create
situations where the financial independence is compromised;

Personal independence. The governor and members of the board should be

completely independent; they should have a mandate that is long enough or last
at least five years. The governor should not be relieved from the office unless
he/she no longer fulfils conditions necessary for the performance of his/her
duties or has been found guilty of serious misconduct. In this respect, the
Slovene legislation was not in line with the EMU concept of personal
independence.

Slovenia adopted a new Law on the Bank of Slovenia in 2002 in accordance with the
EMU acquis in terms of functional, financial and personal independence. As regards the
last concept, Slovenia opted for the ‘professionalisation’ of the board members. The
only admitted exemption is part-time employment of board members in University or
research institutes, where potential conflicts of interests are excluded.

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4.3. Prohibition of Direct Financing of the Public Sector

The Law on the Bank of Slovenia of 2002 transposed two other important Treaty
provisions regarding access of the public sector to financial means. The idea behind
these provisions is that the public sector must be subject to market discipline and must
be put on the same level as the private sector as regards borrowing of financial means.

The first Treaty provision in question relates to the prohibition of direct financing of the
public sector by a central bank (article 101 of TEC). Monetary policy can in no way be
a source of financing the public sector. Neither government nor local communities or
any other bodies governed by public law should have overdraft facilities or credit
facilities with a central bank. Also a central bank is not allowed to directly purchase debt
instruments issued by the public sector.

This Treaty provision is a very important element of fiscal discipline. It also supports
the independence of a central bank. The Law on the Bank of Slovenia of 1992 was not
compliant to this provision. Namely, there was a provision stipulating the possibility of
a short-term overdraft facility for the government with the central bank. It was limited
to 5% of the annual volume of the budget and intended to be used only within the year
to overcome potential liquidity problems of the budget. At the end of the year the credit
would have to be repaid. It was only a legal possibility and had actually never been used
by the Slovene government. Nevertheless, it represented inconsistency with the Treaty
provision and was removed with the new Law on the Bank of Slovenia of 2002.

4.4. Prohibition of Privileged Access of the Public Sector to Financial

Institutions

The next important provision of the EMU acquis is enshrined in article 102 of the EC
Treaty and in Regulation 3604/93. It concerns the prohibition of the privileged access
of the public sector to financial institutions, except for prudential reasons. This
provision is complementary to the prohibition of direct central bank financing and
concerns all financial institutions (banks, insurance, investment funds, etc.). The
objective is, as in the previous case, to put the public sector under market discipline. In
addition, this is also an important element to ensure the freedom of capital movements
and prevent market distortions.

The Slovene legislation on insurance companies, investment funds and other relevant
acts require these financial institutions to invest a certain percentage in bonds issued by
the Slovene government. This has been done for two reasons:

To support government bonds. This actually represented privileged access of the

government to financial institutions;
Governmental bonds were considered as safer then other instruments on the
market, especially when outward investment of insurance companies and
investment funds were still not legally possible.

The relevant provisions have been abolished by changes in the legislation.

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5. MEMBERS OF THE EMU WITH DEROGATION

While becoming a Member State of the EU on May 1st 2004 Slovenia also became a
member of the EMU ‘with derogation’. The status of an EMU member with derogation
is stipulated in article 123(3) of the EC Treaty and Chapter IX of the Statute of the ESCB
and the ECB. Basically it consists of the exclusion of the Member State and its central
bank from rights and obligations within the ESCB. Among others a Member State ‘with
derogation’ is also not subject to excessive budget deficit procedures under the EC
Treaty. As a result, Slovenia has retained powers in the field of monetary policy in
conformity with its Law on the Bank of Slovenia. At the same time, the Bank of
Slovenia has become an integral part of the ESCB and the governor of the Bank of
Slovenia a member of the General Council of the ESCB without voting rights.

After fully implementing all EMU acquis at the pre-accession stage Slovenia has now
to focus on the following aspects of the EMU acquis:

The exchange rate policy as a matter of common concern;

The shaping of economic policies as a matter of common concern; and
The gradual progress towards nominal convergence.

5.1. Exchange Rate Policy and Exchange Rate Mechanism II (ERM II)

A Member State with derogation has to consider its exchange rate policy as a matter of
common concern. It should avoid excessive fluctuations of its exchange rate. This is
also a period of preparation for eventual participation in the Exchange Rate Mechanism
II (ERM II). Participation in the ERM II is a precondition for the adoption of the euro,
which the Bank of Slovenia and the Slovene government envisage for 2007. Slovenia
started with the preparation to enter the ERM II immediately after its accession to the
EU. On 28 June 2004 Slovenia entered the ERM II. The central parity of the Slovene
tolar against the euro was determined by negotiations and is based on common views
about long-term stability of the Slovene tolar by the Bank of Slovenia, the Slovene
government, the European Central Bank, the ministers of finance of the Euro system
Member States, and the ministers and central bank governors of the Member States
participating in ERM II. The central parity has been set at 239,64 Slovene tolars for 1
euro. The actual exchange rate can vary around the central parity within the agreed
standard fluctuation band, which is +/- 15%. The exchange rate needs to be sustainable
in the period of at least two years. In this period there should be no devaluation. If
devaluation occurs, the period of counting will start again. This is a test for the exchange
rate, whether it is in equilibrium. The exchange rate is supposed to be a rate at which
the conversion towards the euro will be done at the end of the period. This period of two
years is a test for the ability of accommodative responses of fiscal, income and structural
policies. Namely, monetary policy can no longer cope with shocks to the economy. It
should be only focused on price stability. So far, there have been no problems in
Slovenia with exchange rate stability within ERM II and the exchange rate seems to be
accepted by market players.
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5.2. Economic Policies as a Matter of a Common Concern

EU Member States have to consider their economic policies as a matter of a common

concern. Economic policies have to be coordinated on the level of EU in the framework
of ECOFIN. They have to be put in line with broad guidelines issued by the EU Council
in order to contribute to EU objectives of which the most important are stable prices,
sound public finance and balance of payments. The economic policies of the Member
States are subject to regular multilateral surveillance. In particular, fiscal policy is given
most importance. Member States should achieve or aim towards budget consolidation
in line with the principles and procedures stipulated by the Stability and Growth Pact4.
Slovenia is thus no longer completely autonomous in conducting its economic policies.

5.3. Nominal Convergence Criteria (“Maastricht Criteria”)

To fulfil the nominal convergence criteria is a condition for the adoption of the euro.
Only those Member States which fully meet convergence criteria can adopt the euro.
Nominal convergence criteria are not a requirement for EMU Member States ‘with
derogation’. However, they are supposed to gradually progress towards the nominal
convergence criteria (so called “Maastricht criteria”) and consider them as medium term
objective.
The nominal convergence criteria are the following:

The following table is showing Slovenia’s compliance with the nominal convergence
criteria as on April 1st 2005. Slovenia is already meeting the public finance and long-
term interest rate criteria. The inflation rate is still beyond the convergence criteria and
it is expected to be also the biggest problem in meeting the convergence criteria. As
Slovenia has joined ERM II at the end of June 2004, it is now somewhere half way of
the two-year period for which stability of exchange rate has to be demonstrated.

4 European Commission, Compilation of Community Legislation on Economic and Monetary Union, July

2004.

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Meeting nominal convergence criteria in Slovenia (April 2005):

6. THE DATE FIXED FOR THE ADOPTION OF THE EURO

The stage of membership in the EMU with derogation is also a period in which a
country has to think about the date on which it intends to adopt the euro. Formally the
country has to comply with nominal convergence criteria. However, real convergence,
although not a formal requirement from the point of view of the EMU acquis, has also
to be seriously considered by the candidate country. For countries with a still weak real
convergence in terms of a big development gap measured in GDP per capita, and a very
different economic structure it may be better to postpone the time of the adoption of the
euro until a higher level of real convergence is achieved. With the adoption of the euro
they give up their own monetary and exchange rate policies as very useful tools to
influence economic activity, balance of payment adjustment and sustainability of
competitiveness of their economies.

Slovenia is among the new Member States that have opted for an early adoption of the
euro. The present decision is to adopt the euro as soon as possible with a target date of
January 1st 2007. Several reasons are in favour of the early adoption of the euro. Firstly,
Slovenia is a small economy, with 2 million inhabitants and accounts for only 0.3% of
total GDP of Member States of the EMU. The currency area of the Slovene tolar is
therefore very small. Joining the common currency area is more beneficial for smaller
countries because monetary policy is more effective in larger currency areas. Secondly,
Slovenia is already very close to meet nominal convergence whereas a relatively high
degree of real convergence has already been achieved.

Given the currently relatively favourable macroeconomic situation in Slovenia and in its
environment it is very likely that nominal convergence will be achieved in the next two
years. On the other hand, factors determining real convergence are not against the early
adoption of the euro. The Slovene economy is relatively strong and robust with a
structure very similar to that of the EU economy. Besides, transition of the Slovene
economy to a modern market economy is to a sufficient degree completed. The current
level of Slovene economic development is comparable to the level of development of
the euro zone countries. In the following chart we can see that the Slovene GDP per

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capita in Purchasing Power Parity (PPP) in 2001 was on the level of 69 of the average
of the euro zone countries. In GDP per capita PPP Slovenia already surpasses some
present EMU members (Greece) and is very close behind Portugal and Spain.

The Slovenian economy does not show similarities with the EU average only in terms
of GDP and PPP. The chart below shows that the structure of value added production by
economic activity in Slovenia does not differ too much from the one in the euro zone
either.

Because the structure of Slovenia’s economy is similar to that of countries within the
euro zone, asymmetric shocks - problematic in a monetary union where there is no room
for ‘local’ monetary policy measures - are less probable.

Slovenia is also a very open economy and already well integrated into the EU economy,
which is an additional argument that speaks in favour of the early adoption of the euro.
The chart bellow shows the percentage of exports and imports combined in GDP.
Slovenia is among countries with the highest share of exports and imports in GDP.
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7. PREPARATIONS FOR CHANGEOVER TO EURO

The final stage of the implementation of the EMU acquis is the changeover to the euro
currency. Slovenia will have to meet fully the Maastricht criteria. The assessment of the
criteria will be done after at least two years in the ERM II with a stable exchange rate.
If the assessment is positive, a decision for abolishment of derogation and adoption of
the euro will be made. Consequently, if the conversion rate is irrevocably fixed, the
Bank of Slovenia looses monetary power and banknotes are issued by the ECB, while
coins will still be issued by Slovenia.

Although Slovenia is still in the ERM II and the target date of adoption of euro is fixed
for 2007, preparations for the changeover to the euro currency are already in full swing.
Slovenia will have no transition period for the introduction of the euro currency. The
euro as a book currency and notes and coins will be introduced simultaneously. There
will be a very short period of only 7 days of dual circulation of the Slovene tolar and
the euro. After this period, the Slovene tolar notes and coins will be withdrawn from
circulation.

Bibliography:

– European Commission, Compilation of Community Legislation on Economic

and Monetary Union, July 2004;

– Banka Slovenije, Vlada Republike Slovenije, Programme for ERM II Entry and
Adoption of the Euro, Joint Programme of the Slovenian Government and the
Bank of Slovenia, Ljubljana, November 2003:
http://www.bsi.si/html/publikacije/evropa/ERM2%20_BS_Vlada_200311.pdf ;

– European Central Bank, Convergence Report 2004:

http://www.ecb.int/home/html/index.en.html

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 SECTION 7

EU SOCIAL AND EMPLOYMENT POLICY

 Chapter 20

CHAPTER 20

EU SOCIAL POLICY, EMPLOYMENT POLICY, HIGHER

EDUCATION AND RESEARCH POLICY

Erol Kulahci*

1. INTRODUCTION

When reviewing the development of socio-economic policies from the Treaty of Rome
(1957) to the Mid-term review of the Lisbon Strategy in 2005, one can be struck by the
strengthening of the general trend of socio-economic liberalisation which prevails in the
project of European construction. It started with negative integration, i.e. the progressive
removal of internal trade barriers between Member States. Next, the Single European
Act (1986) has specially favoured the liberalisation of goods and capital. The project of
Monetary Union (1992) has been strongly influenced by the rigorous monetary
discipline inspired by Germany1. The Growth and Stability Pact (1997) has been
designed to give further guarantee to the monetary discipline. Therefore, it is not
surprising to notice a general asymmetry between the economic-financial liberalisation
and the socio-economic regulation2.

In addition, the recent result of the debate on the EU budget 2007-2013 suggests that
some well-off countries are not ready to contribute significantly to the EU distribution
mechanisms.

Accordingly, progresses on European social, employment, research and higher

education policies were, are and will be rather weak. European social and employment
policies are key policy areas, but it is important to restate that they are not the only
policy domain shaping socio-economic and socio-political policies. Other relevant
domains include research and education policies.

* Lecturer,Free University of Brussels, Faculty of Political Science, Institute of European Studies, Belgium.
1 Kenneth Dyson and Kevin Featherstone, Negotiating Economic and Monetary Union, Oxford, Oxford
University Press, 1999. Kenneth Dyson, “EMU as Europeanisation: Convergence, Diversity and
Contingency”, Journal of Common Market Studies, November 2000, pp.645-666.
2 Gerda Falkner, “The treaty on European Union and its revision. Sea change or empty shell for European

social policies?”, Stein Kuhnle (ed.), Survival of the European Welfare State, London and New York,
Routledge, 2000, p.194. Dermot Hodson and Imelda Maher, “The Open Method as a New Mode of
Governance: The Case of Soft Economic Policy Co-ordination”, Journal of Common Market Studies, Vol.39,
N°4, November 2001, p.732.

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2. SOCIAL POLICY

2.1. History

This part will analyse the various characteristics of the European social policy by
focussing on the historical distribution of competences between the EU and the Member
States. This distribution occurred in five successive steps: the Treaty of Rome, the
Single European Act, the Treaty of Maastricht, the Treaty of Amsterdam and the Treaty
of Nice.
The legislative breakthrough starts with the Treaty of Rome (1957). The following
disposals are adopted: the freedom of movement of workers, the provisions on equal pay
for both sexes, the ‘existing equivalence between paid holiday schemes’ and the
European Social Fund: to provide financing for training and relocation program for
displaced workers (see next section).
“During the 1960s and the 1970s, relatively little occurred to change this picture”3. One
has to wait almost thirty years to witness a second breakthrough with the Single
European Act (SEA) in 1986. Two important legislative disposals have been adopted in
the social policy field:
Harmonisation related to health and safety of workers: the SEA allowed qualified
majority voting (QMV). It does not prevent any Member States from
maintaining or introducing more stringent measures for the protection of
working conditions otherwise compatible with the Treaty;
Corporatist policy-making procedures: the creation of a process of bargaining
between management and labour at the European level through the social
dialogue.

Three years later (1989), the Charter of Fundamental Social Rights for Workers is
adopted following the proposal of the European Commission and the agreement
between the Heads of state and government of the twelve Member States of the EC at
the time, except the United Kingdom. This agreement encompasses an Action
Programme on the implementation of the Social Charter. For instance, there are
measures related indirectly to the Internal Market: labour law standards for young or
pregnant workers, rules on written employment contracts for all employees, rules
relating to working time.
However, the application of the measures from the Action Programme necessitated a
major change in the EC’s social policy rules and practice. A Treaty reform seemed
indispensable to the overwhelming majority of Council delegations by the early 1990s.
The Treaty of Maastricht (Treaty on European Union) in 1992 had taken Social Policy
one step forward with the adoption of the Protocol on Social Policy. This Protocol was
signed by the twelve Member States at the time and annexed to the Treaty on European
Union, noting that eleven Member States (all except the United Kingdom) wished to
continue to make significant progress in this field. The Protocol authorised the then 11
Member States, by means of an Agreement on Social Policy, ”to have recourse to the

3David Hine, “Introduction. The European Union, state autonomy and national social policy”, David Hine
and Hussein Kassim, Beyond the Market. The EU and national social policy, London and New York,
Routledge, 1998, p.5.
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institutions, procedures and mechanisms of the Treaty for the purposes of taking among
themselves and applying as far as they are concerned the acts and decisions required for
giving effect to the abovementioned Agreement”. The UK was granted an ‘opt-out’ from
the Social Policy measures agreed by the rest of the Member States.

As a result, the Treaty of Maastricht and the Protocol on Social Policy achieved an
important procedural step forward and an expansion of competences which led to a
series of additional directives”4.

In 1997, the new UK Labour government joined the Protocol on Social Policy. However,
the problematic aspects of the Protocol on Social Policy remained such as:

The explicit exclusion from Community action of some major social policy
issues;
The absence of delineation from other topics where management and labour
should indeed negotiate;
The de facto exclusion of the EP.

The Treaty of Amsterdam (signed on 2 October 1997 and entered into force on 1 May
1999) restored unity and coherence to Social Policy by incorporating into the EC Treaty
the Agreement referred to above.

In 2000, the European Council adopted the Lisbon Strategy (2000)5. On the surface,
three topics are central: economic reform, employment and social cohesion. The Lisbon
strategy proposes two formal axes:

First, it intends to prepare the transition towards a “knowledge-based economy” around

topics such as Information Society, European Research and Innovation Area, the support
to the creation and development of firms (in particular SMEs), the deepening of
economic reforms to realise the internal market, the development of efficient financial
market and the coordination of macroeconomic policies;
The “European Social Model” constitutes the second formal axis and is organised
around four sub-topics: Education and life-long learning, more and better jobs as well
as an active employment policy, the modernisation of social protection and the support
to social integration.

In institutional terms, the spring European Councils are institutionalised and deal
specifically with socio-economic policies. The European Commission plays a
considerable role. It prepares the report of the Spring European Council and presents
indicators for benchmarking.

4 Stephan Leibfried and Paul Pierson, “Social Policy. Left to Court and Markets?”, in Helen Wallace and
William Wallace, Policy-Making in the European Union, Oxford, Oxford University Press, 2000, p.273.
5 Susana Borras and Kerstin Jacobsson, “The open method of co-ordination and new governance patterns in

the EU”, Journal of European Public Policy, vol.11, no. 2, April 2004, pp.189-190.

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In order to guide the Lisbon Strategy, the Commission drafted the Social Policy Agenda
(2000-2005). It provides the roadmap for employment and social policy, translating the
policy objectives of the Lisbon strategy for economic and social renewal into concrete
measures.

In December 2000, the Nice European Council endorsed six main social policy
objectives: the promotion of employment, the improvement of living and working
conditions, proper social protection, dialogue between management and labour, the
development of human resources and the combating of exclusion. The Commission
reports annually on the progress in its Scoreboards.

2.2. Institutions and actors

It is expected that the Community shall support and complement the activities of the
Member States in the following fields:

Working environment to protect workers’ health and safety;

Working conditions;
Social security and the social protection of workers;
Protection of workers where their employment contract is terminated;
Consultation and information of workers;
Representation and collective defence of the interests of workers and employers;
Conditions of employment for third-country nationals legally residing in
Community territory;
Integration of persons excluded from the labour market;
Equality between men and women with regard to labour market opportunities
and treatment at work;
Combating of social exclusion;
Modernisation of social protection systems.

The Treaty of Nice maintains the status quo. However, the Council, acting in unanimity,
can make QMV applicable to those areas of Social Policy, which are currently still
subject to the rule of unanimity. This ‘bridge’ cannot, however, be used for social
security. In addition, the Treaty of Nice incorporates within the Treaty the Social
Protection Committee, which had been established by the Council pursuant to the
conclusions of the Lisbon European Council.

In parallel, there is to be mentioned the activity of the main actors on interest

mobilisation and representation at the European level. This activity is however still
weakly organised:

ETUC – European Trade Union Confederation;

UNICE – Union of Industrial and Employers’ Confederations of Europe;

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UEAPME – European Association of Craft Small and Medium-sized Enterprises;

CEEP – European Centre of Enterprises with Public Participation & of
Enterprises of General Economic Interest.

2.3. Recent Evolution

The Social Policy Agenda (SPA) for 2006-2010 presents the two following objectives:
providing jobs and equal opportunities for all and ensuring that the benefits of the EU’s
growth and jobs drive reach everyone in society. The EU would like to focus on the
modernisation of labour markets and social protection systems. While protecting the
most vulnerable in society, the SPA for 2006-2010 is intended to help people take hold
of the opportunities created by international competition, technological advances and
changing population patterns.

3. EMPLOYMENT POLICY

3.1. History

In terms of the historical development of employment policy at the European level, the
European Social Fund (ESF) is the first redistributive instrument of the Community. The
scope of the ESF encompasses five key areas for helping and improving the
employment conditions across the Community:

The development of active labour market policies to combat and prevent

unemployment, to avoid long-term unemployment, to facilitate the reintegration
of the long-term unemployed, to support integration into the labour market of
young people and persons returning to work after a period of absence;
The promotion of equal opportunities for all in terms of access to the labour
market, with particular attention to persons at risk of social exclusion;
The improvement of vocational training, education and counselling in the context
of a lifelong learning policy;
The promotion of a skilled, well-trained and flexible workforce, innovative and
adaptable forms of work organisation, and entrepreneurship;
The improvement of access and active participation of women in the labour
market (career prospects, access to new job opportunities, setting up businesses,
etc).

In parallel to the ESF, the EU started in the early nineties to consider seriously the
problem of unemployment. In its White Book on Growth, Competitiveness and
Employment (1993), the European Commission fixed the objective of diminishing
unemployment to 10% until 2000. It suggested considering instruments such as:
increasing investment, deregulating the labour market and improving competitiveness.

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In Essen (1994), the European Council concluded that it is important to:

Invest in professional training;

Diminish indirect wage costs;
Reinforce the efficiency of labour market policies;
Improve measures in favour of young people, long term unemployed, elderly
people and women.

During the 1996-1997 Inter-Governmental Conference the Heads of states and

government agreed to include a Chapter on “Employment“ in the Treaty of Amsterdam
(1997). It was decided that the Member States and the EC were to elaborate a
coordinated common strategy for employment. The Luxembourg European Council
intended to give substance to this common strategy (November 1997) and thus adopted
the four broad guidelines for employment:

Improving employability;
Developing entrepreneurship;
Encouraging adaptability in businesses and their employees;
Strengthening the policies for equal opportunities.

The Luxembourg summit introduced the ‘Open Method of Coordination’ (OMC), which
has become the working method in the area of Social and Employment Policies. At the
same time the European Employment Strategy (EES) has been created. The EES is
based on the following four-step process:

“Employment Guidelines” are proposed by the European Commission and

adopted by the Council of Ministers which must be consistent with the broad
guidelines on economic policy;
“National Action Plans” have to be written and presented by each Member
States;
A “Joint Employment Report” is presented by the European Commission and the
Council;
“Recommendations” for specific Member States can be issued by the Council of
Ministers.

With the Lisbon strategy, the Heads of State and Government agreed on three
objectives:

Raising the average employment rate to 70% (currently 61%);

Increasing the number of women in employment to over 60% (currently 52%);
Raising the average employment rate of people aged 55-64 to 50% (currently
40%).

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3.2. Institutions and actors

Article 125 recommends that the “Member States and the Community shall, in
accordance with this title, work towards developing a coordinated strategy for
employment and particularly for promoting a skilled, trained and adaptable workforce
and labour markets responsive to economic change”. The ‘Open Method of
Coordination’ applies for this policy area. The Treaty of Nice maintains the status quo
set up by the Treaty of Amsterdam.

When examining the European Social Fund (ESF) (Title XI, Chapter II), there are at
least four main actors of the decision-making process: the Commission, the Member
States, the Managing authority (MA), and the Monitoring Committee (MC). The MA is
the body designated by the Member States to manage the Structural Funds programmes.
This body can be a public or private authority at national, regional or local level or even
the Member State itself. The MA and the paying authority can be the same if the
Member State decides so. The MC plays a role of supervision and is set up by the
Member States and the MA. It oversees the implementation of the programmes on the
ground and it checks if the targets are reached. The MC also assesses and approves the
annual and final implementation reports on the programmes before they are sent to the
Commission.

3.3. Recent Evolution

When the Commission was preparing its Communication to the Spring European
Council in 2005, the Wim Kok Report was published. The report criticised the Lisbon
strategy arguing that there were too many objectives to be tackled and that it would be
impossible to reach these targets by 2010. Accordingly, the Kok Report proposed the
reduction of number of objectives and focused on ‘employability’.

The Commission submitted its Communication to the European Council taking into
account the suggestions from this report. It stressed that three sets of actions are
important in order to deliver growth and jobs:

“Making Europe a more attractive place to invest and work” by extending and
deepening the single market, ensuring open and competitive markets inside and
outside Europe, improving European and national regulations as well as
expanding and improving European infrastructure;
“Knowledge and Innovation for Growth”, by increasing and improving
investment in Research and Development, facilitating innovation, the uptake of
ICT and the sustainable use of resources as well as contributing to a strong
industrial base;
“Creating more and better jobs” by attracting more people into employment and
modernise social protection systems, increasing the adaptability of workers and
enterprises and the flexibility of labour markets as well as investing more in
human capital through better education and skills.

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4. RESEARCH POLICY

4.1. History

The European Unions Research Policy was designed in order to compete more
effectively internationally and especially to keep the pace with the American advances
in the field of science and technology6.

Consequently, various Community research activities, mainly in the energy sector, were
combined in 1984 into a five-year framework programme. Subsequent programmes
increased the funding available to transnational networks of researchers in firms,
universities and public laboratories, and broadened main topic areas to include
information technology, life sciences and the environment”7.

In this context, the Commissioner Philippe Busquin (1999-2004) launched the idea of a
European Research Area (ERA) in order not only to coordinate, but also to integrate
Research Policy at EU level. The Commissioner underlined that “the average research
effort in the Union was only 1.8 per cent of the EU’s GDP, as against to 2.8 per cent in
the United States and 2.9 per cent in Japan”8.

In accordance, with the 6th Framework Programme (2002-2006), the Commission was
allowed to manage an important budget:

Focusing and integrating Community research 13 345 Mil

Structuring the European Research Area 2 605 Mil
Strengthening the foundations of the European
Research Area 320 Mil
TOTAL 16 270 Mil

4.2. Institutions and Actors

Research Policy is an area where the EU is supposed to complement the activities

carried out in the Member States. Thus, the Community shall carry out the four
following activities:

Implementation of research, technological development and demonstration

programmes, by promoting cooperation with and between undertakings,
research centres and universities;
Promotion of cooperation in the field of Community research, technological
development and demonstration with third countries and international
organisations;
6 Thomas Banchoff, “Institutions, Inertia and European Union Research Policy”, Journal of Common Market
Studies, 2002, Vol.40, N°1, p.1.
7 Ibid., p.2.
8 Commission of the European Communities, Towards a European Research Area, COM (2000) 6, 18 January
2000, pp.4-5.
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Dissemination and optimisation of the results of activities in Community

research, technological development and demonstration;
Stimulation of the training and mobility of researchers in the Community.

The Treaty of Nice maintains the status quo (Title XVIII). In terms of decision-making
and institutional actors, upon proposal from the Commission, the Council adopts
legislation by QMV (Art. 166 and 167 TEC), after co-deciding with the EP.

4.3. Recent Evolution

The ambition of the European Commission is even more important for the period 2007-
2013, the 7th Framework Programme. Indeed, the European Commissioner Janez
Potocnik presented the following proposal to the European Parliament and the Council:

Cooperation 44 735 Mil

Ideas 11 942 Mil
People 7 718 Mil.
Capacities 7 536 Mil
JRC (Non-Nuclear. Act.) 1 824 Mil
TOTAL 73 215 Mil

5. HIGHER EDUCATION POLICY

5.1. History

Until the 1970s, the European Community was reluctant to give priority to actions in the
field of education. Four reasons are identified for this lack of development of EU
competences in this policy field9:

The emphasis on economic integration;

A legal dispute on the limitations of the EC for actions in the field of education;
The political context that limited the role of the EC in areas that the Member
States saw as their own competency;
The differences in national educational systems and the national orientation of
these systems.

Starting with the 1970s new progresses appeared in the area of education and especially
higher education. The most important achievement was the EU Mobility Programmes.
The 1976 Joint Study Programmes scheme of the EU aimed at the promotion of joint
programmes of study and research between institutions in several Member States10. This
was an experimental program. In 1987, this scheme was replaced by the European
9 Hans de Wit, Internationalization of Higher Education in the United States of America and Europe. A
Historcial, Comparative and Conceptual Analysis, London, Greenwood Press, 2002, p.46.
10 Ibid., p.51.

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Action Scheme for the Mobility of University Students (ERASMUS).

The Maastricht Treaty (1992) included education for the first time in the Treaty. Thus,
important issues emerged such as the European Credit Transfer System (ECTS), the
recognition of diplomas and the development of the European Higher Education Area.

5.2. Institutions And Actors

In the field of education, the EU supports and supplements Member States in the
following areas:

Improvement of the knowledge and dissemination of the culture and history of

the European peoples;
Conservation and safeguarding of cultural heritage of European significance;
Non-commercial cultural exchanges ;
Artistic and literary creation, including in the audiovisual sector.

The Treaty of Nice maintains the Amsterdam status quo. According to the present
articles (149, 150, 251), the Council can adopt legislative acts (directives or regulations)
by QMV with the European Parliament’s co-decision in the areas of education, youth
and vocational training. In addition, in the area of education and youth, the Council can
adopt non-binding recommendations by QMV, on a proposal from the Commission.

Under the limits of its competence, the Community has initiated several programmes
such as:
Education: Socrates and Tempus;
Vocational training: Leonardo da Vinci;
Youth: Youth for Europe, European Voluntary Service.

The Community launched as well a process of exchange of information and experiences

on issues related to the education systems of the Member States: the Eurydice
information network for sharing information on subjects such as lifelong learning,
evaluation procedures of school and university education or cooperation with third
countries.

5.3. Recent Evolution

The recent main developments are related to the European Higher Education Area
(EHEA). Given the impossibility to advance in this policy field by means of the
classical ‘Community method’, the idea of an EHEA was developed outside the EU
framework. This largely intergovernmental process was built around the Bologna
Declaration having as purpose to make “Higher Education systems” converge towards
a consistent system based on three cycles: degree/bachelor, master and doctorate.

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The objective is to develop an EHEA by 2010. In addition, three short-term targets for
May 2005 were identified:
Adopt a two-cycle system;
Issue a diploma supplement in a major language to all their graduates free of
charge without the need of a request;
Start to introduce a quality-assurance system.

The Prague conference (2001) highlighted three objectives:

Lifelong learning;
Enhancement of competitiveness in other parts of the world;
Involvement of higher education systems and students in the process.

Two years later, the Berlin objectives (2003) stressed the importance of creating links
between the EHEA and the European Research Area. It stressed the necessity for 2005
to review progresses regarding quality assurance, two-cycle-systems as well as the
recognition of degrees and periods of students.

In May 2005, ministers responsible for higher education in forty European countries
met at Bergen. They tried to agree on topics such as doctoral studies and the synergy
between Higher Education and Research, lifelong learning, the “Quality Assurance and
Recognition in a Global Perspective” as well as institutional autonomy and governance
of universities.

In this context, the Commission asked for the fulfilment of three conditions for the
modernisation of universities:

The need for higher and more efficient investments by opening up to private
financing;
The imperative of quality and excellence in order to push universities to seek
world-class excellence;
The need for autonomy as well as better system and institutional management.

In the Treaty establishing a Constitution for Europe, the provisions related to education
and vocational training remain mostly unchanged.

Bibliography:

– Kenneth Dyson and Kevin Featherstone, Negotiating Economic and Monetary

Union, Oxford, Oxford University Press, 1999. Kenneth Dyson, “EMU as
Europeanisation: Convergence, Diversity and Contingency”, Journal of Common
Market Studies, November 2000, pp.645-666;

– Gerda Falkner, “The treaty on European Union and its revision. Sea change or
279
Chapter 20

empty shell for European social policies?”, Stein Kuhnle (ed.), Survival of the
European Welfare State, London and New York, Routledge, 2000, p.194. Dermot
Hodson and Imelda Maher, “The Open Method as a New Mode of Governance:
The Case of Soft Economic Policy Co-ordination”, Journal of Common Market
Studies, Vol.39, N°4, November 2001, p.732;

– David Hine, “Introduction. The European Union, state autonomy and national
social policy”, David Hine and Hussein Kassim, Beyond the Market. The EU and
national social policy, London and New York, Routledge, 1998, p.5;

– Stephan Leibfried and Paul Pierson, “Social Policy. Left to Court and Markets?”,
in Helen Wallace and William Wallace, Policy-Making in the European Union,
Oxford, Oxford University Press, 2000, p.273;

– Susana Borras and Kerstin Jacobsson, “The open method of co-ordination and
new governance patterns in the EU”, Journal of European Public Policy, vol.11,
no. 2, April 2004, pp.189-190;

– Thomas Banchoff, “Institutions, Inertia and European Union Research Policy”,

Journal of Common Market Studies, 2002, Vol.40, N°1, p.1;

Hans de Wit, Internationalization of Higher Education in the United States of America

and Europe. A Historcial, Comparative and Conceptual Analysis, London, Greenwood
Press, 2002, p.46;

Commission of the European Communities, Towards a European Research Area, COM

(2000) 6, 18 January 2000, pp.4-5;

Relevant official documents and information can be found at the following

websites:
The Directorates-General of the European Commission:
– Employment, Social Affairs and Equal Opportunities:
http://europa.eu.int/comm/employment_social/index_en.html
– Research, Development, Technology and Innovation:
http://europa.eu.int/comm/research/index_en.cfm
– Education and Training:
http://europa.eu.int/comm/education/index_en.html

Parliamentary Committees in the European Parliament:

– Committee on Employment and Social Affairs:

http://www.europarl.eu.int/committees/empl_home.htm

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– Committee on Industry, Research and Energy:

http://www.europarl.eu.int/committees/itre_home.htm

– Committee on Culture and Education:

http://www.europarl.eu.int/committees/cult_home.htm

The Council Configurations:

– Employment, Social Policy, Health and Consumer Affairs Council:

http://ue.eu.int/cms3_fo/showPage.asp?id=411&lang=en

– Education, Youth and Culture Affairs Council:

http://ue.eu.int/cms3_fo/showPage.asp?id=416&lang=en&mode=g

Non-Governmental Organisations:

– European Trade Union Confederation: http://www.etuc.org/

– Union of Industrial and Employers’ Confederations of Europe:

http://www.unice.org/Content/Default.asp?

– European Association of Craft Small and Medium-sized Enterprises:

http://www.ueapme.com/EN/index.shtml

European Centre of Enterprises with Public Participation & of Enterprises of General

Economic Interest: http://www.ceep.org/

Other links:

– The European Agency for Safety and Health at Work: http://agency.osha.eu.int/

– European training foundation: http://www.etf.eu.int/

– Bologna process: http://www.bologna-bergen2005.no/

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CHAPTER 21

TRANSPOSITION AND IMPLEMENTATION

OF EU SOCIAL AND EMPLOYMENT POLICY –
EXPERIENCES OF THE SLOVAK REPUBLIC

Valéria Kubalová*

1. INTRODUCTION

After an almost three-year ‘negotiation marathon’, the Slovak Republic concluded its
accession negotiations with the European Union at the Copenhagen European Council
on 12-13 December 2002. Slovakia signed the Treaty on Accession to the European
Union on 16 April 2003 and acceded to the EU on 1st May 2004.

As regards the specific field of “Social Policy and Employment”, the Slovak Republic
fully accepted the acquis related to this field and has been prepared for its full
implementation by the date of accession to the EU. Indeed, negotiations in this chapter
were already closed in 2001.

2. TRANSPOSITION OF THE SOCIAL POLICY ACQUIS IN

SLOVAKIA

The necessary amendments to the Labour Code in order to comply fully with the EU
acquis in the field of Social Policy were adopted on the 21 May 2003 and became
effective as from 1st of July 2003. These amendments completed the transposition of all
directives in the relevant area. With respect to the acquis, the modifications of the
Labour Code concerned in particular the following areas:

Non-discrimination: The Slovak Labour Code provisions endorse the ban

against discrimination in connection with the provisions of Directive
76/207/EEC on the implementation of the principle of equal treatment for men
and women as regards access to employment. Directive 2000/78/EC establishing
a general framework for equal treatment in employment and occupation (for
example, the employer may not inquire about the employee’s sexual orientation),
and Directive 2000/43/EC implementing the principle of equal treatment
between persons irrespective of racial or ethnic origin have also been fully
transposed;

* Advisor to the Director General of the Central Office of Labour, Social Affairs and Family for Employment,
Bratislava, Slovakia.
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Protection of pregnant women and parental leave: The possibility to require

information on pregnancy from natural persons applying for work prohibited for
pregnant women was removed in order to comply with Directive 92/85/EEC.
Equally, the “double monthly wage” limit for the exercise of the right to
appropriate financial compensation in case the employer, at the conclusion of the
employment contract, breaches the principle of equal treatment related to access
to employment or other obligations was cancelled. In addition, the ‘non
transferability’ of parental leave is ensured in the provisions of the Labour Code
amendment concerning maternity and parental leave in order to fully comply
with Directive 96/34/EC;

Information and Consultation of Employees: Directive 2002/14/EC has been

fully transposed into the Slovak Labour Code.

Working time: The Slovak Labour Code provisions concerning working time
were further specified in order to ensure greater flexibility within the
organisation of working time and, simultaneously, to guarantee appropriate
protection for employees in accordance with Directive 93/104/EC concerning
certain aspects of the organisation of working time (amended by 2000/34/EC).
The Labour Code amendments also increased the overtime work limit to 250
hours if agreed upon by the employee. Employers may require overtime work of
up to 150 hours; the weekly working time per one employer is set at 48 hours;
new forms of shortened working time have been introduced (up to 20 hours
weekly);

Posting of workers: The transposition of Directive 96/71/EC concerning the

posting of workers in the framework of the provision of services has been
completed. Labour relations with respect to employees posted by their
employers from the territory of an EU Member State to Slovakia to provide
services to another employer are also governed by law, special regulations or the
relevant collective agreement.

Workers’ representation: In accordance with the ILO Convention No. 135

concerning protection and facilities to be granted to workers’ representatives in
the undertaking, the Slovak Labour Code amendment has removed the exclusive
position of labour unions in safeguarding the provision of fair and satisfactory
working conditions of employees through elected representatives. The methods
of participation by individual workers’ representatives are precisely defined and
the amendment enables the concurrent operation of workers’ councils and trade
unions in one undertaking.

3. PREPARATION FOR THE EUROPEAN SOCIAL FUND IN SLOVAKIA

The Slovak Ministry of Labour, Social Affairs and Family has been designated as the
Managing Authority for three programming documents:
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The Sectoral Operational Programme Human Resources (SOP HR)1,

The Single Programming Document (SPD) NUTS II – Bratislava, Objective 3,
The EQUAL Community Initiative financed by the European Social Fund (ESF).

In order to enhance the performance of the administrative and organisational capacity

of the ESF Management Section within the Slovak Ministry of Labour, Social Affairs
and Family (MLSAF), a new organisational structure and a reinforcement of the
personnel was approved by the Minister and is effective since 1st June 2002.

An internal document on the strategy for the use of ESF funding has been elaborated
and used for the successful implementation of the programming documents.

The programming documents SOP HR and SPD-Bratislava, Objective 3 including the

Communication Action Plan were prepared and sent to the European Commission for
negotiation in 2002. Several rounds of negotiations and meetings with the
representatives of the European Commission had been launched before the final version
of both documents has been adopted in the first half of 2004. The programme
complements for both documents have been finalised and approved in 2004, too.
Monitoring committees have been created for both programming documents and the
committees’ statutes and rules of procedures have been elaborated. An IT monitoring
system for structural funds has been developed for all EU Structural Funds. All
ministries dealing as Managing Authority and Intermediary bodies are on-line
connected to this ITMS programme. Information regarding the ESF is available on the
website of the MLSAF.
2
The Central Office of Labour, Social Affairs and Family has been designated as the final
beneficiary for the implementation of active labour market policy through SOP HR as
well as SPD-Bratislava, Objective 3. Drawing of the ESF budget from both
programming documents is based on the implementation of the National Projects.

Employment services have been provided at a higher level of quality since January
2004, in accordance with the objectives of the European Employment Strategy, and are
based on the following principles:

Individual and targeted (tailor made) approaches for unemployed persons;

The obligatory character of active labour market measures (every applicant who
meets the conditions stipulated by law is entitled to a contribution);
Focus on marginalised groups and disadvantaged regions (support for the
creation of jobs for long-term unemployed persons, young people, disabled
persons, single parents, and differentiation of the level of this support according
to the level of unemployment in the region);
Compliance with principles of state aid and with the rules of the ESF;
Support for the development of employment services provided by the private
sector.
1 Sectoral Operational Programme Human Resources: http://www.esfslovakia.gov.sk
2 Central Office of Labour, Social Affaires and Family of the Slovak Republic: http://www.upsvar.sk

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4. THE NATIONAL ACTION PLAN FOR EMPLOYMENT FOR THE

PERIOD 2004–20063

As many other new Member States, Slovakia’s high unemployment rate deviates
significantly from the EU average. Although the unemployment rate is falling, it continues
to be very high, with a large share of long-term unemployed persons. The employment
rate of women is low as well as the rate of young people, disabled persons, low-skilled
and older workers (especially older women). Regional differences are important.

In accordance with the Lisbon strategy, a series of measures have been taken and
structural reforms have been put in place in Slovakia in order to meet the objective of
the EU to establish a “competitive and dynamic knowledge-based economy with greater
social solidarity and a higher rate of employment”.

4.1. Structural policies

The main strategic objective of the Slovak Republic is to achieve the target of the Lisbon
strategy: a total employment rate of 70% in 2010. As a result the Slovak government
has introduced and is implementing a number of structural reforms that relate to this
strategic goal:

The amended Labour Code of 2003 anticipates a balancing of the need for
flexibility in the labour market with the requirement for the protection of
employees’ rights in contractual relations, a simplification of the process for
entering into an employment contract by extending the forms of employment
available to employees, the expansion of freedom of contract including the
options relating to collective bargaining;

In 2003 a significant reform of the tax system took place. A unified 19% rate of
income tax was introduced for corporations and individuals and the system was
made considerably simpler. With regard to property taxes, inheritance tax and
gift tax were cancelled on the grounds that one income may not be taxed twice;
At the beginning of 2004 an institutional reform came into force whose main
effect was to combine employment services with the state administration’s
activities in the area of social services and provide all services in the area of
employment together with related social security benefits;

The Act on Employment Services (which took effect in February 2004) created
a legal framework for the offices of labour, social affairs and family to provide
more directed and individually focused employment services, which help
unemployed citizens to get back into the labour market. This law improved the
system for mediating employment with the private sector, for creating temporary
employment agencies and agencies for supported employing. In order to increase
the speed at which the measures begin to have an impact on the labour market
the MLSAF has prepared national projects to be co-financed from the ESF;
3 Slovak National Action Plan for Employment for the period 2004-2006:

http://www.europa.eu.int/comm/employment_social/employment_strategy/nap_2004/nap2004sk_en.pdf

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As part of the implementation of pension reform, a system of compulsory old-

age pensions saving has been introduced. This so-called ‘second pillar’ of the
pensions system shall guarantee the long-term financial stability of the pensions
system, diversify the risk of individual methods of financing pensions and create
space for increasing the level of pensions provided. This reform is linked to a
comprehensive reform of the ‘pay-as-you-go’ pillar of the pensions system, which
has until now been based on the insurance principle, and the postponement of the
retirement age for both women and men to the age of 62 years;

Several economic policy measures: In the market for products and services, the
key focus is on increasing productivity through a favourable investment climate,
a higher intensity of competition, liberalisation, support for business and
effective regulation. Strengthening the status of small and medium enterprises
(SME) is also one of the priorities of economic policy;

4.2. The Recommendations for Employment Policy in Slovakia

The Council proposed the following recommendations for implementing employment

policy in Slovakia for the year 2004:

Increasing adaptability of workers and enterprises: The recommendations

insist on further reductions in the high tax burden on labour, which consists
mainly of social contributions. Social partners should be encouraged to promote
more contractual and working time diversity (e.g. remove obstacles to part-time
work) so as to create more job opportunities and facilitate job mobility;

Attracting more people to the labour market and making work a real option
for all: According to the Council, it is important to continue the effective
removal of unemployment and inactivity ‘traps’ and to transform undeclared
work into employment by building on the ongoing reforms of the tax and benefit
systems. The implementation and impact of the reforms should be properly
monitored. In addition to efforts aimed at making work pay, special attention
continues to be needed in order to increase the participation of older workers in
employment, especially through the implementation of employment legislation
and pension reform, more flexible forms of work and greater use of part-time
work. According to the Council, this could also contribute to raising female
participation. Financing for active labour market policies is set to increase, as is
the number of people taking part, albeit from a low level. The labour market
should be more inclusive and reforms should be implemented to encourage
people to seek work actively. The recommendations calls for modern active
labour market policies, greater access to training for the unemployed and the
inactive, and modern public employment services to ensure a wider coverage of
the population. Further attention is needed for groups at risk (e.g. the long-term
unemployed, young people, people with disabilities, older workers) and
disadvantaged regions. According to the Council, the new priority given to
integrating the Roma population needs to be rapidly translated into action;

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Ever more effective investment in human capital and lifelong learning: The
alarmingly high unemployment rate among young people points to the need to
bridge the gap between skills they have acquired in their initial education and the
skills needed to succeed on the labour market. Economic restructuring, regional
and skills mismatches also call for greater support for occupational and
geographic mobility throughout the life cycle. The key requirements for the
development of a lifelong learning strategy are greater incentives to invest in
training and to facilitate access to education. According to the recommendations,
there is a need to encourage investment in human capital and foster lifelong
learning by further reforming the education system; and to review the
contributions to be made by individuals, enterprises and society as a whole;

The response of the Slovak Republic’s employment policy to the employment

guidelines and the Council’s specific recommendations for the Slovak Republic can be
found in Slovakia’s National Action Plan for Employment (NAPE).

4.3. Partnerships for the implementation of employment guidelines

The Slovak National Action Plan for Employment (NAPE) 2004-2006 has been
prepared in accordance with the principles good governance and partnership. The
Slovak MLSAF is in charge with the coordination of the preparation of the NAPE.

This coordination and preparation of the NAPE in Slovakia is organised as follows:

Co-operation of ministries, regional government and the state

administration in the regions
The MLSAF works closely with the ‘economic’ ministries (the Ministry of
Finance, the Ministry of the Economy, the Ministry of Agriculture and the
Ministry of Transport, Posts and Telecommunications) to co-ordinate proposals
for projects and policies aimed at increasing demand in the labour market. It
invites the regional governments and regional state administration bodies to
present proposals for projects and policies for improving the relation between
supply and demand in the regional labour markets with the co-operation of
employers in the region. The MLSAF co-operates closely with the Central Office
for Labour, Social Affairs and the Family, with the Slovak Ministry of Education,
the Statistical Offices and the National Labour Inspectorate to create conditions
to gain detailed information on the problems of labour market supply, which is
used to design policies that improve the structure of supply and increase balance
in the labour market;

Central Office for Labour, Social Affairs and the Family

The Central Office for Labour, Social Affairs and the Family and the offices for
labour, social affairs and the family (in total there are 46 such offices in
Slovakia) are institutions created in January 2004 by the National Labour Office
and the social affairs divisions of the former regional and district state
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administration offices as part of the reform of the social system. Their main task
is to get back as many job seekers and recipients of material need assistance as
possible on the labour market in the shortest possible time. Reform has brought
these institutions closer to the jobseeker and they are released from carrying out
activities that have no direct relation to services that support clients’ return to the
open labour market (e.g. they do not distribute unemployment benefit);

Social Insurance Agency

The Social Insurance Agency collects insurance for sickness benefit, pension
insurance, accident insurance, guarantee insurance and contributions for
unemployment insurance. At the same time it pays unemployment benefits to job
seekers. Its branches at the regional level co-operate closely with the offices of
labour social affairs and the family;

Government of the Slovak Republic

The MLSAF presents the draft NAPE for approval by the government, which
ensures that the Slovak strategy for employment has the approval of the Slovak
government;

Co-operation of the National Council of the Slovak Republic

The National Council of the Slovak Republic has a significant role to play,
particularly in the implementation of the NAPE. It passes the laws that provide
the important legislative framework for policies supporting and implementing
changes and improving the situation in the labour market;

Co-operation of social partners

Social partners participate in the preparation of the NAPE by presenting partial
documentation for the elaboration of the relevant guideline. As a rule, the draft
NAPE is discussed in the Council for Economic and Social Agreement (CESA)
before it is presented for discussion by the Slovak government. At this discussion
of the NAPE, the Slovak Confederation of Trade Unions and the Slovak
Federation of Employers’ Associations present their standpoints and CESA
recommends either that the plan should or should not be discussed by the Slovak
government. Social partners were, however, actively involved in preparing
legislation to enable the implementation of the European Employment Strategy
in Slovakia (the Labour Code, the Act on Collective Bargaining, the Act on
Employment Services, the Collective Agreement for Public Services, the Higher-
level Collective Agreement for the State Administration). At company level they
can negotiate, through the process of collective bargaining, more favourable
regulations on working conditions including remuneration and employment
conditions. The state has no right to intervene in the collective bargaining
process between social partners (except to determine mediators and arbitrators
for collective disputes), and it cannot impose what is to be included in a
collective agreement. At local level, the local government is involved in the
implementation of the NAPE, and co-operates most closely with the offices of
labour, social affairs and the family;

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Co-operation with non-governmental organisations and organisations for

the disabled
During the preparation of documentation for the NAPE, non-governmental
organisations are invited to participate;

Co-operation of scientific institutions and the research sector

Scientific institutions (e.g. The Slovak Academy of Sciences and its Institute of
Forecasting and the Institute of Slovak and World Economics, ministerial
research institutes and universities) take part in the development of the NAPE
and also in its implementation;

4.4. Financing the NAPE

The implementation of the NAPE is financed mainly from funds intended for the
implementation of individual measures of the Sectoral Operational Programme–Human
Resources (SOP HR), SPD Bratislava NUTS II Objective 3 and the Community
Initiative EQUAL. This means that Community funds, national public funds and private
funds will be used, depending on the breakdown of individual measures for the relevant
operational programme. In the case of domestic financial resources, financial resources
from the state budget will be used, divided into the budget chapters and budget
programmes for individual ministries. The relevant ministries will be responsible for
implementing individual priorities and measures and also for the transparency with
which financial resources are managed during the implementation of these priorities and
measures.

In accordance with Decree no.133/2002 the Slovak government appointed the MLSAF
as the managing authority for the SOP HR. The managing authority is directly
responsible for managing and implementing operations within the framework of the
operational programme financed from ESF. It is responsible for the collection of reliable
information and ensuring that information is provided on the correct implementation of
activities, with regard to compliance with Community rules. In the Slovak Republic the
Ministry of Education is appointed as an intermediate body under the paying/managing
authority for SOP HR. In accordance with the Slovak Government Decree No. 617 of 5
June 2002, the Slovak Ministry of Finance was appointed as the sole paying authority
for the structural funds. The paying authority delegates the performance of some of its
functions to payment units. The paying authority retains overall responsibility for the
delegated powers. The Paying Authority also may not delegate to the payment unit the
functions of submitting certifications of expenditure and applications for payment to the
Commission, and of acceptance of payments from the EC. The basic role of the payment
unit is to ensure the transfer, in accordance with Slovak legislation, of EU funds from
the state budget from the expenditure account of the relevant Ministry to the account of
the final beneficiary based on the performance of a provisional financial control, to
carry out ex-ante control and to administrate the debtors’ ledger.

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 SECTION 8

EU JUSTICE AND HOME AFFAIRS

Chapter

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CHAPTER 22

EU JUSTICE AND HOME AFFAIRS

Jörg Monar*

1. INTRODUCTION

There are at least three reasons why EU justice and home affairs (JHA) policy-making
in the context of the “area of freedom, security and justice” (AFSJ) can be regarded as
one of the most significant developments in the European integration process at the
beginning of the 21st century:

First, JHA policy-making touches upon essential functions and prerogatives of the
modern nation-state such as providing citizens with internal security, controlling
external borders and access to national territory and administering justice.

Second, JHA policy-making touches upon a number of very sensitive political issues:
the fight against crime and illegal immigration, ensuring that asylum systems are both
fair and protected against abuse and facilitated access to justice.

Third, the AFSR has by now not only become a fundamental integration and treaty
objective but also one of the major areas of ‘growth’ of EU action. Since 1999 the EU
Council has been adopting on average around ten new texts per month, with most of
these texts now being - unlike in the earlier 1990s - of a binding legal nature. Today JHA
measures belong to the fastest growing domains of the EC and EU legal acquis and are
wide-ranging and ambitious to an extent which would have been difficult to imagine at
the beginning of the 1990s.

In the following we will first provide a brief account of the historical development of
EU justice and home affairs cooperation since its origins in the 1970s. Then, we will
look at the current framework in terms of institutions, instruments and decision-making
procedures before we proceed to a survey of progress and deficits in the different policy-
making areas. This chapter will conclude with an assessment of future development
perspectives for the AFSJ in the light of the Hague programme of November 2004 and
the EU’s Constitutional Treaty which is currently in process of ratification.

* Professor of Contemporary European Studies, Co-Director of the Sussex European Institute, Jean Monnet

Chair, University of Sussex, United Kingdom.

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2. THE DEVELOPMENT OF EU JUSTICE AND HOME AFFAIRS

COOPERATION – FROM TREVI TO THE AFSJ

The founding treaties of the three European Communities in the 1950s did not make any
formal provision for cooperation in the JHA domain. As a result the Member States of
the European Communities for more than two decades only cooperated within the EC
on a very limited number of JHA issues which were directly related to the creation of
the Common Market, such as the mutual recognition of court decisions in the civil and
commercial law areas.

Yet there was an important framework for cooperation outside the EC framework in
which the Member States played an active role: the Council of Europe. In the context
of the Council of Europe a number of conventions on important JHA issues were
negotiated since the 1950s (extradition 1957, mutual legal assistance in criminal matters
1959, validity of criminal judgements 1970, transfer of proceedings in criminal matters
1972, etc.) which allowed for the establishment of a basis of cross-border cooperation
in Europe in the criminal justice field. These conventions also formed a point of
departure for the closer cooperation the EC Member States later developed within the
EC and EU context, and a range of Council of Europe legal instruments are in fact today
considered to be part of the EU legal acquis.

With its much larger membership and limited mandate, however, the Council of Europe
did not provide an adequate framework for action on issues of particular common
interest for the EC Member States themselves. Such an interest evolved in the 1970s
when a number of the Member States (France, Germany, Italy and United Kingdom in
particular) were faced with increasing threats by terrorist activities and there was clear
evidence of cooperation between these different terrorist groupings, which was not
matched by similar cross-border law enforcement cooperation between the Member
States. As a result the ministers of interior created in 1975 the so-called TREVI
(“Terrorisme, radicalisme et violence internationale”) framework, which provided for
regular meetings at the level of ministers and senior officials for the purpose of
information exchange, coordination and the facilitation of cross-border cooperation in
the fight against terrorism. TREVI was created outside the framework of the EC Treaties
as a purely intergovernmental cooperation structure with no legal basis, no permanent
institutions and no legal or budgetary instruments. In spite of these limitations TREVI
proved to be a success because it opened up the relevant services of the ministries and
police forces for the first time for regular cooperation in the EC context and led to an
increased efficiency in the fight against terrorism. The Member States therefore
gradually expanded the scope of their TREVI cooperation until the 1980s to the fight
against drugs, money-laundering and organised crime.

By the mid-1980s justice and home affairs cooperation between the Member States was
driven forward by two other factors: The first of those was the political objective of the
abolition of controls on persons at internal borders between the Member States which
was considered to be important both for the creation of a ‘Europe of the citizens’ and
for the completion of the Internal Market through the lifting of any remaining border
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controls. Yet for internal security reasons a number of Member States – and in particular
the United Kingdom – were not willing to proceed with this objective in the EC context.
In response five Member States (France, Germany and the Benelux countries) decided
in 1985 to go ahead with this objective outside of the EC framework and created the
‘Schengen’ system. From 1985 onwards the Schengen countries, which were joined by
more and more of the other EC Member States, gradually designed and implemented a
large number of so-called ‘compensatory measures’ encompassing external border
controls, police cooperation, asylum, the fight against various types of crime and the
creation of a sophisticated Schengen Information System (SIS) in order to ‘compensate’
for the loss of traditional controls on movements of persons across internal borders. By
1995 these compensatory measures were fully in place and controls on persons at
internal borders were fully abolished. Because of the extensive nature of these
‘compensatory’ measures the Schengen system became in fact a precursor and
laboratory for justice and home affairs cooperation within the EC (and later the EU) as
a whole.

The second factor of development in the 1980s was the Internal Market programme
which was implemented from 1985 to 1992. Through its removal of most of the
remaining barriers to the free movement of goods, capitals and services the Internal
Market programme forced also all EC Member States – not only those participating in
Schengen – to reinforce cooperation on a number of JHA issues in order to prevent
especially the new free flow of goods and capitals across borders from creating
increased internal security risks. A number of new intergovernmental coordination
groups within the EC (such as the Rhodes Group of Coordinators on Free Movement)
were set up which, inter alia, prepared the decision taken in 1990 to create a European
police office which later led to the establishment of Europol.

By the end of the 1980s the Member States were therefore engaged in a wide range of
forms of intergovernmental cooperation in the JHA domain, both inside and outside
(TREVI and Schengen) of the EC framework. Yet this cooperation was weakened by the
absence of treaty based action possibilities and the proliferation of often poorly
coordinated intergovernmental groups. The emergence of increased challenges in the
asylum, immigration and transnational organised crime areas as a result of the new
permeability of borders in Europe and the disintegration of state internal security
systems in some of the former communist countries in the East exposed these
weaknesses and led the EC Member States to give for the first time a treaty base to their
cooperation in the JHA domain through the Treaty of Maastricht which was signed in
1991 and entered into force in 1993.

The Treaty of Maastricht formally declared asylum, immigration, judicial cooperation

in civil and criminal matters and police cooperation and fight against serious forms of
crime “matters of common interest”. It gave the EU institutions for the first time
competences to act in these areas. As several Member States were against any
‘communitarisation’ of JHA policies, these new competences were laid down in a
separate part (Title VI) of the Treaty establishing the European Union – not in the EC
Treaty – which became thereafter known as the ‘Third Pillar’ of the EU, the ‘First’ being

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formed by the EC Treaty and the ‘Second’ by the Common Foreign and Security Policy
(CFSP) respectively.

While the Maastricht ‘Third Pillar’ had the important consequences of giving to the
entire JHA domain an EU treaty base and allowing for the incorporation of TREVI and
the other intergovernmental groups into the institutional system of the Union, it also had
a number of serious weaknesses: It lacked precise objectives and adequate legal
instruments, required unanimity amongst the Member States for all decisions, provided
only for a limited right of initiative of the European Commission, severely restricted the
roles of both the Court of Justice and the European Parliament and had not put an end
to the separate existence of the Schengen system outside of the EU. Although some
progress – such as the definitive establishment of Europol and several measures against
organised crime – was achieved under the regime of the Maastricht ‘Third Pillar’, it had
become clear by the mid-1990s that it needed to be reinforced in order to allow for more
efficient action by the EU, this also in the light of the upcoming eastward enlargement.

The opportunity to reform the Maastricht ‘Third Pillar’ arose during the 1996/97
Intergovernmental Conference, which agreed in June 1997 on the Treaty of Amsterdam,
which entered into force on 1 May 1999. In form of the overall objective of the creation
of the “area of freedom, security and justice” (Article 2 TEU) the new Treaty elevated
the JHA domain to a fundamental treaty objective which, this time, was linked to a
whole range of precise objectives some of which were to be achieved during a
transitional period of five years (until end of April 2004). The Treaty also provided for
the ‘communitarisation’ of the areas of asylum, immigration, border controls and
judicial cooperation in civil matters which were transferred to a new title (Title IV) of
the EC Treaty, bringing them under the scope of the Community system with its well
established legal instruments. Only police cooperation and judicial cooperation in
criminal matters were left in the ‘Third Pillar’ (Title VI TEU), but there as well the
decision-making capacity was increased by the introduction of precise objectives and
more effective legal instruments. The role of the Court of Justice was considerably
enhanced across all JHA domains. A further important reform was the incorporation of
the Schengen system into the EU, which finally became a full part of the EU acquis with
the entry into force of the Amsterdam Treaty in 1999.

The progress brought by the Treaty of Amsterdam came at price, though, a certain
degree of fragmentation for the AFSJ since ‘opt-outs’ had to be granted to Denmark
from the communitarised policy-making areas and to The United Kingdom and Ireland
both from the incorporated Schengen system and the communitarised areas, with an
option, however, to join any measures in this domain if they should wish to do so. In the
final stage of the Amsterdam negotiations Germany insisted on maintaining unanimity
voting also for the communitarised areas during the transitional period, which has
significantly reduced the decision-making capacity of the Union in these areas. The
Member States could also not agree at Amsterdam to grant an exclusive right of
initiative to the Commission and co-decision powers to the European Parliament,
restrictions which were only lifted partially after the end of the transitional period.

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Nevertheless the Treaty of Amsterdam marked a major breakthrough for JHA

cooperation in the Union which were marked by the adoption of well over a hundred
texts by the Council every year since 1999 of which a much higher number than before
have been of a fully legally binding nature. The Treaty of Amsterdam provided the basis
for both the decisions of the Tampere European Council (October 1999) to proceed
towards a common European asylum system, to make substantial progress with mutual
recognition in the criminal justice domain and to establish the cross-border prosecution
unit Eurojust, and for the Seville European Council (June 2002) which has added to the
objectives of the AFSJ a stronger emphasis on the fight against illegal immigration and
reinforced cooperation on external border controls. The Treaty has also made all
elements of the AFSJ – including the Schengen system – part of the Union acquis which
new Member States have to accept upon accession, as a result of which the ten new
Member States which joined in 2004 also automatically joined the Schengen system,
although they still have to wait some time before they can join the operational parts of
the system. It seems fair to say that on the basis of the Amsterdam reforms – which
remained essentially unchanged by the Treaty of Nice (2003) – the AFSJ has become
today one of the most important policy-making domains of the Union.

3. INSTITUTIONS, INSTRUMENTS AND DECISION-MAKING

PROCEDURES

3.1. The Institutional Set-up

The intergovernmental origins of EU JHA cooperation, its sensitivity from a national

sovereignty point and the intergovernmental elements left in the current Treaty
provisions have made this a domain in which the Member States continue to play a more
prominent role than in other ‘communitarised’ areas of EU policy-making. This is
reflected, first of all, in an important role played by the European Council (regrouping
the Heads of State or Government) which since 1999 has repeatedly taken important
initiatives regarding the further development of the AFSJ and regularly includes JHA
relevant issues in its “Conclusions”. This means that the Heads of State or Government
of the EU have assumed a role of policy initiation in this domain, reducing thereby to
some extent the traditional role of the Commission as the ‘motor’ of policy-
development.

The JHA Council

The most important decision-making instance on the AFSJ remains the Council (of
Ministers) which meets as the “JHA Council” normally on a monthly basis. It brings
together both the ministers of interior and of justice of the Member States. The presence
of representatives from both ministries, which normally are the cabinet ministers
themselves, not junior ministers or state secretaries, does not always make decision-
making easier as ministers of interior occasionally disagree with the colleagues from the
ministries of justice, especially if those belong to a different party in coalition

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governments. All legislative acts are formally adopted by the Council, although in
practice ministers only deliberate on acts on which compromises have not yet been
found at the committee level (so-called ‘B’ points).

COREPER II and the Council’s Committees

The ministers’ deliberations are prepared by the COREPER II which regroups the
Permanent Representatives themselves, a further indication of the political importance
of this domain. The Permanent Representatives are helped by their so-called “JHA
advisers”, experts delegated to the Permanent Representations by the ministries of
interior and of justice which in practice also serve as ‘watch-dogs’ of their ministries
regarding the policy-making process in Brussels.

The COREPER II relies heavily on compromises on texts already been found in

committees below its level, the most important of which are the SCIFA (Strategic
Committee on Immigration, Frontiers and Asylum), the Committee on Civil Law Matters
and the Article 36 Committee (which coordinates work in the areas of police cooperation
and judicial cooperation in criminal matters). Those committees are composed of senior
officials from the respective national ministries and the Commission and normally sort out
key compromises on texts to be adopted by the Council at their level. Below the level of
these committees there are over 20 different working parties composed of experts from the
ministries and the Commission who deal with the more detailed issues of, for instance, EU
visa policy, expulsion, Europol and the fight against terrorism. There are also ‘horizontal’
working parties to ensure overall coordination of EU action in the areas of the fight against
drug-trafficking and organised crime. The work of these working parties is coordinated by
the senior committees to which they also report. The working parties, the committees and
the Council itself are supported by the Directorate-General of the Secretariat-General of the
Council whose officials often play an important role in helping the Presidency in finding
compromises between national positions.

The European Commission

The Commission has had to struggle to establish its role in the JHA domain, having
been hampered in the 1990s by its originally rather restricted right of initiative, an
unwillingness of some Member States to let it play a more significant role and a rather
limited in-house expertise on JHA matters. Yet as a result of the Amsterdam reforms,
the establishment of a new Directorate-General (“Freedom, Justice and Security”) and
a more pro-active policy line under the Prodi Commission, the institution has gradually
been able to enhance its position since 1999 which was further reinforced on 1 May
2004 when the Commission, as a result of the end of the transitional period, gained an
exclusive right of initiative in the communitarised JHA areas. Disposing now of
significant in-house expertise because of a dedicated Commissioner’s portfolio in the
domain, the Commission now plays a policy-initiating and implementing role rather
similar to that it has in other Community domains in the communitarised areas, but a
slightly weaker one in the remaining ‘Third Pillar’ where it still has to share its right of
initiative with the Member States.

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The European Parliament

The European Parliament had to content itself until 2004 with a consultative role on
most legislative acts in the JHA domain which – having regard to the obvious
implications JHA measures can have for citizens’ rights – has been one of the most
glaring elements of the EU’s democracy deficit. Yet as a result of the decision taken by
the Council on 22 December 2004 to move to the co-decision procedure in all
communitarised areas with the exception of civil law cooperation and measures on legal
immigration (see below) the Parliament has obtained full legislative co-decision rights
with the Council in these domains from 1 January 2005 onwards. This is certainly going
to strengthen its position in the JHA domain very considerably, although it will continue
to be limited to the right to be consulted only in the remaining areas of the ‘Third Pillar’.
The Parliament has entrusted a special standing committee with the scrutiny of
measures in JHA domain – the Committee on Civil Liberties, Justice and Home Affairs
(LIBE) – which, as its name already indicates, has tended to place a special emphasis
in its scrutiny of EU action on the question of adequate protection of civil liberties.

The European Court of Justice

Since the entry into force of the Treaty of Amsterdam in 1999 the Court of Justice (ECJ)
has acquired substantial judicial control powers in both the communitarised and the
non-communitarised domains. Yet its powers are still more limited than in other policy
areas under the EC Treaty. In the communitarised areas the important preliminary
rulings procedure, which allows national courts to refer to the Court for questions of the
application of EC law, has been limited to national courts of last instance. This reduces
the Court’s case-load but makes it also more difficult, for instance, for asylum or
immigration cases to reach review by the ECJ. In all JHA areas the Court’s role is
restricted by an explicit exclusion from its jurisdiction of national measures relating to
the maintenance of law and order and the safeguarding of internal security (Article
68(2) TEC and 35(6) TEU). In addition, the acceptance of preliminary rulings by
Member States in the areas of the ‘Third Pillar’ is not mandatory but subject to a
declaration by each Member State that it is willing to accept such jurisdiction (Article
35(2) TEU) – which not all Member States have made.

The Special Agencies

It is among the specificities of the AFSJ that the Council has set up a whole range of
special agencies which are sui generis institutions entrusted with special tasks. The most
important of those are Europol, Eurojust, the monitoring centres for drugs and racism
and xenophobia, the European Police Academy and the external borders agency, which
is in the process of being established. These institutions do not have, however, any role
in the decision-making process and are limited to information exchange and analysis,
coordination and training tasks.

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3.2. The Instruments

In the communitarised areas of Title IV TEC the legal instruments are those of the EC,
i.e. in most cases “regulations” and “directives” whose legal status, including their
“direct effect”, has been amply clarified through case law of the ECJ. In the areas of the
‘Third Pillar’ the most important applicable legal instruments are “decisions” and
“framework decisions”, with the latter being designed as instrument for the
approximation of laws, which is binding on the Member States but leaves it to them to
adopt implementing legislation. According to the EU Treaty, they do not have “direct
effect” (Article 34(2)).

In addition to the legal instruments the Council also often uses non-binding instruments,
the most important of those being the adoption of multi-annual “action plans”. These
action plans normally focus on priority areas of EU action – such as the fight against
drugs, terrorism and organised crime – and define both shorter and longer-term
objectives for common action through legislation or other means. Although not legally
binding, the action plans have become important programming instruments, which
largely determine the sequence of measures taken by the EU and the extent of legislative
action.

Since the Treaty of Amsterdam the EU budget can be used to finance measures both in
the communitarised and the non-communitarised areas. The annual EU budget has a
separated heading for the AFSJ whose total allocation for 2005 amounts to Euro 526
million (out of a total budget of Euro 116.5 billion).

Finally, it has to be mentioned that the EU can also use external instruments to pursue
JHA objectives. Because of the principle of the parallelism between internal and
external competences (developed by the ECJ) the EC can negotiate and conclude
agreements with third countries in all of the communitarised areas. In the ‘Third Pillar’
areas the Union can do the same by using the ‘Second Pillar’ treaty-making procedure
(Article 24 TEU in conjunction with 38 TEU). The EU has already used these external
powers in several cases and is likely to do so more often in future as internal JHA
measures increasingly require complementary action at the international level.

3.3. The decision-making procedures

The Treaty of Amsterdam had not brought an immediate breakthrough towards majority
voting in the JHA domain, maintaining initially unanimity for the transitional period of
five years. The Treaty of Nice, which entered into force on 1 February in 2003,
accelerated the passage to the use of qualified majority in the communitarised areas, a
move which was completed by a decision taken by the Council on 22 December 2004
(OJ L 396/45 of 31.12.2004) to apply the co-decision procedure to all communitarised
JHA areas under Title IV TEC with the exception of measures relating to legal
immigration and to family law from1 January 2005 on. As a result the Council now
decides by qualified majority on asylum, matters of illegal immigration, external border
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controls and civil law cooperation issues (with the above mentioned exception of family
law) by qualified majority voting, and this on the basis of an exclusive right of initiative
by the Commission (see above).

In the remaining ‘Third Pillar’ areas (police and judicial cooperation in criminal
matters), however, unanimity continues to prevail, and the Commission there still has to
share the right of initiative with the Member States. Overall therefore substantial areas
of the AFSJ remain dominated by the unanimity principle, which in most cases means
longer delays in decision-making and least common denominator agreements.

4. PROGRESS AND DEFICITS IN THE DIFFERENT POLICY-

MAKING DOMAINS

4.1. Asylum Policy

The free movement of persons within the EC and the abolition of controls at internal
borders have provided a powerful argument for a substantial harmonisation of asylum
law within the EU. In an ‘area’ of free movement restrictive measures by one Member
State inevitably tend to divert asylum applications to other Member States, with the risk
that this generates a ‘race to the bottom’ of asylum guarantees.

The first step taken towards a common approach in the asylum domain was the Dublin
Convention, which entered into force on 1 September 1997 and has since been
transformed into an EC Regulation (No 343/2003, OJ L 50/1 of 25.2.2003). This so-
called Dublin Regulation establishes criteria and mechanisms for determining the
Member State responsible for examining an asylum application. These criteria, which
include – for instance – the existence of family links of the asylum seeker in a Member
State, allows for the identification of a single Member State for the processing of an
asylum application whose decision is normally recognised by all other Member States
so that a rejected asylum seeker will in most cases not get a second chance in another
Member State.

The Member States have had considerable difficulties to agree on common minimum
standards on procedures for the granting and withdrawing of the refugee (asylum)
status. The Member States have failed so far to agree on a common list of ‘safe third
countries’ to which rejected asylum seekers can be returned after the termination of their
procedure. This constitutes a serious deficit as procedural standards continue to vary
widely amongst the Member States which means that asylum seekers continue to be
treated rather differently from one Member State to the other during their procedures.

Regarding minimum standards for the reception of asylum seekers the Council has been
more successful. A Directive was adopted in January 2003 (No 2003/9, OJ L 31/18 of
6.2.2003) which defines a range of minimum standards regarding the subsistence of
asylum seekers and their access to a number of social rights such as health and

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education. These standards, however, are rather ‘minimalist’ and leave it largely to the
individual Member States, for instance, to grant or not grant asylum seekers access to
their labour markets.

After long and difficult negotiations the Member States have also been able to agree on
an approximation of rules regarding the recognition and content of the refugee status:
On 29 April 2004 the Council adopted the so-called ‘qualification’ Directive (No
2004/83, OJ L 304/12 of 30.9.2004) which provides for a minimum harmonisation of
the qualification elements for the status of refugee as defined – rather vaguely – by the
1951 Geneva Convention. In addition, the Member States were also able to agree on the
establishment of a European Refugee Fund (2000) co-financing national projects for the
reception, integration and repatriation of refugees and on minimum standards for the
protection of displaced persons (2001). Taken together, these measures have at least put
elements of a truly ‘common policy’ into place.

4.2. Immigration Policy

The main emphasis of EU action in the immigration domain has so far been clearly on
the combat against illegal immigration. After various individual measures the Council
adopted on 28 February 2002 a comprehensive action plan which provides for a range
of measures in the areas of visa policy, information exchange, readmission and
repatriation, police cooperation and border controls. In the legislative field this action
plan has so far led to a Framework Decision on combating trafficking in human beings
(No. 2002/629/JHA, OJ L 203/1 of 1.8.2002), another Framework Decision on the
strengthening of the penal framework to prevent the facilitation of unauthorised entry,
transit and residence (No. 2002/946/JHA, OJ L 328/1 of 5 December 2002) as well as
a Directive defining the facilitation of unauthorised entry, transit and residence (No.
2002/90, OJ L 328/17 of 5 December 2002). In the operational field the action plan has
facilitated the launching of a number of joint operations (including in the
Mediterranean) of forces from several Member States to intercept illegal immigration
routes and cooperation on the identification of major illegal immigration routes and
facilitators.

In the area of legal immigration progress has proved to be much more difficult as the
Member States want to retain national control over both the numbers of legal
immigrants and their conditions of integration, especially because of the labour market
implications. The Council has been able to agree on a Directive on the right of third-
country nationals to family reunification (No. 2003/86, OJ L 251/12 of 3.10.2003),
which defines common minimum criteria of eligibility in terms of age and family
relationship, and a Directive on the status of long-term resident third-country nationals
(No. 2003/109, OJ L 16/44 of 23.1.2004), which defines the rights of a “long-term
resident” status which third-country nationals can acquire after having been legally
resident for at least five years.

Overall the EU’s immigration policy remains incomplete and unbalanced: In spite of the
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enormous demographic challenges the Union is facing there is no real policy on legal
immigration, most of the efforts being targeted at the reduction of illegal immigration.

4.3. Border Controls and Visa Policy

Apart from the United Kingdom and Ireland, which remain outside of the Schengen
system, the 10 new Member States will only become operationally part of the Schengen
zone after their ‘Schengen maturity’ in terms of their capacity to fully implement
Schengen border security standards has been formally established by the ‘old’ Schengen
members.

The Schengen countries have developed an electronic information system, the

“Schengen Information System” (SIS). The SIS, which is going to be transformed into
a functionally more advanced second-generation SIS II by 2007, puts border police
posts in a position to decide whether or not a person trying to enter the Schengen
territory is to be admitted, refused entry or arrested, and also enables police forces to
use criminal record data from other Member States for law enforcement purposes within
their territories.

Another development is the decision on the creation of a European Agency for the
Management of Operational Cooperation at External Borders in October 2004. This
Agency will be based in Warsaw and should start its work in autumn 2005. It is intended
to coordinate operational cooperation between Member States and to provide border
risk assessments, technical assistance and training.

The “Schengen visa” is based on a common format, harmonised procedures for the
issuing of such visas and a common list of third countries whose nationals must be in
possession of a visa for entering the Schengen zone. In June 2004 the Council decided
to establish a Visa Information System (VIS) allowing for the exchange of visa data
between the Schengen members to prevent abuses of the Schengen visa system (Council
Decision 2004/512/EC, OJ L 213/5 of 15.6.2004).

4.4. Judicial Cooperation in Civil Matters

The main method to achieve progress in the civil law area has been mutual recognition
of judicial decisions. The most comprehensive instrument adopted so far is the so-called
‘Brussels I Regulation’ (No. 44/2001, OJ L 12/1 of 16.1.2001) of December 2000 on
jurisdiction and the mutual recognition and enforcement of judgements in civil and
commercial matters.

The ‘Brussels I Regulation’ does not cover family law matters and a number of other
areas such as social security. Its principles, however, have been extended to the domain
of family law by the so-called ‘Brussels II Regulation’ (No. 2201/2003, OJ L 338/1 of

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23.12.2003) concerning jurisdiction and the recognition and enforcement of judgments

in matrimonial matters and the matters of parental responsibility. This second
Regulation covers civil proceedings relating to divorce, legal separation and annulment
of marriage as well as matters concerning parental responsibility for children of married
and non-married couples, including right of access to children.

The effectiveness of cross-border judicial cooperation obviously also depends on the

speed of transmission of judicial and extra-judicial documents. In 2001, the EU has
created a European Judicial Network in Civil and Commercial Matters, which is aimed
at facilitating cross-border judicial cooperation through specially designated national
contact points and the appointment of liaison magistrates.

A further important objective of civil law cooperation has been the improvement of
access to justice by citizens (Directive 2002/8 on minimum common rules relating to
legal aid in cross-border disputes, OJ L 26/41 of 31.1.2003). It provides for common
minimum standards as regards the granting of legal aid to persons partly or totally
unable to meet the costs of proceedings if they are domiciled or habitually resident in a
Member State other than the Member State where the court is sitting or where a court
decision is to be enforced.

4.5. Judicial Cooperation in Criminal Matters

The Tampere European Council defined in 1999 the principle of mutual recognition as
the cornerstone of criminal justice cooperation, and some significant progress has
indeed been achieved on this basis. On 26 June 2001 the Council adopted a Framework
Decision on money laundering and the identification, tracing, freezing or seizing and
confiscation of the proceeds from crime (No 2001/500/JHA, OJ L 182/1 of 5.7.2001)
which – building on a Council “Joint Action” of 1998 – provides for the implementation
of confiscation orders issued in other Member States as well as the facilitation of the
execution of requests for the identification, the tracing, freezing or seizing of criminal
assets.

The most important element of progress on the mutual recognition side, however, has
been achieved with the Framework Decision of 13 June 2002 on the European Arrest
Warrant, which entered into force on 1 January 2004 (No. 2002/584/JHA, OJ L 190/1
of 18.7.2002). It makes it possible to arrest and transfer between Member States
suspects without formal extradition procedures, eliminating in particular all possible
political intervention in the procedure by national governments. The European Arrest
Warrant provides for a substantial exemption from the principle of double criminality
for a total of 32 offences, which includes terrorism, homicide, fraud, trafficking in
human beings and racism.

In spite of the already mentioned difficulties of harmonisation in the area of substantive

criminal law some progress has also been made in this respect for particularly serious
forms of cross-border crime. Since 1995 the Council has adopted over 20 texts
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providing for elements of minimum harmonisation as regards the definition of certain

types of crime and of penalty levels, ranging from the protection of the Euro, money-
laundering, environmental crime, trafficking in human beings and drug trafficking to
terrorism.

In the field of criminal justice the EU has also proceeded with a growing
institutionalisation of cross-border cooperation. In 1998 the Council established the
European Judicial Network for criminal matters (not to be confused with the one for
civil and commercial matters) for the facilitation of judicial cooperation through
national contact points and regular meetings. It also created in 2002 Eurojust as a
permanent cross-border prosecution unit. Composed of one magistrate nominated by
each of the Member States plus supporting staff Eurojust has been vested with the task
to facilitate judicial co-operation between prosecutors and magistrates in the Member
States through the co-ordination of the competent authorities and the facilitation of the
implementation of international mutual legal assistance and extradition requests.
Eurojust is widely regarded as a potential precursor for the establishment of a European
Public Prosecutor’s Office, which is introduced in the Treaty establishing a Constitution
for Europe.

4.6. Police Cooperation

A step forward in the institutionalisation and facilitation of cross-border cooperation

between police forces has been the establishment of the European Police Organisation
Europol on the basis of a Convention of 1995 (Europol Convention, OJ C 316/1 of
27.11.1995). Europol, which is located in The Hague, became fully functional in 1997
and has currently around 400 members of staff. Its primary role is to support both cross-
border police cooperation and national investigations into cross-border crime through
the computerised collection, transmission and analysis of data provided by national
police forces through the national Europol contact units. The Member States maintain
permanent European Liaison Officers (ELOs) at Europol who play an important role in
facilitating the establishment of direct contacts between police forces in different
Member States and in ensuring the supply of relevant information. Europol’s remit
extends to a range of serious forms of cross-border crime, including terrorism, organised
crime, trafficking in human beings and drugs and counterfeiting of the Euro.

Another structure created for police cooperation purposes is the Police Chiefs Task
Force (PCTF). It was established in 2000 in order to provide - in co-operation with
Europol - a basis for the exchange of experiences, common evaluations and the planning
of common operations in the fight against cross-border crime. Unlike Europol, however,
the Task Force is not an institution with legal competences and permanent infrastructure
but a high-level coordination group, which meets at least once per Presidency with
changing priorities. Another structure to be mentioned in the area of police co-operation
is the European Police College. Established by a Council Decision of December 2000
the College has the task to provide training courses for senior law enforcement officers
in various fields relating to the fight against cross-border crime, including terrorism.
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The College currently functions only as a network of national training institutions, but
a permanent Secretariat has been established in 2004 at the Bramshill Police Training
College near London.

It has to be emphasised that all measures mentioned in this section leave the principle
of territoriality and national control over law enforcement fully intact. There has been
no move towards the creation of any supranational policing powers.

5. FUTURE DEVELOPMENT PERSPECTIVES

5.1. The Hague Programme

On 4/5 November 2004 the European Council endorsed a programme for the further
development of the AFSJ, called the Hague Programme (Council document 14292/04,
Annex I). This Programme, which builds on the progress made during the period 1999-
2004 with the implementation of the objectives agreed by the Tampere European
Council (see above), defines priorities and objectives for the period 2005-2010. These
include the establishment of a common asylum procedure and uniform asylum status
until 2010, the creation of a common financial instrument to support external border
security cooperation by 2006, the operational upgrading of the SIS to the SIS II until
2007, enhanced procedural cooperation in the issuing of visas and measures to facilitate
the expulsion and repatriation of illegal immigrants. In order to facilitate decision-
making, the Programme also provides for the passage to the co-decision procedure in
most communitarised domains, a move that has already been implemented through the
aforementioned Council Decision of 22 December 2004.

Yet the Hague Programme has also a number of major deficits: Most important amongst
these are the absence of any more substantial common measures in the domain of legal
immigration and rather vague objectives – with the exception of the intended
introduction of a European Evidence Warrant - as regards further mutual recognition
and harmonisation in the criminal justice field.

5.2. The Treaty establishing a Constitution for Europe

The Treaty establishing a Constitution for Europe, which is currently in the process of
being ratified provides for a number of substantial changes in the AFSJ domain:

First, it changes the legal framework of the AFSJ by abolishing the current three ‘pillar’
structure, by creating a single set of legal instruments and a single legal personality of
the EU for external action, by providing for a stronger and more uniform role for the
ECJ across the whole JHA domain and by incorporating the EU Charter of
Fundamental Rights as fully legally binding part of the Constitution.

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Second, the Constitution enlarges the EU action possibilities in the areas of asylum,
immigration (though more on illegal rather than legal immigration), the integrated
management of external borders, procedural and substantive criminal law and crime
prevention. A particular innovation is a provision allowing for the establishment of a
European Public Prosecutor’s Office vested with cross-border prosecution powers. Yet
the establishment of such an Office is subject to a unanimous Council decision and its
remit will initially be limited to the protection of the financial interests of the EU.

Third, the Constitution strengthens the institutional and decision-making framework of

the AFSJ through the introduction of the co-decision procedure with qualified majority
voting and co-decision by the European Parliament as standard legislative procedure.
Yet some sensitive domains – such as criminal law harmonisation – will remain
exempted from this reform, and the Commission will still have to share its rights of
initiative with the Member States in the current ‘Third Pillar’ areas.

Should the new Treaty be ratified – which cannot be taken for granted at this stage,
especially after the ‘No’-votes in France (29 May 2005) and in the Netherlands (1 June
2005) – it will definitely reinforce the EU’s capacity to act in the domains of the AFSJ
and reinforce democratic and judicial control. Yet it will not bring a breakthrough
towards supranational policy-making and implementation on core JHA. Internal
security will remain largely a prerogative for national authorities, although they will
increasingly have to act in a coordinated European framework based on common
minimum standards.

Bibliography
– Joanna Apap, Malcom Anderson, Police and Justice Cooperation and the New
European Borders, Kluwer, The Hague 2002;

– Emmanuel Barbe, Hervé Boullanger, Justice et affaires intérieures dans l’Union

européenne. Un espace de liberté, de sécurité et de justice, La documentation
française, Paris, 2002;

– Valsamis Mitsilegas, Jörg Mönar, Wyn Rees, Guardian of the People? The
European Union and Internal Security, Palgrave Macmillan, New York, 2003;

– Jörg Monar, “Justice and Home Affairs”, Lee Miles (ed.), “The European Union,
Annual Review 2003/2004”, Journal of Common Market Studies, vol. 38, 2004;

– Steve Peers, EU Justice and Home Affairs Law, Longman, Harlow 2000.

Relevant official documents and information can be found at the following

websites:

– Council, DG Justice and Home Affairs:

http://ue.eu.int/cms3_applications/applications/search/jaiSearch.asp?lang=EN
&cmsID=495
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– Commission, DG Freedom, Security and Justice:

http://europa.eu.int/comm/justice_home/index_en.htm

– European Parliament, Committee on Civil Liberties, Justice and Home Affairs:

http://www.europarl.eu.int/committees/libe_home.htm

– Europol: http://www.europol.net/
– Eurojust: http://www.eurojust.eu.int/

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CHAPTER 23

IMPLEMENTATION OF EU JUSTICE
AND HOME AFFAIRS IN POLAND

Adam Dudzic*

1. INTRODUCTION

Compared with other policies of the EU, Justice and Home Affairs (JHA) policy
requires specific attention in the implementation process, which is mainly due to the
particularities this policy area has.

Firstly, JHA is one of the newest areas of cooperation within the EU: it was only the
Treaty of Maastricht that brought JHA cooperation inside the EU structure. Then,
massive changes in JHA cooperation were introduced by the Treaty of Amsterdam,
which implied significant temporary uncertainty as regards the exact nature of EU
membership. The Amsterdam Treaty integrated into the EU framework a substantial
body of measures that had been developed outside the EU, namely the 1985 Schengen
Agreement and associated implementing acts, together called ‘the Schengen acquis’. As
a result, in the JHA area there is a wide range of legislative instruments coming from
the first pillar (mainly regulations and directives) and the third pillar (framework
decisions, conventions, etc.).

Secondly, the rapid growth of the JHA acquis is another particularity of this policy
area. The acquis is accumulating rapidly, turning the achievement of accession
requirements into a moving target. The Treaty of Amsterdam (1997) enshrined the
maintenance and development of an “Area of Freedom, Security and Justice” as a
central treaty objective of the EU and set a five-year deadline for the adoption of a series
of measures. The Vienna Action Plan (December 1998) and the special European
Council on JHA of Tampere (October 1999) provided extra guidelines for the
development of the “Area of Freedom, Security and Justice”. A great surge in counter-
terrorism measures, political and judicial cooperation followed the terrorist attacks of
11 September in the United States, whereas the European Council of Seville (June
2002) re-emphasised the Member States’ pre-occupation with the combat of illegal
immigration. The next step in JHA acquis development was the adoption of the Hague
Programme and the Action Plan to that Programme setting out the EU objectives till
2009 in the area of freedom, security and justice.

The third particularity of the field of JHA is that since the Treaty of Amsterdam

* Headof Unit for the European Union, Ministry of Interior and Administration, Department for International
Cooperation, Warsaw, Poland.
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accession to the EU also implies accession to the Schengen cooperation. This

process is governed by a separate two-stage procedure. A new EU Member State after
accession does not immediately participate fully in the Schengen cooperation, which is
the case of Poland. The first stage commenced after the signature of the Accession
Treaty with the EU and involves a period of close monitoring of the new Member State’s
implementation of the Schengen obligations (so called ‘Schengen evaluation process’).
The second stage, which comprises full participation of the new Member State in the
Schengen cooperation and most notably the lifting of internal border controls, will only
enter into force after a separate and unanimous decision of the JHA Council. The full
participation in the Information System (SIS II) – is only foreseen for the end of 2005.
However, considering the scale of the implementation tasks it is unlikely that internal
border controls with Poland will be lifted at the beginning of 2006. By way of
comparison: it took other countries (e.g. Italy and Greece) up to eight years after
signature of the Schengen accession agreement before the decision to abolish internal
border controls was taken.

The fourth particularity that explains why JHA policy requires special attention in the
implementation process is the ‘vulnerability’ of the “Area of Freedom, Security and
Justice” to the failure of individual Member States to fully implement the acquis. In the
absence of substantial EU involvement in the implementation of JHA policies, Member
States have to rely on the performance of each other’s national systems for
implementing JHA measures. This ‘vulnerability’ to individual non-performance
together with the high sensitivity of the policy areas involved, which deeply touch upon
the question of sovereignty, makes JHA issues even more complex.

The particularities of the JHA area explain also the relatively uncompromising attitude
taken by the EU in the accession negotiations concerning this field. The EU Heads of
States and Governments announced that monitoring would continue after the signature
of the Accession Treaty. The unyielding position of the EU is further reflected by the
endorsement in the Accession Treaty of a specific safeguard clause concerning the
operation of the JHA areas. For a period of up to three years after accession, a safeguard
clause may be invoked vis-à-vis a new Member State that fails to implement
commitments, upon a motivated request by any Member State or on the Commission’s
initiative. The duration of such measures may extend beyond the three-year period,
excluding the new Member State concerned partly or entirely from JHA cooperation.
This clearly shows the lack of trust and a need for ‘security measures’ among old EU
Member States. Moreover, it should be mentioned that the Schengen part of the JHA
acquis already contains several ‘safeguard mechanisms’.
All the above-mentioned particularities reasoned for a difficult negotiation process in
the area, especially for such a big and specific country as Poland is.

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2. NEGOTIATIONS AND IMPLEMENTATION STRUCTURE

Despite all afore-mentioned particularities, the JHA area was not given any special
treatment during the negotiation process. It was treated like any other chapter, both by
the EU and Poland.

In Poland the general structure for the negotiation process established was also used for
negotiations on chapter 24, JHA. This structure was the following:

The Prime Minister provided the political leadership of the negotiations and was
supported by the Minister of Foreign Affairs, together with the Secretary of the
Committee for European Integration (UKIE) and the Government Plenipotentiary for
Polands Accession Negotiations to the EU. In conjunction with the above-mentioned
persons, the Prime Minister adopted the guiding decisions relating to the negotiation
process. The Council of Ministers approved the position papers prepared by the
Negotiation Team and recommended to the Council of Ministers by the Committee for
European Integration (UKIE).

The Negotiation Team was responsible for the formulation and implementation of the
negotiation strategy, including the elaboration of position papers and other necessary
documents. The Negotiation Team consisted of nineteen members (negotiators). These
were representatives from key ministries in the ranks of secretaries and undersecretaries
of state, and appointed personally by the Prime Minister. The Government
Plenipotentiary for Polands Accession Negotiations to the EU headed the Negotiation
Team.

From an institutional point of view the following institutions were involved in

negotiations and the acquis adjustment process in the field of JHA:

Committee for European Integration (UKIE)

The Committee for European Integration (UKIE) was established under the Law of 8
August 1996. As supreme organ of state administration, the Committee was charged
with programming and coordinating the policy of Poland’s integration into the EU. The
Prime Minister chaired the Committee for European Integration. The Committee was
composed of the Chairman, the Secretary, and the Ministers of Foreign Affairs, Internal
Affairs and Administration, the Ministers of the Economy, Finance, Labour and Social
Policy, Agriculture and Rural Development, and Justice.

Chief negotiator
A step towards the establishment of a formal and institutional basis for the Polish
negotiation structure was the Decree of the Polish Council of Ministers of 24 March
1994 appointing the Government Plenipotentiary for Poland’s Accession Negotiations
to the EU. In accordance with this Decree the position of the Plenipotentiary was filled
by a secretary of state in the Chancellery of the Prime Minister. The tasks of the
Plenipotentiary included the conceptual preparation and coordination of the negotiation
process. A very important function was the preparation of the Accession Treaty between
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the Republic of Poland and the Member States of the EU and its negotiation on behalf
of the government. The Plenipotentiary was authorised to present opinions on the drafts
of legal acts and documents relating to the process of Poland’s membership negotiations
with the EU. Apart from that, with the Prime Ministers consent, the Plenipotentiary
could present to the Council of Ministers legal acts regarding the scope of his work.

Negotiation team
On 27 March 1998, the Prime Minister appointed the Negotiation Team for Poland’s
Accession Negotiations to the EU, whose primary task was to prepare and conduct
membership negotiations. The Team was headed by the Chairman of the Team, the
Government Plenipotentiary. The team consisted of the Chairman of the Team and its
Members who where in the rank of secretary or undersecretary of state and put forward
by the ministries; they were nominated personally by the Prime Minister.

The tasks of the Negotiation Team included:

o Formulating opinions on European Commission reports from the concluded

screening sessions, which constitute an assessment of the degree of adjustment
of Polish law to EU law;
o Revising draft negotiation instructions;

o Preparing and approving draft position papers of the Polish government;

o Preparing and approving responses to EU queries within the mandate resulting

from the position papers;

o Preparing package deals on the basis of negotiation instructions;

o Coordinating the entire negotiation process.

Minister of Foreign Affairs and Ministry of Foreign Affairs

The Minister of Foreign Affairs was the Head of the Polish Delegation to the Inter-
Governmental Conference (IGC) on Accession. The Minister and Ministry of Foreign
Affairs also supervised diplomatic missions in the Candidate and EU Member States
and therefore fulfilled a key role in coordinating foreign contacts and organising
multilateral and bilateral meetings within the frames of the negotiation process and
chief negotiators cooperation. They managed lobbying activities and information flow
contributing to the creation of a positive image of Poland’s accession negotiations. In
this respect, it is necessary to emphasise also the role of the Representation of the
Republic of Poland to the EU in Brussels.

Government Institutions involved in the accession negotiations

When talking about the negotiation process the implementation structure plays a crucial
role. In Poland the implementation of the acquis in the JHA area was mainly led by the
Ministry of Justice, the Ministry of Interior and Administration and supervised
institutions like the Border Guard Head Quarters, the Police Head Quarters, and the
Office for Repatriation and Foreigners. However, because of the specificity and
complexity of JHA area, many other government institutions were involved (Ministry of
Finance, Ministry of Health, Ministry of Infrastructure, General Inspector for Data
Protection etc.)

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3. THE OUTCOME OF NEGOTIATIONS

The negotiations in JHA affairs were to some extent of ‘political nature’. The initial
Polish negotiation position of October 1999 was very simple. Poland simply accepted
all JHA acquis including an exemption for three international instruments, which were
also not implemented by the EU Member States at that time.

When the JHA chapter was closed in July 2002, there was actually not a large amount
of JHA acquis, which was considered to be implemented satisfactorily. The areas
‘ready’ for accession were only the following: reform and structure of the Office for
State Protection, of military courts, provisions on personal data protection, the
functioning of the General Inspector for Personal Data Protection, consular
cooperation, local border traffic agreements, travel documents and provisions
concerning the conditions of stay in Poland.

The majority of the acquis, however well advanced in transposition, was still regarded
as not satisfactorily implemented. This concerned mainly the following areas:

The Schengen Action Plan, especially as regards training of Border Guard

officers, phasing out conscript officers, development and proper allocation of
equipment, assignment of 80% of the newly recruited border guards to its future
external border and gradual reallocation of 30% of its staff and equipment from
the future internal borders to the external border, employing 1325 new Border
Guard officers each year till 2006;

The reform of the judiciary, especially as regards sufficient human resources

and qualified staff, adequate and modern equipment, acceleration of court
proceedings, reduction of the number of pending cases to avoid unreasonable
delays and measures to ensure the adequate enforcement of judgments, effective
access to justice, including a system of legal aid;

Visa policy, especially with regard to the new visa regulation (Regulation (EC)
539/2001, as amended by Regulation (EC) 2414/2001), Poland was to adopt the
necessary provisions and put in place the necessary administrative structures in
advance of accession, in order to ensure effective implementation upon
accession;

External borders, especially as regards effective control of Poland’s borders,

including its international airports and seaports, by specialised trained
professionals, properly equipped, with the powers to tackle border related
crimes, cooperation between all national authorities working in the field of
border security including police, customs and the prosecution service;

Migration, especially as regards the conclusion of readmission agreements with

the Russian Federation and Belarus, and the development of a system of training
for the staff of Polish migration services;

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Asylum, especially as regards analytical and organisational measures for the

active participation in EURODAC;

Police cooperation, especially as regards accountable, reliable and fully

coordinated police organisation, cooperation and coordination between the
police, the prosecuting and judicial bodies as well as other competent agencies,
development of databases, recruitment of staff for the Central Bureau of
Investigation;

Other areas such as: fight against crime, corruption, money laundering,
terrorism, and fight against drugs.

The EU stressed that the implementation of practical measures as identified was

essential in the run up to accession. The EU therefore confirmed to continue to take the
closest interest in the progress of Poland in both, the adoption and the practical
implementation of the acquis in these areas. Moreover, given the importance and
complexity of the acquis under this chapter, the EU confirmed to reinforce the existing
monitoring process, which would continue until accession, within a uniform and
consistent framework, paying particular attention to Poland’s administrative and judicial
capacity to implement and effectively enforce the acquis. Reinforced monitoring would
include increased coordination of all available information sources, as well as peer
reviews. In this context, Poland was invited to provide information to the Commission
on a regular basis, and at least every six months, on progress made in implementing the
JHA acquis.

The EU recalled that it is devoting significant resources to support JHA preparations in

the candidate countries, given the priority of this area. However, the EU underlined that,
as a matter of principle, the implementation of the acquis for the purpose of accession
could not be made conditional upon the EU’s financial assistance.

Monitoring the progress in the adoption and implementation of the JHA acquis
continued throughout the negotiations and until accession, in particular as regards
Poland’s adherence to its planned legislative schedule and further measures aimed at
developing the institutional and administrative capacity of all Polish law enforcement
authorities and of the judiciary. The EU underlined that it would devote particular
attention to monitoring Poland’s implementation of its specific commitments regarding
the EU’s visa policy, asylum and migration policy, the recruitment of border guards, the
allocation of sufficient funding for the implementation of the Schengen Action Plan, the
Strategy of Integrated Border Management and the reform of the judiciary, the
construction of new border stations at the Eastern border, the impact of the
reorganisation of the customs, and the adoption and implementation of the National
Drugs Strategy. Special attention was also given to Poland’s capacity to cooperate
effectively with other States to implement the JHA acquis and to enforce it.

In this context, the EU recalled that the establishment of an independent, reliable and

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efficient judiciary was of paramount importance. The EU emphasised the need for
Poland to improve its overall administrative capacity, in particular with regard to human
resources policy, professional training, infrastructure, equipment and the coordination
between the relevant authorities. According to the EU, a final assessment of the
conformity of Poland’s legislation and policies with the acquis and its implementation
capacity could only be made at a later stage of the negotiations.

The decision to close the JHA chapter was to some extent a ‘political’ one. It involved
a firm mechanism of monitoring which included conducting so called ‘EU peer review
monitoring missions’. There were two such missions conducted in Poland, in March and
September 2003 and their outcome was positive.

4. IMPLEMENTATION PROBLEMS

Poland had to effectively implement the acquis in every sub-area of the JHA acquis.
This involved not only pure legal changes but also (or perhaps above all) achieving
proper functioning standards, proper staffing and equipment, training, development of
infrastructure, creating new institutional framework, inter-institutional cooperation and
introducing the mechanism of strategic planning. It must also be remembered that
compliance with the requirements for EU membership in the field of JHA required
substantial financial, socio-economic and socio-political challenges for Poland.

Poland transposed the EU JHA acquis in all sub-areas but the most problematic ones
seemed to be border protection and visa policy.

Border protection

One of the most important areas of implementation was the field of border protection
and control. Implementing these requirements involved legislation on border
management, proper infrastructure and facilities for carrying out border checks and
surveillance, deployment of professional border guards, training of personnel,
appropriate equipment, as well as functioning international coordination at all levels.

Those Schengen provisions, which are directly connected to the lifting of internal
border controls, did not have to be implemented upon accession. These involve the
separation of “out-” and “in-Schengen” passenger flows at the international ports and
airports, and the provisions on the abolition of checks at internal borders.

A fully professional, well-equipped and trained border service is an essential ‘tool’ of

efficient realisation of tasks in border protection. A rudimentary characteristic of the
powers as well as the methods and means of the formation’s activities is their police
character. The Border Guard has been appointed by virtue of the 1990 act regulating the
tasks, the organisation and the scope of its authority. At the same time was also passed
the Act on State Border Protection regulating, amongst others, the definition of a state
border and its course on land and sea, general principles of state border crossing and
laws in force on the borderline.
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From the moment of its formation the Border Guard was primary directed at:
counteracting and combating illegal migration, counterfeit detection of specific
documents, preventing wanted and undesired individuals from crossing the border and
combating smuggling (narcotics, hazardous, including radioactive, materials, and arms,
vehicles, excise goods).

The situation on the state border, in particular the massively increasing border crime at
the beginning of the 90’s, fundamentally influenced the organisational, legal and
logistical alterations executed since 1991. Successive waves of illegal migrants, rapid
increase in contraband of certain goods and stolen vehicles as well as the progressing
threat of organised crime prejudged the necessity for sealing the border and modifying
the methods and means of the formation’s activity. Creating an advanced system of
border protection became its primary goal. This system consisted, amongst others, of
adequately expanded border infrastructure, modernised equipment and armament, a
cadre selection system and a training system.

The following activities were undertaken in order to improve the efficiency of border
protection and to improve border traffic controls:

– Adaptation of border protection standards to illegal migration threats and other

border crime, including penetration of undesirable individuals, objects and
substances through the border;
– Achieving border traffic controls standards allowing for unrestrained movement
of individuals and objects through borders in the EU framework in addition to
effective employment of controls procedures compliant with EU regulations on
the external border;
– Adaptation of the structure to the specific character of the tasks, execution of
evolutionary allocation of forces and means relevant to the alteration of the
character of the border;
– Achievement of tele-informational infrastructure standards allowing the
utilisation of compilations and data bases with guaranteed appropriate
information security consistent with Schengen principles;

The effects of these activities were the following:

– 18 new border patrol stations were included in the protection of the eastern
section of the state border. In total, the external UE border in Poland is now
protected by 62 organisational border units. The average extent of the protected
section is about 22km;
– New legal instruments were introduced enabling amongst others operational
control and the realisation of so-called controlled delivery;
– EU recommendations regarding border traffic controls were initiated including
entries in the Schengen Common Manual;

– The goals and directions of migration policies were defined, including those
pertinent to effective monitoring of foreigner inflow with controls before entry,
on the border, during transit, stay and departure;
– A timetable regarding the process of making the Border Guard a professional
force between 2003-2006 was prepared;
– In 2002 a new model for professional training of Border Guard officials was

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introduced, taking into account the integration of border protection and border
traffic control services;
– The tele-informational network has been expanded. Since the end of 2003 all
Border Guard units have access to an extensive network and all data bases are
administered by the formation;
– Bilateral contacts with border services of Member States were developed;
– The modernisation of Border Guard equipment was executed, which includes
transport equipment, specialised technology, armament, communication,
computer and specialised equipment for border traffic controls, vehicles with
thermovision, portable thermovision cameras, observation means and vessels.

Visa Policy

The abolition of internal border controls within the Schengen context made it necessary
to harmonise Poland’s visa policy in order to avoid ‘visa shopping’ by third-country
nationals. This harmonisation concerned primarily the lists of countries whose nationals
needed entry visas (‘negative list’) and whose nationals did not (‘positive list’), a
uniform visa format, and provisions as regards the issuing of visas and their fees.

The introduction of visa requirements for nationals of the Republic of Belarus, the
Russian Federation and Ukraine, initially scheduled for 1st July 2003 was postponed till
1st October 2003. In this respect, Poland had to take into account the historic context of
the relations with its eastern neighbours. These include:

– The presence of several million persons of Polish origin who found themselves
outside Poland as a result of World War II and the stormy relations of Poland
with Russia and the former Soviet Union. These persons identify themselves
with the Polish nation, belong to Polish organisations, cultivate Polish traditions
and language, and maintain animated contacts with their country of origin. The
Polish state also feels responsible for their fate and for nurturing their ties with
Poland;

– Close contacts of Poles with their neighbours in the East have a centuries-long
tradition, based on common historic, cultural and language roots. They find their
practical expression at present in lively cooperation in the social, cultural,
educational and economic spheres, reflecting a shared heritage and friendly
interest in the lives of people on the other side of the border.

This general context of Poland’s relations with Russia, Belarus and Ukraine, and also
the current political considerations, strengthen Poland’s interest in developing contacts
with these states, and in maintaining links between local communities and citizens.
According to the Polish authorities, the introduction of visa-based travel must not create
any barrier in mutual contacts, nor lead to their reduction. This view is fully in
compliance with the principles of the EU’s visa policy, which is fully implemented by
Poland. Accordingly, it was the objective of the concluded agreements on the movement
of persons with eastern neighbouring countries to comply with EU standards while
facilitating – wherever possible – the movement of persons and transfer of values.

During the negotiations on the agreements, in line with the political guidelines, the

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Polish side sought to retain the principle of identical treatment of all partners without
agreeing to excessive claims concerning the easing of visa conditions. At the same time,
in anticipation of its impending accession to the Schengen Group, the Polish side
adapted certain Schengen provisions, thus demonstrating Poland’s firm commitment to
the broadest possible implementation of the relevant European solutions.

The agreements with the neighbours in the East envisaged that in principle travel
required visas. A departure from this rule is contained in the agreement with Ukraine,
which provides for visa-free travel by Polish nationals and charge-free issuing of visas
to Ukrainian nationals. This formula was welcomed by the public opinion of both states.
Polish proposals for similar solutions in relations with Belarus and Russia were however
not accepted.

The concluded agreements incorporated a number of solutions, compatible with EU law

and designed to enhance economic and social contacts. These included accelerated
processing of visa applications by businessmen, persons travelling in family
emergencies, members of official delegations and working groups, and also the granting
of multiple visas to railway workers, truck drivers, and participants in exchanges at state
and self-government levels. An important provision envisages charge-free visas for
youth and the elderly, teachers and students taking part in school exchange programs,
participants in cultural, educational, sports and scientific-technological events arranged
at various levels of cooperation, and also for persons visiting the graves of relatives. The
adopted regulations abolish visa requirements for the crews of civilian aircraft and sea
vessels, crews of rescue aircraft, diplomats (with the exception of those delegated to
work on the territory of the other state), persons granted temporary or permanent right
of residence in the other country. There will be no requirement of transit visas for
nationals of Belarus, the Russian Federation and Ukraine possessing visas or a right of
residence in Schengen states, and for Poland nationals travelling to their country of
destination through the territory of Belarus or the Russian Federation. Regarding travel
to and from the Kaliningrad Oblast of the Russian Federation, the agreement with
Russia grants Polish nationals and the inhabitants of the Kaliningrad Oblast multiple,
charge-free visas, without the obligation of submitting invitations.

5. CONCLUSIONS

Poland’s way to the European “Area of freedom, security and justice” is a hard one but
at the same time successful. Poland had to reinforce the whole system of internal
security including the strengthening of the Police, the Border Guard and other law
enforcement bodies as well as cooperation between them. Sooner or later, Poland would
have probably done these reforms as part of a normal process in a democratic society.
However, due to the pressure of the EU in the perspective of enlargement these reforms
had to been done much quicker.

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CHAPTER 24

IMPLEMENTATION OF EU JUSTICE
AND HOME AFFAIRS IN ROMANIA

Sebastian Laurenþiu Lãzãroiu *

1. INTRODUCTION

Justice and Home Affairs was one of the most difficult chapters in the process of
negotiations for EU membership. The negotiations in this chapter dealt with very
sensitive issues such as the reform of the judiciary, the necessity to adopt strong and
efficient anti-corruption measures and the obligation to secure the borders in order to
align to the Schengen acquis. Romania managed to officially close negotiations on
chapter 24 on Justice and Home Affairs in December 2004.

Romania has fully transposed the EU legislation and policies required in the field of
Justice and Home Affairs. Romania also succeeded to strengthen the existent
institutions and to create the necessary administrative capacity. However, considerable
effort is still needed as regards the effective implementation of Justice and Home Affairs
related policies.

2. SCHENGEN ACTION PLAN

Romania has a strategic geographical position in the future context of European Union.
First, it is situated at the crossroads of two major routes of world migration: East-West
and South-North. Second it has a long eastern border with the Republic of Moldova and
Ukraine, which will become an external EU border after Romania’s accession to the
EU. Complementary to the Schengen Action Plan, Romania adopted the National
Strategy for Integrated Border Management 2004-2006 and the Strategy for Securing
the Romanian Border 2004-2007.

In spite of significant progresses that have been made during the last four years there
are still serious difficulties of effective implementation related to administrative
capacity and infrastructure. In accordance a series of actions need to be taken in order
to stick to the initial calendar for Romania’s accession to the EU (January 2007) and to
avoid the activation of the safeguard clauses, which may delay Romania’s accession
until 2008. Particular attention should be paid to:
* Lecturer at the Department of Sociology, University of Bucharest, Romania; Associate Professor, Political

Sciences Department, National School for Political and Administrative Studies – SNSPA, Bucharest,
Romania; Managing Director, Center for Urban and Regional Sociology – CURS SA.
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Increased efforts to improve equipments and infrastructure at the future external

border;
Accelerated recruitment of 4.483 agents and border police officers filling
vacancies up to 100% especially at the border with Ukraine, the Republic of
Moldova, and the Romanian seacoast border and to strengthen cooperation with
third countries.

3. EU VISA POLICY

Romania is now fully aligned to the EU ‘positive visa list’. As regards the ‘negative list’,
Romania respects the EU requirements with the exception of the Republic of Moldova,
which is going to be included into the ‘negative list’ at a date close to accession due to
the special relations Romania has with this country. An online visa system has already
been set up which is linking the Office for Foreigners with consular missions in Russia,
Ukraine, Turkey, Serbia and Egypt. However, visa regimes for Russia, Turkey and
Serbia are not fully in line with the Schengen acquis. As the Romanian potential for
migration is still high (up to 15% of the adult population would like to seek work
abroad) more efforts should be made to strictly control irregular migration and to
comply to exit criteria for Romanian citizens.

4. EU LEGISLATION ON DATA PROTECTION

The Ombudsman office is the national authority in charge with personal data monitoring
and control processing. All the acquis concerning data protection has been correctly
transposed, but there are still important gaps at the level of implementation, mainly
because of the lack of financial resources and administrative capacity. In this sense the
Ombudsman office needs more financial and human resources in order to function
efficiently and to secure its independence.

5. EU MIGRATION POLICY

Although Romania is not yet a destination country for traditional international

migration flows, it is a source of migration for more developed western countries.
Therefore, anticipative steps should be made in order to prepare the country for the
years after accession when a significant number of immigrants and asylum seekers is to
be expected.

The National Office for Foreigners needs to create new specialised positions and the
existent personnel should pass through a training process. There is still a need to fill in
about 30% of vacancies. More financial resources should be allocated to this institution.
Migration issues are dealt by different institutions, with different or overlapping
responsibilities. A unique authority that might take the lead or the role of coordination

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should be considered in the future. Romania should also continue to appoint liaison
officers and internal attaches to diplomatic missions in order to fight irregular migration.

6. EU ASYLUM POLICY

The National Office for Refugees is the authority in charge with all asylum issues. This
institution has effectively cooperated with relevant NGOs and the United Nations’
Refugee Agency (UNHCR) in order to implement programmes in different areas of
reception and integration. There is still a need for supplementary programmes for all
personnel involved in asylum procedures and integration of refugees.

In the past, the general view was that Romania is more a transit country for immigrants.
This perception led to ignoring the integration problems of existent immigrants and
refugees. In accordance, more attention needs to be paid to integration programmes
which aim to encourage access to education for minors, enhance skills of refugees and
immigrants and help to prepare their entry into the labour market, facilitate the
recognition of their diplomas and fight discrimination in the labour and housing market.

7. POLICE COOPERATION AND FIGHT AGAINST ORGANISED

CRIME

Significant reforms have been taken in Romania’s police system. However, the reform
process is far from being accomplished. Effective decentralisation and delegation of
responsibilities to the regional and local level are immediate priorities of the reform.
Recruitment and development of human resources should be based on merit promotion
and encouraging career police officers.
There is also a need to fill around 7000 vacancies in the police forces in order to
strengthen their capacity. More efficient and short training programmes for the new
recruits should be put in place, especially in the case of Gendarmerie. Although the
public order system in Romania is dual (Police and Gendarmerie) a decision should be
made whether to maintain both institutions or to eliminate overlapping responsibilities.
Cooperation between the police and the judiciary should be improved as well as
cooperation between the national police and counterparts in neighbouring countries.

Trafficking in human beings is still a serious issue. Many victims still come from
Romania and Romania is a transit country for transporting victims of trafficking from
Moldova and Ukraine. Organised crime departments should pay more attention to these
cases and treat them according to international standards and adopted national
legislation already in place.

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8. CUSTOM COOPERATION

Efforts are still necessary as regards the work of the relevant customs authorities,
especially in the sector of drugs transit. Only recently national customs authorities have
succeeded significant captures of drug loads at Romania’s eastern and southern borders.

There is an acute need for cooperation between custom authorities and commercial
companies for fighting trafficking in drugs. Corruption at custom points is still a
problem and needs to be tackled with more than just internal disciplinary measures
against custom officers.

9. FIGHT AGAINST FRAUD AND CORRUPTION

Corruption is still an important issue that Romania is facing since 1990. Corruption
might be one of those issues, which can possibly delay the accession of Romania to the
EU. New institutions have been created since 2002: the National Anti-Corruption
Prosecutor (2002), the Office for Fighting Community Frauds, which is working in
connection with OLAF (2004) and the Department for Fighting Organised Crime and
Corruption (2004). However, there are justified concerns that these institutions are not
totally independent from politics. Obviously they have not been able to accomplish their
tasks properly especially in cases of corruption of high officials.

The National Corruption Strategy was adopted and audited in 2005. The declaration of
assets and interests of the Members of Parliament, government officials and civil
servants were changed in 2005 in order to promote more transparency.

All in all one might say that anti-corruption legislation is in place; however, it is not
implemented rigorously. High-level corruption should be the focus and cases of
corrupted officials should be immediately revealed to the general public. More financial,
human and training resources need to be allocated to the national Anti-Corruption
Prosecutor in order to make it function efficiently and independently from any political
influence. There should be also an increase of public awareness about the consequences
of corruption at the macro and micro levels of the society.

10. JUDICIAL COOPERATION

The reform of the judiciary is also crucial in order to stick to the agreed calendar of
accession to the EU. Significant steps have been made just recently to change the laws
concerning the status of magistrates, the organisation of the judiciary, and the Superior
Council of Magistrates.

The Superior Council of Magistrates should be given more power as to secure the
independence of the justice system from political and economic intrusions. More

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financial resources and training programmes should be designed to strengthen the

institutional capacity. The declarations of assets and interests were already implemented
for all the personnel functioning within the justice system, but they need to be
monitored by an independent organism.

11. CONCLUSION

The most critical aspects that still need to be tackled by the Romanian authorities in
order to be ready for EU membership are undeniably the fight against corruption, the
reform of the judiciary and measures aiming at securing Romania’s eastern border. The
Romanian government took note of the signals coming from the EU and allocated
supplementary funds to the relevant institutions dealing with those central issues: the
Ministry of Justice and the Ministry of Interior and Administration.

These budgetary reinforcements have to be accompanied by concentrated political

efforts to accept and endorse all necessary measures in the field of Justice and Home
Affairs.

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EU TRADE AND DEVELOPMENT POLICY

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CHAPTER 25

EU EXTERNAL TRADE AND DEVELOPMENT POLICY

Bart Kerremans and Jan Orbie*

1. TRADE AS A COMPOSITE POLICY

“(..) trade has become pervasive, touching almost all aspects of EU policy,
both internal and external”1

With this observation, Martin Holland points at the wide significance of trade policy in
the European Union. Trade touches indeed a wide range of aspects of EU policy and of
EU society. One factor in this evolution is that, as trade liberalisation proceeds, it not
just affects cross-border issues, but behind-the-border ones as well. These may range
from product regulation to social and environmental rules. Obviously, the latter may be
politically very sensitive. Indeed, because trade policy increasingly affects behind-the-
border issues, it is increasingly affected by fundamental societal choices, and thus prone
to become the subject of intensive, often polarised, political debate.

It is in this context that one has to look at the EU’s external trade and development
policy. At first sight a technical issue, it is one that has been politicised increasingly,
especially during the last ten years. Consequently, those political actors that play a
central role in this policy field need to do so under often severe political constraints and
under the ever more critical scrutiny from societal groups.

The EU’s trade policy has an autonomous and an external dimension. The autonomous
dimension consists of the trade remedies that the EU can use as part of what is called
“contingency protection”, that is, the protection against certain contingencies. Three
such contingencies stand out: dumping, subsidies, and rapidly rising imports. The
protective measures against these three consist of respectively anti-dumping measures,
countervailing measures, and safeguard measures. In addition to these trade remedies,
unilaterally granted preferences are also part of the EU’s autonomous trade policy. In
practice, it concerns the EU’s Generalised System of Preferences (GSP).

As far as its external dimension is concerned, the emphasis is on the EU’s actions as a
negotiator in the international trading system. Such a role is played in the first place in
the context of the World Trade Organisation (WTO), where the EU has become an
* Bart Kerremans, Associate-Professor (Hoogleraar) of International Relations and American Politics at the
Catholic University of Leuven, Belgium.
Jan André Orbie, Research Assistant of the Fund for Scientific Research (Flanders, Belgium), Department of
Political Science, Gent University, Belgium.
1 Marc Holland, The European Union and the Third World, Houndmills, 2002, Palgrave, p.140.

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important player. But besides this multilateral role, the EU is also an active bilateral
player. This has resulted in a broad array of bilateral (or inter-regional) preferential
agreements. With these agreements, the EU created a so-called pyramid of preferences
in which different groups of countries enjoy preferential access to the EU market, up to
the level of free access for a wide range of goods, in the first place industrial products.

In this chapter, we will take a brief look at different important components of the EU’s
external trade and development policy. We start with a short observation on the reasons
why there is such a policy in the first place. One could call this the “demand side” of its
external trade and development policy. We proceed then with a look at the capacity of the
EU to “deliver” an external trade and development policy. First, attention will be paid to
the legal part of this capacity, i.e. to the treaty provisions and the way in which they have
been interpreted. Second, attention will be paid to the way in which the negotiating
process operates in practice. We will see that when looking at the question of the “capacity
to act”, one has to look at the countervailing impact of the “need for control” as well.

The third and final component of this chapter will consist of the output, the “supply
side” of the EU’s external trade and development policy. We will briefly look at the
multilateral dimension, and more precisely at the EU’s current role in the WTO.
Subsequently, a look will be taken at the EU’s pyramid of preferences and the ‘raison
d’être’ of this pyramid. Last but not least, attention will be paid to the development
component in the EU’s external trade policy, more specifically to the most important (or
extensive) part of this component: the relationship of the EU with the ACP countries.

2. THE DEMAND FOR THE EU’S EXTERNAL TRADE POLICY

Three factors can be distinguished to explain why a certain demand exists for the EU to
develop an external trade policy. The first one is related to internal developments in the
EU itself. As the EU was created as a customs union, it needed to provide for a system
to negotiate about its common customs tariffs with third countries and to develop a
range of policies in this regard. With the gradual introduction of the common customs
tariffs, which was finalised in 1968 for industrial goods and in 1970 for agricultural
goods, the EU also started to act as an international player on these issues. Further
European integration equally inextricably entailed an expansion of the EU’s external
agenda. Preserving the commonality of the EU’s internal rules and legal order required
indeed that it was enabled to negotiate about such issues with third countries as well.
From a legal point of view, the European Court of Justice (ECJ) came to this conclusion
in its ruling in the ERTA case (case 22/70). In this ruling, the ECJ developed the
reasoning of “in foro interno, in foro externo”, referring to a parallelism between the
expanding scope of internal EU competence and related regulations, and the
concomitant expansion of the scope of the EU’s external activities, be it under certain
conditions. Indeed, as has been elaborated in later rulings and opinions, internal
competence can only lead to external competence for the EU in case the latter is
necessary to achieve the objectives set out in the treaties, or to safeguard the
commonality of the acquis communautaire. In such cases, the external competence of
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the EU becomes an exclusive one. This means that it concerns a competence that is not
being shared with the Member States.

This parallelism between internal and external competence, and thus between the scope
of the internal acquis and the one of the EU’s external activities only tells part of the
story however. As the EU has been growing economically and has been expanding its
membership continuously, its market has become a very important outlet for a growing
range of third countries. The following table provides an indication as it points at the
trade dependence of several countries on the EU.

Last but not least, the demand for the EU’s external trade policy is triggered by its
importance in the international trading system in general. As a matter of fact, the
development of the EU itself has taken place in parallel – even if not in direct
relationship – with the multilateral trading system, and more precisely the GATT and
the WTO. Today, as the following table indicates, the EU (measured by its extra-
community trade) provides for an important part of world trade. As a consequence, it
enjoys a lot of potential market power in the World Trade Organisation, which
intensifies both the incentives and the external pressure for it to develop an effectively
operating external negotiating machinery, and an external trade and development policy
that respects the rules of the multilateral trading system. Indeed, the credibility of these

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multilateral rules largely depends on the extent to which the “great trading powers” such
as the EU and the US abide by these rules themselves.

The table above provides the figures for the former EU fifteen Member States and for
trade in goods. The figures for the current EU of twenty-five Member States are about
two percentage points higher. As far as trade in services is concerned, the share of extra-
community trade in world trade amounts to 24.7%.

3. THE EU’S CAPACITY TO DELIVER TRADE AND DEVELOPMENT

Given that there is a demand for an EU external trade and development policy triggered
by the EU’s internal developments, the externalisation effect of these developments, and
the EU’s market power in the world trading system, does the EU have the capacity to
respond to these demands in an effective and efficient way? This question brings us to
two issues. First the legal framework within which the EU needs to develop these
policies, and second, the way in which the EU decision-making system on trade
operates.

3.1. The Legal Framework

The basis of the legal framework is provided by both the EC’s legal personality and the
treaty provisions that provide it the competence to develop an external trade and
development policy. The former is provided by article 284 TEC. This means that
whereas the European Community legally has the capacity to act as a legal person in the
international realm, the EU doesn’t have that capacity. Thus legally, it is not the EU but
the EC that acts on international trade.

The basis of the EC’s competence to act on trade is provided by article 133 TEC. The
one in relation to development is provided by article 177 TEC.

Article 133 TEC is part of Title IX of the EC Treaty, which is the Title that deals with
the EC’s common commercial policy. Title IX consists of four articles. From the
perspective of the EC’s external trade relations, article 133 is by far the most important
one.

Basic provisions on EC trade policy

The first of these four articles – article 131 TEC – puts the EC’s common commercial
policy in the wider perspective of the establishment of a customs union among the EU
Member States. By establishing such a union, the Member States not only committed
themselves to the removal of the tariff barriers among themselves (as stated in articles
3 par. 1(a) and 25 TEC).2 They also committed themselves to a uniform and joint
commercial policy vis-à-vis the rest of the world. The two adjectives are important here.

2 The Member States equally accepted the prohibition of quantitative import and export restrictions among

themselves (see articles 28, 29 and 30 TEC).

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They first committed themselves to a uniform commercial policy meaning that the
commercial policies of the member states would be largely harmonised through one EC
commercial policy, through a Common Commercial Policy. They also committed
themselves to a joint commercial policy, meaning that they would act jointly in their
trade relations with the rest of the world.

What is the competence of the EC to negotiate international trade agreements, be they

bilateral, plurilateral, or multilateral? Article 133 TEC provides the answer. Paragraphs
3 to 7 of that article provide for the decision-making procedures whenever the EC wants
to conclude such agreements and engages in negotiations with that purpose in mind.
They equally provide for the scope of the EC’s exclusive competence in this regard.

The basic structure of the decision-making process under article 133 consists of the
following successive parts:

The Commission makes a recommendation to the Council about the opening of

negotiations;
The Council authorises the Commission to open such negotiations;
The Commission negotiates on behalf of the EC and in close consultation with a
committee of Member States’ representatives;
The Commission concludes the negotiations;
The Council decides whether the agreement will be signed;
The Council eventually approves the agreement on behalf of the EC. Such an
approval is equivalent to ratification by the EC.

Important in this procedure is the possibility for the Council to issue negotiating
directives, which the Commission needs to respect in its negotiations with third
countries. The Council doesn’t have to do that. It may choose to do so. What the Council
needs to do before negotiations can be opened is authorising the Commission to open
them. A mandate is thus optional, not mandatory. This fact has a number of
consequences for both the Commission and the Member States, and especially for the
special committee to which article 133 refers. The role of that committee becomes much
more important in situations where no mandate has been adopted by the Council. We
will deal with this aspect of the decision-making procedure later. Here it is important to
notice that this special committee is better known as the Committee 133.3

The EC’s competences in the field of trade policy

For all trade-related issues that fall within the scope of the EC’s exclusive competence,
the Council decides by qualified majority.4 This is the case for the authorisation of
negotiations, for the authorisation of the signing of the agreement, and for the ultimate
approval (ratification) of an eventual trade agreement. The question is then: what falls
within the scope of the EC’s exclusive competence on trade? The answer to this
3 As a matter of fact, the Committee 133 meets monthly at its titulaires level, and weekly at its deputy level. Besides
that the following specialised Committees 133 exist as well: steel products, textiles, and services.
4 This means that in the EU-25, 231 of the 321 votes available are required to adopt a decision, on the condition that
minimum 62% of the EU population is represented by that QMV as well. More importantly, from a practitioner’s
point of view however, is the blocking minority. In the EU-25 90 votes are needed to form such a minority.
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question is far from easy. Originally, article 133 largely applied to trade in goods.
Almost all international trade agreements were limited to trade in goods, so the question
of the scope of article 133 did not really materialise.5 With the expansion of the
negotiations within the framework of the GATT to trade in services, and to intellectual
property rights in the eighties and nineties, the question was pushed to the forefront. At
the end of the cycle of multilateral trade negotiations within the GATT in 1993, called
the Uruguay Round, the question did arise. It was through an opinion from the ECJ
(Opinion 1/94) that at least some clarity was created in this regard. This didn’t stop the
debate, rather the contrary. Proponents of a larger scope – especially the Commission –
faced the proponents of either the status quo or a narrowing down of the scope. As a
consequence, during two consecutive negotiations on treaty revisions,6 the scope of
article 133 was on the table, as it also was during the Convention and the subsequent
negotiations on the Constitutional Treaty (2003-04).

In the amendments to article 133 that have been enacted since Opinion 1/94, efforts
have been made to define the scope of article 133 in relation to trade in services more
precisely. In this effort, the principle that trade in services cannot in principle be
excluded from the scope of article 133 is being recognised as it is for the trade-related
aspects of intellectual property rights. This is made clear by the way in which paragraph
5 is formulated. In the first indent of that paragraph, reference is made to paragraphs 1
to 4 of article 133 that cover trade in goods and – in the philosophy of Opinion 1/94 –
parts of the trade in services and trade-related intellectual property rights.

“Paragraphs 1 to 4 shall also apply to the negotiation and conclusion of agreements in

the fields of trade in services and the commercial aspects of intellectual property, in so
far as those agreements are not covered by the said paragraphs and without prejudice to
paragraph 6.”

Paragraph 6 (cf. infra) contains a number of restrictions on the extent to which trade in
services may be considered to belong to the EC’s exclusive competence.

In the remainder of paragraph 5, the scope of the QMV is restricted as far as trade in
services and the commercial aspects of intellectual property rights are concerned. First,
unanimity is required whenever such agreements include provisions for which
unanimity is required for the adoption of internal rules. Second, unanimity is required
as well, in case such agreements contain provisions on issues on which the EC has not
yet exercised the powers conferred upon it by the EC Treaty by adopting internal rules.
This means that in case international agreements on trade in services and the
commercial aspects of intellectual property provide for the initial legislation on such
issues in the EC, they need to be adopted unanimously by the Council. In addition – and
a little bit strangely – the last indent of paragraph 5 secures the right of the Member
States “(..) to maintain and conclude agreements with third countries or international
organisations in so far as such agreements comply with Community law and other
relevant international agreements.”
5A question that did arise and that has been referred to above concerned the trade policy instruments covered
by article 133, not its material scope.
6 The one resulting in the Amsterdam Treaty, the second in the Nice Treaty.

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As has been indicated above, paragraph 6 of Article 133 TEC – to which reference is
made in paragraph 5 – contains a number of restrictions on the extent to which trade in
services may be considered to belong to the EC’s exclusive competence. First, it defines
a number of services that belong to the competence shared between the EC and its
Member States, and thus not to the exclusive competence of the former. It concerns:

Trade in cultural and audiovisual services;

Trade in educational services;
Trade in social services;
Trade in services related to human health.

Second, it clearly links the scope of the EC’s external powers on trade in services and
the commercial aspects of intellectual property rights with those of its internal powers,
and stresses this not just for the issues that can be dealt with, but also for the kinds of
measures that can be adopted.

“An agreement may not be concluded by the Council if it includes provisions which
would go beyond the Community’s internal powers, in particular by leading to
harmonisation of the laws or regulations of the Member States in an area for which this
Treaty rules out such harmonisation.”

Third – and in line with the Court’s reasoning in Opinion 1/94 – paragraph 6 states that
“the negotiation and conclusion of international agreements in the field of transport
shall continue to be governed by the provisions of Title V and article 300”. Title V of
the EC Treaty deals with the EC’s transport policy, whereas article 300 sets the rules for
cases where the EC’s internal powers allow it to negotiate international agreements.

Last but not least, article 133 TEC contains a provision that allows the Council to extend
its scope to international negotiations and agreements on intellectual property “in so far
as they are not covered by paragraph 5”. For such a scope extension, unanimity in the
Council is required. The Council may do so case-by-case, or may decide to extend the
scope in more general terms. In the latter case, decisions on concrete international
negotiations and agreements covered by that extended scope could be adopted by QMV.
Given the reference to the “commercial aspects of intellectual property rights” in
paragraph 5, the scope extension provided for in paragraph 7, would bring other-than-
commercial aspects of such rights within the scope of the EC’s exclusive external
competence.

As can be concluded from the above, article 133 is pretty complicated. In the
negotiations on the Treaty establishing a Constitution for Europe, a genuine effort has
been made to simplify (or at least to clarify) matters, this in article III-315. However,
given the referenda in France and the Netherlands (May 29 and June 1, 2005
respectively), the Constitutional Treaty is in jeopardy, at least for now, meaning that the
EU will continue to operate in the area of external trade on the basis of article 133 TEC,
however complicated that may be.

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3.2. The Decision-Making on External Trade

When looking at the EU’s decision-making on external trade, one needs to pay attention
to a fundamental tension between the “capacity to act” and the countervailing “need for
control”. Indeed, each of the Member States tries to exert control on the EU’s external
trade and development policy, and the more such policy touches on sensitive issues in
society, the more inclined the Member States tend to be to maximise their control. But
control comes at a price, and that price is a reduced capacity for the EU as a whole.
Indeed, to a certain extent, one could claim that the more each Member State is able to
exert control on the way in which the EU’s external trade policy is shaped and
conducted, the lower the capacity for the EU as a whole to act decisively and pro-
actively in the international trading system. In looking at this potential tension between
capacity and control, we need thus to look beyond the legal framework.

In the EU’s decision-making on external trade negotiations, the centrally important

component is provided by the interaction within the triangle between the Commission,
the Council, and the Committee 133 (see figure below). Whereas the Commission
negotiates externally (either in the presence or the absence of the Committee 133
members), the Council needs to approve the outcome, and the Committee 133 members
are supposed to control the Commission during the process. From the perspective of the
Commission, this triangular interaction is essentially important for reasons of
predictability. It is no use for the Commission to negotiate an external trade agreement
in case the outcome is not going to be accepted by the Member States and thus, by the
Council. The Commission thus needs to be able to anticipate the way in which the
Council is going to react to the deals that it concludes. And the members of the
Committee 133 are supposed to be helpful in that. These need to fulfil a number of roles
therefore. They need to act as a watchdog that controls what the Commission is
negotiating and the kind of concessions it is in the course of making. They also need to

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act as a soundboard for the Commission, as that helps the former to know how the
Member States are going to react to different possible outcomes. But also important is
that they need to act as transmitters towards their own national administrations and
political leaders. Indeed, as the Committee 133 members are more or less involved in
the external negotiating process, they are supposed to understand the rationale behind
concessions that are being made. Their role is therefore also, to explain that rationale in
their home country, and by doing this, to reduce the probability that their respective
governments are going to reject the agreement.

Managing this triangular relationship is not easy. For strategic reasons, it may be
important for the Commission not to inform the Committee 133 members completely
about what it is doing as external negotiator. This may be the case because the EU tends
to be a leaking system in which secrets are difficult to keep. For negotiating-strategic
reasons, such secrets may be important however, and this may lead to a situation where
the Commission is not that open in its communication with the Committee 133
members. But one thing is important. The Commission can never completely close the
communication as it has an interest in the Committee 133 members being able to expect
and anticipate the negotiating outcomes and thus, to prepare their respective
governments for the possible political turmoil that may come with these. Doing so is not
always easy as the Commission may be sometimes in the position where it increases the
pressure on the Member States by confronting them with concluded package deals. But
even then, it has to provide for an outcome the costs and benefits of which are
distributed in such a way that for no Member State a reason exists to reject it. In
operating in this way, the EC has been able to conclude a wide array of bilateral, and
plurilateral agreements, and to participate in the conclusion of multilateral ones. It is to
this output that we turn now.

4. THE OUTPUT OF THE EU’S EXTERNAL TRADE POLICY

4.1. The multilateral track

Since the beginning of the nineties the European Union has evolved from a rather
defensive actor to a champion of the multilateral WTO regime. The EU played a major
role in the launching of the current ‘Doha Development Round’ (2001), whereas the
US has become more reluctant than during the previous rounds (Dillon, Kennedy, Tokyo
and Uruguay Round) of multilateral trade talks. Europe’s plea for a comprehensive
WTO round fits within its ‘harnessing globalisation’ discourse, which basically argues
that global trade liberalisation should go hand in hand with global rules, following the
‘European model’. But Europe’s insistence on a broad trade agenda also has a strategic
objective, since it allows the Commission negotiators to compensate the inevitable
‘losses’ in agriculture for ‘gains’ in other policy domains.

This brings us to the Achilles heel of Europe’s position on the international trade scene.
Since agriculture became part of the trade agenda during the Uruguay Round (1985-’93),

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Europe’s rather protectionist Common Agricultural Policy (CAP) has been a major
target for many developed and developing countries. But even here, a more offensive
and liberalising EU stance can be noticed. Internal budgetary constraints (e.g.
enlargement) as well as the possibility of WTO rulings after the ending of the ‘peace
clause’ (e.g. the sugar panel) have contributed to this steady (but slow) evolution.
Moreover, some parts of the agricultural lobby (e.g. sugar refineries) have interests in a
more open market system.

In terms of market access, Europe has lowered its tariffs at the multilateral (WTO),
bilateral and unilateral (see below on bilateral free trade agreements and on ‘Everything
but arms’) levels. In the so-called July Package (2004) of the ‘Doha Development
Round’, the Union finally agreed to eliminate all export subsidies, albeit without
specifying a timetable. In the future, major trade frictions may be expected in the
domain of domestic (‘Green Box’) subsidies. Here the Union forcefully argues that the
‘multifunctional’ nature of its agricultural sector (rural development, food safety, animal
welfare…) justifies EU funding, although many would notice that the ‘decoupling’ has
not yet materialised and that domestic subsidies continue to distort agricultural
production.

While agriculture remains the Union’s most difficult international trade issue, it has a
major interest in the negotiations on services within the General Agreement on Trade in
Services (GATS) framework. Today the EU is already the world’s largest exporter and
importer in services. The Union’s ‘requests’ and ‘offers’ during the GATS negotiations
include telecommunication, financial, transport, tourism, legal, energy and
environmental services. After the Commission’s leaked proposals became heavily
politicised in 2003, the EU more explicitly excluded negotiations on public services
(education, health and audio-visual services) and stressed the exceptions and advantages
for developing countries.

With agriculture and services being part of the ‘built-in agenda’ after the Uruguay
Round, the Union attempted to put several new and trade-related topics on the
negotiating table of the WTO. These include the so-called ‘Singapore issues‘ of
investment, competition, government procurement and trade facilitation. Faced with
protracted opposition from developing countries and reluctance from the US, the Union
ultimately agreed to drop the first three issues from the Doha Agenda. A similar picture
can be made for the idea of a ‘social clause’, although the idea of discussing
international labour standards within the WTO trade regime appeared less prominently
in Europe’s priority list, compared with the ‘Singapore issues’. The EU argument to deal
with environmental concerns within the WTO framework only resulted in the rather
noncommittal intention to look at the relationship between existing WTO rules and
specific trade obligations set out in multilateral environmental agreements.

Finally, Europe’s international trade discourse explicitly focuses on the benefits for
developing countries. This role as a mediator between the North and the South works
particularly well in subjects that mainly affect US economic interests, such as the highly
politicised disputes on TRIPS (compulsory licensing of generic medicines) and cotton

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(dumping because of US subsidies). The EU also stresses the advantages of its GATS
offers (e.g. temporary movement for computer service providers from India) and
requests (e.g. European tourism-related services in Egypt), as well as the importance of
‘special and differential treatment’. It should also be pointed out that, for example in the
agricultural negotiations, there are conflicting interests between the larger and export-
oriented countries (G20 countries such as Brazil, Thailand, Argentina, South Africa,
China) and the most vulnerable developing countries. Most ACP countries belong to the
latter category. Together with the non-Member States in the near abroad, these former
colonies used to appear at the top of Europe’s preferential pyramid of bilateral trade
relations.

4.2. The bilateral track

During the past fifty years, Europe has established a complex web of bilateral and
preferential trade arrangements. Ad hoc and piecemeal responses to historical, strategic
and foreign policy considerations, in combination with externalisations of successive
enlargements, have resulted in the so-called ‘spaghetti bowl’ of EU trade relations. Until
the nineties and contrary to America’s multilateral focus, European trade policy was
mainly directed at preferential relations with the ACP group (the Lomé regime) and with
neighbouring countries (internal European integration, EFTA/EAA, agreements with
Maghreb/Mashrek countries). Because of the preferential treatment for these ‘spokes’
as well as further economic integration within the European ‘hub’, Europe’s
commitment to multilateral trade liberalisation could long be called into question. At the
end of the nineties, however, it became clear that fears for a protectionist ‘Fortress
Europe’ were exaggerated. On the contrary, the EU revealed itself as a major supporter
of further liberalisation within the WTO framework.

In addition, Europe’s scheme of existing bilateral trade relations is increasingly

(re)structured in conformity with the WTO article XXIV requirements on free trade
agreements (FTAs). The shift to agreements that establish reciprocal liberalisation of
‘substantially all’ trade manifests itself most clearly in the Cotonou Agreement (2000)
with the ACP countries. Unlike the non-reciprocal Lomé regime, this agreement will
establish free trade agreements (so-called Economic Partnership Agreements or EPA’s)
between the EU on the one hand and six ACP regions on the other. Only the least-
developed countries continue to receive unilateral (non-reciprocal) access to Europe’s
market under the ‘Everything but arms initiative’7. The European Union is also engaged
in free trade agreements with the Maghreb and Mashrek countries as well as with
developing countries such as Mexico, Chile, South Africa and (in the near future)
Mercosur and the Gulf Cooperation Council. This FTA activism also illustrates the
competition with others (especially the US) for access to strategically important
markets.
Importantly, Europe’s new trade arrangements can be considered as ‘WTO+
agreements’. Many topics that the Union attempts to introduce at the multilateral WTO
7 An agreement by which the EU concedes 0 tariff to Least Developed Countries for all export products

originating from those countries, except for arms.

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level (e.g. the ‘Singapore issues’, access to services) are dealt with in these bilateral free
trade agreements. But here too Europe’s insistence on a comprehensive package
(including political dialogue and cooperation in other areas than trade) should
compensate for concessions in the field of agriculture. It also reflects the process of
‘tariff erosion’ and the increasing importance of ‘behind-the-border’ instead of ‘at-the-
border’ issues.

These ‘behind-the-border’ issues appear prominently in Europe’s bilateral relations with

other industrialised countries such as the US, Canada and Japan. Although in terms of
tariffs, these ‘Most Favored Nation’ (MFN) countries appear at the bottom of Europe’s
preferential pyramid, they are undoubtedly the Union’s most important trading partners.
The Mutual Recognition Agreements between the EU and other OECD countries entail
a different form of economic integration than ‘traditional’ negotiations on tariffs. The
same is true for the Veterinary Agreement and the Competition Policy Agreement
between the EU and the US. The transatlantic trade relationship is particularly
characterised by strong economic interdependence. From this perspective EU-US trade
conflicts reflect their high level of mutual integration, rather than fundamental
disagreements about the content of the international trade regime.

Apart from the trade component, EU bilateral agreements also contain more general
‘foreign policy’ elements on political dialogue (including human rights clauses),
development cooperation (financial assistance and loans) and cooperation in a wide
array of other areas (including justice and home affairs). One distinctive characteristic
of Europe’s bilateral agreements (such as the EPA, Gulf Cooperation Council and
Mercosur negotiations) is its emphasis on regional integration between its trading
partners. Recent EU bilateral agreements have also been inspired by regional
stabilisation concerns, for example the Stabilisation and Association Agreements (SAA)
with the Western Balkan countries and the Euro-Mediterranean Association Agreements
(EMAA). In fact also the enlargement process, implying the sudden rise of the CEECs
from the bottom to the top of the pyramid of preferences, illustrates the stabilisation
objectives of the EU’s foreign and external policy.

5. THE EU DEVELOPMENT POLICY

5.1. From development through trade…

Europe’s development policy has largely developed in the context of its trade policy.
During the seventies, the EU was at the forefront of two major trade initiatives towards
the South. Since 1975 the Lomé Agreement established a comprehensive ‘trade and aid’
package that, in addition to non-reciprocal market access, included export stabilisation
insurance mechanisms (Stabex/Sysmin) and commodity arrangements (cf. banana and
sugar protocols). The intergovernmentally negotiated European Development Fund
(EDF) is specifically providing aid budgets for the ACP countries. Secondly, the
Community was the first to apply a Generalised System of Preferences (GSP), granting
unilateral market access to all developing countries from 1971.
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The Cotonou Agreement and the current EPA negotiations still have a broad
development-oriented focus, even though most ‘interventionist’ remnants of its Lomé
predecessor have disappeared. The EU-ACP relationship is also characterised by an
increasing emphasis on human rights, democracy and good governance. A similar
evolution can be noticed in Europe’s GSP regime, with additional tariff reductions for
countries meeting certain labour rights and environmental criteria or for countries
combating drug production and trafficking. While the first arrangements have hardly
been applied, the drugs regime was found illegal by a WTO panel in 2003. It remains to
be seen whether Europe’s newly proposed GSP combined with a regime for ‘sustainable
development and good governance’, rewarding vulnerable countries that comply with
23 conventions on human rights, good governance and the environment, will be more
successful.

5.2. …to an ‘EU’ development policy?

While the ‘trade route’ has long enabled the Community to conduct a development-
oriented policy towards the South it took until the Maastricht Treaty when ‘development
strictly speaking’ became an autonomous policy domain under the first pillar. In
addition, although the codecision procedure applies, development is only a shared
competence between the Community on the one hand and the Member States on the
other (see Title XX / art. 177-181 Nice Treaty).

This brings us to a first cleavage, which is the debate on the level of EU integration.
Although the Treaty states that EU development policy should be “complementary to
the policies pursued by the Member States”, one common criticism is that both policy
levels are sometimes competing rather than collaborating. Dissatisfaction with the
added value of the EU scale has even provoked some Member States, such as the UK,
to argue in favour of a re-nationalisation of Europe’s development policy. In any case,
it is clear that development is still largely considered as a continuation of the Member
States’ ‘traditional’ foreign policy. But although attempts to ‘Europeanise’ this external
policy domain have only had limited results, the EU is now playing a bigger role in the
international campaign for the promotion of the UN Millennium Development Goals
(MDGs).

Attempts to coordinate and increase Official Development Assistance (ODA) budgets at

the EU level have been relatively successful, although Europe’s collective average of
0,39% ODA/GNI is still far away from the 0,7% goal. The Member States recently
agreed to reach an average of 0,56% by 2010.

Disagreements on the role of the Community versus the Member States are also related
to a second political cleavage, namely about the objectives of EU development policy.
The Treaty gives a broad and enumerative description, emphasising sustainable
development, integration in the world economy, poverty reduction, democracy and
human rights. Recent policy documents and EU discourse particularly emphasise the
eradication of poverty and the promotion of the MDGs. According to the consistency
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requirement, these objectives should also be taken into account in other EU policy
domains that affect developing countries. In practice, however, some fear that these
development objectives may be subordinated to other policy goals, for example in
agriculture (subsidies for EU farmers and dumping in third world markets) or in
Europe’s general foreign policy activities (reorienting aid flows from the poorest
countries to accession countries or strategic partners).

Since 2001 EuropeAid is responsible for implementing the Commission’s external aid
instruments, while ECHO (Humanitarian Aid Office) has provided emergency
assistance and relief to the victims of natural disasters or armed conflict since 1992.
ECHO funds and coordinates humanitarian operations, while relying on non-
governmental organisations for implementation.

Bibliography

– Holland, Marc, The European Union and the Third World, Houndmills, 2002,
Palgrave.

Relevant official documents and information can be found at the following

websites:

– European Commission, DG Trade:

http://europa.eu.int/comm/trade/index_en.htm

– European Commission, DG Development:

http://europa.eu.int/comm/development/index_en.htm

– ECHO: http://europa.eu.int/comm/echo/

– EuropeAid: http://europa.eu.int/comm/europeaid/index_en.htm

– International Centre for Trade and Sustainable Development:

http://www.ictsd.org/

– World Trade Organisation (especially Trade Policy Reviews): www.wto.org

– OECD, DAC: www.oecd.org/dac

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CHAPTER 26

IMPLEMENTATION OF THE EU TRADE AND

DEVELOPMENT POLICY –
EXPERIENCES OF POLAND

Sebastian Barkowski*

1. INTRODUCTION

On 1 May 2004 Poland joined the EU together with nine other European countries. At
the day of accession more than 80% of foreign trade has been conducted by the Polish
economic operators with companies from either the EU-15 or the other acceding
countries. It is self-explanatory, that the internal market regulations rather then the trade
and development policy measures are of utmost importance for the economy of Poland.
Despite this obvious statistical phenomenon, the role of EU external trade for Poland
cannot be underestimated. The wise use of the instruments that the trade and
development policies provide to the EU Member States can clearly lead to the increase
of the competitiveness of their companies. They can protect them from the unfair
economic activities of third countries, and promote better access to third countries’
markets. However, in order to take full advantage of those possibilities, the EU Member
States (and more precisely their central administrations) have to know which economic
areas of third countries may be influenced when using EU trade and development
measures and how to make use of those measures.

The aim of this paper is to present the main problems Poland has faced during the period
of accession negotiations with the EU and as an active observer in the pre-accession
period and which problems Poland currently faces as an ‘infant’ Member State of the
EU since 1st of May 2004.1

2.NEGOTIATIONS WITH THE EU IN THE “EXTERNAL RELATIONS”

CHAPTER

During the accession negotiations trade and development issues were included in the
26th negotiating chapter entitled “External Relations”. Poland’s negotiating position in
this area was adopted by the Council of Ministers on 10 December 1998 (and
subsequently amended on 6 February 2001). Poland declared full acceptance and

* Senior Expert, Head of Team in the Integration Policy Department of the Office of the Committee for
European Integration, Warsaw, Poland. The paper presents individual opinions of the author.
1 No direct references to the EU legal acts have been made. They all can be found at:

http://europa.eu.int/comm/trade/issues/sectoral/index_en.htm

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readiness to implement the acquis in this field as from the day of accession (initially
scheduled at 31 December 2002). This means that no transitional periods were
demanded. Poland highlighted only three so-called ‘technical problems’:

The lists of GATS commitments;

The integration of the WTO Agreement on Textiles and Clothing Textile (ATC)
list;
The import quota on textiles and clothing.

The reason behind pointing out these particular areas was of pure economical and
practical nature. The conditions of Poland’s export and import relations in the above
mentioned areas differed much from those of the former EU-15 Member States. Their
immediate introduction could have negative effects for Polish economic operators.
However, due to ‘external’ circumstances, those ‘technical problems’ disappeared. The
consolidation of the GATS commitments was postponed in general. The Commission is
doing the consolidation only now (mid-2005) for the whole EU-25. As regards textiles
and clothing (both ATC and the import quota), the problem for Poland was linked to the
primarily scheduled date of accession, 1 January 2003. By mid-2002 the date of
accession has been postponed to 1 May 2004. In addition, the whole WTO system of
managing trade in textile and clothing was rescheduled to 1 January 2005 to be changed
to the ‘simple’ system, the same applicable to other industrial products. Accordingly, it
has been agreed that there is no need to change substantially the EU import regime for
7 months only2.

In the field of external trade relations, the main requests during accession negotiations
came from the EU. The Commission highlighted few key areas that were closely
supervised, especially through the annual Monitoring Reports:

Renegotiation or renouncement of international trade agreements (both

preferential and MFN-based ones). Poland renounced (or, as in the case of
CEFTA, withdrew from) approximately 120 agreements. Renegotiations have
been launched in the case of one trade agreement, the Friendship, Commerce and
Navigation Treaty with Japan, but have not finished until now3;

Renegotiation or renouncement of international investment agreements.

Poland has not renounced any of those agreements due to the fact that the
number of similar (OECD-pattern) agreements have been concluded by a
majority of the EU-15 Member States. Since foreign investment issues are
falling within the shared competences of the Community and the Member States,

2 In fact some EU import quotas and EU system of import licensees were slightly changed in order to preserve
traditional imports of Polish companies.
3 In the case of the Friendship, Commerce and Navigation Treaty with Japan (as well as the Bilateral
Investment Treaty with the USA and the Foreign Investment Protection Agreement with Canada) negotiations
have been carried out by the European Commission on request and on behalf of all the acceding and candidate
countries that were bound by similar treaties with those parties.
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Poland (together with other Member States) is waiting for a common approach
of the Commission in this field. Two agreements concluded by Poland (the
Bilateral Investment Treaty with the USA and the Foreign Investment Protection
Agreement with Canada) have been subject to renegotiation. The agreement with
the USA has been successfully amended. Negotiations with Canada are still on-
going;

Accession to the WTO and Government Procurement Agreement (GPA). At

the beginning of the EU accession negotiations the Commission insisted on the
prompt accession of Poland to the GPA, enforcing in this way quick adjustment
of regulations on public procurement to the international standards (being similar
to those of the EU) and ensuring openness of the Polish government purchases’
market for the companies from EU and other GPA members. The policy of
Poland in the field of public procurement was to keep the market closed for
foreign competitors as long as possible (in the case of the EU, until the end of
the 10 years period foreseen in the European Agreement, meaning until the end
of February 2004). The accession to the GPA has been postponed as well, and
became effective only upon the accession to the EU4;

Trade defence measures. In order to prepare for accession, Poland has declared
that it would establish already in the pre-accession period a trade defence system
(regarding rules, but not individual measures) similar to the EU one. This has
been done by virtue of laws adopted in 20015. As far as individual measures are
concerned, all measures imposed by Poland were abolished on the day of
accession. All measures imposed by the EU were applicable from the date of
accession also on imports to Poland6, except those imposed on imports from
Poland, that were abolished because of accession7. In the case of some EU trade
defence measures affecting import of goods essential for Poland and whose
import was not limited in the pre-accession period (e.g. components of
agricultural fertilizers imported from Russia and Ukraine), specific transitional
measures were adopted. Negotiations on those measures were carried out in the
weeks preceding accession and lasted even until after the date of accession;

Dual-use items and technologies. In general the system of control of exports of

goods and technologies of both civil and military purpose was brought in line
already before accession (in 2000). However, until the very last day some minor
discrepancies remained as far as the list of such items and technologies is
concerned. Only on the day of accession the Council Regulation establishing the
list entered into force in Poland.

4 Since the GPA provisions are falling within the sole competence of the Community, the Commission has carried
out all necessary adjustments; in fact, the public procurement provisions of the Accession Treaties with the ten new
members were introduced (with minor changes) to the lists of GPA commitments of the European Community.
5 The EU trade defence system is based on the directly applicable regulations, meaning all the acceding countries’
regulations in this area had to be abolished not later than on the day of accession.
6 Due to the fact that EU measures are imposed in imports entering the internal market, and all the new Member
States are parts of the internal market as from 1 May 2004.
7 Upon the gentleman’s agreement between Poland and EU reached in mid-2003 no new investigations have been
launched by the EU against Poland during the last year of pre-membership period.
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Two other issues were present in almost all Commission’s Monitoring Reports
highlighting its importance for the EU and a quite good preparation of Poland. Those
were the system of export credits8 and the coherence of Poland’s overall policy with the
EU inside the WTO forum.

3. EXTERNAL TRADE POLICY PROBLEMS ENCOUNTERED IN

POLAND AFTER ITS ACCESSION TO THE EU

Although the accession negotiations in the “External Relations” chapter went quite
smoothly and without major obstacles, some problems arose shortly after accession.
Those problems should have ideally been tackled during the pre-accession period.
However, at that time, they have not been identified by Poland as problems. The
following areas were concerned:

Adoption of the Common Customs Tariff. Poland claimed no changes in this

respect and carried out no adjustments, meaning that on the 1 May 2004 the
average customs tariff rate applicable on imports of goods from third countries
fell by approximately 2/3. However, tariff rates on some goods, quite important
for Polish economy (as well as for other new Member States), have risen. Those
were above all three products: aluminium semi-products9, bananas and rice.
Poland has hoped for compensations (mainly the lowering of rates) that the EU
has to grant according to GATT rules. However, the Commission was not in
favour of granting such compensations;

In the case of aluminium, the majority of EU companies are not interested in

cheap imports of semi-products from EU eastern neighbours (a traditional source
of Polish imports), because they are importing either raw aluminium, or semi-
products from the free-trade EFTA zone (especially Norway);

In the case of rice the high EU import duties are connected to the internal
organisation of the market, supporting the domestic producers (mainly from
Italy);

In the case of bananas, the current EU import regime, based on various import
quota and so called ‘traditional’ and ‘non-traditional’ importers, is organised in
order to support the ACP producers and not the ‘dollar zone’ exporters from
Latin America, which are the main suppliers of the Polish market.
The system is due to change in 2006 but the negotiations on the rate of the tariff
duty are still on-going10;
8 The system of export credits is the only part of the EU external trade and development area that is based not
on regulations but on directives.
9 Aluminium semi-products are in fact the only example of semi-products for which the Common Customs
Tariff foresees higher tariff rates than for the raw product.
10 In fact Poland has highlighted the banana import regime as another technical problem (in the addenda to
the negotiating positions in the “Agriculture” and “External Relations” chapters, but it has been tackled only
from the point of view of ‘traditional’ vs. ‘non-traditional’ importers.
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Generalised System of Preferences (GSP). The GSP constitutes the framework

of EU trade-related development policy. During the accession negotiations
Poland declared that it would gradually align with the system, especially
regarding preferences for the least developed countries. Full alignment has been
achieved only at the moment of accession, when the GSP Regulation entered into
force in Poland. However, what is of far greater importance for all new EU
Member States are changes in the EU GSP itself, reflecting the different
development level of the EU-15 compared to the EU-25. Those changes have not
been claimed before accession. As a result the system remained in the form
designed by the former EU-15. No changes have been claimed following the 1
May 2004, mainly due to the fact that the current GSP is to be replaced as from
mid-2005, and that the works on the new system have started already in summer
2004;

Accession to the international agreements concluded by the EU and its

Member States (‘mixed’ agreements). According to the Accession Treaty,
Poland was due to accede to all such agreements by virtue of “Additional
Protocols” that were to be negotiated by the Commission on behalf of all current
and acceding Member States. Until these Protocols are not in force, the
agreements are to be applied by the new Member States on a provisional basis.
As far as the ‘political’ provisions of the agreements are concerned, they required
no substantial changes. However, the provisions relating to trade (especially
those establishing bilateral preferences) were subject to negotiations. In the
majority of cases, negotiations have been carried out and concluded before the
formal accession of the new EU Member States when they were only active
observers (meaning they had no real power to influence the process and just
learned how to ‘behave’ in the EU decision-making system). As a result quite a
few provisions of the Protocols are not in line with Poland’s priorities, especially
as regards sensitive agricultural products 11;

Accession to the international trade agreements concluded by the EU. These

are agreements regulating trade in steel products with selected NIS Countries.
These agreements fall into the sole competence of the Community and no legal
adjustments were needed because of accession. However, since import of steel
products from the eastern EU neighbours is of great importance for the Polish
economy, the enlargement of quotas foreseen in the agreements was crucial.
Necessary adjustments were carried out in the first months of membership, in
order to avoid a distortion of the steel production in Poland.

Taking into account the developments during the negotiations process and the period
when Poland had the status of an active observer, those issues that were initially
considered to be problematic prior to the date of accession did not turn out to be the
most problematic ones. Actually, the most difficult issues started to occur after
accession.
11 The only exception in this case was the negotiations on the enlargement of the EEA. Those have been

carried out not by the Commission alone, but in the presence of all acceding countries and the three EFTA-
EEA states. Since the EEA is simply extending the internal market, the real negotiations dealt only with the
tariff duties on some agricultural and fishery products and with the amounts of the financial instruments
provided for the new EU Member States.
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CHAPTER 27

TRANSPOSITION AND IMPLEMENTATION OF THE EU

TRADE AND DEVELOPMENT POLICY –
COSTS AND BENEFITS FOR ROMANIA

Florin Bonciu*

1. INTRODUCTION
The integration of Romania into an economic space like the European Union and in
particular the adoption and implementation of the EU trade and development policy
implies certain costs and benefits. Normally, the benefits should be larger than the costs
but such a calculation is based on probabilities and on circumstances that may change
in time.

In principle, in the field of trade policy the EU made the most to maximise the
opportunities created for Romania as an accession country by provisions like the
asymmetrical reduction and elimination of customs duties. But the capitalisation of
these opportunities has been entirely dependant on Romania’s decisions and policies, as
well as on Romania’s capability to be competitive in the internal market of the European
Union.

As regards the development side of the EU trade policy things are different. The
development policy of the EU has the objective to support developing nations by means
of various trade benefits offered to these nations like, for example, the Generalised
System of Preferences (GSP), the “Everything but Arms Initiative”, the granting of
asymmetrical preferences. These initiatives have been taken from a ‘donor’-perspective
and this is normal as most of the current EU Member States are considered to be
developed economies.

As the environment changes inside and outside Romania, this chapter will focus on the
costs and benefits of the implementation of the EU trade and development policy for the
period after accession, when Romania becomes a full EU Member State1.

2. COSTS AND BENEFITS FOR ROAMNIA’S FULL PARTICIPATION

IN THE EU TARDE AND DEVELOPMENT POLICY

The costs and benefits related to the full adoption of the EU trade policy involve
relations with two different groups of countries:

*Dean, Faculty of European Integration, Romanian-American University, Bucharest, Romania.

1Marian L. Tupy, EU Enlargement Costs, Benefits, and Strategies for Central and Eastern European
Countries, Policy Analysis, September 18, 2003, Cato Institute, pp.5 – 6.
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The other Member States of the EU;

Third countries, i.e. non-EU Member States which include both developed
economies (like the USA or Japan) and developing countries - some of them
benefiting of EU trade preferences like the ACP countries.

2.1. Costs

After Romania’s accession to the EU a number of significant changes will take place in
the trade and development area2. Among these changes are the following:

Full adoption of the EU trade policy: Romania will transfer all attributions in
the respective field to the Community. However, the EU trade policy is designed
for the whole EU space. Due to the different level of development and the
different structure of the Romanian economy in comparison with the EU average
the EU’s trade policy preferences will not fully represent Romania’s trade
interests which means much less possibilities for trade protection for Romanian
products. This assumption is supported by the fact that in 2005 Romania’s GDP
per capita stands at 28% of EU–25 average;

Elimination of trade barriers within the enlarged customs union and

adoption by Romania of the EU Common External Tariff (CET): The overall
trade protection will decrease as compared to the pre-accession period, which
will be due to the adoption of the CET. Customs duties applied under Most
Favourite Nation treatment will decrease from 18.6% to 6.3% as an average,
from 30% to 16.2% for agricultural products and from 15.4% to 3.6% for
industrial products. For a number of Romanian companies, particularly for small
and medium sized companies, the increased competition may create substantial
difficulties and even the risk of going out of business;

Negotiation of a List of Common Commitments to the WTO: The

enlargement of the Customs Union will have to be done in accordance with the
rules stated in Article XIV and Article XVII of GATT meaning that the
enlargement:

does not have to imply a higher tariff protection than before enlargement;
does not have to negatively impact the imports from third party countries.

Romania will give up its list of commitments within the WTO and will negotiate
together with the extended EU a new list, valid for all members of the new customs
union. As mentioned before, due to differences in the general level of development
and the structure of the Romanian economy in comparison with the EU average
these new lists may not correspond fully to Romania’s interests. This fact may also
lead to requests for compensatory measures from third parties – inside the WTO –
which may be affected by this change in Romania’s WTO commitments;

2 Constantin Ciupagea (coordonator), Evaluarea costurilor ºi beneficiilor aderãrii României la UE, Bucureºti,

2004, www.ier.ro, pp.62 – 65.

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Romania and EU Development Policy: Romania becomes a donor of

preferences at the same level as the EU, e.g. in the framework of the GSP, or the
Cotonou Agreement;
Costs due to the increase of control capacity at the new EU customs borders
of Romania: This includes technical costs (e.g. equipment, IT, etc.) but also a
reduction of customs staff due to the elimination of customs control for intra-
community trade;

Reduction of budget revenues due to the elimination of customs duties: This

reduction has 2 components: reduction of customs duties as such and the fact that
all customs duties collected at the Romanian customs border are transferred to
the Community budget.

2.2. Benefits

The benefits related to the adoption of EU trade policy after Romania’s accession to the
EU refer to:

Opportunities resulting from a better access to third party markets due to

preferential agreements of EU with these countries: Romania may use its
traditional experience with developing countries and become an important
partner for the ACP countries;

Improvement of Romanian position within WTO as part of EU: However,

this benefit can materialise only to the extent the level of development and
structure of Romania’s economy becomes similar to the EU average;

Diversification of offer on Romania’s market: While this aspect is in principle

positive for the Romanian consumer, it may lead to significant trade deficits in
case Romanian exports are not competitive enough;

Increased mobility of production factors, particularly of foreign direct

investment: The increased mobility of production factors is expected to be the
highest positive economic impact;

Costs reductions due to economies of scale: The free access to a much larger
market - the single European Space - may help Romanian companies to achieve
the much-needed economies of scale.

Research showed that in case of Romania’s integration in the EU, during the period
2003–2015, the Romanian external trade will increase 3.6 times in case of exports and
2.8 times in case of imports. For the hypothetical case of non-integration into the EU,
the Romanian external trade will increase 2.4 times in case of exports and 1.8 times in
case of imports. These results prove the positive impact of integration on trade and
development of Romania.
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3. CONCLUSIONS

Both theoretical approach and econometric simulations show that accession to the EU
and therefore the transposition and implementation of EU trade and development policy
is in principle positive.

The expectations have to be well pondered by the fact that while the costs are effective
(they happen anyway), the benefits are potential, depend on many domestic and external
factors and will become evident only in the medium to long term.

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 SECTION 10

EU COMMON FOREIGN AND

SECURITY POLICY
 Chapter 28

CHAPTER 28

EU COMMON FOREIGN, SECURITY AND DEFENCE POLICY

Fulvio Attinà*

1. INTRODUCTION

Foreign policy is associated with state sovereignty, and consists of the capacity of state
governments to make and implement actions and policies abroad in order to promote
domestic values and interests. Such capacity depends on resources, such as diplomatic,
military and economic resources, which belong to states. The use of the concept in the
case of non-sovereign, non-state entity such as the European Union (EU) raises
scepticism and disbelief because this entity is seen as lacking both centralised decision-
making and appropriate resources.

However, the EU has progressively got the capacity of making decisions towards the
external world, and the capabilities for carrying out foreign policy actions. Today, this
EU condition is conventionally named with the composite acronym CFSP/ESDP, i.e.,
Common Foreign and Security Policy (CFSP) and European Security and Defence
Policy (ESDP). More exactly, CFSP/ESDP consists of the common actions and
positions of the EU institutions and Member States towards political issues and
problems in the outside world.

CFSP and ESDP have separate histories and different regulations. The history of the
former is longer and richer than that of the latter. Consequently, also the decision-
making structures and procedures of the former are more developed than that of the
latter. Though, overlapping of the two policies and a process of convergence are under
way, it is better to proceed to the separate presentation of the two.

2. THE COMMON FOREIGN AND SECURITY POLICY (CFSP)

2.1. Historical Evolution

CFSP consists of cooperative actions

undertaken by the EU institutions on behalf of all the Member States toward non-
Member States and international bodies;
oriented toward the specific goal of intervening in facts, issues and processes of
the world system; and
* Professor at the University of Catania, Italy, Department of Political Studies, President of the Italian Political

Science Society.
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made operational by means of various activities and instruments, such as political

dialogue, cooperation programmes, and peace-keeping operations.

Taking into account the composite nature of the EU (i.e. the coexistence of EU and EC)
it is not surprising that, as Michael Smith1 remarks, three strands are intertwined in
CFSP:

First there is the European Community strand, i.e. the economic dimension of the
European foreign policy.

Secondly, we can quote the European Union strand that, until the Single European Act
of 1986, consisted of the informal coordination of the foreign policies of the Member
States in the European Political Cooperation (EPC) process. This line of development
has been subsequently formalised and upgraded by the Treaty of European Union and
its reforms since 1992.
The third strand is the national one, i.e. the separate foreign policies of the Member
States, which are increasingly under the institutional influence of the EU foreign policy.

CFSP actions are the result of cooperation among the EU Member States in situations
in which they do not perceive themselves as having identical interests, and agree to
adjust their foreign policies to accommodate each other2. A reciprocal relationship has
been developed between Member States cooperation in foreign policy and the process
of CFSP institution building.

The institutionalisation process of foreign policy cooperation among the European

countries can be traced back to the early 70s. In brief, two phases are distinguished in
this process. The European Political Cooperation phase, from 1970 to 1993, and the
subsequent CFSP phase, still developing.

The most important dates and events of the European Political Cooperation phase are
the following ones:

The 1970 Davignon Report created the European Political Cooperation process
to ensure mutual understanding, and strengthen the solidarity of the Member
States on international problems;

Another important historical event was the 1973 European Council decision, in
Copenhagen, which aimed to seek common approaches, and implement
concerted diplomacy;

The 1983 European Council decision, in Stuttgart urged to include the political
and economic aspects of security within the scope of the EPC;

And finally, the 1986 Single European Act brought the European foreign policy
cooperation into the treaty. During this phase, the foreign policies of the Western
European countries underwent a process of harmonisation on the basis of
informal agreements and without permanent, formal structures.

1 Michael Smith, Europe’s Foreign and Security Policy: The Institutionalisation of Cooperation, Cambridge,
Cambridge University Press, 2004.
2 Michael Smith, Europe’s Foreign and Security Policy.

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A brief timeline of the CFSP phase consists of the following dates and events:

In 1992, the Treaty on European Union consecrated the birth of the Common
Foreign and Security Policy (CFSP);

The1997 Amsterdam Treaty enhanced the construction of CFSP by expanding

the number of common instruments and developing the decision-making
procedures;

The 1999 European Council, in Helsinki, made decisions that strengthened

common security and defence policy;

From 2000 to 2004, European Council meetings furthered the plan for building
EU military and civilian capabilities of crisis management;

Lastly, in 2004, the Treaty establishing a Constitution for Europe contains

important articles on the development of both the political and defence
dimension of CFSP/ESDP.

Though critics say that it has been a slow process with modest substantive
achievements, over the past twelve years the CFSP building process has been steadily
growing and producing important results. The great variety of national preferences and
expectations about CFSP can explain the slow pace of development of this policy field.
The European governments and publics have different, sometimes variable, attitudes
towards CFSP. Governments with high power capabilities are less supportive of
supranational integration in foreign and security matters than governments with low
capabilities in world affairs. Governments of countries in which identification with
Europe is strong are more supportive of supranational integration in foreign and security
policy than governments of countries with low European identification. However, there
are studies3 which support opposite ideas: governments that support supranational CFSP
are not necessarily conformist, weak, Europeanised, or federal.

In order to account for the emergence and development of the common foreign policy,
it is better to take into consideration broad explanatory factors such as:

The convergence of interests, identities and expectations of the European

countries, which have been increasing over the years under the effect of the
economic integration process;

The preference for the politics of scale also in areas such as foreign and security
policies under the effect of world interdependence and the intensive globalisation
process;

The pressure of the expectation of external actors; and

The growth of multilateralism.

3 Mathias Koenig-Archibugi, “Explaining Government Preferences for Institutional Change in EU Foreign

and Security Policy”, International Organization, no. 58, 2004, pp. 137–174.
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2.2. The CFSP Instruments

The treaties and practice have developed the CFSP institutional system and decision-
making process. Article 12 of EU Treaty defines the CFSP instruments as consisting of:

Principles and general guidelines;

Common strategies, to be implemented by the Union in areas where the

Member States have important interests in common;

Joint actions, to address specific situations where operational action by the

Union is required;

Common positions, to define the approach of the EU to a particular matter of a

geographical or thematic nature; and the systematic cooperation between the
Member States.

2.3. The CFSP Actors and Decision-Making

Decisions on these CFSP instruments are the responsibility of the CFSP institutions.
They are the European Council, who defines the general guidelines; the Council, who
adopts the decisions necessary for defining and implementing CFSP on the basis of the
general guidelines. Another actor is the CFSP High Representative who contributes to
the preparation, and ensures the implementation of the decisions. The Political and
Security Committee (PSC) monitors the international situation, gives opinions to the
Council, monitors the implementation of agreed policies, exercises the political control
and strategic direction of crisis management operations. The Commission sustains the
proposals of the High Representative and the European Parliament may ask questions
and make recommendations. The European Parliament has in general a weak role in this
policy field. The Member States ensure that their national policies conform to the
positions of the EU, and coordinate their action in international organisations and at
international conferences.

3. THE EUROPEAN SECURITY AND DEFENCE POLICY (ESDP)

3.1. Historical Evolution

The new and hard process for building the common defence policy aims at achieving
the so-called ‘headline goal’, decided by the European Council in 1999. This goal
consists in giving to the EU military and civilian capabilities of crisis management, also
known as Petersberg missions, after the 1994 decision of the Western European Union.
The ESDP military and civilian organs, the rules of their operation, and the agreements
governing ESDP relations with NATO and third countries have been developed after the
Treaty of Amsterdam (1997) in a continuous process of negotiation.

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3.2. The ESDP Actors and Decision-Making

ESDP decisions are the responsibility of the European Council, the Council, and the
High Representative. In addition, three important organs prepare the decisions and are
involved in their implementation. They are:

The Political and Security Committee (PSC), formed by the Political Directors
of the Foreign Affairs Ministries of the Member States, which exercises political
control and strategic direction of the EU’s military response to crisis, proposes
to the Council the political objectives of the Union in a crisis situation and
recommends a set of options;

The EU Military Committee (EUMC), composed of the Member States’ Chiefs

of Defence, which is responsible for providing the PSC with military advice and
recommendations on all military matters within the EU, and exercises military
direction of all military activities within the EU framework; and

The EU Military Staff (EUMS), composed of nationals of the Member States,

which performs early warning, situation assessment and strategic planning
including identification of European national and multinational forces, and
implements policies and decisions as directed by the EUMC.

As of today, ESDP military capabilities consist of military units called battlegroups. A

battlegroup is based on combined arms, battalion sized force (1500 troops), reinforced
with combat support elements. It could be formed by a framework nation or a
multinational coalition of Member States. Each battlegroup is associated with a Force
Headquarters and pre-identified transport and logistics elements. The Member States
have engaged in creating 13 EU battlegroups, fully operational in 2007. Battlegroups
are able to launch an operation within 5 days of the approval by the Council, undertake
simultaneously two operations sustainable for a maximal period of 120 days, no later
than 10 days after the EU decision, in response to a crisis or to an urgent request by the
UN.

ESDP civilian capabilities are ready to operate in four priority areas: police operations,
rule of law, civilian administration, and civil protection. The operations of the civilian
capabilities are the responsibility of the Committee of civilian crisis management. In
addition, the EU civilian and military cell has been created recently, and put under the
responsibility of the High Representative. The cell will assist in coordinating civilian
operations, and have the responsibility for generating the capacity to plan and run an
autonomous EU military operation.

The preparation of the decision to intervene in a crisis involves the High Representative
and the Chiefs of Defence. They prepare a document on possible police, military and
juridical actions. On this document base, the Council decides the type of action
following the advice of the PSC and EUMC in the event of military answer; of the
Committee of civilian crisis management in the event of civil actions; and of the
Commission in the event of legal actions.

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The European Security Strategy, also known as the Solana Doctrine, which was
published in June 2003, has given to the EU wide-ranging guidelines for meeting with
responsibilities in world affairs, even beyond security and defence policy problems. The
European Security Strategy has engaged the EU to develop the common security and
defence policy in order to make Europe:

More active by developing a strategic culture that fosters early, rapid, and when
necessary, robust intervention;

More coherent by bringing together different instruments and capabilities such

as European assistance programmes, military and civilian capabilities from the
Member States, and other instruments such as the European Development Fund;
and

More capable by developing more resources for defence, greater capacity to

bring civilian resources in crisis and post crisis situations, stronger diplomatic
capability, and improved sharing of intelligence among Member States and
partners.

4. TRANSATLANTIC RELATIONS

EU-US relations are crucial to the development of the political framework of the foreign
policy of the EU. These relations are heavily conditioned by the global power
competition structure that shapes the world system, and the state of the problems of
international politics.

Intertwined and mutually reinforcing suspicions are the scenario of current transatlantic
relations. On the one side, the United States, having primacy in security affairs and
hegemonic leadership in world affairs, complains about lack of burden sharing in NATO
and European free-riding behaviour. Furthermore, the USA suspects being abandoned
by the European allies because the building of ESDP and the EU capacity for military
actions are perceived as depreciation of NATO and decoupling from the allied strategy.
On their side, the Europeans, traditionally reluctant to increase military spending to
contribute meaningfully to the military capabilities of Western defence, want to play a
significant role in Western defence policymaking. In a wider perspective, it is remarked
that also domestic structural factors are responsible for this state of the relationship. The
two allies are fragmented political systems in which the governments cannot control the
domestic environment in which diverging priorities, different threat and risk
perceptions, different policy preferences and worldviews, and different definition of the
national interests are growing4.

The war in Iraq brought to the surface the wide difference of perspectives existing

4 Ingo Peters, “ESDP as a transatlantic issue: problems of mutual ambiguity”, International Studies Review,

vol. 6, no. 3, 2004, pp. 381-403.

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between the USA and Europe on the best strategy to cope with the problem of countries
in serious conditions of economic backwardness, political repression and social unrest.
The Americans prefer the strategy of bilateral relations and the use of specific-problem
measures such as for instance, the eradication of drug traffic through strengthening the
local police and army, as in the case of Colombia, or improving economic conditions by
changing bilateral trade agreements, as in the case of Mexico. The Europeans, instead,
prefer multilateral agreements and regional programs of economic cooperation that
contain the clause of political conditionality. To cope with the problems of irresponsible
dictators and rogues states, the Europeans prefer maintaining the existing economic,
political and social regimes until cooperation programmes (as, for instance, the Euro-
Mediterranean Partnership project of free trade in the Mediterranean area) bring
economic development and, subsequently, relaxation of political and social tensions to
a group of countries. For the Americans, instead, waiting for long term-effects of
cooperation projects is not necessarily the best solution; they often prefer to choose
immediate military interventions.

With regard to security, in particular, the European states have built on their continent a
security co-management system or regional security partnership, which is largely
founded on multilateral institutions and mechanisms inspired by the concept of
cooperative and comprehensive security5. Accordingly, regional security agreements are
the preferential road to security problem solving, and the Europeans believe that the
European security model is to export to other regions. The USA, instead, consider
regional security arrangements as subsidiary to their world role interests.

5. THE EU AND ITS NEIGHBOURS

Neighbourhood policy is, admittedly, the most important concern and challenge of the
CFSP today. European foreign policy-makers recognise that building viable, peaceful
and stable relations with the countries of the areas surrounding Europe will have real
and symbolic consequences. In this perspective, the most important European Union
programs are the ten-year old Euro-Mediterranean Partnership (EMP), also known as
the Barcelona Process, and the two-year old European Neighbourhood Policy (ENP),
which has been created recently and incorporates the former.

The programs of the ENP have not yet generated considerable outputs. However, their
objective and structure are clear. Focusing on dialogue and cooperation, and mixing the
political, socio-economic, cultural and military dimensions, the EU wants to promote
sustainable economic development, viable political structures, democracy and respect
of human rights and healthy environmental and social conditions. Partnership and closer
economic integration are offered to partners on condition of concrete progress in
implementing political, economic and institutional reforms, and developing regional
and sub-regional cooperation and integration.
5 Fulvio Attinà, “The building of regional security partnership and the security culture divide in the

Mediterranean region”, Emanuel Adler and Beverly Crawford (eds), The Convergence of Civilizations?
Constructing a Mediterranean Region, Toronto, University of Toronto Press, 2005.
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In concrete terms, the EU incentives to the neighbours are the following:

Extension of the internal market and regulatory structures;
Preferential trading relations;
Agreements on lawful migration;
Integration into transport, energy and telecommunications networks and the
European research area;
Promotion and protection of investment;
Integration into the global trading system;
New sources of finance;
Cooperation to prevent and combat common security threats;
Involvement in conflict prevention and crisis management;
Efforts to promote human rights, further cultural cooperation, and enhancement
of mutual understanding.

The countries invited to join the project are Russia, Ukraine, Belarus, Moldova, Algeria,
Egypt, Israel, Jordan, Lebanon, Libya, Morocco, Syria, Tunisia, the Palestinian
Authority, Armenia, Azerbaijan, and Georgia. The process of negotiation with each
country consists of three formal acts: the definition of the Country Report, the approval
of an Action Plan, and the redaction of Reports on Progress. As of June 2005, the Action
Plans of Israel, Jordan, Morocco, Moldova, the Palestinian Authority, Tunisia, and
Ukraine have been agreed. The funding for the programmes consists of € 955 millions
for the period 2004-2006, and € 14.992 millions for the period 2007-2013.

The partnership-building process in the Mediterranean was launched in 1995 in the city
of Barcelona as a long-term process of change, which must be adapted to overcome
obstacles and problems. The Barcelona Declaration of the Euro-Mediterranean
Partnership has three chapters. In the Political and Security chapter, governments pledge
to promote peace, stability and security in the Mediterranean region ”by all means at
their disposal“. In the Economic and Financial chapter, the establishment of a free trade
area by 2010 is associated to speeding up the pace of lasting social and economic
development and to improving peoples’ living conditions by raising employment and
closing the development gap in the region and promoting cooperation and regional
integration. In the Social, Cultural and Human Affairs chapter, governments agree to
develop a wide range of cooperation projects in culture, religion, education, and the
media, and also between trade unions and public and private companies.

The governments of the non-EU Mediterranean countries welcomed the programme. To

them, the Barcelona Process is an instrument for solving domestic economic problems,
enhancing their countries’ position in the world economy, and influencing European
unilateralism in domestic policies (e.g. visa and immigration) and foreign policy (e.g.
Conditionality clause6; Middle East; EU-USA relations).

6 The conditionality clause is included in the bi-lateral Association Agreements between the EU and its
Mediterranean Partners. It states that respect for human rights and democratic principles constitutes an
essential (and thus legally binding) element in the EU’s relations with its Partners. The purpose is to link
human rights and democracy promotion with political dialogue and economic development.

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6. EUROPEAN UNION AND GLOBAL GOVERNANCE

The functioning of the United Nations (UN) as well as the need for reforms (as, for
example, of the Security Council) are of main concern to the EU and the Member States
since the EU foreign policy-makers have increasingly engaged in effective
multilateralism as the main objective of the EU world policy.

It is acknowledged that the European engagement in helping the UN to carry out its
mission is remarkable. In 2003, the EU-25 contributed 38% of the UN’s regular budget
(against 22% of the USA, and 19% of Japan) 2/5 of the UN peacekeeping operations
budget and 1/2 of all UN funds and programs.

The EU is a party to more than 50 UN multilateral agreements and conventions.

Furthermore, in 2003, the European Commission and the UN signed a financial and
administrative framework agreement, which established a strategic partnership in
development and humanitarian fields with a number of UN agencies, funds and
programs.

In the security field, EU Member States’ contributions of troops, police officers, and
observers to UN operations are also important. In 2003, the EU contribution was of
9.0% (i.e. 3 259 personnel) of the UN total. EU is also the largest troop contributor to
other peace missions under the authority of the UN Security Council, even if not
directly run by the UN. At present, the share of the EU-25 in the UN peacekeeping
budget is around 39% of the world total, making the Union by far the largest contributor,
before the USA (27%) and Japan (18%).

It is worth mentioning the June 2004 document of the European Council for enhancing
collaboration with the UN peacekeeping operations. The Council proposes various
forms of support to UN forces such as the ‘clearing house process’ to coordinate EU
Member States’ contribution to UN Peace Operations, and the ‘bridging model’ which
will fast activate EU peace-keeping forces in order to give time to UN for the
organisation of their forces.

The EC was granted observer status at the General Assembly in 1974. Since then, the
Commission’s Delegations represent the EU in the UN and most UN specialised
agencies. The EU Presidency, instead, is responsible for coordination and represents the
Union in most areas of UN activity, in discussions with other UN Member States,
regional groups or organisations. It delivers demarches and statements on behalf of the
EU.

In such a perspective, it is worth considering the high level of convergence of the

positions of the EU member countries at the United Nations. This has been done with
the analysis of voting in General Assembly7. In 1979, the EU states voted identically in
almost 60% of all recorded votes. In the 1990s, following the formal creation of the
CFSP in the Treaty of European Union, voting agreement further increased up to about
90%. Consensus is particularly high on Middle East and human rights issues.

7 Paul Luif, EU cohesion in the General Assembly, ISS Occasional Paper, no. 49. 2003.

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Bibliography

– Fulvio Attinà, “The building of regional security partnership and the security
culture divide in the Mediterranean region”, Emanuel Adler and Beverly
Crawford (eds), The Convergence of Civilizations? Constructing a
Mediterranean Region, Toronto, University of Toronto Press, 2005;

– Mathias Koenig-Archibugi, “Explaining Government Preferences for

Institutional Change in EU Foreign and Security Policy”, International
Organization, no. 58, 2004, pp. 137–174;

– Paul Luif, EU cohesion in the General Assembly, ISS Occasional Paper, no. 49,.
2003;

– Ingo Peters, “ESDP as a transatlantic issue: problems of mutual ambiguity”,

International Studies Review, vol. 6, no. 3, 2004, pp. 381-403;

– Michael E Smith, Europe’s Foreign and Security Policy: The Institutionalisation

of Cooperation, Cambridge, Cambridge University Press, 2004;

Relevant official documents and information can be found at the following

websites:

– Activities of the EU, Foreign and Security Policy:

http://europa.eu.int/pol/cfsp/index_en.htm

– The Commission, Directorate General for External Relation:

http://europa.eu.int/comm/external_relations/cfsp/intro/index.htm

– The European Parliament, Committee on Foreign Affairs:

http://www.europarl.eu.int/committees/afet_home.htm

– The Council of the EU:

http://ue.eu.int/showPage.asp?lang=en&id=248&mode=g&name=

– The High Representative for the CFSP:

http://ue.eu.int/cms3_applications/applications/solana/index.asp?lang=EN&cm
sid=246

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CHAPTER 29

ROMANIA’S SECURITY AND DEFENCE POLICY

FROM THE PERSPECTIVE OF THE COMMON FOREIGN
AND SECURITY POLICY AND THE EUROPEAN SECURITY
AND DEFENCE POLICY

Liviu Mureºan*

1. ROMANIA’S POSITION TOWARDS THE COMMON FOREIGN AND

SECURITY POLICY

The External Relations and the Common Foreign and Security Policy (CFSP) chapters
(Chapters 26 and 27) were among the first negotiation chapters opened by Romania
after the start of the accession negotiations with the European Union, on February 15,
2000. These chapters were temporarily closed in June 2000.

According to the position papers presented, Romania stated that the acquis
communautaire for both chapters would be accepted and applied upon EU accession in
2007, without any transition period.

Romania’s Position paper for Chapter 27 regarding CFSP states that: “Romania is ready
to accept and to apply the European Union’s acquis in the field of Common Foreign and
Security Policy (CFSP). The necessary structures for its implementation have been
created, and Romania’s foreign and security policy is based on the same principles and
has the same orientation as the one promoted by the European Union”1.

Romania supports the non-proliferation of nuclear, biological and chemical weapons

and is part of all relevant international agreements in this field. Romania has introduced
and exercises a strict control of the double usage products and technologies and is part
of all international treaties regarding arms control.

Romania is member of the United Nations Organisation (UNO), of the Council of

Europe, of the North Atlantic Treaty Organisation (NATO) and some other international
organisations. Romania is as well an active promoter of the regional co-operation
through participation to various regional groups or organisations such as the Black Sea
Economic Co-operation Organisation (BSECO), the Central European Initiative (CEI),

* Executive President, EURISC Foundation, Bucharest, Zurich, Washington, Moscow.

1 Position paper on Chapter 27: Common Foreign and Security Policy, in Vasile Puscas, Negociind cu Uniunea
European?, Volumul 1: Documente initiale de pozitie la capitolele de negociere, Editura Economica, Bucharest,
2003, p. 796; For the English version of the document see “Romania’s Position Paper Chapter 27: Common Foreign
and Security Policy”, in Vasile Puscas, Negotiating with the European Union, Vol 2: The Initial Position Papers for
Chapters of Negotiation, Edit. Economica, Bucharest, 2003, pp. 784.a
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the Central European Free Trade Area (CEFTA), the South-Eastern Europe Co-
operation Process (SEECP), the Royaumont Process, the South-Eastern Co-operation
Initiative (SECI), and the Stability Pact for South-Eastern Europe.

Romania is now in an advanced stage of settling all aspects of its relations with the
neighbouring countries, based on international law and is part of a trilateral agreement
network with these states, which is meant to ensure peace and stability in Central and
South-Eastern Europe.

The channels Romania can use for integrating into the European Security and Defence
Policy (ESDP) are multiple:

Periodic consultation on European security;

Participation to the decision making process on issues regarding the management
of military and civilian aspects of the crises;
Involvement in the current activities of the EU institutions and agencies dealing
with security issues (General Affairs Council, The Policy and Security
Committee, The Military Committee, the European Union Institute for Security
Studies, etc);
Participation in the Western European Union (WEU) Assembly sessions, in the
sessions of the Inter-parliamentary Security and Defence Assembly;

Participating in EU lead crises management exercises and operations, and many others.

From a military perspective, Romania can potentially constitute an important ESDP

pillar in Central and South-Eastern Europe, a fact proven by its participation in the
Multinational Peace Force from South-Eastern Europe (MPFSEE), in the Multinational
High Combat Capacity Brigade of the UN Forces (SHIRBRIG), in the Black Sea naval
co-operation Group (BLACKSEAFOR), in the creation of a peace keeping brigade of
the Central European countries (CENCOOP) and in the mixed military units – a
Romanian-Hungarian peace keeping battalion, a landmines Romanian-Ukrainian-
Hungarian-Slovak unit and a Romanian-Moldavian battalion.

On regional level also, Romania actively participated in the “Working Table 3” on

security issues of the Stability Pact for South-Eastern Europe and chaired the Defence
Ministries Committee for Co-ordinating the Co-operation Process in South-Eastern
Europe, as well as the Politic and Military Committee of the Multinational Peace Force
from South-Eastern Europe. Romania has also accepted to host in Constanta the
headquarters of the South-Eastern European Brigade (SEEBRIG) in 2003-2006.

The willingness of Romania to participate in international military co-operation is also

sustained by hosting regional military training institutions such as the Romanian-British
Regional Partnership for Peace Training Centre within the High Military Studies’
Academy in Bucharest and the Regional Defence Resources Management Centre from
Brasov.

The participation of the Romanian army in peace support missions is another element

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that underlines the viability of the Romanian military organism on the international
level. Starting with 1991 Romania participated in many operations of this kind, namely
in IFOR/KFOR commanded by NATO in Bosnia and Herzegovina (203 militaries),
ALBA and MAPE in Albania (one police officer), UNMIK in Kosovo (46 police
officers, 4 civilian experts, one liaison officer). Romania is also part of the police forces
missions of the European Union (EUPM) in Bosnia and Herzegovina and to the
European Union’s Concordia military operation in Macedonia.

2. THE ROMANIA-ESDP RELATION FROM THE PERSPECTIVE OF

TRANSATLANTIC RELATIONS

The analysis of the relation Romania-ESDP from the perspective of transatlantic

relations should start from a series of facts2:

Romania has been accepted, as member state with full rights, on March 29, 2004,
into the North-Atlantic Alliance, an alliance strongly influenced from a political
and military point of view by the USA;

Romania should in principle become member of the European Union on January

1st 2007. However, this date is still a desired target in the future. Therefore
Romania needs to find a balance between its position in a political-military
alliance where the country already belongs to (NATO) and a political
organisation to which Romania wishes to adhere but whose security and defence
dimension is insufficiently consolidated (EU);

In the last three decades the military power and technological gap between the
USA and the EU Member States (with the relative exception of the United
Kingdom and France) had an ascendant trend3. Starting from this fact, the USA
administration adopted gradually a more unilateral approach to military
interventions with a tendency to engage in more ad hoc military coalitions;

In addition, the European Union has not yet, as an entity, the political unity
required for building up a common armed force. Despite its growing global
economic and financial power, the European Union cannot have yet a significant
global military presence in case a conflict emerges, even a diffuse one as the fight
against terrorism is, and less probably in a war situation;

At the same time, the European Union does not dispose of the necessary material
resources for building up military force capable of rapid intervention at global
level, simultaneously on more operation deployments;

Despite the lack of classic war type conflicts, the current period is still not a peaceful
time. This is why it is very likely that NATO will remain, at least on medium term, the
2 See also Liviu Muresan, Adrian Pop, Florin Bonciu, The European Security And Defence Policy – A factor
of influence on the actions of Romania in the field of security and defence. Research paper, The European
Institute of Romania, Bucharest, 2004.
3 The so-called ‘Revolution in Military Affairs’ (RMA) has triggered the development of brand new
approaches and technologies for military affairs in the USA. A similar evolution did not happen in the EU
countries.
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main European politico-military organisation, and the European Union, through

CFSP/ESDP will support NATO’s ‘heavy-handed’ interventions through ‘soft’ actions,
especially related with crises prevention and post-conflict reconstruction and
rehabilitation4.

3. CONCLUSIONS

As future Member State of the EU Romania should encourage the ESDP and participate
in it. The risk of a possible conflict of interest in the Romania-NATO and Romania–EU
relations is low because ESDP might not have, in the near future, the capability of
effectively engaging in big military operations. Under these circumstances Romania
could participate, for instance, in peace keeping operations within ESDP and any other
type of military operations together with NATO.

Consequently to the EU expansion after 2007, the Eastern neighbours of Romania

(Ukraine, the Republic of Moldova) will become both the western frontier of Russia’s
‘near abroad’ and the eastern frontier of the ‘new neighbourhood’ of the EU. The new
geopolitical context will require a pro-active involvement of Romania in the policy of
the ‘new neighbourhood’ of the EU, including in the management of ‘frozen conflicts’
in the Community of Independent States, as the one in Transnistria.

Romania can contribute substantially to the successful implementation of the ESDP

through the existent human and logistic resources as well as through experiences
gathered in peace keeping missions and regional military co-operation.

In order to enhance the chances for a relevant contribution to the ESDP, Romania must
promote and act upon the concept of inter-agency cooperation in crisis prevention and
management. From an institutional point of view, the main priority remains the setting
up of a National Centre for Crisis Management and a Regional Centre for Crisis
Management in Bucharest.

Some specialised departments also need to be established within the Ministry of Foreign
Affairs and the Ministry of Defence, to implement ESDP and to provide the necessary
expertise for adequate decision-making. Moreover, a department of European and Euro-
Atlantic security should be created at highest governmental level. This body could
function as a coordinating agency and a contact point for international cooperation
initiatives.

4 Ovidiu-Adrian Tudorache, “Conflicts of interests in Europe: NATO – OSCE”, in Studii de Securitate vol. 2,

no. 1/2004.
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Bibliography

– Position paper on Chapter 27: Common Foreign and Security Policy, in Vasile
Puscas, Negociind cu Uniunea Europeana, Volumul 1: Documente initiale de
pozitie la capitolele de negociere, Editura Economica, Bucharest, 2003, p. 796;

– For the English version of the document see: “Romania’s Position Paper Chapter
27: Common Foreign and Security Policy”, in Vasile Puscas, Negotiating with
the European Union, Vol. 2: The Initial Position Papers for Chapters of
Negotiation, Edit. Economica, Bucharest, 2003, pp. 784;

– Liviu Muresan, Adrian Pop, Florin Bonciu, The European Security And Defence
Policy A factor of influence on the actions of Romania in the field of security and
defence. Research paper, The European Institute of Romania, Bucharest, 2004;

– Ovidiu-Adrian Tudorache, “Conflicts of interests in Europe: NATO – OSCE”, in

Studii de Securitate vol. 2, no. 1/2004.

367