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REPORT III
Study on ASEAN-EU FTA Impact
on Thailand and Thailand’s Strategy
EU Trade Policies
(TOR 6, 8, 9, 12 and 14)
FINAL REPORT
15 February 2008
By
Hunton & Williams
Executive Summary ASEAN-EU FTA Impact on Thailand
15/02/2008 Hunton & Williams Page 2 of 5
บทสรปผบรหาร
นโยบายและกฎระเบยบทางการคาและการลงทนของสหภาพยโรป
สาหรบการศกษาผลกระทบตอประเทศไทย
จากการจดทาความตกลงการคาเสรอาเซยน-สหภาพยโรป
สวนหน�งของรายงานการศกษาผลกระทบตอประเทศไทยจากการจดทาความตกลงการคาเสรอาเซยน-สหภาพยโรป คอ จดทาและวเคราะหสทธพเศษทางการคาตางๆ ท�สหภาพยโรปไดใหกบประเทศอ�นๆ ตาม TOR 3 และ มาตรการเฉพาะ/มาตรการสงเสรม/กฎระเบยบทางการคาและการลงทนของประเทศสมาชกสหภาพยโรป ตาม TOR 7 รายงานฉบบน 9จงเปนสวนหน�งของรายงานฉบบท� 3 (นโยบายทางการคาของสหภาพยโรป) สภาพยโรปใชนโยบายเชงพาณชยรวมกน และเม�อมการคาเขามาเก�ยวของ สหภาพยโรปจะรวมกนในฐานะเปนผ เจรจาความตกลงการคาโดยผานกรรมาธการยโรป (EC) กฎเกณฑนโยบายทางการคาของสหภาพยโรปปรากฏอยในขอบทท� 133 ของ EC Treaty ซ�ง EC เปนคณะเจรจาแทนประเทศสมาชกท 9ง 27 ประเทศ โดยหารอผานทาง Article 133 Committee สหภาพยโรปใหสทธพเศษทางการคาฝายเดยวแกประเทศท�สาม (อาท GSP, Cotonou Agreement, OCT) หรอใหโดยทางความตกลงทางการคาแบบพเศษ (อาท EEA, EU-Switzeland, EU-Chile, EU-Mexico, EU-Turkey) สาหรบ TOR 5 รายงานฉบบน 9ไดจดทาขอมลพ 9นฐานเบ 9องตนและคณลกษณะท�จาเปนสาหรบการไดรบสทธพเศษทางภาษในแตละโครงการ การไดรบสทธพเศษทางภาษน 9นข 9นอยกบการพสจนแหลงกาเนดท�มแบบแผนการสะสมแหลงกาเนดสนคาท�แตกตางกนไปตามแตละความตกลง ในเชงทฤษฎ สนคาสงออกของไทยจะไดรบผลเสยจากสทธพเศษทางภาษ สาหรบกรณท�สนคาชนดเดยวกนหรอทดแทนกนจากประเทศอ�นถกนาเขาสสหภาพยโรปภายใตโครงการสทธพเศษทางการคา โดยท�ผลกระทบจากสทธพเศษทางภาษท�มตอสนคาสงออกของไทยไปสหภาพยโรปทาการวดผลกระทบในเชงปรมาณไดยาก จงไดทาการศกษาจากสดสวนการสงออกของไทยไปยงตลาดสหภาพยโรปท 9ง 27 ประเทศ ซ�งมมลคาสงสดในป 1998 และมแนวโนมลดลงต 9งแตน 9นเปนตนมา การสญเสยสวนแบงตลาดของการสงออกของไทยในตลาดสหภาพยโรปประจวบเหมาะกบมลคาการคาของสหภาพยโรปกบโลกท�เพ�มข 9น ดงน 9น การสญเสยสวนแบงตลาดดงกลาวจงไมทาใหความสามรถในการแขงขนของไทยลดลงในภาพรวม อกปจจยหน�ง คก การลงนามจดทาความตกลงการคาเสรกบประเทศชล เมกซโก อเมรกาใต และ ATMs กบ Western Balkans ในชวงระยะเวลาเดยวกนน 9น อาจมสวนนาไปสการสญเสยสวนแบงตลาด รายงาน
Executive Summary ASEAN-EU FTA Impact on Thailand
15/02/2008 Hunton & Williams Page 3 of 5
เน�องมาจากการจดทาความตกลงการคาเสรของสหภาพยโรปกบชลและกบเมกซโก อกท 9งผลจากแบบจาลอง GTAP มผลในทางบวกตอไทย จงสรปวาการจดทาความตกลงการคาเสรกบสหภาพยโรปอาจชวยจดการกบสวนแบงตลาดของสนคาสงออกไทยท�ปรบเปล�ยนในตลาดสหภาพยโรป
สาหรบ TOR 7 รายงานจดทาขอมลสาหรบมาตรการเฉพาะ/มาตรการสงเสรม/กฎระเบยบทางการคาและการลงทนของประเทศสมาชกสหภาพยโรป แมวาประมวลกฎหมายศลกากรสหภาพยโรปไดวางแนวทางดานกฎระเบยบสาหรบการปฏบตของเจาหนาท�ศลกากรและการจดการในสวนของ “เขตปลอดอากรและทณฑบนปลอดอากร” แตสาหรบแนวทางการจดต 9งและประกอบการในเขตปลอดอากรน 9นเปนเร�องท�แตประเทศสมาชกเปนผ กาหนด เขตปลอดอากรเปนพ 9นท�พเศษท�อยภายใตอาณาเขตของศลกากรของสหภาพยโรป สนคาท�อยในเขตเหลาน 9ปลอดจากภาษนาเขา VAT และคาธรรมเนยมนาเขาอ�นๆ สาหรบสนคาสงออกจะสามารถนาเขามาในเขตปลอดกอากรน 9ไดตอเม�อไมตองเสย VAT (อาท ไมมคา VAT ท�ถกคดจากผสงสนคาชนดดงกลาว) ในดานขาเขา เขตปลอดอากรเปนโกดงสาหรบสนคาท�ไมไดมาจากสหภาพยโรปท�ถกจดเกบไวจนกวาจะมการตรวจปลอยของออกไป ใบขนขาเขาไมตองถกนามาย�นสาหรบไวสาหรบการฝากสนคาในเขตปลอดอากร ในดานขาออก สนคาของสหภาพยโรปถกนามาไวในเขตปลอดอากรเพ�อใชประโยชนจากกฎระเบยบสหภาพยโรปในการขอคนภาษสาหรบการสงออกหรอขอคนภาษนาเขา ใบขนขาเขาและขาออกตองถกนามาย�นสาหรบไวตลอดระยะเวลาท�สนคาอยในเขตปลอดอากร นอกจากสทธประโยชนท�จะไดรบจากเขตปลอดอากรดงกลาวแลว สทธประโยชนอ�นๆ ท�นอกเหนอจากน 9ยงมใหกบนกลงทนท�มาลงทนในเขตปลอดอากรของประเทศ Cyprus, Latvia และ Slovenia อกดวย รายงานไดเนนใหเหนถงสทธพเศษดานการลงทนและดานภาษของแตละประเทศสมาชก เน�องจากสทธประโยชนทางการลงทนการแตกตางจากสทธประโยชนทางการคาในเร�องของสทธพเศษดานภาษและเขตปลอดอากรซ�งครอบคลมโดยประมวลกฎหมายศลกากรสหภาพ คอ ไมมการกลมกลนดานมาตรฐานสาหรบสทธประโยชนทางการลงทน ดงน 9น แตละประเทศสมาชกจงตองเจรจาความตกลงความคมครองการลงทนและสนธสญญาภาษของแตละประเทศเอง และสงวนความรบผดชอบสาหรบนโยบายการลงทนของตนเองเทาน 9น ทายท�สด รายงานไดแสดงถงมาตรการกดกนทางการคาและการลงทนของสหภาพยโรปและของแตละประเทศสมาชก ซ�งไดเคยหยบยกข 9นโดยประเทศคคา อาท สหรฐฯ และ ญ�ป น ท�อาจอยในความสนใจของผมสวนไดเสยของไทย
Executive Summary ASEAN-EU FTA Impact on Thailand
15/02/2008 Hunton & Williams Page 4 of 5
EXECUTIVE SUMMARY
EU Trade and Investment Policies for
the Study on ASEAN-EU FTA Impact on Thailand and Thailand’s Strategy
As part of the study on the ASEAN-EU FTA Impact on Thailand, this report discusses trade
preferences that EU offer to third countries (TOR 5), and trade and investment specific
measures, incentives, and regulations of individual EU Member States (TOR 7). This report
should be considered part of Report III - “EU Trade Policies”.
The EU has a common commercial policy, and thus when trade is concerned, EU acts as one,
where the European Commission negotiates trade agreements. The legal basis for the EU’s
trade policy is Article 133 of the EC Treaty. On this basis, the European Commission
negotiates on behalf of the 27 Member States , in consultation with the so-called “Article 133
Committee”.
The EU offers trade preferences to third countries unilaterally (e.g. GSP, Cotonou
Agreement, OCT) through preferential trade agreements (e.g. EEA, EU-Switzerland, EU-
Chile, EU-Mexico, EU-Turkey). To address TOR 5, the report provides basic background
information and essential features about each tariff preference program. The tariff
preferences are subject to proof of origin, with different cumulation of origin schemes
depending on the agreement.
In theory, Thailand’s exports would be adversely affected by the tariff preferences if they are
like products or competing products to those imported under the EU preferential trade
programs. While the impact of the tariff preferences on Thailand’s exports to the EU is
difficult to quantity, observations were made that Thailand’s share of the EU-27 market
peaked in 1998 and has been trending downwards ever since. The weakening of EU market
share coincides with the increase in the value of trade with the EU and worldwide, thereby
suggesting that the loss of market share is not a result of an overall decrease of
competitiveness of Thailand. The signing of FTAs with Chile, Mexico and South Africa as
well as ATMs granted to the Western Balkans, during the same period, could have
contributed to the loss of market share. Noting the positive outcomes of Chile’s and
Mexico’s FTAs with the EU, and the GTAP simulation results for Thailand, the report
Executive Summary ASEAN-EU FTA Impact on Thailand
15/02/2008 Hunton & Williams Page 5 of 5
concludes that a FTA with EU could potentially address the market share slide by Thailand’s
exports to the EU.
To address TOR 7, the report provides information with regard to trade and investment
specific measures, incentives and regulations of individual EU Member States. The
Community Customs Code provides the regulatory framework applicable to all Customs
related procedures within the EU and specifically deals with the issue of "free zones and free
warehouses". While the Code sets out the requirements in terms of treatment by the customs
authorities the arrangements for the actual establishment and operation of the zones is left to
the individual Member State.
Free zones are special areas within the customs territory of the Community. Goods placed
within these areas are free of import duties, VAT and other import charges. Goods for export
can also be put in free zones as this allows for VAT zero rating (i.e. no VAT is charged by
the supplier in respect of those goods). On importation, free zones are mainly for storage of
non-Community goods until they are released for free circulation. No import declaration has
to be lodged as long as the goods are stored in the free zone. On exportation, Community
goods may be put in free zones in order to benefit from Community legislation governing
export refunds or the repayment of import duties. Import and export declarations have only to
be lodged when the goods leave the free zone. Apart from the typical benefits of free zones,
additional incentives or reliefs are available to investors in free zones in Cyprus, Latvia and
Slovenia.
The report highlights the investment and tax incentives of individual Member States. Unlike
trade incentives like tariff preferences and free zones that are governed by the Community
Customs Code, there is no harmonized or standardized program of investment incentives.
EU Member States negotiate their own bilateral investment protection and taxation treaties
and generally retain responsibility for their own investment regimes.
Finally, the report highlights various trade and investment barriers in the EU and in
individual Member States that have been raised by other trading partners (US and Japan) that
might be of interest to Thai stakeholders.
ASEAN-EU FTA Impact on Thailand
15/02/2008 Hunton & Williams
Table of Contents:
I) Introduction ................................................................................................................ 1
II) EU Policies (TOR 6) .................................................................................................. 2
i) Rules of Origin ............................................................................................................... 3
ii) Customs Measures ......................................................................................................... 9
iii) Horizontal Services Issues ........................................................................................... 14
iv) Movement of Business Persons and other natural persons .......................................... 19
v) Government Procurement ............................................................................................ 36
vi) Competition Policy ...................................................................................................... 39
vii) Investment .................................................................................................................... 46
viii) Intellectual Property Protection ................................................................................... 52
ix) Trade Measures ............................................................................................................ 60
x) Labor and Environment ............................................................................................... 68
xi) Business Establishment ................................................................................................ 84
xii) Other Non Tariff Measures ........................................................................................ 182
III) Taxes, Surcharges and Fees on Imports (TOR 8) .................................................. 191
IV) Sensitive Issues, Products, and Services (TOR 9) ................................................. 197
V) Industry-Specific EU Policies (TOR 12) ............................................................... 222
(i) Fresh, Chilled, Frozen Fruits, Vegetables and Meat; Processed Food ...................... 223
(ii) Rubber and Products .................................................................................................. 234
(iii) Textile and Clothing; Footwear ................................................................................ 235
(iv) Glass ........................................................................................................................... 239
(v) Jewellery .................................................................................................................... 242
(vi) Electronics and Electrical Products ........................................................................... 244
(vii) Motor Vehicles and Parts ........................................................................................... 246
(viii)Furniture ..................................................................................................................... 252
VI) Sector Specific EU Policies (TOR 14) .................................................................. 255
(i.) Professional Services, including nurse ...................................................................... 256
(ii.) Hotel and Restaurant Services, including cook ......................................................... 269
(iii.) Distribution Sector ..................................................................................................... 271
(iv.) Massage and spa business, including masseuse ......................................................... 272
(v.) Entertainment business .............................................................................................. 276
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15/02/2008 Hunton & Williams
(vi.) Food processing ......................................................................................................... 277
(vii.) Fishery........................................................................................................................ 280
(viii.) Poultry Farming and Processing ........................................................................ 284
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I) Introduction
This report contains an overview of policies, laws, measures, rules and regulations of the
European Union (EU) and its Member States. Part I of this report comprises a brief Executive
Summary, EU policies (TOR 6), Information on taxes imposed on imported products (TOR
8), Information on sensitive issues, products and services (TOR 9), Product-specific EU
policies (TOR 12), and Sector-specific policies (TOR 14).
Our objective has been to summarize and focus on those policies and laws that are likely to
(or may) create market access problems, in particular for imports from Thailand. The subjects
covered by this report are extremely broad. There is much law and policy on topics such as
rules of origin, customs measures, horizontal services issues, movement of business persons
and other natural persons, government procurement, competition policy, investment,
intellectual property protection, trade measures, labor and environment, business
establishment, and other non-tariff measures. We provide information on taxes and fees
charged by the Member States on imported products. We identify sensitive issues, products
and services. We also cover relevant legislation for products and sectors of special interest to
Thailand.
In conducting the analysis, we have consulted primarily regulations and laws at the EU and
Member State level, as well as emerging legislation influencing trade negotiations. We have
obtained useful information from the websites of various organizations, including the
European Union and the World Trade Organization (WTO), as well as from secondary
sources. Where certain policy areas are within the exclusive competence of the EU, or
Member State legislation merely implements and enforces EU law, we only review the
relevant EU legislation.
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II) EU Policies (TOR 6)
This chapter reviews EU and Member State (where relevant) policies, measures, laws, rules
and regulations in areas identified in TOR 6 of the study, and in particular rules of origin,
customs measures, horizontal services issues, movement of business persons and other
natural persons, government procurement, competition policy, investment, intellectual
property protection, trade measures, labor and environment, business establishment, and other
non-tariff measures.
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i) Rules of Origin
The European Community (EC) applies both preferential and non-preferential rules of
origin. Non-preferential rules of origin are contained in the Community’s Customs Code
(CC)3, as established by Council Regulation 2913/92 (as amended), and the
corresponding implementing regulations, and preferential rules of origin are contained in
the implementing provisions of the CC (IPC)4 (for autonomous/non-reciprocal
preferences), as laid down by Commission Regulation 2454/93, and in the relevant
preferential trade agreements. In determining both non-preferential and preferential
origin of products that are not wholly produced in a country, the EC uses the sufficient
work or process test, defined through: (i) criteria based on the change of tariff headings;
(ii) economic criteria based on value-added; and (iii) technical or industrial criteria based
on processing operations. In general, origin certificates are required mainly for
preferential treatment purposes.5 The Rules of Origin described here are applicable to
third non-EU countries. Thailand enjoys preferential arrangements under the GSP.
Non-preferential origin
The legal basis for non-preferential rules of origin are contained in Articles 22-26 of the
CC, and Articles 35-65 and Annexes 9-11 of the IPC.
Non-preferential origin can be: ‘wholly obtained’ products and “products having
undergone a ‘last substantial transformation’”. According to Article 23 of CC, ‘wholly
obtained’ goods are “those wholly obtained or produced in that country”6 and section 2
expands the definition further by giving specific examples such as, mineral water
3 Council Regulation (EEC) No 2913/92 of 12 October 1992 establishing the Community Customs Code,
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31992R2913:EN:HTML
4 Commission Regulation (EEC) No 2454/93 of 2 July 1993 laying down provisions for the implementation of Council Regulation (EEC) No 2913/92 establishing the Community Customs Code,
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31993R2454:EN:HTML
5 Certificate EUR.1, EUR.2, or Form A, invoice declaration.
6 Article 23 section 1 of Council Regulation No. 2913/92 (CC)
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extracted from that country or products from fishing or hunting which were carried in that
country. According to Article 24 of CC, “goods whose production involved more than
one country shall be deemed to originate in the country where they underwent their last,
substantial economically justified processing or working in an undertaking equipped for
that purpose and resulting in the manufacture of a new product or representing an
important stage of manufacture.”7
There are 3 main ways of defining last substantial transformation products:
• by a rule requiring a change of tariff heading in the HS nomenclature;
• by a list of manufacturing or processing operations that do or do not confer on the
goods the origin of the country in which these operations where carried out;
• by a value added rule, where the increase of value due to assembly operations and
incorporation of originating materials represents a specified level of the ex-works
price of the product.
Article 25 of CC contains an anti-circumvention provision. This provision applies in
cases where the working or processing on a product is only carried out in order to
circumvent provisions applicable to these products from certain countries.
Article 26 of CC provides for the possibility in customs legislation or specific legislation
to require a proof of origin.
Articles 35-40 of IPC lay down specific provisions for applying the rule of last substantial
transformation for textiles and a limited number of other products.
Articles 41-46 of IPC contain specific provisions on origin relating to accessories, spare
parts and tools that form part of the standard equipment of machines, apparatus or
vehicles.
Articles 47-54 of IPC contain provisions relating to the conditions that certificates of
origin have to fulfil:
• it shall be made out by a reliable authority or agency duly authorized for
that purpose by the country of issue;
7 Article 24 of Council Regulation No. 2913/92 (CC)
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• it shall contain all the particulars necessary for identifying the product to
which it relates in particular:
o the number of packages, their nature, and the marks and number
they bear,
o the type of product
o the gross and net weight of the product; these particulars may,
however, be replaced by others, such as the number of volume
when the product is subject to appreciable changes in weight
during carriage or when its weight cannot be ascertained or when
it is normally identified by such other particulars,
o the name of the consignor
• it shall certify unambiguously that the product to which it relates
originated in a specific country
Special provisions apply to certain products in order to determine their originating status8.
For some products originating status is identified in accordance “with the position taken by
the EC in the negotiations under the Harmonisation Work Programme which defines
the…concept of ‘last substantial transformation’”. In specific circumstances, if application of
the above mention provisions do not allow determination of the origin of the products, the
residual rules in Annex 9 will apply.
Preferential origin
Preferential origin confer “tariff benefits on goods traded between countries which have
agreed such an arrangement or where one side has granted it autonomously.”9 Certain
conditions, laid out in the origin protocol of the country concerned or in the autonomous
arrangements, must be satisfied. This usually means that the products must “either be
manufactured from raw materials or components which have been grown or produced in the
beneficiary country or…at least undergo a certain amount of working or processing in the
beneficiary country”. The minimal process required to obtain originating status is laid down
8 This could be found in Annexes 9 and 11 of IPC. Annex 9 contains instructions of how to apply the rules laid out in Annexes 10 and 11
9 http://ec.europa.eu/taxation_customs/customs/customs_duties/rules_origin/preferential/article_773_en.htm
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in the common provisions and provisions in certain individual agreement as such provisions
will vary between agreements.
While the objective of all preferential origin arrangements is the same, the provisions of those
arrangements may vary in certain details. In order to have a complete picture, it is necessary
to look both at the common provisions given and at the specific provisions of each individual
arrangement. The common provisions are:
• Originating status: it is compulsory for the goods to have been either
wholly obtained or achieved the minimal requirement of work to be done
in the country agreed in order to receive preferential origin;
• Cumulation: allows countries that have the same origin rules “to use
originating products from each other”;
• Minimal operations: concerns certain processes that are considered to be
insufficient to confer originating status;
• General tolerance rule: sets the percentage in which the parties are allowed
to use non-originating materials in producing the final products;
• “No drawback” rule: prohibits refunds of duties paid for importing goods;
• Principle of territoriality: the process must be carried out in the territories
of the countries concerned;
• Direct transport rule: ensures that the goods arrived at the imported
destination is the same as the goods left from exported country;
• Proof of origin: the person concerned must provide proof of origin for the
goods to assure the importing countries that the preferential origin is
correct;
• Approved exporter: an exporter who under certain conditions is allowed to
make out proofs of origin10.
10 An approved exporter is an exporter who has met certain conditions imposed by the customs authorities and
who is allowed to make out invoice declarations. Just as the customs authorities can grant that status, they can also withdraw it if the exporter misuses or abuses the authorisation. The procedures attached to granting "approved exporter" status depend on national provisions. Under certain conditions, a 'single authorisation' may be granted to an approved exporter, who is established in one Member State, where he keeps his records containing the evidence of origin, but whose products are exported from other Member States (Article 8 of Council Regulation (EC) N° 1207/2001 of 11 June 2001).
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The EC has both unilateral and conventional preferential arrangements. Each arrangement
has its own legal basis in the form of a preferential agreement or a special provision in the
IPC.
EC is considered a single unit when determining originating status of products exported from
EC regardless of how many Member States were involved in the production of those
products. Both Community exporters and the customs authorities need to complete
information at the time of establishing the proof of origin as well as in the event of
subsequent verification, showing the originating or non originating status and particulars of
the materials used in the manufacture of the product whose origin has to be established. This
is the purpose of the 'supplier's declaration', to be provided by the supplier to the exporter11.
Each arrangement contains an annex of list rules that consists of procedures obtaining
originating status. General tolerance rule applies in case where some of the materials used
were non-originating. Most common rules are: i) only wholly obtained materials can be used;
ii) non-originating materials from certain positions can be used in or are excluded from the
working or processing; iii) a specific working or processing operations must be carried out;
iv) a certain percentage of value is added or cannot be exceeded in the production process; v)
a combination of different rules; vi) a choice between different rules is given.12
An important feature of the EC's preferential rules of origin is the provision for cumulation,
which allows the use of materials originating in a partner country (other than the exporting
country) to be considered as originating in the exporting country. The EC applies three types
of cumulation scheme: bilateral, diagonal, and full. Bilateral cumulation involves only two
partners; under diagonal cumulation, materials originating in specific countries, linked
through a network of preferential agreements, may be counted as originating in the exporting
country; and under full cumulation, any working or processing operations done within the
free-trade area will count together towards the determination of origin. Furthermore, certain
11 Council Regulation (EC) N° 1207/2001 of 11 June 2001
12 http://ec.europa.eu/taxation_customs/customs/customs_duties/rules_origin/preferential/article_776_en.htm
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EC preferential rules of origin apply the absorption principle and include tolerance rules,
especially with regard to textiles.13
Changes are to be implemented on preferential rules of origin, for the purpose of simplifying
them. The European Commission has adopted a Communication (COM (2005) 100) on the
future of preferential rules . Three key changes are envisaged: (i) the replacement of all
existing rules (many of which are specific to products and countries), by one, across-the-
board rule based on value-added in the beneficiary country (i.e. a threshold of value-added, to
be determined, would define origin) subject to an ongoing evaluation of its suitability;
(ii) certifications of origin would be replaced by a statement on origin given directly by the
exporter, with the appropriate country authorities retaining responsibility for carrying out
registration and certification of origin controls; and (iii) enforcement of rules of origin would
fall under the responsibility of the competent authorities in the beneficiary country.
13 Under the absorption principle, when a non-originating material acquires originating status by meeting the corresponding processing requirement, it is considered to be fully (100%) originating once incorporated into a final product; tolerance rules allow the use, in the manufacture, of a limited percentage of non-originating materials supplied by non-cumulation-beneficiary countries that would otherwise not be accepted.
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ii) Customs Measures
The European Community is founded on a customs union, which is an essential element for
functioning of the single European market. The principle for free movement of goods
establishes that the customs union covers all trade of goods and prohibits customs duties on
imports and exports between Member States, as well as requires the adoption of common
customs tariff.
The Single EU market provides for common rules at the external borders of the EU, which
implies that the customs authorities of all 27 Member States should act as one. The common
rules extend beyond the customs union to all aspects of trade policy, such as common tariff
with regard to third countries, preferential trade, health and environmental control, non-tariff
instruments.
Legislation and Procedures
The EC's Customs Code (CC)14 and its implementing provisions15 provide the basic
legislative framework for customs procedures in the EC.
The EC's customs procedures have been established in accordance with the relevant
provisions of the Treaty and are influenced by the customs-related arrangements of
international organizations, including the WTO, United Nations Economic Commission for
Europe (UNECE), and the World Customs Organization (WCO). The CC aims to bring
together the general rules and all customs procedures applicable to goods imported from third
countries, in a single and coherent body of law.
The CC mainly concerns:
14
Council Regulation (EEC) No 2913/92 of 12 October 1992 establishing the Community Customs
Code: http://eur-lex.europa.eu/Result.do?direct=yes&lang=en&consleg=01992R2913 15
Commission Regulation (EEC) No 2454/93 of 2 July 1993 laying down provisions for the implementation of Council Regulation (EEC) No 2913/92 establishing the Community Customs Code: http://eur-lex.europa.eu/Result.do?direct=yes&lang=en&consleg=01993R2454
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• general provisions on people's rights and obligations with regard to customs
legislation;
• the basic provisions governing trade in goods. These include import and export duties,
customs value , the EC's customs tariff , the tariff classification of goods and their
origin;
• the provisions governing the introduction of goods into the EC's customs territory.
These cover the presentation of goods to customs, the customs declaration, the
obligation to assign goods a customs-approved treatment or use, and temporary
storage;
• non-Community goods which are moved under a transit procedure;
• customs-approved treatment or use. The Code describes the placing of goods under
customs procedures, release for free circulation, transit, customs warehousing , inward
and outward processing, processing under customs control, temporary admission and
export;
• introduction of goods into a free zone or free warehouse, re-export, destruction of
goods and their abandonment to the exchequer.
Under the CC, goods brought into the customs territory of the EC can be placed under
customs procedures or other types of customs-approved treatment.16 Placing goods under
customs procedures requires a declaration to that effect17, while entry for other types of
customs-approved treatment or use normally requires only a physical act.18 The customs
declaration must, under normal procedures, be made in writing and consist of the Single
Administrative Document, accompanied by pertinent documents (e.g. invoices or other
documents for customs valuation purposes, certificates of origin for application of
preferential tariffs or derogations from the Common Customs Tariff and any other document
16
Customs procedures are required for the release of goods for free circulation; transit; customs warehousing; inward processing; processing under customs control; temporary admission; outward processing; and exportation. The other customs-approved treatments or uses are: entry of goods into a free zone or free warehouse; their re-exportation from the customs territory of the Community; their destruction; and their abandonment to the Exchequer. 17
CC Art 59(1). 18
CC Art 169(1).
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required by any specific legal regulations on the importation of the goods, for instance, health
certificates, certificates of conformity and authenticity). It can also be made through data
processing techniques or by means of any other relevant act.19 The customs authorities may
grant permission to simplify the completion of formalities and procedures.20 The code applies
uniformly throughout the customs territory of the Community to exports and imports of
goods.
Several amendments to the CC were introduced by Regulation No. 648/2005, most of them
with the aim of increasing safety and security procedures while at the same time furthering
trade facilitation. The Regulation introduces the legal concept of an authorized economic
operator (AEO), i.e. an economic operator that has: (i) an appropriate compliance record
with customs requirements; (ii) a satisfactory system of managing commercial (and, where
applicable, transport) records; (iii) proven financial solvency (when applicable); and (iv)
appropriate security and safety standards (when applicable).
The EC Commission adopted two proposals to modernize the CC in November 200521. A
political agreement was reached by the EU Council of Ministers on 25 June 2007 on the
proposals for a modernised Community Customs Code (MCCC). The MCCC envisages to
simplify legislation and streamline customs process and procedures for the benefit of both
customs authorities and traders. The agreement still needs to be confirmed by the European
Parliament in a second reading. The MCCC will introduce the following improvements:
• electronic lodging of customs declarations and accompanying documents as the rule;
• exchange of electronic information between the national customs and other competent
authorities;
• "centralised clearance", under which authorised traders will be able to declare goods
electronically and pay their customs duties at the place where they are established,
19
CC Art 61. 20
CC Art 76. The CC distinguishes three types of simplified procedure: a declaration that omits some of the required particulars; a simplified commercial or administrative document to be lodged in place of the declaration; and a recording of entry, thereby removing the requirement for the declarant to present the goods to Customs. 21
Proposals for a regulation laying down the Community Customs Code (COM (2005) 608 final), and for a decision on a paperless environment for customs and trade (COM (2005) 609 final). Both proposals were adopted on 30 November 2005.
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irrespective of the Member State through which the goods will be brought in or out
of the EU customs territory or in which they will be consumed.
• development of the 'Single Window' and 'One-Stop-Shop' concepts, under which
economic operators give information on goods to only one contact point ('Single
Window' concept), even if the data should reach different administrations/agencies,
so that controls on them for various purposes (customs, sanitary, etc.) are performed
at the same time and at the same place ('one-stop-shop' concept).
Commission Regulation (EEC) No 2454/93 (CCIP) (as amended) lays down the provisions
for the implementation of Council Community Customs Code. It combines the implementing
provisions for European customs law in a single document. It covers: i)general implementing
provisions; ii) customs-approved treatments or uses; iii) privileged operations; iv) customs
debt and certain controls. The general provisions cover areas such as binding information, the
origin of goods, value of goods and customs declarations.
Common Customs Tariff
Council Regulation (EEC) No 2658/87 on the tariff and statistical nomenclature and on the
Common Customs Tariff establishes a Combined Nomenclature that meets Customs Union
tariff and statistical requirements and creates an Integrated Tariff of the European
Communities (TARIC). The EC tariff nomenclature, known as the Combined Nomenclature,
is based on the International Convention on the Harmonized Commodity Description and
Coding System (HS): the first six digits are identical to the relevant HS sub-headings. The
Combined Nomenclature introduces sub-divisions for Community purposes at the eight-digit
level. A further subdivision (at the 10-digit level), referred to as the TARIC, identifies the
various trade policy measures applying to specific imports and, in some cases, exports.22 In
some cases, the TARIC nomenclature establishes four additional codes, for agricultural
components, anti-dumping duties, dual-use items, and export subsidies. All EC member
States have to follow this nomenclature, but are allowed to introduce sub-divisions or
additional codes for national purposes (e.g. VAT or excise duties). Annex I to the Regulation
fixes the conventional rates of duty, the autonomous Common Customs Tariff rates when
22
TARIC is derived from French: Tarif Intégré des Communautés Européennes: http://ec.europa.eu/taxation_customs/customs/customs_duties/tariff_aspects/customs_tariff/index_en.htm
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they are less than the conventional ones, and the statistical supplementary units. An updated
version of the Annex I to the Regulation23 is published as a Commission Regulation every
year Official Journal of the EU.
The EC applies several types of tariff: ad valorem rates are the most widely used (90%),
followed by specific (6.4%), compound (2%), alternate (0.7%) and variable (0.9%). Some
agricultural products are subject to tariff quotas. Ad valorem tariffs are applied on the c.i.f.
customs value.
Customs policy is of exclusive competence of the EU. It is applicable to economic operators
and goods from third non-EU countries. Customs Authorities of Member States are
responsible for the enforcement and application of the rules, but not for creating them. For
this reason, we have not discussed Member States legislation with regard to customs
measures.
23
The 2007 version of the Combined Nomenclature is available at: http://eur-lex.europa.eu/LexUriServ/site/en/oj/2006/l_301/l_30120061031en00010880.pdf
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iii) Horizontal Services Issues
The European Community (EC) is the world’s leading trader of commercial services, with its
services sector contributing to EC economic growth and job creation more than any other
sector. This alone highlights the economic importance of services in the EC.
The fundamental principle of the internal market for services
The fundamental principles governing the internal market provide that EC companies have
the freedom to establish themselves in other member states, and the freedom to provide
services on the territory of a member state, other than the one in which they are established.
The freedom of establishment and free movement of services are two of the “fundamental
freedoms” and of key importance to the EC internal market. Their principles are laid down in
Chapter 4 of the EC Treaty. The provisions governing the freedom to provide services are
enshrined in Article 49 EC of the Treaty.
The provisions of the fundamental freedoms have direct effect. This means that member
states must modify national laws that restrict freedom of establishment, or freedom to provide
services, which are incompatible with these principles. This includes not only discriminatory
national rules, but also any national rules which are indistinctly applicable to domestic and
foreign operators but which hinder the exercise of these fundamental freedoms, in particular
if they result in delays or additional costs. In these cases, member states may only maintain
such restrictions in specific circumstances where these are justified by overriding reasons of
general interest, for instance on grounds of public policy, public security or public health.
Obstacles to the free movement of services across border in the EC
However, despite progress in some specific service sectors24, the overall internal market for
services is not yet working as well as it should. The reasons why services are not frequently
traded between member states are that there is still a huge gap between the vision of an
integrated EU economy and the reality as experienced by European citizens and European
service providers.
24 Important developments and progress in the field of services have been brought about through specific legislation in certain fields such as financial services, telecommunications, broadcasting and the recognition of professional qualifications.
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The biggest barrier to trade in services are differences in legal requirements across member
states. Some identified differences are:
* Monopolies in establishing of services providers;
* Quantitative restrictions i.e. rules governing the number of service providers, rules on
maximum surface area, or distance between service providers;
* Territorial restrictions that require authorization to engage in business activities in specific
region. National requirements exist with respect to shareholders, management, staffs, and
some regulated professions of service enterprises;
* Residence requirements of the members of the management board of service enterprises;
* Rules designed to ensure independence and autonomy between different activities,
preventing some service activities from being exercised jointly;
* Professional qualifications;
* Company taxes differ and result in obstacles for cross-border establishment of service
providers, as well as, the risk of double taxation and compliance cost;
* Price regulations such as maximum/minimum prices;
* Bank account is required in facilitating transaction payment, which involves tax
declarations and administrative costs;
* Accounting rules differ;
* Payment and reimbursement of VAT, where suppliers are subject to VAT in country of
consumption rather than country of establishment, causes difficulties for cross-border
suppliers;
* More favorable tax treatment for services to local providers.
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The Services Directive
EC adopted Directive 2006/123/EC25 on services in the internal market (the “Services
Directive”) on 12 December 2006. The Services Directive aims to create a genuine internal
market for trade in services by 2010 through: facilitating freedom in business establishment
and free movement of services between member states; strengthening rights of users of
services of other member states; promoting the quality of services; and establishing effective
administrative cooperation among member states.
The Services Directive established a general legal framework for services provided for
economic return (with the exception of excluded sectors26) while taking the specific nature of
certain activities or professions into account.
Administrative simplification and Removing legal and administrative barriers to the
development of service activities
The Services Directive requires member states to examine and simplify the procedures and
formalities applicable to accessing a service activity.
To ease freedom of establishment, the Directive provides:
* The obligation to evaluate the compatibility of the authorization schemes in light of the
principles of non-discrimination and proportionality and to maintain certain principles
regarding the conditions and procedures of authorization applicable to service activities;
* Repeals certain legal requirements that remain in the legislation of some Member States
and that are no longer justifiable; and
* Contains the obligation to evaluate the compatibility of a certain number of legal
requirements in light of the principles of non-discrimination and proportionality.
25 Directive 2006/123/EC of the European Parliament and of the Council of 12 December 2006 on services in the internal market http://eur-lex.europa.eu/LexUriServ/site/en/oj/2006/l_376/l_37620061227en00360068.pdf
26 The Services Directive covers around 50% of EC economic activity, but does not include some sub-sectors which are subjected to other EC initiatives: non-economic services of general interest; financial services; electronic communications services on certain matters; transport services; services of temporary work agencies; healthcare services; audiovisual services; gambling; activities connected with the exercise of official authority; certain social services (relating to social housing, childcare and aid for persons in need); private security services; and services provided by notaries and bailiffs, who are appointed by an official act of government.
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Easing the freedom to provide temporary cross-border services
For the purpose of improving the free movement of services, the Directive stipulates that
member states must guarantee freedom of access to the service activity and the freedom to
exercise such activity throughout their territory. Member State, to which the service provider
moves to establish, may only enforce its own requirements as much as these are non-
discriminatory, proportional and justified for reasons of public order, public safety, public
health or environment protection.
Strengthening consumer rights as service users
With a view to strengthening rights of recipients, the Directive provides: affirmation of the
right of recipients to use the services of providers from other member states; and
establishment of the right of recipients to obtain information on the rules applicable to
providers, whatever their location may be, and on the services offered by a service provider.
Ensuring service quality
The Directive aims to strengthen the quality of services by encouraging, for example,
voluntary certification of activities or drawing up quality charters; and encourage European
codes of conduct to be drawn up, in particular by professional bodies or associations.
Establishing effective administrative cooperation among member states
In order to facilitate the establishment and free movement of services throughout the EC, the
Directive imposes a legal obligation requiring member states to cooperate with the relevant
authorities of other member states in order to ensure efficient control of service activities in
the EC while avoiding a multiplication of monitoring, as well as, an alert mechanism between
member states; and the basis for developing an electronic system for the exchange of
information between member states, which is vital for establishing effective administrative
cooperation between them.
Limitations for non-EC residents on market access in services to the EC
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As mentioned earlier, obstacles to trade in services which are differences in legal
requirements across member states would restrict freedom of establishment, or freedom to
provide services, indistinctly applicable to EC and non-EC operators.
For those third-country companies who would like to establish their commercial presences27
in the EC, national rules of each member state would be applicable to non-EC companies.
Please see detailed regulations on establishment in the EC and member states in our report
Section II.xi. on Business Establishment.
For those non-EC residents who would like to provide their services within the EC, national
rules of each member state would be applicable to non-EC residents. Please see detailed
regulations regarding entry of third-country nationals, employment of third-country nationals,
as well as, regulations on certain professionals providing services in the EC and member
states in our report Section II.xi. on Movement of Business Persons and Natural Persons.
The EC effort in harmonization of national rules to create internal single market for trade in
services would facilitate foreign companies who operate services in one member state and
would like to operate their services in other member states, which have differences in legal
requirement on the same business.
27
Commercial presence includes establishing corporate subsidiaries, trusts, joint ventures, partnership, sole proprietorships, associations, representative offices or branches, or acquiring such entities.
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iv) Movement of Business Persons and other natural persons
The free movement of persons is one of the four pillars of the Single Market as created by the
EC Treaty. Article 39 of the Treaty secures the free movement of workers within the EU.
Any discrimination based on nationality between workers of the Member States with regard
to employment, remuneration or any other working conditions is prohibited. Workers from
Member States have the right to work in any other Member State subject to limitations
justified on grounds of public policy, public security or public health. This entails the right to
accept offers of employment actually made and to move freely within the Member States for
this purpose; to stay in a Member State for the purpose of employment in accordance with the
laws governing employment of nationals of that state; and to remain in a Member State after
being employed there. These rights do not apply to certain civil service posts if they entail
the exercise of official authority.
Article 39 does not yet apply to all the Member States of the EU. The accession treaties of
eight of the countries which joined the EU in 2004 (Czech Republic, Estonia, Latvia,
Lithuania, Hungary, Poland, Slovakia and Slovenia) included clauses allowing the old
Member States (the EU-15) to restrict access to nationals of these States for a maximum
period of seven years (until 2011). The EU-15 and the ten Member States that joined in 2004
(the EU-25) have the right to restrict access to nationals of Bulgaria and Romania, again for a
maximum period of seven years.
Article 39 does not apply to third non-EU countries.
Entry of third-country nationals
Rules for entry and exit through the EU’s external borders are governed by Regulation (EC)
No. 562/2006.28 Third-country nationals are subject to thorough checks when entering or
exiting external borders of the EU. For stays not exceeding three months in a six-month
period, third-country nationals must (i) possess a valid travel document; (ii) possess a valid
28 Regulation (EC) No. 562/2006 of the European Parliament and of the Council of 15 March 2006 establishing a Community Code on the rules governing the movement of persons across borders (Schengen Borders Code), http://eur-lex.europa.eu/smartapi/cgi/sga_doc?smartapi!celexplus!prod!DocNumber&lg=en&type_doc=Regulation&an_doc=2006&nu_doc=562
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visa, if required; (iii) justify the purpose of their intended stay, and have sufficient means of
subsistence; (iv) not be a person for whom an alert has been issued in the SIS (Schengen
Information System) for the purposes of refusing entry; (v) not be considered a threat to
public policy, internal security, public health or the international relations of the Member
States.29
Council Regulation (EC) No. 539/2001 lists the third countries whose nationals must be in
possession of visas when crossing the external borders of the EU.30 There is currently a
proposal for a Community Code on Visas31 which will harmonize the issuance of visas
throughout the EU and ensure the equal treatment of all visa applicants.
The United Kingdom and Ireland are not bound by these rules and still apply domestic laws
on entry and exit of third-country nationals.
Admission of third-country nationals as self-employed persons
In 1994 the Council of the EU passed a resolution laying down principles to guide the
Member States in the application of policy on admission for the purpose of pursuing activities
as self-employed persons.32 The Council considered that only those third-country nationals
who provides investment, innovation, transfer of technology or job creation should be
admitted. It must be duly established that the activity in question will benefit the economy of
the host country. Requests for admission must be accompanied by information which can be
used to assess the merits of the request, including e.g. documents indicating the nature, scale
and duration of the activity, the number of staff required, and evidence of funds available for
the intended purpose. In particular the Member States will be careful not to admit anyone as
a self-employed person if their true intent is to seek paid work on the labor market.
29 Regulation (EC) No. 562/2006, Articles 5(1), 7(3)
30 Council Regulation (EC) No. 539/2001 of 15 March 2001 listing the third countries whose nationals must be in possession of visas when crossing the external borders and those whose nationals are exempt from that requirement, http://eur-lex.europa.eu/LexUriServ/site/en/oj/2001/l_081/l_08120010321en00010007.pdf
31 Draft Proposal for a Regulation of the European Parliament and of the Council establishing a Community Code on Visas {SEC(2006)957} {SEC(2006)958}.
32 Council Resolution of 30 November 1994 relating to the limitations on the admission of third-country nationals to the territory of the Member States for the purpose of pursuing activities as self-employed persons.
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Admission of third-country nationals for employment
In 1994 the Council of the EU passed a resolution establishing principles governing Member
States’ policies regarding admission of third-country nationals for employment.33 The
resolution lays down that Member States should only consider requests for admission for
purposes of employment where vacancies in a Member State cannot be filled by national and
Community manpower or by non-Community manpower lawfully resident in the Member
State. Third-country nationals may be admitted on a temporary basis and for a specific
duration if an offer of employment is actually made to a named worker or named employee of
a service provider and the work is of a special nature due to specific qualifications.
Vacancies can be offered to seasonal workers in strictly controlled numbers for a specifically
defined job; trainees; frontier workers; and intra-corporate transferees, i.e. persons
temporarily transferred by their companies as key personnel. Seasonal workers can be
admitted for a maximum of six months within a twelve-month period. Trainees can be
admitted for a period of one year but can extend the period if necessary to obtain a relevant
qualification in the Member State. Other third-country nationals admitted for employment
will be admitted for a period not exceeding four years in the first instance.
Member States also admit ‘business visitors’, i.e. third-country nationals seeking entry in
order to (a) negotiate for the supply of goods or services, or (b) deliver goods or assemble
machinery manufactured in a third country as part of a supply contract, provided that such
persons will be dealing only with businesses in the Member State and not with the general
public and that any one visit and possibly the work permit do not exceed six months.
Member State Systems34
Austria
33 Council Resolution of 20 June 1994 on limitation on admission of third-country nationals to the territory of the Member States for employment.
34 Most Information on Member State immigration laws is taken from “Legal Employment Channels for Third-Country Nationals in the EU 25: Focus on the Entry of Low-Skilled Workers”, report prepared for the European Parliament, March 2005, available at http://www.europarl.europa.eu/comparl/libe/elsj/events/hearings/20050314/legal_empl_chann_en.pdf
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The Third Country Nationals Act (1997, amended 2002) restricts immigration to highly
skilled and seasonal workers. Separate laws set out quotas for employment of foreigners
(based on maximum share of the work force) and residence permits. After ten years of
continuous residence, guest workers gain a status similar to citizens. Integration courses are
required for new migrants.
Belgium
In most cases work permits are issued only when there are not enough workers available on
the labor market for the relevant sector. Exceptions include highly qualified persons,
management executives, researchers. Third-country nationals must submit an application for
a Type D visa to the local Belgian consular authorities with a work permit, a certificate of
good conduct, and a medical certificate. Type C visas are for those from French-speaking
third countries.
Foreigners wishing to start a business in Belgium must apply for a card authorizing the
exercise of a self-employed activity issued by the Federal Public Service of the Economy,
Small and Medium-Sized Businesses, the Self-Employed and Energy. This must be applied
for at the same time as the visa.
Family members of a third-country national residing lawfully in Belgium are eligible for
family reunification. These are the spouse and the children of the worker and the children of
his or her spouse. Both the worker and the spouse must be 18 years of age, whereas the
children must be below 18. The entire family must live together.
Bulgaria
With Bulgaria's entry into the EU in 2007, Bulgaria's general visa requirements have been
upgraded to meet EU requirements. To work in Bulgaria, foreigners need a work permit and
residence permit. Prospective employers should apply for work permits for new employees at
the local Labor Office. Foreigners with an employment contract and a work permit can apply
for residence for the duration of the contract. In order to obtain a residence permit (1 or 5
years) one should either own a company which employs at least 10 Bulgarian staff and/or
invest at least $500,000 in the country. To get a 5 year residence permit a foreign national
will have to sit for a test in Bulgarian language proficiency.
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Cyprus
Applications for work permits must be submitted by the intended employer along with a work
contract. In principle, permits will only be approved if there are no available adequately
qualified nationals of a Member State. Once legally resident and working in Cyprus, workers
are not tied to one employer and can move to other employers in the same sector.
Czech Republic
Work permits are issued depending on the needs of the labor market. Employers must submit
detailed employment and permits are only valid for a specific employer, job and area. The
work permit is good for a maximum of one year with the option of renewal. Once in
possession of a permit, the worker may apply for a visa.
Conditions for establishing a business on a self-employed basis are more relaxed then in most
European legislation. The applicant does not need to submit a business plan or demonstrate
sufficient financial resources.
Spouses, lone parents over seventy years of age, and children of workers are eligible for
family reunification.
Denmark
Work and residence permits may be granted to third-country nationals within professions
where a shortage of qualified manpower exists (the ’positive list’). Workers that meet these
requirements are eligible for a 3-year residence permit with an opportunity for extension. A
permit will never be granted for a period longer than the period set forth in the employment
contract. Danish law includes a requirement that that salary and employment conditions in
contracts for third-country nationals meet Danish standards. Any worker who receives a
residence permit can bring his or her spouse, cohabiting companion or underage children to
Denmark. The family must live together and be self-sufficient.
Estonia
Third-country nationals need a work permit for employment or self-employment. The
employment must ensure the worker’s subsistence. Foreign workers can be granted work
permits if an open competition has been carried out to staff the position and after two months
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it has not been possible to recruit an EU national. Estonia has an annual immigration quota
which, as of 2005, could not exceed 0.05% of the population.
Finland
Under the 2004 Aliens Act, third-country nationals must apply for a work permit, which can
be granted for either temporary work or work of a continuous nature. The employee can
move to another employer in the field for which he/she has been granted a permit. The first
permit is generally one year in duration, and the worker can apply for an extension of up to
one year at a time. Finland currently has no quota system for third-country nationals.
For self-employment, third-country nationals need a residence permit for a self-employed
person in order to conduct business activities in Finland. The activity must be profitable
above the threshold for basic income support.
The spouse, registered partner or cohabitant, and any unmarried child under 18 is eligible to
join the worker in Finland upon application for a residence permit.
France
Third country nationals can apply for the right to work in France if they have an employer’s
letter proving intent to hire them. Under the 2003 Law No. 119 concerning immigration
control, foreign residence and nationality, there is an increase in the control of foreigners,
with an obligation for medical insurance and proof of reception. Temporary permit (carte
temporaire) are valid for one year and give limited access to employment to those able to
prove family ties, scientists, artists, students, and visitors. It is renewable under the law for a
maximum of three years.
In order to conduct business as self-employed in France, a third-country national needs to be
granted a combined residence and work permit. For a long-term visa, one must show suitable
accommodation, medical insurance and/or family links in France.
Immigrants can apply for family reunification after one year in France as a full resident if
they have the resources (over the level of minimum wage and accommodation). A spouse and
any unmarried children under 18 are allowed to join the worker in France.
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Germany
The 2004 Immigration law in Germany allows companies to only hire third-country nationals
if there is no EU citizen available for the position. However, highly qualified non-EU
workers such as scientists and top level managers can obtain a residence permit of unlimited
duration. Foreign students are permitted to stay for one year after finishing their studies to
look for work.
To be self-employed in Germany as a third-country national, one does not have to have a
work permit, but must just apply first for a residence permit. Applicants have to meet the
general requirements governing business or trade. There are no caps on the number of self-
employed third-country nationals, but one must invest at least a million Euro and add at least
ten new jobs.
Provisions exist in the law for the family of the third-country national to be reunified with the
worker in Germany with certain conditions of resources. Germany also has cooperation
agreements with Turkey and a seasonal worker program.
Greece
The Greek system for granting residence permits to third-country nationals has five stages.
First, there is a determination made as to the needs of the country. An employer and worker
must have contact which leaves to the granting of a work permit by Prefect. Then, a visa can
be granted to the third-country national by the Region in which he or she will be working.
Seasonal work is also available, and seasonal workers can work for six months a year.
Residence permits granted are valid for one year with an option to renew. Under the 2003 Act
3202/2003, immigrants applying for a second renewal of the one year permit will be granted
a two year permit.
Self-employed foreign nationals must have sufficient resources and provide an activity,
business or service that helps to develop the Greek economy. They only need a work permit
which is of annual duration and renewal for five years. One must have proof of a professional
skill, and economic and technical study, and a copy of their criminal record or lack thereof.
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A spouse and any unmarried children are able to join the worker in Greece if the worker has
enough resources and medical insurance.
Hungary
Work permits applied for by the employer may only be granted if the employer has first
advertised the job in Hungary, the foreign worker is fully qualified for the job, and the wage
provided is to be of the minimum standard. The legislation also provides that the foreign
national’s country of origin must not discriminate against Hungarian workers, and the
administration in Hungary has discretionary powers to refuse a work permit based on the
prospective employer’s labor force history.
Self-employment is only allowed where a foreign national has permanent resident status.
Hungary does not recognize family reunification as a right or concept, however an applicant
must have a temporary residence permit and show proof of accommodation, means of
livelihood and medical insurance.
Ireland
Any non EEA citizens going to work in Ireland needs a permit before starting a job there.
New Green Card permits have been introduced for all jobs with salaries over 60000 Euro.
Green cards are also available for certain job categories paying over 30000 Euro. For all the
other jobs - a "normal" work permit has to be applied for.
Work Permits can be granted for some occupations with a salary of €30,000 or more where
Green Card Permits are not available and, in very limited circumstances, in the salary range
below €30,000. The Work Permit is an employment permit issued to an employee, which
permits them to work in Ireland for an employer - but only in the occupation specified on the
permit. Work Permits are valid for an initial period of two years and can then be renewed for
a further three years. After five years, the work permit can be renewed indefinitely. Either the
employee or the employer can apply for a Work Permit.
There are two categories of application based on salary level. (i) Firstly, where the annual
salary (excluding bonuses) on offer is €30,000 or more the Work Permit can be considered
for occupations other than those which are contrary to the public interest. (ii) Secondly, Work
Permits will only be considered for a very limited number of occupations below an annual
salary of €30,000.
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A vacancy, in respect of which an application for a work permit is being made, must be
advertised with the FÁS/EURES employment network and additionally in local and national
newspapers, for three days, to ensure that, in the first instance a national of the EEA or
Switzerland, or in the second instance a national of Bulgaria or Romania, cannot be found to
fill the vacancy. Evidence that this has been done must be included with the application. The
foreign-national concerned must posses the relevant qualifications, skills or experience that
are required for the employment.
There are certain fees that must be paid by the worker in order to get the work permit as well
depending on the level of salary that they will make.
Spouses and dependants under 18 may join the worker in Ireland. On the basis of being a
Spouse or Dependant or a legal worker, they are free to seek employment and to apply for a
Spousal/Dependant work permit once they are a legal resident.
Italy
To work in Italy, non EU citizens require an entry visa, a residence permit as well as a work
permit.
Employers must prove that there is no available EU worker before attempting to hire a third-
country national. To obtain a residence permit, all third-country nationals must provide
fingerprints. Permit lengths vary and can be provided for nine months seasonal work, one
year short term, or two years unlimited contract or self-employment. Renewal is for the same
period conditional on proving a sufficient income level equal to the minimum social benefit.
The self-employed are permitted if there are sufficient resources, qualifications, and
accommodation and income are guaranteed. A work permit for self-employed activity has a
duration of two years and can be renewed.
After eight days’ residence in Italy at the very latest, a non EU citizen has to apply for a
residence permit in accordance with the purpose indicated in his or her visa. This can be done
at the Police Headquarters in charge of the person’s Italian place of residence. After doing so,
this person will be given proof of having submitted a resi-dence application. Af-ter one week
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at the latest, an answer will be given. If the request is rejected, this must be done in a
language that the applicant can understand.
Spouses and unmarried children under 18 are able to join the third-country national worker in
Italy. Adult children unable to care for themselves are also permitted where consent of the
parent/worker is given. However, the worker must first demonstrate sufficient income and
housing in order to support the family members in Italy.
Latvia
An employer should confirm a work invitation in the State Labor Agency (Ministry of
Welfare). The State Labor Agency will then make a labor market test based on each
particular case. Applicants must pay a state fee and the permit duration is up to four years.
Self-employed persons may apply for a yearly permit. Applicants must prove that they have
sufficient financial means, proof of qualifications, a business plan, and a statement issued by
the State Revenue Service about the payment of income taxes.
A foreign national with a permanent residence permit may sponsor family members with
proof of sufficient funds and accommodation. The spouse, minor children or dependent
parents must submit proof of no criminal record.
Lithuania
A foreign national wishing to work in Lithuania must have an employer’s offer, documents
proving the company’s legality, a copy of the social security certificate of the company, and
the applicant’s proof of qualifications for the position. Work permits can be issued for a
duration of two years and can be renewed. Foreign residents are not allowed to perform any
other jobs except those which their original work permit was obtained for. Self-employed
persons do not need a work permit, but are required to meet requirements for proof of capital
and qualifications.
Foreign nationals intending to work in Lithuania must also obtain a temporary residence
permit which can be applied for abroad at Lithuanian diplomatic missions. Those foreign
nationals applying with an employment contract must prove sufficient funds and health
insurance.
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A foreign national may apply for family reunification after five years in Lithuania. The time
period is shortened if the foreign nationals pass an exam on Lithuanian language.
Luxembourg
The Ministry of Labor requires proof that an employer has tried to find an EU national for the
position and may submit candidates of its own from the local unemployment rolls. Under
most circumstances, it’s difficult to obtain a work permits for non-EU nationals for anything
less than a managerial post.
Work permit rules don’t apply to self-employed people, but you must obtain permission from
the Ministry of Small Businesses (Ministère des Classes Moyennes) in order to operate any
sort of business or trade in the Duchy. To obtain permission, you must submit documentation
relating to the incorporation of the business or the setting up of a company or partnership, a
resume of your professional qualifications and a certificate of solvency to show not only that
you can make a living from your business, but that you’ve already done so in another
country. Also, a clean criminal record or certificate of good life are requested for those non-
EU nationals who have been living in the country for less than five years. Re-application for
the business permit must be made if the nature of the business changes.
Malta
A third-country national must obtain a work permit to obtain employment in Malta. The work
permit is issued to the employer for a determined period and a fixed purpose after it can be
shown that every effort has been made to engage a Maltese citizen. A residence permit is
automatically granted with the approval of a work permit for the applicant and his or her
spouse. Employment licenses are valid for the duration of a year and can be renewed.
Netherlands
Before an employer can apply for a Netherlands work permit for a non-EEA national, it is
normally necessary to show that attempts have been made to fill the position from the local
and EEA labor markets. These attempts should include advertising in national newspapers,
websites, industry publications, etc. If a third-country national wishes to stay and work in The
Netherlands for more than three months for employment purposes, they must have a long
term visa/provisional residence permit “MVV”. The first stage of the process requires the
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candidate to make an application for a temporary residence permit/visa (MVV) through
his/her local Royal Netherlands embassy.
Self-employed workers do not need work permits, but for a residence permit, the economic
activity must be innovative, match essential interests of the country, not hinder competition
and the eligible person must not be over 60 years of age. The residence permit is valid for one
year and is renewable.
Seasonal work also exists, with a worker being able to stay up to twenty-four weeks.
Spouses and minor children are permitted to join the worker in The Netherlands. After
reunification there is a requirement to follow a language and society class. There are also
some possibilities for unmarried partners and parents of the worker to join them as well.
Poland
Generally, foreign nationals must obtain a Work Permit prior to engaging in employment in
Poland. This general provision applies both to persons engaged in a traditional
employer/employee relationship as well as to independent entrepreneurs who perform their
services on a contractual basis. The Work Visa is a Polish residence visa with a right to
employment in Poland.
The procedure for obtaining a Work Permit in Poland commences with an application for a
Promissory decision for a work permit. This document is the basis for issuing a Work Visa
and a Work Permit, which will enable a foreign national to enter and remain in Poland for the
duration of his/her Employment Contract or assignment. The application of a Promissory
decision for a Work Permit is submitted by the prospective employer to the local Labor
Office with jurisdiction over the place of the intended employment. Processing time takes
approximately 1.5 months. Upon approval of the Promissory decision for a Work Permit, an
application for a Work Visa is submitted to the Polish Consulate with jurisdiction over the
applicant's current legal residence. Processing of the application takes approximately two to
three weeks. In order to obtain the Work Permit, the foreigner should present the required
documents to the Provincial Employment Office.
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A foreigner applying for a residence permit in Poland for a specified period of time is obliged
to put forward the following documents to the authority issuing the permit: an application,
indicating significant circumstances, justifying his or her stay in Poland, four photographs,
confirmation of administration fee payment and documents confirming that they have sources
of income and own means, together with a confirmation of sums (e.g. a statement from a
bank account). Moreover, a voivodship (or a consul accepting an application) can demand: an
extract of a birth certificate, marriage certificate, or a certification of having no commitments
in relation to the Internal Revenue Office in their country of origin and the confirmation of
lack of criminal record in their country of origin.
A worker may apply for family reunification for his or her spouse and dependent minor
children. An applicant will be obliged to prove that he or she owns a place to live and
material means to support his or her family so that of social security support will not be
necessary. A permit to live with a family is valid for 12 months from the date of the issue. If a
family goes to Poland at the invitation of a holder of temporary residence card, then
permission for stay is prolonged to the end of the card's validity. If an applicant is a holder of
a permanent residence card, then permission for residence for his or her family is valid for
two years.
Portugal
Third-country nationals who wish to work in Portugal are required to apply for a work visa.
Four types of work visa exist: sports and leisure professionals, highly skilled researchers and
technical professionals, independent workers, and the remaining types of paid workers. In
order to obtain a work visa or a residence visa for work purposes, a third-country national
must show that he or she does not have a criminal record, proof of health insurance, a work
contract, the necessary qualifications for his or her profession, and proof of subsistence.
Long-term workers also need to apply for a Residence Visa justified by work purposes which
allows them to obtain a temporary residence permit.
For self-employment, the third-country national application is checked by the Investment,
Trade and Tourism in Portugal or by institutions regulating the relevant professions in
Portugal. One must have a Type III visa which is renewable.
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After one year of residence, an immigrant can apply for family reunification for a spouse,
minor children, handicapped children, or dependent parents.
Romania
The Romanian Office for Immigration is now responsible for the implementation of
Romania's immigration policies and asylum laws and for the integration of foreign nationals
into the Romanian community. The Office for Immigration replaces the Authority for
Foreign Citizens, the Romanian National Office for Refugees, and the Office for Foreign
Force Migration.
Work Authorization ("Autorizatie de Munca") will be issued for the following purposes:
1. Indefinite employment – A foreign national may be employed by a Romanian
entity based on an individual employment contract. The employment contract can be for a
predetermined temporary period of time or can be of an indeterminate duration.
2. Transfers – A foreign national may be seconded to Romania by their employer for a
maximum period of one year within a five-year period. Note that this time limitation will not
apply to foreign nationals that have a direct and necessary impact on ongoing projects in
Romania that contribute to the development or improvement of the economic infrastructure
of the country.
Slovenia
In order to obtain a work permit, a third-country national must have a declaration from an
employer, a certificate of the lack of a criminal record, proof of health insurance, and
sufficient funds to live in the country. Temporary residence permits have an initial duration
of one year and can be renewed.
A foreign citizen with a temporary residence permit can apply for family reunification for the
period of his or her residence in Slovenia for a spouse and minor children. Again, they must
demonstrate sufficient funds to support the family members, health insurance and proof of the
lack of a criminal record for those wishing to enter and stay with the worker in Slovenia .
Slovakia
Third-country nationals can apply for a temporary stay permit based upon the existence of an
employment permit or a trade license for the purpose of business activity issued pursuant to
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special regulations. The duration of the permit is for one year, and permits are renewable
specifically in the initial sector in which they were granted. To be granted a temporary stay
permit, a third-country national must show sufficient funds, proof of medical insurance and a
lack of criminal record.
Family reunification for a spouse, minor children and dependent parents can be applied for if
the foreign national has a temporary stay permit for one year and will stay for a further two
years.
Spain
Non-EU citizens are required to obtain a residence permit (Permiso de residencia y
reconocimiento de la excepción a la necesidad de obtener permiso de trabajo) to work in
Spain. Third-country nationals can request a residence permit in any Spanish consulate. To
request a residence permit a person needs the following documents: a valid passport, three
photographs, a certificate of good health, criminal record, and a job offer. The employer will
send the job offer on your behalf to the Spanish Ministry of Interior, which will send it in turn
to the consulate. Before a work permit is granted to a foreign worker, specific conditions
must be met. There must either be a lack of Spanish national or EU national workers, or the
needs cannot be met by the National Employment System. The duration of a work permit is
up to five years and renewable.
Self-employed persons must show sufficient investment to develop the activity in Spain, and
professional qualifications. Non-EU students need to obtain a special residence permit for
students.
A spouse, unmarried minor children, disabled relatives, and dependents may ask for
reunification after having been in Spain for a year. The worker must be able to show support
for the family members as well as housing accommodations. A spouse may obtain an
individual permit if he or she finds employment or can provide proof of having lived with the
spouse for at least two years.
Sweden
Requirements for a work permit include an application for a work and residence permit. The
first application for a work permit is made at the Swedish Embassy or Consulate in the
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country of origin or in the country of domicile of a non-EU citizen. A foreign national must
have a written offer of work in Sweden, made out on a special form (AMS PF 101704) which
the employer can obtain from the employment office. The employer must complete it and
send it to the worker so that it can be enclosed with the application. The employer must also
guarantee that the salary will be a minimum of SEK 13,000 per month before tax. Some form
of accommodation must have been arranged in Sweden as well. The Migration Board decides
on a case by case basis after reviewing applications.
Self-employed persons are required to obtain a residence permit. They must show a business
plan, capital to support the enterprise, and economic advantages to Sweden. The residence
permit is granted for initial six month periods over a trial period of two years. At the end of
the trial period, a self-employed foreign national may be granted a permanent residence
permit (PUT).
Workers may apply at the Swedish embassy or Swedish consulate for family reunification. If
the worker’s family member is of working age, with their residence application they will
automatically be granted a work permit as well.
United Kingdom
Work permits are issued by Work Permits (UK), part of the Home Office's Border and
Immigration Agency. A work permit relates to a specific person and a specific job. The work
permit scheme lets UK employers recruit or transfer people from outside the European
Economic Area (EEA), while still protecting the interests of resident workers in the UK.
Work permits also allow overseas nationals to come to the UK for training or work
experience.
There are six different work permit arrangements:
1. Business and commercial
These allow UK employers to recruit people from outside the EEA who will fill a vacancy
that the employer has not been able to fill with a resident worker.
2. Sportspeople and entertainers
These allow UK employers to employ established sportspeople, entertainers, cultural artists
and some technical and support people from outside the EEA.
3. GATS (Global Agreement on Trade in Services)
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This allows employees of companies that are based outside the European Union to work in
the UK on a service contract awarded to their employer by a UK-based organization.
4. Sectors Based Scheme (SBS)
From 1 January 2007, this scheme only allows workers from Romania and Bulgaria to enter
the UK for up to 12 months to take low-skilled work in the food manufacturing industry.
More details on this scheme are available from Work Permits (UK).
5. Training and Work Experience Scheme (TWES)
This scheme allows people from outside the EEA to carry out work-based training for a
professional or specialist qualification, or a short period of work experience as an extra
member of staff. To qualify for TWES, a worker must: hold a valid TWES work permit and
be able to carry out the training or work experience it applies to; intend to leave the UK after
the training or work experience; be aged over 16; not intend to take employment except as set
out on the permit, and be able to support oneself and dependants, without needing any help
from public funds.
6. Student Internships
The Student Internship arrangements allow students from outside the EEA, studying first or
higher degree courses overseas to undertake an internship with an employer in this country. A
student will only be given permission for one internship with an employer and approval will
be given for a maximum of three months.
Those who wish to set up a business can apply with certain restrictions. The person must be
involved full-time in running the business and have sufficient funds to support them and their
dependents, as well as at least £200,000 under his or her control for the business. The self-
employed must intend to provide investment and services for which there is a genuine need in
the UK and not intend to look for other employment than work for the business.
Family reunification rules restrict work permit holders to bringing their spouse and dependent
minor children. One must be able to prove that public funds will not be necessary in order to
support the family.
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v) Government Procurement
The government procurement procedures in the European Union are governed by both
internal Community laws and international laws. The EU public procurement market is
estimated at around 16.1 % of the EU’s GDP. Current legislation includes Directive No.
2004/17/EC35 of 31 March 2004 which governs procurement procedures of entities operating
water, energy, transport and postal service sectors and Directive No. 2004/18/EC36 of 31
March 2004 which governs coordination of procedures for the award of public works
contracts, public supply contracts, and public service contracts. These directives are then
implemented into national law by the twenty-seven Member States and are intended to make
government procurement non-discriminatory and transparent as among Member States. The
Commission is responsible for the handling of government procurement infringement cases.
The Directives stipulate procedures to be applied when the value of the purchase is at or
above the designated thresholds. If the purchase value is below the threshold, the procedure is
based on national law and general principles of the EC Treaty.
The Directives are applicable in the Union of 27 Member States. In certain bilateral
agreement, EU has granted the other party a treatment no less favorable than to its domestic
goods, services and suppliers with respect to laws, regulations, procedures and practices
regarding government procurement.
Directive 2004/18/EC allows for the authorities to use their discretion with the use of open
and restricted procedures. Contracts should be awarded on the basis of objective criteria
which ensure compliance with the principles of transparency, non-discrimination and equal
treatment and which guarantee that tenders are assessed in conditions of effective
competition. As a result, the purchasing officer can choose the bid of ‘the lowest price’ or the
‘the most economically advantageous’ tender. The Directive provides a list of cases justifying
the use of the negotiated procedure with a prior public notice and without a public notice. A
35 Directive 2004/17/EC of the European Parliament and of the Council of 31 March 2004 coordinating the procurement procedures of entities operating in the water, energy, transport and postal services sectors available at http://eurlex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32004L0017:EN:NOT
36 Directive 2004/18/EC of the European Parliament and of the Council of 31 March 2004 on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts available at http://eurlex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32004L0018:EN:NOT
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competitive dialogue may be used when a contract is complex and cannot otherwise be
awarded under an open or selective procedure. A contract is defined as ‘particularly complex’
where the procuring entities cannot objectively define the technical requirements capable of
satisfying their needs, or they are not objectively able to specify the financial or legal
composition of the project. The procuring entity shall inform the tenderers and candidates of
the decision of the award as soon as possible. Upon request, they shall also provide reasons
for their decisions within fifteen days from the receipt of the request.
The Utilities Directive (2004/17/EC) is more restrictive for suppliers in EU utilities sector. It
allows contracts for utilities to be awarded under open, restricted, or negotiated procedures. It
also allows the contracting authorities to either reject non-EU bids where the proportion of
goods originating in non-EU countries exceeds 50% of the total value of the goods, or apply a
3% price difference to non-EU bids in order to give preference to bids from within the EU.
Commission Decision of 7 January 200537 gives detailed rules for the application of the
procurement provided for in Article 30 of the Utilities Directive (2004/17/EC). The Directive
requires open, objective bidding procedures, but still separates against bids with less than
50% EU content that are not covered by an international or reciprocal bilateral agreement. It
applies to the entities operating in the water, energy, transport, and postal services sector, but
excludes the telecommunications sector. Member States have their own national practices
regarding government procurement as well. In some instances, they require obligations or
offsets that require companies to provide services, create jobs, or purchase local goods as a
condition for the award of a contract.
The EU is a signatory to the WTO Government Procurement Act (GPA).38 Parties to the
agreement are eligible to bid on supply contracts from European public contracting
authorities above the agreed thresholds and all EU Member States provide national treatment
for goods or suppliers from the countries that are signatories to the GPA. Procurement falling
under the GPA must be published internationally, except for direct tendering. Tenders are
37 Commission Decision of 7 January 2005 on the detailed rules for the application of the procedure provided for in Article 30 of Directive 2004/17/EC of the European Parliament and of the Council coordinating the procurement procedures of entities operating in the water, energy, transport and postal services sectors (notified under document C(2004) 5769) Text with EEA relevance, O.J. (L 7) 7 available at http://eur-lex.europa.eu/LexUriServ/site/en/oj/2005/l_007/l_00720050111en00070017.pdf
38 Government Procurement Agreement (GPA) available at http://www.wto.org/english/ docs_e/legal_e/gpr-94_01_e.htm
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advertised in the Official Journal of the EC and in the database Tenders Electronic Daily
(TED). Public agencies must also publish a general overview over planned purchases of
goods and services that exceed certain thresholds, as well as general information on any
major building and construction projects to be undertaken. Awards must be advertised no
later than two months after taking place, through a published notice in an official EU/WTO
language. Contracting authorities in the utilities sector are not obliged to state the contract
value in post-contract award notices; authorities in the rest of the public sector may postpone
the publication of the contract value only to guard commercial interest. While public sector
suppliers must publish a notice for every intended contract, procuring agencies in the utilities
sector may use a permanent list of suppliers. Procuring entities in the utility sector may
advertise their qualification requirements for all tenders through a single annual notice and
procurement falling within these qualification requirements is not announced individually.
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vi) Competition Policy
EU competition policy aims to facilitate the functioning of the internal market and the free
movement of goods, services, capital and people. The Directorate General of the European
Commission is the responsible authority for ensuring competition within the Community is
not distorted and that competition rules are enforced.
The competition regime of the EU sets forth the following basic policies:
� Agreements and collusive behavior between undertakings which restrict competition
are prohibited (Article 81 of the EC Treaty39);
� Abuse of a dominant market position is prohibited (Article 82 of the EC Treaty40);
� State aid given directly and indirectly by Member States to companies (Article 87 of
the EC Treaty) is, in principle, incompatible with the common market;
� Council Regulation 139/2004 EC (the Merger Regulation)41 governs proposed
mergers, acquisitions and joint ventures with a certain amount of turnover.
An agreement is prohibited if its object or effect is to prevent, restrict or distort competition.
Article 81 prohibits as incompatible with the common market all agreements between
undertakings, decisions by associations of undertakings and concerted practices which may
affect trade between Member States. In particular those which:
� directly or indirectly fix purchase or selling prices or any other trading conditions;
39 Article 81 of the Treaty establishing the European Community available at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:12002E081:EN:HTML
40 Article 82 of the Treaty establishing the European Community available at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:12002E082:EN:NOT
41 Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings (the EC Merger Regulation) available at http://eur-lex.europa.eu/LexUriServ/site/en/oj/2004/l_024/l_02420040129en00010022.pdf
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� limit or control production, markets, technical development, or investment;
� share markets or sources of supply;
� apply dissimilar conditions to equivalent transactions with other trading parties,
thereby placing them at a competitive disadvantage;
� make the conclusion of contracts subject to acceptance by the
other parties of supplementary obligations which, by their nature or
according to commercial usage, have no connection with the subject
of such contracts.
Such agreements may be unwritten as well as concerted practices. Examples include fixed
pricing, agreements limiting production markets or sources of supply between competitors, or
agreements that apply discriminatory condition to companies that are no parties. Some
restrictive agreements between companies are allowed in certain instances where they
promote technical progress, improve the production or distribution of goods, or benefit
consumers. The Commission has adopted block exemptions which are allowed under Article
81. The current block exemption regulations cover research and development agreements,
particular sector agreements like transport and insurances, and technology transfer
agreements. The European Commission provides guidance to companies on how it will apply
conditions for particular exemptions and situations. Commission guidelines on the
assessment of horizontal agreements and of vertical agreements further clarify how the
agreements affect competition and give examples of how the Commission makes its
determinations.
Article 82 prohibits abusive practices by companies with a dominant position. In order for
Article 82 to apply, the company must first be in a dominant position. The Commission
analyzes the relevant product and geographic markets to determine the company’s position.
Market share is also considered, and a 50% market share or above is typically an indication
of dominance.
Articles 81 and 82 of the EC Treaty have direct effect, and thus they may be enforced in
national courts. Companies and consumers can claim damages if they have been the victim of
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illegal behavior which restricts competition. Regulation 1/2003 allows more power in the
field of competition to be held by the national courts, but they must avoid any decision which
would conflict with a Commission decision. The Commission may submit observations
before the national court when it has an interest, and the national courts may ask the
Commission to provide more information.
All EU Member States have national competition authorities which have the power to enforce
the EU competition law. They may order agreements and practices which restrict competition
to be stopped and they may fine companies that have broken EU competition law. The
European Commission and the national competition authorities of the Member States
cooperate on competition issues through the European Competition Network (ECN). The
ECN was established to strengthen the system of parallel enforcement. When the competition
authorities in Member States initiate proceedings, they must inform the Commission not later
than thirty days before the adoption of a decision implementing Article 81 or 82 of the Treaty
and requiring that an infringement be brought to an end.
The Commission is empowered by the Treaty to apply the competition policies. It may
investigate by sealing any business premises and books or records to the extent necessary for
the dawn raids, asking staff for explanations of facts or documents, or by searching private
homes. The Commission may conduct such a search only by issuing an order that shall
specify the subject matter and purpose of the dawn raid. Prior authorization from the
competent court of the member state concerned is required. For private premises, the
Commission is merely entitled to search and cannot seal them. The Commission also has the
power to impose fines on undertakings who violate EU antitrust rules.
In addition to specific business focused investigations, the Commission may initiate market
sector inquiries when it feels that the market is not working as properly as it should be. It then
publishes reports and makes them available for comment.
Mergers
All mergers with a Community dimension have to be notified to the Commission prior to
taking effect. The rules for the assessment of concentrations are set forth in Council
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Regulation (EC) No 139/2004 on the control of concentrations between undertakings42.
Commission Regulation No. 802/200443 provides the details of the notifications requirements
and the notification form in the annex. If the annual turnover of the businesses exceeds a
specified threshold in terms of global and European sales, the proposed merger must be
notified to the European Commission. If the turnover is below the thresholds, the national
competition authorities may review the merger in the Member State. The EU Competition
rules are applied to all mergers in the world no matter where the company has its registered
office or headquarters, because the mergers may affect markets in the EU.
The Commission can decide whether or not to authorize the transaction or conduct an in-
depth investigation procedure after an initial scrutiny period of twenty-five working days
from the receipt of notification. The further investigation of the merger takes 90 working
days with some longer (105 or 125 days) in some circumstances.
Cartels
Article 81 of the Treaty prohibits cartel activity which distorts competition within the Single
Market. Such illegal activity can include agreements and concerted practices concluded
between competitors for price fixing, restriction of a supply to certain companies by limiting
their sales or their production capacities, and/or dividing up their markets or consumers. If the
Commission suspects illegal activity is occurring it can investigate. A leniency policy exists
for companies which first provide inside evidence of a cartel to the European Commission.
Leniency allows the Commission to offer full immunity or a reduction in the fines that would
otherwise have been imposed on a cartel member in exchange for disclosure of information
on the cartel and cooperation with the investigation. The amount of these fines for companies
involved in the cartel is calculated according to the gravity and duration of the infringement.
Fines may be as much as 10 % of the firm’s worldwide turnover.
State Aid
42 Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings (the EC Merger Regulation) available at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32004R0139:EN:NOT
43 Commission Regulation (EC) No 802/2004 of 7 April 2004 implementing Council Regulation (EC) No 139/2004 on the control of concentrations between undertakings available at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32004R0802:EN:NOT
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The EU generally prohibits state aid which distorts competition unless it is justified for
general economic development reasons. The European Commission is responsible for the
compliance of the State Aid rules within the EU legislation.
The EC adopted new guidelines in 2006 for the national regional aid provided by Member
States. The new guidelines are for the period of 2007 – 2013 and cover four areas of state aid:
geographic areas below the average GDP per capita, regions with less than 75% of the EC-15
average GDP per capita but more than 75% of the EC-25 GDP per capita, economic
development and low population density areas, and other areas to which discretionary
funding is allocated under Article 87(3)(c) of the EC Treaty.
Member States are required to inform the Commission of any plan to grant or alter State aid
and they are not allowed to distribute the aid before it has been authorized by the
Commission. The Commission is given the competence under the Treaty to determine
whether or not the notified aid measure constitutes State aid in the sense of Article 87(1) of
the Treaty, and if it does, whether or not it qualifies for exemption under Article 87(2) or (3)
of the Treaty. Since Member States can not grant any State aid unless it has been notified and
authorized by the Commission, aid which is granted in absence of Commission approval is
automatically classified as “unlawful aid”. Under the present procedural rules, the
Commission is obliged to order the recovery from the beneficiaries of any unlawful aid that is
found to be incompatible with the common market. National judges are competent to decide
whether the notification procedures haven been complied with and if not, to order recovery of
the aid. Regulation (EC) No 994/98 of 7 May 199844 enables the Commission to adopt so-
called “block exemption regulations” for State aid. These regulations allow the Commission
to declare certain categories of State aid compatible with the Treaty if they fulfill certain
conditions. Thus, the State aid is exempt from the requirement of prior notification and
Commission approval. Currently five block exemption regulations have been adopted by the
Commission. Three of the regulations45 create exemptions for aid to small and medium-sized
44 Council Regulation (EC) No 994/98 of 7 May 1998 on the application of Articles 92 and 93 of the Treaty establishing the European Community to certain categories of horizontal State aid available at http://eurlex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31998 R0994:EN:NOT
45 Commission Regulation No 70/2001 of 12 January 2001 on the application of Articles 87 and 88 of the EC Treaty to State aid to small and medium-sized enterprises O. J. (L 10) 33-42 available at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32001R0070:EN: NOT; Commission Regulation No 364/2004 of 25 February 2004 amending Regulation (EC) No 70/2001 as regards the extension of its scope to include aid for research and development O. J. (L 63) 22-29 available at
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enterprises, employment aid and training aid (all have been prolonged until 30 June 2008).
The fourth regulation46 exempts transparent regional investment aid schemes, and some ad
hoc aid from 2007 until the end of 2013. A fifth regulation47 codifies the application of the de
minimis rule. It establishes that aid to an enterprise that is below the threshold of 200,000
Euro over a period of three fiscal years and that respects certain conditions, does not
constitute State aid in the sense of Article 87(1) of the Treaty since it is deemed not to affect
trade or distort competition.
International Cooperation
The EEA (European Economic Area) agreement concluded between the European
Communities, all EU Member States and all EFTA (European Free-Trade Association)
members contains specific competition provisions, principally Articles 53 to 64, which are
similar to those of the EC Treaty. Today, the remaining EFTA parties to the EEA agreement
are Iceland, Liechtenstein and Norway. Cooperation between the European Commission and
the EFTA Surveillance Authority in competition matters is governed by the terms of
Protocols 23 (cooperation between European Commission and ESA in cartel and dominance
cases) and Protocol 24 (cooperation in the field of concentrations).48 The agreement sets forth
a provision in merger cases that gives the Commission exclusive jurisdiction in the EEA to
deal with all concentrations in competition cases with a Community dimension, as defined in
the EC Merger Regulation.
The EU currently has cooperation agreements on competition policy with the United States,
Japan, and Canada. As part of the agreements, competition authorities from both countries
exchange information and co-ordinate their enforcement activities. Each competition
http://eurlex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX: 32004R0364%20:EN:NOT; Commission Regulation (EC) No 1857/2006 of 15 December 2006 on the application of Articles 87 and 88 of the Treaty to State aid to small and medium-sized enterprises active in the production of agricultural products and amending Regulation (EC) No 70/2001 O. J. (L 358) 3–21 available at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri= CELEX:32006R1857:EN:NOT
46 Commission Regulation (EC) No 1628/2006 of 24 October 2006 on the application of Articles 87 and 88 of the Treaty to national regional investment aid (Block Exemption Regulation for regional aid) O. J. (L 302) 29 available at http://eur lex.europa.eu/LexUriServ/ LexUriServ.do?uri=CELEX:32006R1628:EN:NOT
47 Commission Regulation (EC) No 1998/2006 of 15 December 2006 on the application of Articles 87 and 88 of the Treaty to de minimis aid O. J. (L 379) 5 available at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32006R1998:EN:NOT
48 Agreement on the European Economic Area, Part IV Competition and Other Rules, available at http://ec.europa.eu/comm/competition/international/multilateral/eea_agreemt_comp.pdf
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authority may ask the other to take enforcement action (positive comity), and either
competition authority must take account of the other's significant interests when enforcing
competition rules (traditional comity). Other FTAs signed by the European Union contain
provisions on general cooperation in competition matters.
The Commission has established a structured dialogue with China on competition matters and
a permanent forum for consultation with Korea sharing non-confidential information. The EU
is also part of the International Competition Network (ICN)49 created in 2001 as a forum for
competition authorities worldwide to discuss various policy issues.
49 See the International Competition Network (ICN) available at http://www.internationalcompetitionnetwork.org/
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vii) Investment
The fundamental principle on freedom of capital movements within the EC
The Treaty of Rome, which came into effect on 1 January 1958, was based on the principle of
the four freedoms: free movement of goods, persons, services and capital. Article 67(1) of
the Rome Treaty established the obligations for Member States to lift restrictions on the free
flow of capital, with a view to ensure the proper functioning of the Common Market. The
Rome Treaty also provided that financial services should be liberalized alongside with the
progressive liberalization of capital movements.
The full liberalization of capital movements within the EC came into effect on 1 July 1990,
introduced by Directive 88/361/EEC50. When the Maastricht Treaty on European Union
entered into force on 1 November 1993, Article 67(1) of the Rome Treaty and its
implementing Directive 88/361/EEC were replaced by the Articles 56 to 60 of the new
Treaty. The principle of freedom of movement of capital in the Treaty is directly effective
and requires no further legislation at EC or national level.
Article 56 of the Treaty stipulates that all restrictions on capital movements are prohibited,
Article 57 to 60 EC provides for limitations and exemptions. The principle of freedom of
capital movements provides that all restrictions on movement of capital and payments, both
between Member States and between Member States and third countries, are prohibited.
Thus, EC citizens are able to do cross-border operations, buy shares in non-domestic
companies, invest where best return is, and purchase real estate. Companies are being able to
invest and own other European companies and take an active part in their management.
Previously, financial operations with other Member States were subjected to prior
authorization requirements by national authorities, known as exchange controls.
Exemptions to the freedom of capital movements
50 Council Directive 88/361/EEC of 24 June 1988 for the implementation of Article 67 of the Treaty http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31988L0361:EN:HTML
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There are certain exemptions under the EC Treaty with a view to limit the principle of
absolute freedom of capital movements both within the EC and with third countries. The
Member States may refer unilaterally to exceptional circumstance with a view to maintain or
introduce restrictions in national legislation or in their own international commitments.
Under the Treaty, operations51 that are considered as capital movements, by taken into
account of the economic nature of assets and liabilities concerned, involve: direct investment;
investment in real estate; operations in securities on capital market (shares, equities, and
bonds); operations in units of collective investment undertaking; operations in securities and
other instruments on money market; operations in current and deposit accounts with financial
institutions; credits related to commercial transactions or to the provision of services in which
a resident is participating; financial loans and credits; sureties, other guarantees and rights of
pledge; transfers in performance of insurance contracts; personal capital movements; physical
import and export of financial assets; and other movements.
Third-countries restriction applicable by the EC member states
Specific restrictions on capital movement:
* Article 57(1) EC: The member states have the right to maintain restrictions that existed as
at 31 December 1993 under national law in relation to direct investment including - in real
estate - establishment, the provision of financial services or the admission of securities to
capital markets.
* Article 58(1)(a) EC: The member states have a right to apply a certain degree of tax
differentiation of taxpayers according to their place of residence or place of investment
(non-residents benefit from tax exemptions) or the place where the capital is invested (foreign
investments will be discriminated against through less favorable tax treatment).
51 Annex I to Directive 88/361/EEC sets out a nomenclature and explanatory notes of capital. It remains valid for the purpose of defining what constitutes capital movement.
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* Article 58(1)(b) EC: The member states have a right to take prudential supervision of
financial institution, or to lay down procedures for the declaration of capital movement on
administrative or statistical information.
* Article 58(1)(b) EC: The member states have a right to take measures which are justified on
grounds of public policy or public security.
Specific restrictions to the right of establishment52:
* Article 58(2) EC establishes a link between the freedom on right to establish and the
freedom of capital movement, by stating that ‘the provisions of this Chapter shall be without
prejudice to the applicability of restrictions on the right of establishment which are
compatible with this Treaty’. The establishment regime is de facto subject to the single
market requirements and restrictions enshrined in Article 43 to 48 EC, and to any specific
restrictions existing in national legislation and EC law.
The general exceptions of the Treaty:
* Article 295 EC: The member states may provide legal order with regard to restrictions on
property ownership for private and public ownership .
* Article 296 EC: The member states may derogate from their capital movement obligations
when national security is threatened, including the restrictions on investment in defense
material manufacturing.
* General interest considerations: The member states may adopt measures imposed direct or
indirect restriction to foreign investment in the privatization of public utilities undertaking.
Third-countries restriction applicable by the EC
52 ‘Establishment’ is a sub-set of ‘direct investment’ under EC legislation. According the EC definition, direct investment includes ‘establishment and extension of branches or new undertakings belonging solely to the person providing the capital, and the acquisition in full of existing undertakings’.
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* Article 57(1) EC: EC has the right to maintain restrictions that existed as at 31 December
1993 under EC law in relation to direct investment including - in real estate - establishment,
the provision of financial services or the admission of securities to capital markets.
* Article 57(2) EC: EC may adopt measures providing either further liberalization or
restricting specific capital movement transactions.
* Article 59 EC: EC may adopt restrictive measures for a period not exceeding six months,
in case where serious threat to the operation of economic and monetary union is occurred.
* Article 60 EC: The EC may adopt sanctions against specific third-countries.
* Article 119 and 120 EC: The EC may adopt measures to reintroduce quantitative
restrictions or protective measures against third-countries, in case where a member states
experiences serious balance-of-payment difficulties.
EC legislation on investment and establishment
Some horizontal regimes affect foreign investor’s presence in the EC single market, as well
as, in the several economic sectors that are regulated at EC level through secondary
legislation. Key horizontal EC regimes with regard to investment are as follows:
* Competition policy53: The EC seeks to enforce regulations on anticompetitive practices,
enhance competitiveness and address anticompetitive problems in liberalized sectors. There
are no different rules applying to investors from third countries as compared to EC investors.
* Taxation policy54: Member States may apply similar tax rules with regard to mergers,
divisions, transfer of assets and exchanges of shares, and the grouping of parent companies
and subsidiaries. Foreign companies, that are not established in the EC, do not benefit from
this special treatment.
53 For more details please refer to the section on Competition
54 The relevant Treaty provisions governing taxation are enshrined in Article 90 to 93 EC.
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EC regimes on specific sectors, protected from third country ownership through EC
ownership and control requirements, are identified below:
* Inland waterways transport: transport of goods and persons within member states and in
transit is reserved for carriers established in a member state, whose vessels are owned by
nationals of a member state or legal persons majority-owned by member states’ nationals.
* Air transport: free market access in air transport is reserved for air carriers having their
principal place of business and registered office in a member state, and effectively controlled
by member state and/or nationals of member states, either directly or through majority
ownership.
* Maritime transport: providing services in maritime transport within member states, and
between member states and third countries, is reserved for EC ship-owners, whose shipping
companies were established in accordance with the legislation of a member state and whose
principal place of business is situated, and the effective control exercised, in a member state.
Some EC regimes on specific sectors with indirect restrictions on third country market
access, as follows:
* Energy: with respect to prospecting, exploration and production of hydrocarbons, the
member states have the right to deny market entry to entities from a third country, if the third
country entity does not grant EC entities treatment comparable to that granted by the EC to
third country residents.
* Audiovisual services: there are no rules that directly restrict third country investments or
operation of audiovisual services in the EC. However, the relevant EC framework provides
for various measures, including performance requirements and financial incentives, which
impact indirectly on third country investments and establishments.
* Financial services: the EC framework on financial services provides indirect restrictions on
direct investment in establishment of financial institution by third country entities. When the
EC credit institutions, insurance companies, or securities firms are not granted effective
market access by a third country (comparable to that granted to similar institutions from that
third country) and national treatment in the operation of their activities, member states must
redress the balance through suspension or limitation of pending authorization requests
relating to firms established in that third country (reciprocal requirement).
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International commitments on investment liberalization by EC and member states
In order to give a rough estimate of existing restrictions on third-country ownership of EC
assets, it is reasonable to take into account the consideration on liberalization commitments
and restrictions thereon lodged by the EC and the Member States in multilateral agreements,
in particular GATS.
In this regard, any further liberalization of investment regimes towards third countries in the
EC as a whole may result either from the removal of restrictions existing the EC framework
in the specific sectors or the removal of restrictions maintained unilaterally by Member States
in their national legislation.
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viii) Intellectual Property Protection
(a) The fundamental principle on intellectual property protection
The intellectual property rights (IPR) regime in the EC is governed by both the EC-wide
legislation and legislation in the member states. Member States’ legislation takes into account
EC legislation and commitments under international agreements, including the European
Patent Convention, the World Intellectual Property Organization (WIPO) conventions and
treaties, and the WTO TRIPS Agreement.
The objective of IPR protection in the EC aims to protect IP and encourage innovation but at
the same time refrain from restricting free movement within the EC and affecting the
competition policy. The IPR legislation described here is applicable to third non-EU
countries.
(b) IPR enforcement on counterfeit goods and piracy
The EC has adopted European Parliament and Council Directive 2004/48/EC55 concerning
IPR enforcement on 29 April 2004. As mentioned earlier, the Directive aims to protect
copyrights and encourage innovation of IP but at the same time refrain from restricting free
movement within the EC and affecting the competition policy. The directive also aims to
harmonize national legislation on the IPR enforcement which are significantly different
between member states. The differences in IPR protection policy include different
arrangements on remedies for the right holders, the procedure in which the case will be
processed, methods of preserving evidences, and application of injunctions. Member states
were also required to appoint national correspondents to cooperate with other member states
and the EC, with regard to the exchange of information through assessment reports
concerning effectiveness of the implementation of the IPR rules. The Directive also ensures
that license fees are paid to the right holders an all kinds of goods, with aiming at preventing
further infringement of the rights or ensuring the compensation of the right holders in case of
existence of alleged infringement.
55 DIRECTIVE 2004/48/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL OF 29 APRIL 2004 ON THE ENFORCEMENT OF INTELLECTUAL PROPERTY RIGHTS: OJ L 157, 30.4.2004, as corrected by OJ L 195, 2.6.2004 and OJ L 204, 4.8.2007
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In order to combat with the increasing counterfeited and pirated articles confiscated at the EC
borders, the EC has adopted Council Regulation 1383/200356 concerning customs action
against goods suspected of infringing certain IPR and measures to be taken against goods
found to have infringed such rights, implemented by Commission Regulation 1891/2007.
The Regulation sets out the conditions under which customs authorities may take action
where imported goods are suspected of infringing IPR. The Regulation provides the
procedures by which right holders may apply for actions to be taken; including definitions of
who may represent holders of right, and proof of IPR ownership. The Regulation also sets
time limits and procedures for the exchange of information between member states and the
EC.
(c) Copyright and related rights
Harmonization of certain aspects of copyright and related rights in the information society
EC has adopted European Parliament and Council Directive 2001/29/EC57 concerning the
harmonization of certain aspects of copyright and related rights in the information society.
The EC legislation must adapt to the advanced technology society, in which IPR can be easily
exploited and reproduced, with a view to promote freedom of movement. The Directive
ensure that the right holders58 receive just amount of reward for their works: the exclusive
right of the right holders concerning reproduction rights, the right of communication and
distribution rights; as it will encourage more production of creative work and more
investment in this area. Member states are allowed to provide exceptions in cases where the
information is used for the purpose of education or scientific uses or within public facilities.
Term of protection
56 Council Regulation (EC) No 1383/2003 of 22 July 2003 concerning customs action against goods suspected of infringing certain intellectual property rights and the measures to be taken against goods found to have infringed such rights: http://eur-lex.europa.eu/LexUriServ/site/en/oj/2003/l_196/l_19620030802en00070014.pdf
57 Directive 2001/29/EC of the European Parliament and of the Council of 22 May 2001 on the harmonisation of certain aspects of copyright and related rights in the information society: http://eur-lex.europa.eu/LexUriServ/site/en/oj/2001/l_167/l_16720010622en00100019.pdf
58 The right holders include creator of work, the actual performances, phonogram producers, film producers or broadcasters.
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Council Directive 93/98/EEC59 aims to harmonize the term of protection for copyright and
related rights in the EC. The Directive sets the term of protection for copyright at 70 years
and for related rights at 50 years.
Resale right60 for the benefit of the author of an original work of art
European Parliament and Council Directive 2001/84/EC61 on the resale right for the benefit
of the author of an original work of art aims to harmonize resale rights in the internal
European market. Due to barriers to the internal market and distortions of competition within
the EC as well as a lack of protection for the authors of original artistic works, member states'
legislation needs to be harmonized at Community level by introducing a compulsory resale
right for the benefit of the author.
Rental right and lending right
The EC has adopted Council Directive 92/100/EEC62 on rental right and lending right and on
certain rights related to copyright in the field of intellectual property. The Directive aims to
harmonize the legal situation regarding rental right, lending right and certain related rights, so
as to provide a greater level of protection for literary and artistic property. The Directive
poses member states to provide for the right to authorize or prohibit the rental and lending of
originals and copies of copyright works. It also determines who holds these rights63 and lays
down certain procedures for exercising them.
Satellite broadcasting and cable retransmission
59 Council Directive 93/98/EEC of 29 October 1993 harmonizing the term of protection of copyright and certain related rights: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31993L0098:EN:HTML
60 A resale right is an inalienable right of the author of an original work of art to receive a percentage of the price obtained from any resale of that work by art market professionals (auction houses, galleries or any other kind of art dealer).
61 Directive 2001/84/EC of the European Parliament and of the Council of 27 September 2001 on the resale right for the benefit of the author of an original work of art http://eur-lex.europa.eu/LexUriServ/site/en/oj/2001/l_272/l_27220011013en00320036.pdf
62 Council Directive 92/100/EEC of 19 November 1992 on rental right and lending right and on certain rights related to copyright in the field of intellectual property http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31992L0100:EN:HTML
63 The holders of the rental right and lending right are the authors, including the principal directors of films, performing artists, phonogram producers or producers of films.
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EC has adopted Council Directive 93/83/EEC64 on the coordination of certain rules
concerning copyright and rights related to copyright applicable to satellite broadcasting and
cable retransmission. The Directive aims to promote the free cross-border satellite
broadcasting of programmes and their cable retransmission from other Member States, and in
particular to remove the obstacles arising from disparities between national provisions on
copyright and from the legal uncertainty that exists in this field.
Legal protection of databases
European Parliament and Council Directive 96/9/EC65 on the legal protection of databases
has been adopted on 11 March 1996. The Directive aims to provide harmonized copyright
protection to databases. It introduces a new specific sui generis right for the creators of
databases, whether or not these have an intrinsically innovative nature.
Legal protection of services based on, or consisting of, conditional access
The EC has adopted European Parliament and Council Directive 98/84/EC66 on the legal
protection of services based on, or consisting of, conditional access. The Directive aims to
provide the legal protection of services based on conditional access is to protect electronic
pay services against piracy. It prohibits all commercial activities involving the manufacture,
distribution or marketing of smart cards and other devices which make it possible to
circumvent protected access to television, radio and Internet pay services.
Legal protection of computer programs
Council Directive 91/250/EEC67 on the legal protection of computer programs has been
adopted on 14 May 1991. The Directive aims to harmonize member states' legislation
64 Council Directive 93/83/EEC of 27 September 1993 on the coordination of certain rules concerning copyright and rights related to copyright applicable to satellite broadcasting and cable retransmission http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31993L0083:EN:HTML
65 Directive 96/9/EC of the European Parliament and of the Council of 11 March 1996 on the legal protection of databases: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31996L0009:EN:HTML
66 Directive 98/84/EC of the European Parliament and of the Council of 20 November 1998 on the legal protection of services based on, or consisting of, conditional access http://eur-lex.europa.eu/LexUriServ/site/en/oj/1998/l_320/l_32019981128en00540057.pdf
67 Council Directive 91/250/EEC of 14 May 1991 on the legal protection of computer programs: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31991L0250:EN:HTML
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regarding the protection of computer programs in order to create a legal environment which
will afford a degree of security against unauthorized reproduction of such programs
Management of online rights in musical works
Commission Recommendation 2005/737/EC68 on collective cross-border management of
copyright and related rights for legitimate online music services, proposes measures to
improve the licensing of online music across the EC. In particular, it recommends that right
holders and commercial users of material protected by copyright or related rights should be
given a choice as to their preferred model of licensing. The aim is to make EU-wide licenses
more easily accessible to online music service providers and thus help these services to take
off in Europe.
(d) Community patent
Proposal for a Council Regulation on the Community patent has been proposed on 1 August
2000 for the creation of a Community patent, aiming at giving inventors the option of
obtaining a single patent which is legally valid throughout the EC. The expected advantages
of this system are a substantial reduction in patenting costs (in particular those relating to
translation and filing), simplified protection of inventions throughout the EC territory through
one single procedure, and the establishment of a single centralized system of litigation
The proposed system under the proposed regulation will supplement Convention on the Grant
of European Patents in 1973 (the Munich Convention). The Community patent will be
issued by the European Patent Office which was established under the Munich Convention as
a European patent, specifying the territory of the Community instead of individual member
states. Certain matters which is not contained in the Munich Convention are developed in
this proposed regulation for Community patent. The creation of a Community patent system
remains a sensitive issue as this dossier is still deadlocked after many years of discussions
between the European decision-makers.
(e) Community trade mark
68 Commission Recommendation of 18 May 2005 on collective cross-border management of copyright and related rights for legitimate online music services http://eur-lex.europa.eu/LexUriServ/site/en/oj/2005/l_276/l_27620051021en00540057.pdf
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The EC has adopted Council Regulation (EC) No 40/9469 on the Community trade mark. The
major advantage of the Community trade mark system is that it makes possible the uniform
identification of products and services by enterprises throughout the EC. A unique procedure
applied by the Office for Harmonization in the Internal Market (OHIM) allows them to
register trade marks which will benefit from unitary protection and be fully applicable in
every part of the EC.
Council Directive 89/104/EEC70 of 21 December 1988 is to ensure that registered trade
marks enjoy the same protection under the laws of all member states.
Apart from the member states, certain natural persons or legal entity may be proprietors of
Community trade marks, such as, other states which are parties to the Paris Convention for
the protection of industrial property, etc.
A Community trade mark confers on its proprietor exclusive rights. The proprietor is entitled
to prohibit all third parties from using in the course of trade, except as allowed under the
relevant regulations. In the five years following registration, the proprietor must put the
Community trade mark to genuine use in the Community in connection with the goods or
services for which it is registered.
An application for a Community trade mark may be submitted, at the choice of the applicant,
with either the OHIM, at the central industrial property office of a member state, or the
Benelux Trade Mark Office. The office concerned must then forward the application to
OHIM within two weeks of filing. It must be accompanied by various documents and
information (in particular, a registration request, information identifying the applicant and the
list of the goods or services for which the registration is requested) and necessitates the
payment of an application fee and, where appropriate, one or more class fees.
The Community trade mark is registered for ten years from the date of filing of the
application. Registration is renewable for further periods of ten years.
(f) Community design71
69 Council Regulation (EC) No 40/94 of 20 December 1993 on the Community trade mark http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31994R0040:EN:HTML
70 First Council Directive 89/104/EEC of 21 December 1988 to approximate the laws of the Member States relating to trade marks: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31989L0104:EN:HTML
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Council Regulation (EC) No 6/200272 of 12 December 2001 on Community designs
establishes a unified system for obtaining a Community design covered by uniform protection
in the internal market. It aims to eliminate obstacles and the sources of unfair competition at
EC level, and to encourage creativity and innovation by providing reliable, uniform
protection throughout the EC.
European Parliament and Council Directive 98/71/EC73 of 3 October 1998 on the legal
protection of designs aims to harmonize national legislation on the subject to ensure the free
movement of goods incorporating designs and guaranteeing freedom of competition within
the Union.
The regulation above provides for two types of protection of designs directly applicable in
each Member State, i.e., as an "unregistered Community design" and as a "registered
Community design", if it is registered with the OHIM. The characteristic feature of the
protection granted to an unregistered Community design is its short-term: it is protected for a
period of three years from the date on which the design was first made available to the public
within the EU (the product was put on sale through marketing or prior publication measures).
In the case of the registered Community design, the protection is for a minimum of five years
and a maximum of twenty-five years. The difference in the degree of protection conferred is
that a registered design is protected against both systematic copying and the independent
development of a similar design, whereas an unregistered design is protected only against
systematic copying. A registered design thus benefits from more formal and more
comprehensive legal certainty. Moreover, the OHIM is not responsible for unregistered
Community designs.
An application to register a Community design may be submitted to the Office, the central
industrial property office of a member state or, in the Benelux countries which already have a
common design, to the Benelux Design Office. In all cases, the application is transmitted to
the Office, which conducts a formal examination and, where applicable, grants the
71 A design means the appearance of the whole or a part of a product resulting from the features of the lines, contours, colours, shape, texture and/or materials of the product itself and/or its ornamentation.
72 Council Regulation (EC) No 6/2002 of 12 December 2001 on Community designs http://eur-lex.europa.eu/LexUriServ/site/en/oj/2002/l_003/l_00320020105en00010024.pdf
73 Directive 98/71/EC of the European Parliament and of the Council of 13 October 1998 on the legal protection of designs: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31998L0071:EN:HTML
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Community design to the applicant by entering it in the Community Design Register. The
entry is then published by the Office in a bulletin open to the public. The applicant may
request that publication be deferred for a period of 30 months from the date of filing in order
to protect sensitive information.
(g) Geographical Indications
When a product acquires a reputation extending beyond national borders it can find itself in
competition with products which pass themselves off as the genuine article and take the same
name. This unfair competition not only discourages producers but also misleads consumers.
European Union created systems known as PDO (Protected Designation of Origin), PGI
(Protected Geographical Indication) and TSG (Traditional Speciality Guaranteed) to promote
and protect food products. Council Regulation (EC) No 510/200674 of 20 March 2006
governs the protection of geographical indications and designations of origin for agricultural
products and foodstuffs.
In respect of protected geographical indication, the geographical link must occur in at least
one of the stages of production, processing or preparation. Furthermore, the product can
benefit from a good reputation.
(h) International treaties
Accession to the WIPO Treaties
Council Decision of 16 March 2000, on the approval on behalf of EC of the WIPO Copyright
Treaty and the WIPO Performances and Phonograms Treaty. The decision promotes the EC
accession to the WIPO Copyright Treaty (WCT) and the WIPO Performances and
Phonograms Treaty (WPPT) concluded in December 1996. The WCT and the WPPT aim to
update international protection of copyright and related rights in the Internet age, by
supplementing the provisions of the Berne Convention75 to adapt them to the digital
environment.
74 Council Regulation (EC) No 510/2006 of 20 March 2006 on the protection of geographical indications and designations of origin for agricultural products and foodstuffs http://eur-lex.europa.eu/LexUriServ/site/en/oj/2006/l_093/l_09320060331en00120025.pdf
75 The Berne Convention concerns the protection of literary and artistic works.
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Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS)
Council Decision 94/800/EC76 of 22 December 1994 concerning the conclusion on behalf of
the European Community, as regards matters within its competence, of the agreements
reached in the Uruguay Round multilateral negotiations (1986-1994). The Decision aims to
ensure effective and appropriate protection for trade-related intellectual property rights,
taking into account differences in national legal systems, as well as, to draw up a multilateral
framework of minimum rules to help combat counterfeiting.
The TRIPS Agreement aims to ensure that adequate rules on the IPR protection of are applied
in all WTO member countries, on the basis of obligations laid down by the WIPO. The
agreement covers a vast range of topics, from copyright and trademarks77 to layout-designs of
integrated circuits and trade secrets, including patents protecting pharmaceutical products.
ix) Trade Measures
Trade measures are of exclusive EU competence, and as such regulated and implanted at EU
level.
Safeguard measures
EC Regulation 3285/94 sets the EU legal base for safeguard measures with respect to imports
from WTO members, while Regulation 519/94 is the EU legal basis for safeguards with
respect to imports from non-WTO members. Regulation 3285/94 implements the WTO
Safeguard Agreement. In addition, Regulation 427/2003 implements a product-specific
transitional safeguard mechanism provided in the Protocol of the Accession of China to the
WTO, and Regulation 138/2003 administrates special safeguard provisions against textiles
and clothing imports from China.
76 94/800/EC: Council Decision (of 22 December 1994) concerning the conclusion on behalf of the European Community, as regards matters within its competence, of the agreements reached in the Uruguay Round multilateral negotiations (1986-1994): http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31994D0800:EN:HTML
77 http://europa.eu/scadplus/leg/en/lvb/l26022a.htm
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Council Regulation (EC)3285/9478 on the common rules for imports (as amended)79,
establishes the common rules for imports into the European Community based on the
principle of freedom of imports and defines the procedures enabling the Community to
implement surveillance and safeguard measures:
• The EU has the power to open safeguard investigations, subject to consultation with
the Member States, where imports of the product in question are causing or
threatening to cause serious injury to the Community producers concerned. The
Commission should initiate the investigation within one month of receipt of
information from a Member State, and publish a notice of initiation in the EU Official
Journal , summarizing all the necessary information for the interested parties.
• Within nine months of initiation of the investigation, the Commission should
determine whether safeguard measures are necessary. If not necessary, the
Commission should terminate the investigation within a month. If necessary, it should
take the necessary decisions within the nine-month period.
• In the meantime, the EU can take provisional safeguard measures (Article 8 of
Regulation 3285/94). They can only be taken where a product is imported into the
Community in such greatly increased quantities and/or on such terms or conditions as
to cause, or threaten to cause, serious injury to Community producers. Where a
measure is taken under Regulation 3285/94, Article 8 provides that such measures can 78Council Regulation (EC) No 3285/94 of 22 December 1994 on the common rules for imports and repealing Regulation (EC) No 518/94:
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31994R3285:EN:HTML
79 Regulation (EC) No 139/96 of 22 January 1996 amending Regulations (EC) No 3285/94 and (EC) No 519/94 with respect to the uniform Community surveillance document: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31996R0139:EN:HTML; Council Regulation (EC) No 2315/96 of 25 November 1996 establishing, pursuant to Article 1 (7) of Regulation (EEC) 3030/93, the list of textiles and clothing products to be integrated into GATT 1994 on 1 January 1998 and amending Annex X to Regulation (EEC) No 3030/93 and Annex II to Regulation (EC) No 3285/94: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31996R2315:EN:HTML; Council Regulation (EC) No 2474/2000 of 9 November 2000 establishing, pursuant to Article 1(7) of Regulation (EEC) No 3030/93, the list of textiles and clothing products to be integrated into GATT 1994 on 1 January 2002 and amending Annex X to Regulation (EEC) No 3030/93 and Annex II to Regulation (EC) No 3285/94 http://eur-lex.europa.eu/LexUriServ/site/en/oj/2000/l_286/l_28620001111en00010014.pdf; Council Regulation (EC) No 2200/2004 of 13 December 2004 amending Council Regulations (EEC) No 3030/93 and (EC) No 3285/94 as regards the common rules for imports of certain textile products from third countries: http://eur-lex.europa.eu/LexUriServ/site/en/oj/2004/l_374/l_37420041222en00010028.pdf.
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only be applied “in critical circumstances where delay would cause damage which it
would be difficult to repair, making immediate action necessary and where a
preliminary determination provides clear evidence that increased imports have caused
or are threatening to cause serious injury.” The measures cannot last for more than
200 days, and must be in the form of an increase in tariff level.
• Surveillance measures include retrospective check of imports (statistical surveillance)
or prior checks. In the case of the latter, products under prior Community surveillance
may be put into free circulation only on production of an import document.
• Safeguard measures may be in the form of a tariff increase or a quantitative
restriction, and must also be limited in time (in principle not exceeding 4 years, or 8
years including extensions). Safeguard measures apply to every product which is put
into free circulation after entry into force of the measures. No safeguard measures
may be applied to a product originating in a developing country as long as that
country’s share of Community imports of the product concerned does not exceed 3%.
In addition to safeguard measures as such, Regulation 3285/94 stipulates that the
Commission may adopt appropriate measures to allow the rights and obligations of
the Community to be exercised and fulfilled at international level.
Council Regulation (EC) 519/9480 (as amended)81 establishes common rules for imports into
the European Community from certain third countries and laying down the procedures
enabling the Community to implement safeguard measures. This Regulation applies to
80 Council Regulation (EC) No 519/94 of 7 March 1994 on common rules for imports from certain third countries and repealing Regulations (EEC) Nos 1765/82, 1766/82 and 3420/83: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31994R0519:EN:HTML
81 Council Regulation (EC) No 839/95 of 10 April 1995 amending the list of countries mentioned in Annex I to Regulation (EC) No 519/94 http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31995R0839:EN:HTML; Council Regulation (EC) No 139/96 of 22 January 1996 amending Regulations (EC) No 3285/94 and (EC) No 519/94 with respect to the uniform Community surveillance document http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31996R0139:EN:HTML; Council Regulation (EC) No 168/96 of 29 January 1996 amending Regulation (EC) No 519/94 on common rules for imports from certain third countries http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31996R0168:EN:HTML; Council Regulation (EC) No 1138/98 of 28 May 1998 amending Annexes II and III to Regulation (EC) No 519/94 on common rules for imports from certain third countries http://eur-lex.europa.eu/LexUriServ/site/en/oj/1998/l_159/l_15919980603en00010003.pdf; Council Regulation (EC) No 427/2003 of 3 March 2003 on a transitional product-specific safeguard mechanism for imports originating in the People's Republic of China and amending Regulation (EC) No 519/94 on common rules for imports from certain third countries http://eur-lex.europa.eu/LexUriServ/site/en/oj/2003/l_065/l_06520030308en00010011.pdf.
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certain former communist countries and was justified by the State’s monopoly in these
countries in the area of foreign trade. The procedure and measures under this Regulation are
similar to those under Regulation 3285/94, as described above.
As a whole, EU has not used the safeguard mechanism very often. Since 2004, the EC
initiated three safeguard investigations (on certain textile products, frozen strawberries, and
farmed salmon), initiated one review of a safeguard measure (citrus fruits), imposed two
definitive safeguard measures (citrus fruits, farmed salmon), and revoked one measure
(farmed salmon). As of September 2006, there were safeguard measures on citrus fruits, and
surveillance measures on footwear and steel products. The investigation on strawberries was
terminated without imposition of measures.
Antidumping measures
Council Regulation (EC) 384/9682 (as amended)83 on protection against dumped imports from
countries not members of the European Community, transposes the WTO Anti-dumping
Agreement into a Community law. The Regulation applies to all countries84 that are not
members of the EU and to all products. The Regulation lays down the provisions for
82 Council Regulation (EC) No 384/96 of 22 December 1995 on protection against dumped imports from countries not members of the European Community http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31996R0384:EN:HTML
83 Council Regulation (EC) No 2331/96 of 2 December 1996 amending Regulation (EC) No 384/96 on protection against dumped imports from countries not members of the European Community http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31996R2331:EN:HTML ; Council Regulation (EC) No 905/98 of 27 April 1998 amending Regulation (EC) No 384/96 on protection against dumped imports from countries not members of the European Community http://eur-lex.europa.eu/LexUriServ/site/en/oj/1998/l_128/l_12819980430en00180019.pdf; Council Regulation (EC) No 2238/2000 of 9 October 2000 amending Regulation (EC) No 384/96 on protection against dumped imports from countries not members of the European Community http://eur-lex.europa.eu/LexUriServ/site/en/oj/2000/l_257/l_25720001011en00020003.pdf; Council Regulation (EC) No 1972/2002 of 5 November 2002 amending Regulation (EC) No 384/96 on the protection against dumped imports from countries not members of the European Community http://eur-lex.europa.eu/LexUriServ/site/en/oj/2002/l_305/l_30520021107en00010003.pdf; Council Regulation (EC) No 461/2004 of 8 March 2004 amending Regulation (EC) No 384/96 on protection against dumped imports from countries not members of the European Community and Regulation (EC) No 2026/97 on protection against subsidized imports from countries not members of the European Community http://eur-lex.europa.eu/LexUriServ/site/en/oj/2004/l_077/l_07720040313en00120020.pdf; Council Regulation (EC) No 2117/2005 of 21 December 2005 amending Regulation (EC) No 384/96 on protection against dumped imports from countries not members of the European Community http://eur-lex.europa.eu/LexUriServ/site/en/oj/2005/l_340/l_34020051223en00170017.pdf
84 The Community may adopt specific provisions in relation to countries non-market economies or economies in transition
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application of antidumping duties. Antidumping duties are imposed only when certain
conditions are met:
• dumping: the export price at which the product is sold to EC is lower than the
comparable price for a like product in the ordinary course of trade within the
exporting country;
• injury: the dumped imports have caused or threaten to cause injury to the Community
industry;
• Community interest: the costs for the Community of taking measures must not be
disproportionate to the benefits.
In general dumping cases are initiated on the basis of a written complaint submitted by
or on behalf of the Community industry. The Community industry is deemed to consist of the
Community producers as a whole of the like products, or those whose collective output
constitutes a major proportion of the total Community production. Once a complaint is
officially filed with the Commission, the latter must consult the Member States and decide
within 45 days of the lodging of the complaint whether to reject the complaint or accept it.
If the complaint is accepted, the Commission must publish a Notice of Initiation in the C
series of the Official Journal, which marks the start of the 15 month period in which the
investigation has to be concluded. At the same time as publishing the Notice, the Commission
sends out questionnaires to all known interested parties and to the governments concerned.
When there are too many exporters to investigate, the Commission will resort to sampling. The
Commission will choose a limited number exporters who will make up the sample. A general
deadline of 40 days applies to the submission of arguments concerning injury and/or
Community interest. Usually, the Commission allows the parties to supplement submissions
made within this deadline by further information and submissions after the deadline. For AD
measures to be imposed it is not only necessary that there is dumping, but this dumping must
cause injury to the Community industry and it must be in the Community interest to impose AD
measures. For injury a host of criteria is considered, the main ones being the volume of the
dumped imports, their prices and the impact they have on Community industry. The
examination of their impact on Community industry usually involves a broad range of economic
factors such as Community industry’s sales, profits, output, market share, capacity utilization,
employment figures and the like. Even if it is true that profits, market share, employment show
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a decreasing trend, then it is important to argue that this was not due to imports from the country
under investigation, but due to other factors. Under the Community interest heading, the
Community institutions have to balance the interests of all market players: the complainants,
other Community producers, users, consumers, importers and traders and the like. Users of the
allegedly dumped imports - who will end up paying a higher price if AD duties are imposed -
have an important role to play here.
If the Commission decides to impose provisional measures, which it usually does, this
must be done nine months after opening at the latest. After 15 months the investigation must be
concluded, either by closing it without the imposition of measures, or by imposing definitive
measures and collecting the provisional ones. Anti-dumping measures can take a number of
forms: duties (ad valorem (%) duties, fixed amount duties, floor price duties or a combination
thereof) or undertakings (as to price or quantity). Subject to reviews (anti-dumping measures
generally remain in force for a five year period before they expire. It is also possible that the
Commission’s proposal for definitive measures is not adopted by the Council in which case the
provisional measures - which are in force for 6 months only - lapse and the case is over without
any official notice being published in the Official Journal.
An anti-dumping investigation is initiated and conducted up till the very last part by the
Commission. It is the Commission’s sole power to open the case and to impose provisional
measures. If the Commission wishes to impose definitive measures, it must make a proposal to
this effect to the Council (i.e. the Member States). Definitive AD measures are then imposed by
Council Regulation. However, during the entire investigation, the Member States - in the form
of the Anti-dumping Committee and in the final stages in the form of Council working groups or
COREPER - are consulted by the Commission.
Article 11 of the basic AD Regulation, provides for three kinds of reviews: (i) an expiry
review, (ii) an interim review and (iii) a newcomer review. Anti-dumping measures expire five
years from their imposition, or five years from the conclusion of the most recent review, unless
it is determined in a review that the expiry would be likely to lead to a continuation or
recurrence of dumping and injury. An expiry review is either initiated by the Commission on its
own initiative (which does usually not happen in practice) or upon request by the Community
industry. If no request for a sunset review is received, the measures expire after their entry into
force. Interim reviews may be carried out on the initiative of the Commission or at the request
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of a Member State or, provided at least one year has elapsed since the imposition of the
measures, at the request of any exporter or importer or by the Community producers. An
interim review shall be initiated where the request shows sufficient evidence that "the continued
imposition of the measure is no longer necessary to offset dumping and/or that the injury would
be unlikely to continue or recur if the measure were removed or varied, or that the existing
measure is not, or is no longer, sufficient to counteract the dumping which is causing injury".
Article 11(4) provides for so-called newcomer reviews, which are carried out for the purpose of
determining individual dumping margins for new exporters in the exporting country in question
which have not exported the product during the period of investigation on which the measures
were based.
For the period from 1 January 2004 to 30 September 2006, EC initiated 77 AD investigations,
imposed 39 definitive AD measures, and terminated 18 cases without imposition of measures.
The definitive measures applied were mostly ad volarem duties on textiles, chemicals,
electronics, processed wood, bicycles, bricks, steel products, hand pallet trucks, trout, salmon,
refrigerators, chamois leather, plastic sacks and bags. As of 30 September 2006, 135 definitive
AD measures were in place, of which 9 on imports from Thailand. However, no new
antidumping investigations have been initiated in the first half of 2007.
Anti-subsidy measures
Council Regulation (EC) 2026/9785 (as amended)86 on protection against subsidized imports
from countries not members of the European Community, transposes the provisions of the WTO
Agreement on Subsidies. The Regulation provides for the imposition of countervailing duties
for the purpose of offsetting any subsidy granted, directly or indirectly, for the manufacture,
production, export or transport of any product from a third country whose release fro free
circulation in the Community cases injury. Apart from the provisions on the definition of a
85 Council Regulation (EC) No 2026/97 of 6 October 1997 on protection against subsidized imports from countries not members of the European Community http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31997R2026:EN:HTML
86 Council Regulation (EC) No 1973/2002 of 5 November 2002 amending Regulation (EC) No 2026/97 on the protection against subsidized imports from countries not members of the European Community http://eur-lex.europa.eu/LexUriServ/site/en/oj/2002/l_305/l_30520021107en00040005.pdf; Council Regulation (EC) No 461/2004 of 8 March 2004 amending Regulation (EC) No 384/96 on protection against dumped imports from countries not members of the European Community and Regulation (EC) No 2026/97 on protection against subsidized imports from countries not members of the European Community http://eur-lex.europa.eu/LexUriServ/site/en/oj/2004/l_077/l_07720040313en00120020.pdf
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subsidy, countervailable subsidies and the calculation of subsidies, the Regulation is identical to
the AD Regulation discussed above.
A subsidy is deemed to exist if i) if there is a financial contribution by a government, and ii) if a
benefit is conferred. Financial contribution is considered a direct transfer or potential direct
transfer of funds or liabilities by the government, tax credits, as well as other benefits provided
by the government. Subsidies are subject to countervailing measures only if they are specific to a
company, group of companies or industries.
For the period from 1 January 2004 to 30 September 2006, EC initiated two new anti-subsidy
investigations (against plastic sacks and bags from Thailand and Malaysia), which were
terminated without imposition of measures, and imposed two definitive countervailing
measures.
As part of its Global Europe strategy for European competitiveness, on 6 December 2006, EC
adopted a Green Paper87 to launch reflection on how EU trade defense instruments
(antidumping, anti-subsidy, and safeguards) can continue to be used to best effect in the EU
interest, in light of emerging new global trade realities.
87 Communication from the Commission - Global Europe - Europe's trade defense instruments in a changing global economy - A Green Paper for public consultation http://eur-lex.europa.eu/LexUriServ/site/en/com/2006/com2006_0763en01.pdf
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x) Labor and Environment
Labor
Free movement of persons is one of the fundamental freedoms guaranteed by Community
law. Every citizen of the EU has the right to work and live in another Member State without
being discriminated against on grounds of nationality. The EU has concluded agreements
with several third countries which contain in many cases a clause on equal treatment as
regards conditions of work. This means that once nationals of these countries have gained
access to the labour market of a Member State in accordance with its national rules, they have
to be treated in the same way as nationals of that Member State.
The European Union launched the new Social Agenda in 2005 which continues until 2010.
The Agenda has two social priority areas of action: (i) moving towards full employment and
(ii) combating poverty and extending equal opportunities to everyone in society. It contains a
program of many instruments for expanding growth and employment in the EU such as the
European Employment Strategy and the European Social Fund. The European Social
Dialogue is part of the social model that refers to the discussions, consultations, negotiations
and joint actions undertaken by the social partner organizations representing the management
and labor sides of industry. Articles 138 and 139 of the EC Treaty give the European social
dialogue a specific role in the process of European integration. At the EU level, social
dialogue consists of a two part dialogue between the European employers and trade union
organizations, and a tripartite dialogue involving interaction between the social partners and
the public authorities. The Working Time Directive of 1993 (93/104/EC)88 set forth:
• Maximum weekly working time of 48 hours on average, including overtime;
• At least four weeks’ paid annual leave;
• A minimum rest period of 11 hours in each 24, and one day in each week;
• A rest break if the working day is longer than six hours;
• A maximum of eight hours’ night work, on average, in each 24. 88 Council Directive 93/104/EC of 23 November 1993 concerning certain aspects of the organization of working time, O.J. (L 307) 18 available at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31993L0104:EN:HTML
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An opt-out clause was included in the 1993 Directive to satisfy the UK government. It
enables employers to get round the maximum 48-hour working week under certain conditions
where workers must sign individual opt-out agreements, and must not suffer any penalty if
they refuse to do so and employers must keep records of staff who work more than 48 hours a
week, and make them available to the appropriate authorities.
Council Directive 89/654/EEC of 30 November 1989 concerning the minimum safety and
health requirements for the workplace89 was adopted with an aim to provide minimum
measures to improve the working environment in order to guarantee a better standard of
safety and health protection. European Agency for Safety and Health at Work was set up
1996 in order to aid in the development of better working conditions throughout Europe.
Trade unions exist both EU wide and the national Member State level. At European level, the
cross-industry trade union organization is the European Trade Union Confederation(ETUC).
Sector organizations of unions at the European level work closely with the ETUC and with
the international organizations that operate in their sector. They also advise and work with
national unions, particularly in relation to the European dimension. The organization and
financing of the social protection systems is a responsibility of the Member States. The
European Union ensures through EU legislation coordinating national social security systems
that people who move across borders and hence come within the remit of different social
protection systems are adequately protected. Such legislation mainly concerns statutory social
security schemes.
Third-country nationals who are admitted onto the territory of one Member State do not have
the right to move freely to another Member State. However, third-country nationals legally
residing in the territory of a Member State for five years who, upon fulfilment of the
conditions prescribed by Directive 2003/109/EC acquire a "long-term resident status – EC"
laid down by the Directive may move from one Member State to another under certain
conditions including, where required by the Member State, an obligation to go through
89 Council Directive 89/654/EEC of 30 November 1989 concerning the minimum safety and health requirements for the workplace, O.J. (L 393) 13 -17 available at http://eur-lex.europa.eu/smartapi/cgi/sga_doc?smartapi!celexapi!prod!CELEXnumdoc&lg=en&numdoc=31989L0654&model=guichett
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certain national procedures. Once residing in another Member State, they will be entitled to
the rights and benefits very similar to those granted in the first Member State. Nevertheless,
Directive 2003/109/EC is not applicable to Ireland, United Kingdom and Denmark. For this
reason third-country nationals residing in these Member States are not entitled to acquire a
"long-term resident status – EC" and consequently they will not be able to move to another
Member State. Furthermore, third country nationals who acquired "long-term resident status
– EC" in the Member States bound by the Directive will not be in the position to go to these
three Member States either.
With regard to working conditions, Article 31 of the Charter of Fundamental Rights of the
European Union, headed ‘Fair and just working conditions’ provides that, ‘Every worker has
the right to working conditions that respect his or her health, safety and dignity’. This applies
to third-country nationals as well as nationals of the EU Member States. Article 15(3) of the
Charter establishes a principle of equal treatment as regards working conditions between non-
EU nationals and EU citizens, a principle not evident in the Treaties. Article 15(3) enacts at
European level the non-discrimination principle at work on the basis of nationality. The right
is to equivalent working conditions; this is different from identical or equal. Moreover,
Article 15(3) does not modify the legal position of third-country nationals in terms of access
to national labour markets or free movement within the EU.
Directive 2000/43/EC implementing the principle of equal treatment between persons
irrespective of racial or ethnic origin and Directive 2000/78 establishing a general framework
for equal treatment in employment and occupation protect all Union citizens and third-
country nationals and both cover ‘employment and working conditions, including dismissals
and pay’ (Article 3(1)(c) in both directives).
Council Regulation 859/2003 of 14 May 2003 extended the free movement of workers and
social security provisions of Regulation 1408/71 and Regulation 574/72 to nationals of third
countries who are not already covered by those provisions solely on the grounds of their
nationality. Regulation 859/2003 aimed at granting rights as similar as possible to those
enjoyed by Union citizens to third-country nationals legally resident in the Community who
satisfy the other conditions provided for in Regulation 1408/71.
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Environment
The European Union's environment policy is based on Article 174 of the Treaty establishing
the European Community and aims to preserve, protect, and improve the quality of the
environment and to protect human health. The Directorate General for the Environment (“DG
Environment”) is responsible for environmental law and policy making and administration.
EU environmental policy making is based on the Environmental Action Programs. The Sixth
Environment Action Programme90 sets out the priorities for the EU for the period 2004-2010.
Four areas are emphasized: climate change, nature and biodiversity, environment and health,
and the management of natural resources and waste. Proposed measures to achieve these
priorities include improving the application of environmental legislation, working together
with the market and citizens, and ensuring that other Community policies take greater
account of environmental considerations.
EU policy on the environment is aimed at sustainable development, and more specifically,
� preserving, protecting and improving the quality of the environment;
� protecting human health;
� prudent and rational utilization of natural resources;
� promoting measures at international level to deal with regional or worldwide
environmental problems.
90 Communication from the Commission to the Council, the European Parliament, the Economic and Social Committee and the Committee of the Regions On the sixth environment action programme of the European Community 'Environment 2010: Our future, Our choice' - The Sixth Environment Action Programme available at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:52001DC0031:EN:HTML
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Chemicals
REACH
In December 2006, the European Union (EU) adopted the Registration, Evaluation,
Authorization and Restriction of Chemicals (REACH) Regulation 1907/200691.
This regulation entered into force on 1 June 2007. REACH is a very comprehensive piece of
regulation that involves several regulatory regimes. Its impact is not limited to chemicals in
bulk, but also affects products (more specifically, chemicals used in products, called
“articles”), including electrical and electronic products. There is no exemption for products
subject to the RoHS Directive.
A manufacturer of electronic products based outside the EU may be affected by REACH in
the following ways:
• If it has manufacturing subsidiaries in the EU, or has contracts with manufacturers in
the EU for the manufacture of its products, these companies will be subject to
REACH with respect to their use of chemicals and the products they put on the EU
market. They may need the assistance of their non-EU parent or contracting party in
complying with REACH.
• If it imports chemicals into the EU (e.g., for use in manufacturing or for purposes of
rendering services to customers), it will be subject to the obligations imposed on EU
importers of chemicals. If another entity serves as the EU importer, that entity will
be subject to REACH, but it may need assistance from the non-EU manufacturer so
as to be able to comply.
• If it imports products into the EU, it will be subject to REACH’s obligations applying
to “articles.” If another entity serves as the EU importer, that entity will have to
91 Regulation (EC) No 1907/2006 of the European Parliament and of the Council of 18 December 2006 concerning the Registration, Evaluation, Authorization and Restriction of Chemicals (REACH), establishing a European Chemicals Agency, amending Directive 1999/45/EC and repealing Council Regulation (EEC) No 793/93 and Commission Regulation (EC) No 1488/94 as well as Council Directive 76/769/EEC and Commission Directives 91/155/EEC, 93/67/EEC, 93/105/EC and 2000/21/EC, O.J. (L 396) 1 available at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32006R1907:EN:NOT
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comply with REACH, but it will likely needs assistance from the non-EU
manufacturer. Specific rules apply to the registration of chemical substances in
products (“articles”), which will be discussed in a forthcoming report.
Pursuant to REACH, a new European Chemicals Agency (“ECHA”) was established and is
based in Helsinki, Finland. Although the Commission and member states will play important
roles in administrating and implementing REACH, the ECHA will have important tasks in
respect of registration and other aspects of REACH.
Dangerous Substances
The EU adopted Directive 67/548/EEC92 in 1967 to approximate the national provisions
among Member States relating to dangerous substances. The Directive introduced common
provisions on the
• classification of dangerous substances, since placing a substance into one or several
defined classes of danger characterizes the type and severity of the adverse effects
that the substance can cause;
• packaging of dangerous substances, since adequate packaging protects from the
known danger(s) of a substance;
• labeling of dangerous substances, since the label on the packaging informs about the
nature of the danger(s) of the substance inside and about the safety measures to apply
during handling and use.
Directive 67/548/EEC has been amended to account for the scientific and technical progress.
The 6th amendment of the Directive introduced the protection of the environment from the
dangerous effects of substances as well as a notification system for new substances which
required the establishment of the list of existing substances, called EINECS. EINECS is the
European Inventory of Existing Commercial Chemical Substances and lists all substances
that were reported to be on the market on or before 18 September 1981. The substances
placed on the market for the first time after this target date are considered “new” and are
92 Council Directive 67/548/EEC of 27 June 1967 on the approximation of laws, regulations and administrative provisions relating to the classification, packaging and labeling of dangerous substances, O.J. (L 196)1 available at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31967L0548:EN:HTML
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added to ELINCS. ELINCS is European List of Notified Chemical Substances. The 7th
Amendment to the Directive required the principles of risk assessment for “new” substances.
It further introduced the “sole representative” in the notification system, and added the Safety
Data Sheet (SDS) as a hazard communication facility for the professional user. The
notification system of new substances of Directive 67/548/EEC is substituted by the new
REACH Regulation (see Section on REACH below).
The classification and labeling system of the Directive is scheduled to be replaced by a new
Commission proposal for a Regulation on the Classification, Labeling and Packaging of
Substances and Mixtures COM(2007) 355. The new proposal incorporates the classification
criteria and labeling rules agreed at UN level, the so called Globally Harmonized System of
Classification and Labeling of Chemicals (GHS).
Waste
The framework legislation for waste materials in the EU is Directive 2006/12/EC93 (the
codified version of Directive 75/442/EEC as amended). The Directive defines waste and sets
for the basic requirements for waste management activities.
The supervision and control of shipments of waste within, into and out of the European
Community is covered by Council Regulation (EEC) No 259/93 of 1 February 1993, as
amended94.
The European Community has adopted the Basel Convention on the control of transboundary
movements of hazardous wastes and their disposal through Council Decision 93/98/EEC95.
Commission Regulation (EC) No 1547/199996 determines the control procedures under
93 Directive 2006/12/EC of the European Parliament and of the Council of 5 April 2006 on waste (Text with EEA relevance), O.J. (L 114) 9 available at http://eur-lex.europa.eu/LexUriServ/site/en/oj/2006/l_114/l_11420060427en00090021.pdf 94 Council Regulation (EEC) No 259/93 of 1 February 1993 on the supervision and control of shipments of waste within, into and out of the European Community, O.J. (L 30) 1 available at http://eur-lex.europa.eu/LexUriServ/site/en/consleg/1993/R/01993R0259-20020101-en.pdf 95 Council Decision of 1 February 1993 on the conclusion, on behalf of the Community, of the Convention on the control of transboundary movements of hazardous wastes and their disposal (Basel Convention), O.J. (L 39) 1 available at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31993D0098:EN:HTML 96 Commission Regulation (EC) No 1547/1999 of 12 July 1999 determining the control procedures under Council Regulation (EEC) No 259/93 to apply to shipments of certain types of waste to certain countries to which OECD
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Council Regulation (EEC) No 259/93 to apply to shipments of certain types of waste to
certain countries to which OECD Decision C(92)39 final does not apply.
Regulation (EC) No. 1013/200697 of the European Parliament and of the Council of 14 June
2006 on shipments of waste establishes procedures and control regimes for the shipment of
waste, depending on the origin, destination and route of the shipment, the type of waste
shipped and the type of treatment to be applied to the waste at its destination. Imports of
waste for disposal of any kind into the Community are prohibited, as well as export of waste
to third countries for disposal. An exception of exports is made for EFTA countries which are
also part of the Basel Convention. Non-hazardous wastes that are destined for recovery may
be freely circulated between Member States.
WEEE Directive
Directive 2003/108/EC was designed to help prevent the waste electrical and electronic
equipment (WEEE), and in addition, to promote the reuse, recycling and other forms of
recovery of such wastes so as to reduce disposal. The Directive was to be transposed by 13
August 2004, has now been implemented by all EU member states. The UK was the last
member state to adopt implementing law. The UK WEEE Regulations entered into force in
January 2007. The WEEE Directive applies also in the countries belonging to the European
Economic Area (“EEA”), i.e. Iceland, Norway and Liechtenstein.
The WEEE Directive provides for producer responsibility and imposes “take-back” and
recycling obligations on producers, and makes them financially responsible for the cost
associated with WEEE management schemes. Currently, studies are being done, and the
WEEE directive will be reviewed according to requirements set forth in the Directive itself
for possible revisions. Following a discussion of the WEEE Directive’s background, this
report addresses the current issues of concern regarding the WEEE Directive.
Decision C(92)39 final does not apply (Text with EEA relevance), O.J. (L 185) 1 available at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31999R1547:EN:HTML 97 Regulation (EC) No 1013/2006 of the European Parliament and of the Council of 14 June 2006 on shipments of waste, O.J. (L 190) 1 available at http://eur-lex.europa.eu/LexUriServ/site/en/oj/2006/l_190/l_19020060712en00010098.pdf
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RoHS Directive
The EU RoHS Directive 2002/95/EC of the European Parliament and of the Council of 27
January 200398 imposes restrictions on Member States regarding the use of hazardous
substances in electrical and electronic equipment (EEE). The restrictions on the use of
chemical substances in EEE have been in effect as of 1 July 2006 and all Member States have
implemented national laws transposing the Directive. Like the WEEE Directive, the RoHS
Directive also applies in states belonging to the EEA.
The RoHS Directive provides that new electrical and electronic equipment put on the market
does not contain lead, mercury, cadmium, hexavalent chromium, PBB or PBDE. A number of
exemptions are set forth in the Annex to the RoHS Directive. The national enforcement
authorities of the Member States worked together with the enforcement agency for RoHS in
the United Kingdom to produce a guidance document for RoHS. The National Weights and
Measures Laboratory (NWML) of the UK issued “The RoHS Enforcement Guidance
Document”99 at the end of May 2006. The Member States undertook the task of establishing
the non-binding guidance document because the RoHS Directive itself does not prescribe any
requirements in respect of compliance documentation that needs to be maintained or
enforcement procedures that need to be undertaken.
Battery Directive
The EU Battery Directive 2006/66 of 6 September 2006100 is aimed at harmonizing Member
States’ national laws, and at minimizing the negative impact of batteries and accumulators
and their waste on the environment. It is based in part on Article 175 of the Treaty, and in 98 Directive 2002/95/EC of the European Parliament and of the Council of 27 January 2003 on the restriction of the use of certain hazardous substances in electrical and electronic equipment, O.J.(L 37) 19 available at http://eurlex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32002L0095:EN:HTML
99 The RoHS Enforcement Guidance Document available at http://www.rohs.gov.uk/Docs/Links/RoHS%20Enforcement%20Guidance%20Document%20-%20v.1%20May%202006.pdf
100 Directive 2006/66/EC on batteries and accumulators and waste batteries and accumulators and repealing Directive 91/157/EEC, O.J. (L 266) 1 available at http://eur-lex.europa.eu/LexUriServ/site/en/oj/2006/l_266/l_26620060926en00010014.pdf
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part on Article 95 of the Treaty (heavy metal content and labeling). It replaced the battery
legislation based on Directive 91/157, which is considered to have failed in adequately
controlling the risks posed by waste batteries. Member States are required to transpose the
new EU Battery Directive into national law by September 2008.
In order to protect the environment and eliminate confusion, the new EU Battery Directive
applies to all batteries and accumulators placed on the market within the Community
regardless of their shape, volume, weight, material composition or use, subject to limited
exceptions.
The Battery Directive prohibits the placing on the market of all batteries or accumulators,
whether or not incorporated into appliances, that contain more than 0,0005% of mercury by
weight and portable batteries or accumulators, including those incorporated into appliances,
that contain more than 0,002% of cadmium by weight. Member States are prohibited from
impeding, prohibiting, or restricting the placing on the market in their territory of batteries or
accumulators that meet the requirements of the Directive.
Button cells with a mercury content of no more than 2% by weight are exempt from the
Directive. Additional exemptions for the batteries or accumulators that contain more than
0,002% of cadmium by weight are provided for emergency and alarm systems, including
emergency lighting, medical equipment, and cordless power tools.
The Directive requires that manufacturers design appliances to make batteries and
accumulators easily removable with instructions for the end-user on how they can be safely
removed. Batteries must be labeled to show the “crossed-out wheeled waste bin” symbol,
the battery’s capacity (for portable and automotive batteries), and, in some cases, for heavy
metal content.
Battery distributors in the EU are required to take back waste batteries from consumers at no
extra charge. Treatment and recycling schemes must be established by September 2009.
Member States must also meet the binding recycling targets for general consumer batteries of
50% by September 2011.
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Producers and importers of batteries and appliances incorporating batteries must finance the
costs of collection, treatment and recycling of waste batteries and accumulators, as well as the
costs of public information campaigns on the treatment and recycling. They must also register
with the Member States. Exemptions for small producers from financing may be granted if it
does not impede the functioning of the collection and recycling schemes.
Further, the Directive sets forth requirements for Member States to work with manufacturers
in their territory to increase environmental performance through the promotion of research
and encouragement of improvements in the environmental performance, developing and
marketing of batteries and accumulators which are safer for the environment.
Energy Using Products (EuP) Directive
The Directive on Energy-Using Products (“EuP”)101 was adopted in July 2005, and provides a
framework for adopting eco-design requirements for electrical and electronic products. The
Directive does not introduce directly binding requirements for specific products, but instead
defines conditions and criteria for setting requirements regarding environmentally relevant
product characteristics. The Member States were to have implemented the directive by 11
August 2007. Under an implementing measure, manufacturers will be required to perform an
assessment of the environmental aspects of their products throughout their life cycle. They
will have to use this assessment to evaluate alternative design solutions, with the aim of
improving the environmental performance of their products.
Environmental Liability Directive
101 Directive 2005/32/EC of the European Parliament and of the Council of 6 July 2005 establishing a framework for the setting of ecodesign requirements for energy-using products and amending Council Directive 92/42/EEC and Directives 96/57/EC and 2000/55/EC of the European Parliament and of the Council, O.J. (L 191) 29 available at http://ec.europa.eu/enterprise/eco_design/directive_2005_32.pdf
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Directive 2004/35/EC of the European Parliament and of the Council of 21 April 2004102 on
"environmental liability with regard to the prevention and remedying of environmental
damage" entered into force on 30 April 2004. The Environmental Liability Directive aims to
prevent and remedy environmental damage through the main principle of “polluter pays”.
Any operators whose activity has caused environmental damage or the imminent threat of
any damage is to be held financially liable. The Directive sets forth two different liability
schemes: (1) strict liability and (2) a fault-based system. The first liability regime holds
operators of activities listed in Annex III to the Directive liable for damage to protected
species and natural habitats, water damage and land damage with no fault by the operator
required. Annex III of the ELD includes most major EU environmental legislation that
applies to operators. Among the activities included are waste management installations; large
industrial installations; the manufacture, use, storage, processing, filling, release into the
environment and onsite transport of dangerous substances and preparations. Generators are
included in list of operations covered under strict liability for the very nature of their
activities.
The second liability regime requires fault or negligence be established on the part of the
operator in order to hold the operator responsible for any financial liability. It applies to
damage to protected species and habitats that is caused by any other activity than those listed
in Annex III of the Directive.
Many Member States have yet to transpose the ELD. Member States have discretion on how
they implement important issues such as the definition of operator, multi-party causation,
defenses, and the scope of the liability.
Green Procurement
EU public procurement legislation, and the case law of the European Court of Justice, permit
that public authorities, under certain conditions, use environmental criteria in public
procurement. This is known in the EU as “green public procurement.” Technical
specifications may include environmental performance standards, including energy
102 Directive 2004/35/CE of the European Parliament and of the Council of 21 April 2004 on environmental liability with regard to the prevention and remedying of environmental damage, O.J. (L 143)56 available at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32004L0035:EN:NOT
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efficiency, and production methods. Eco-label criteria may also be incorporated into tender
specifications, and, under certain conditions, preference may be given to bidders participating
in the EU Environmental management and Auditing Scheme (“EMAS”).
The Commission has launched several projects intended to promote “Green Public
Procurement.” One of these projects is called “GreenLabelsPurchase,” which started in 2006
and runs through 2008. The objective of the project is to increase the use of energy labels in
the procurement processes of public authorities, the tertiary sector, and administrations of
industry and SMEs.
Air
The European Union strategy against air pollution was set forth in the Sixth Environmental
Action Programme. The EU is acting through EC legislation, through work at international
level to reduce cross-border pollution, through co-operation with sectors responsible for air
pollution, through national, regional authorities and NGOs, and through research to reduce
exposure to air pollution.
On 4 February 1991 the Council authorized the Commission to participate on behalf of the
European Community in the negotiation of a United Nations framework convention on
climate change. The European Community ratified the Framework Convention by Decision
94/69/EC of 15 December 1993. The Framework Convention entered into force on 21 March
1994 and the European Community signed the Protocol on 29 April 1998. The EU is
committed under the Kyoto Protocol to reduce greenhouse gas emissions by 8% from 1990
levels by 2008-2012.
Directive 2001/81/EC103 on National Emission Ceilings for certain pollutants (NECs) sets
upper limits for each Member State of the EU for the total emissions in 2010 of the four
103 Directive 2001/81/EC of the European Parliament and the Council on National Emission Ceilings for certain pollutants (NECs), O.J. (L 309) 22 available at http://eur-lex.europa.eu/LexUriServ/site/en/oj/2001/l_309/l_30920011127en00220030.pdf
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pollutants responsible for acidification, eutrophication and ground-level ozone pollution
(SO2, NOx, VOCs and ammonia). In January 2005 the European Union Greenhouse Gas
Emission Trading Scheme (EU ETS) commenced operation. It is based on Directive
2003/87/EC104, which entered into force on 25 October 2003. The aim of the EU ETS is to
help EU Member States achieve compliance with their commitments under the Kyoto
Protocol. The assessment of the allocation plans is based on the 12 common criteria in Annex
III to the Directive on Emission Trading. For the 2005-2007 trading period, 11 criteria were
relevant. Criterion 1 provides that the proposed total quantity of allowances must be in line
with a Member State’s Kyoto target. Member State should make sure that the allocations that
they grant their plants will allow it to meet its Kyoto target. Other sectors also generate
greenhouse gas and in the EU, transport is responsible for 21% of EU greenhouse gas
emissions, households and small businesses for 17% and agriculture for 10%. Member States
can purchase emission credits through Kyoto's flexible project-based instruments Clean
Development Mechanism (CDM) and Joint Implementation (JI) and international emissions
trading under the Kyoto Protocol. CDM and JI allow governments to implement emission-
reduction projects abroad and count the achieved reductions against their own Kyoto targets.
JI projects can be undertaken in other industrialized countries with Kyoto targets, while CDM
projects can be hosted by developing countries, which under the Protocol have no targets.
All these measures and their projected results must be mentioned in the allocation plans in
each of the Member States. Under Criterion 1, the Commission assesses whether the emission
levels of the industries that participate in Emission Trading will enable the Member State to
meet its targets. As only the combined effect of different policies and measures will allow
Member States to achieve their targets, the Directive speaks of the “path” to Kyoto. A
number of other criteria also ask Member States to assess emissions developments and
potentials for reductions in all sectors.
The Commission has the sole responsibility to assess the plans of the Member States.
However, the Directive provides that the Climate Change Committee, comprised of the
Member State representatives, considers each plan.
104 Directive 2003/87/EC of the European Parliament and of the Council of 13 October 2003 establishing a scheme for greenhouse gas emission allowance trading within the Community and amending Council Directive 96/61/EC, O.J. (L 275) 32 available at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32003L0087:EN:NOT
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Soil
As one of the Seven Thematic Strategies, the Commission has proposed a Thematic Strategy
for Soil Protection which consists of a Communication from the Commission to the other
European Institutions, a proposal for a framework Directive105, and an Impact Assessment.
The proposed Framework Directive sets out common principles, objectives and actions.
Member States are required to adopt a systematic approach to identifying and combating soil
degradation, tackling precautionary measures and integrating soils protection into other
policies. The Member States are to decide the level of ambition, specific targets and the
measures to reach those specific targets. Member States are also required to identify areas
where there is a risk of erosion, organic matter decline, compaction, salinization and
landslides. They must set risk reduction targets for those areas and establish programs of
measures to achieve them as well as establish an inventory of contaminated sites on their
territory and draw up national remediation strategies. When a site is being sold, where a
potentially contaminating activity has taken or is taking place, a soil status report has to be
provided by the seller or the buyer to the administration and the other party in the transaction.
Water
The EU Water Framework Directive106 aims to establish a framework for the protection of all
waters and fixes the objectives referring to fresh and coastal waters. The proposal was
adopted in 2000 and went into effect in 2003. The ultimate aim of this Directive is to achieve
the elimination of priority hazardous substances and contribute to achieving concentrations in
the marine environment near background values for naturally occurring substances. The
Directive provides a long-term policy basis for water management with a deadline for
meeting the objective by 2015.
105 Proposal for a Directive of the European Parliament and of the Council establishing a framework for the protection of soil and amending Directive 2004/35/EC available at http://ec.europa.eu/environment/soil/pdf/com_2006_0232_en.pdf
106 Directive 2000/60/EC of the European Parliament and of the Council establishing a framework for the Community action in the field of water policy, O.J. (L 327)1 available at http://eur-lex.europa.eu/LexUriServ/site/en/oj/2000/l_327/l_32720001222en00010072.pdf
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The Directive 91/271/EEC107 on urban water treatment was adopted on 21 May 1991 to
protect the water environment from the adverse effects of discharges of urban waste water
and from certain industrial discharges. In 1998, the Commission issued Directive 98/15/EC
amending Directive 91/271/EEC to clarify the requirements of the Directive in relation to
discharges from urban waste water treatment plants to sensitive areas which are subject to
eutrophication. This had the effect of amending Table 2 of Annex I. Commission Decision
93/481/EEC was adopted on 28 July 1993 and defines the information that Member States
should provide the Commission when reporting on the state of implementation of the
Directive according to Article 17, and specifies the format in which the information should be
provided.
107 Council Directive 91/271/EEC of 21 May 1991 concerning urban waste-water treatment, O.J. (L 135) 40 available at http://eur lex.europa.eu/LexUriServ/LexUriServ.do?uri= CELEX:31991L0271:EN:NOT
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xi) Business Establishment
EU level
The freedom of establishment, which is one of the fundamental freedoms in the internal
market of the European Community is set out in Articles 43-48 of the EC Treaty. Under
Article 43 EC “Freedom of establishment shall include the right to take up and pursue
activities as self-employed persons and to set up and manage undertakings, in particular
companies or firms within the meaning of the second paragraph of Article 48, under the
conditions laid down for its own nationals by the law of the country where such establishment
is effected, subject to the provisions of the chapter relating to capital.”
Under Articles 44-47 EC, the Council shall in accordance with the procedure in Article 251
EC establish directives to attain the aim of the freedom of establishment.
Under Article 48 EC “Companies or firms formed in accordance with the law of a Member
State and having their registered office, central administration or principal place of business
within the Community shall, for the purposes of this Chapter, be treated in the same way as
natural persons who are nationals of Member States.”
To facilitate the application of Articles 43-48 EC, the EU has adopted the European
Company Statute which, sets the legal framework intended to allow companies incorporated
in different Member States to fully benefit from the freedom of establishment and movement
of business in the Union of twenty seven Member States. Those Member States that have
adopted the Statute will undoubtly benefit from improved regime and take full advantage of
the single market by restructuring across borders and freely operate in several EU countries.
The European Company Statute is established by two pieces of legislation. Firstly, the
Council Regulation 2157/2001/EC108 on the Statute for a European Company is directly
applicable in Member States that establish the company law rules. Secondly, Council
108 Council Regulation of 8 Oct 2001 on the Statute for a European company (SE) http://eur-lex.europa.eu/LexUriServ/site/en/oj/2001/l_294/l_29420011110en00010021.pdf
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Directive 2001/86/EC109 complementing the Statute for a European Company with regard to
the involvement of employees in the European company will have to be implemented into
national law in all Member States.
Council Regulation 2157/2001/EC
Objective
Member States must realize the reorganization of their business on a Community scale for the
completion of the internal market and the improvement in the economic and social dimension
of the Community.110
It is essential to ensure as far as possible that the economic unit and the legal unit of business
in the Community coincide…under the law created by a Community Regulation directly
applicable in all Member States.111
Scope
This Regulation does not cover other areas of law such as taxation, competition, intellectual
property or insolvency. The provisions of the Member States law and of Community law are
therefore applicable in the above areas and in other areas not covered by this Regulation.112
Formation
According to Articles 17-37 of the Regulation 2157/2001, there are four ways to form a
European Company or SE:
1. Merger 109 Council Directive 2001/86/EC of 8 October 2001 supplementing the Statute for a European company with regard to the involvement of employees: http://eur-lex.europa.eu/LexUriServ/site/en/oj/2001/l_294/l_29420011110en00220032.pdf
110 Recital 1 of Council Regulation 2157/2001.
111 Recital 6 of Council Regulation 2157/2001
112 Recital 20 of Council Regulation 2157/2001.
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2. Formation of a holding company
3. formation of a joint subsidiary
4. conversion of a public limited company previously formed under national law.
Minimum capital
Article 1(3) of the Regulation states that the capital of an SE shall be divided into shares.
Article 4(1) of the Regulation states that the capital shall be expressed in euros and Article
4(2) sets out the minimum capital which shall not be less than EUR 120 000 in order to
ensure that such companies are of reasonable size.
Council Directive 2001/86/EC
Objective
The Directive complements the Regulation on the Statute for European Company so that the
objectives are successfully met. In order to promote the social objectives of the Community,
special provisions have to be set, notably in the field of employee involvement, aimed at
ensuring that the establishment of a SE does not entail the disappearance or reduction of
practices of employee involvement.113
Article 1(1) of the Directive sets out the objectives of the legislation. “The Directive governs
the involvement of employees in the affairs of European public limited-liability companies
(SE) as referred to in Regulation 2157/2001.” Article 1(2) states “to this end, arrangements
for the involvement of employees shall be established in every SE in accordance with the
negotiating procedure referred to in Articles 3 to 6 or, under the circumstances specified in
Article 7, in accordance with the Annex.”
Scope
113 Recital 3 of Council Directive 2001/86.
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This Directive should not affect other existing rights regarding involvement and need not
affect other existing representation structures, provided for by Community and national laws
and practices.114
It is of fundamental principle and stated aim of this Directive to secure employees’ acquired
rights as regards involvement in company decisions.115
Member States should be able to provide that representatives of trade unions may be
members of a special negotiating body regardless of whether they are employees of a
company participating in the establishment of an SE.116
Directive 2006/68/EC117
Directive 2006/68/EC amends Council Directive 77/91/EC as regards the formation of public
limited liability companies and the maintenance and alteration of their capital.
Objective
According to the Commission the aim is to significantly contribute to the promotion of
business efficiency and competitiveness without reducing the protection offered to
shareholders and creditors.
Small and Medium sized Enterprises (SMEs)
The European Commission is in the process of preparing an European Statute for Small and
Medium sized enterprises to simplify registration and minimum capital requirements in order
to match their establishments to current globalized markets. The European Parliament has
114 Recital 15 of Council Directive 2001/86.
115 Recital 18 of Council Directive 2001/86.
116 Recital 19 of Council Directive 2001/86.
117 Directive 2006/68/EC of the European Parliament and of the Council of 6 September 2006 amending Council Directive 77/91/EEC as regards the formation of public limited liability companies and the maintenance and alteration of their capital; http://eur-lex.europa.eu/LexUriServ/site/en/oj/2006/l_264/l_26420060925en00320036.pdf
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accepted a Commission proposal for removing unnecessary burdens on small businesses. The
proposal is part of a package of ten ‘fast track actions’ recently presented by the Commission.
Directive on cross border-mergers of limited liability companies
The Directive on cross-border mergers of limited liability companies118 is intended to reduce
the cost of mergers across national borders, guarantee legal certainty and open up the benefits
of such mergers to the largest possible number of companies - in particular small and mid-
sized businesses unable to benefit from the European Company Statute. Directive
2004/25/EC119 of the European Parliament and of the Council of 21 April 2004 on takeover
bids lays down measures coordinating the laws, regulations, administrative provisions, codes
of practice and other arrangements of the Member States, including arrangements established
by organizations officially authorized to regulate the markets relating to takeover bids for the
securities of companies governed by the laws of Member States where all or some of those
securities are admitted to trading on a regulated market.
European Economic Interest Grouping
The European Economic Interest Grouping (EEIG)120 is a legal instrument under EU law
introduced in 1989 to facilitate and encourage transnational cooperation between firms
registered in more than one EU country. It has set up a new type of association, enabling
separate businesses registered in different EU countries to carry out certain activities together
without being required to merge or to form a joint subsidiary. The EEIG works within a legal
framework that is independent of individual national legal systems.
118 Directive 2005/56/EC of the European Parliament and of the Council of 26 October 2005 on cross-border mergers of limited liability companies, O.J. (L 310) 1 available at http://eur-lex.europa.eu/LexUriServ/site/en/oj/2005/l_310/l_31020051125en00010009.pdf
119 Directive 2004/25/EC of the European Parliament and of the Council of 21 April 2004 on takeover bids (Text with EEA relevance), O.J. (L 142) 12 available at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32004L0025:EN:HTML
120 Council Regulation (EEC) No 2137/85 of 25 July 1985 on the European Economic Interest Grouping (EEIG), O.J. (L 199) 1 available at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31985R2137:EN:HTML
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Better Regulation
The regulatory framework in which businesses operate is a key factor of their
competitiveness, growth and employment performance. Therefore, a key objective of the
European Union's Enterprise policy is to ensure that the regulatory environment is simple and
of high quality. This is why “better regulation” is a centerpiece of the European
Commission’s “Partnership for Growth and Jobs” according to the renewed 'Lisbon Strategy'
launched in Spring 2005. To make sure that regulation is used only when necessary and that
the burdens they impose are proportionate to their aim, the Commission has a number of
processes and tools in place:
-Withdrawal or modification of pending legislative proposals;
-Measures to simplify existing legislation;
-Better quality of new Commission proposals: systematic use of impact
assessment and public consultation in the development of new policy proposals
Monitoring and reducing administrative burdens.121
121 http://ec.europa.eu/enterprise/regulation/better_regulation/index_en.htm; For further information, see Secretariat General's website on Better Regulation.
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Member State level
On Member State level, a popular reform that took place in some countries in 2005/2006 was
the simplification and reduction of time limits to issue licenses when starting a business. To
take some examples, Portugal, Romania, and Spain have reduced the time for issuing a
license for setting up a business. Germany and France have also simplified their business
regimes by taking other measures. This has been estimated by a report of the World Bank and
the International Finance Corporation.122 According to this regime it is easier for builders to
plan their projects, hire workers, contracting with suppliers, and arranging for credit lines
with a bank. Additionally, “it puts pressure on bureaucrats to be efficient.”123 Other countries
in Europe are focused on cutting costs or simplifying registration. We will look into some of
this in detail below.
Austria
To establish a business in Austria, one needs the primary investments that goes into the fixed
assets. To estimate capital requirements, one must include the additional expenses and add
10% to that number. When setting up a business, choosing the appropriate legal structure is
of decisive importance. This choice primarily depends on:
1. the number of people involved (one or more entrepreneurs)
2. the size of the enterprise
3. the type of financing
4. the type and extent of liability, etc.
Every business activity must hold a business licence (Gewerbeberechtigung) which is issued
by the respective trade organization. An activity is regarded as a trade if it is carried out on a
self-employed, regular and profit-making basis. Only liberal professions (e.g. doctors, 122 A copublication of the World Bank and the International Finance Corporation, Doing Business 2007; How to reform?, Washington 2006.
123 A copublication of the World Bank and the International Finance Corporation, Doing Business 2007; How to reform?, Washington 2006, page 14.
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pharmacists, notaries etc.) or the “new liberal professions” (e.g. psycho-therapists, and
physiotherapists, teachers etc.) are excluded from the scope of the Trades Code, and these are
usually regulated by other codes. There are four types of trades: free trades, regulated trades,
related trades (Teilgewerbe)and officially regulated trades (Rechtskraftgewerbe).
There are different forms of business entities from which to conduct business in Austria:
corporations, limited companies, partnerships (limited and unlimited), joint ventures or
branch offices of foreign companies. The choice of entity should be carefully considered in
particular in the light of method of governance, liability issues and certainly tax issues. The
companies legislation is contained in various acts, the most important of which are:
♦ Commercial Code (Handelsgesetzbuch; HGB)
♦ Act on Limited Liability Companies (Gesetz über die Gesellschaften mit beschränkter
Haftung; GmbHG)
♦ Act on Stock Corporations (Aktiengesetz; AktG)
An amendment of the Commercial Code entailing fundamental changes to the current
structure of commercial law is planned for the near future. This new Commercial Code will
be applicable not only to merchants (as is the current status) but to entrepreneurs in general.
Amongst others, changes include a reformation of the rules regarding commercial
partnerships (OHG, KG). The most common form of business entity is the company: the two
main types of companies are the Limited Liability Company ("GmbH") and the Stock
Corporation ("AG"). Both companies come into legal existence upon registration with the
Commercial Register in Austria (Firmenbuch). Please note that all documents submitted to
the Commercial Register have to be in German. Documents in other languages will have to
be translated and legalized. In general the following costs arise in connection with the
registration of a company:
♦ court fees for incorporation,
♦ fees of an attorney and notary public,
♦ (minimum) corporate tax, and
♦ the fees for the publication in the semi-official Austrian newspaper "Wiener Zeitung"
(such publication being obligatory).
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Limited Liability Company (Gesellschaft mit beschränkter Haftung; GmbH)
The limited liability company is probably the most common business form used in Austria.
The main source of law is the Act on Limited Liability Companies ("GmbH-Gesetz"). The
constitutional document for the GmbH are the Articles of Association (Gesellschaftsvertrag)
which have to be set up in the form of a notarial deed. The Articles of Association are filed
with the commercial register upon registration of the company. The registration procedure
takes approximately two to three weeks. The minimum share capital of a limited liability
company is € 35.000,- and may be paid up either in cash or in kind. The company is
represented by one or more managing directors, who are appointed by the shareholders and
may be removed by the shareholders at any time without a cause. The directors may be
appointed for an indefinite time period and are directly bound to the shareholders' orders. The
election of a supervisory board of directors is – except under certain circumstances –
voluntary. The supervisory board is elected by the shareholders and consists of at least three
members. In order to protect the rights of the employees it is obligatory under certain
conditions that the shareholders only elect two thirds of the members of the supervisory board
whereas the other third is elected by the employees themselves. Minority rights: With a
minimum of 10% of share capital, certain minority protection rights can be exercised. Shares
of a Limited Liability Company cannot be issued and a quotation on a stock exchange is not
possible. A notarial assignment deed is required for assignment of shares.
Stock Corporation (Aktiengesellschaft; AG)
The legal rules on Stock Corporations (AG) are primarily contained in the Act on Stock
Corporations (Aktiengesetz). The constitutional document for the AG are the Articles of
Association (Satzung) which has to be notarized. The Articles of Association are filed with
the commercial register upon registration of the company. The minimum share capital is €
70.000,- which may be paid up in cash or in kind. Shares are issued, and – under certain
conditions – quotation on a stock exchange is possible. The shareholders may be anonymous,
and the assignment of shares is made by physical transfer of the share certificates. The AG is
represented by the managing board of directors (Vorstand) who is appointed by the
supervisory board for a maximum period of five years and is removable only for important
reasons. In contrast to the Limited Liability Company, the managers are not directly bound to
the shareholders' orders.
General Partnership (Offene Handelsgesellschaft; OHG)
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This form of enterprise is founded by two or more individuals or corporations, both of them
endowed with full liability. The OHG is represented by its partners. Although the OHG is not
a full legal entity it may incur liabilities, real estate, rights and may also be party in lawsuits.
General Partnerships are governed by the Commercial Code. Limited Partnership
(Kommanditgesellschaft; KG)
The Limited Partnership has two kind of partners: at least one partner has full liability
(Komplementär), the other partners (Kommanditist) are liable up to the amount of their
invested share. The KG is represented by its partner(s) with full liability. Like the OHG, the
KG is governed by the Commercial Code.
Joint Ventures
There are typically three different ways of concluding a joint venture. A joint venture
company can be incorporated in the form of a stock corporation, a limited liability company
or a commercial partnership to which the parties are shareholders or partners. The normal
rules for corporations or partnerships – as described above – apply to this form of a joint
venture. Another way of conducting a joint venture is by executing a co-operation agreement
on a contractual basis. In this case, general contract law applies. The third typical way of
concluding a joint venture is by forming a civil law partnership. This particular form is
recommended if the parties intend to work only on a narrowly defined project for a limited
period of time because little administrative work is required to conduct a civil law
partnership.
Subsidiaries and Branches
Setting up a new branch of a non-resident foreign legal entity requires registration with the
Commercial Register in order to complete its formal incorporation. In case of establishing a
Limited Liability Company or a Stock Corporation, enterprises residing in non-EU member
states must appoint at least one representative whose customary place of abode is in Austria.
Disclosure of complete accounting records on all transactions carried out by the branch office
of a foreign enterprise is obligatory.
Belgium
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Belgian company law recognizes the commercial company in various forms. The most
common forms commercial companies can take are: the Company limited by shares
(S.A./N.V.), the Private Limited Liability Company (S.P.R.L./B.V.B.A.), the Co-operative
company, the European Economic Interest Grouping.
Companies aiming at incorporating in Belgium may decide between operating through a
subsidiary (incorporated under Belgian law) or a branch (incorporated under the laws of a
foreign country).
A subsidiary in the form of a company organized under Belgian law is endowed with legal
personality and hence forms a legal entity distinct from its parent. A subsidiary which takes
the form of a Company Limited by Shares (S.A./N.V.) must be incorporated by notarial deed.
A preliminary financial plan for a 2-year period must also be supplied.
The articles of association and all documents regarding appointment of the directors and
auditors must be filed with the Court of Commerce and must be published in the Belgian
Official Gazette within fifteen days. The language of the documents is either French or Dutch
depending on the region in which the business will be located.
The components of the setting up costs are:
• the notary fees which are calculated as a decreasing percentage on the subscribed
capital
• the registration tax of 0.5% on the subscribed capital
• the costs of publication in the Official Gazette.
The subsidiary must be registered with the local Trade Register and must also apply for a
VAT number (the latter does not entail any additional costs).
Company Limited by Shares
The minimum capital requirements and the minimum amount paid-up depend on the form the
subsidiary will take. In the case of a Company Limited by Shares, the minimum share capital
of 61,500 EUR must be fully subscribed and fully paid up. The share capital can also be
subscribed in kind, but this requires a valuation report from an authorized auditor.
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The Company Limited by Shares requires a minimum of two shareholders, who may be
individuals or legal entities (Belgian or foreign). All the powers of the daily management of
the company are in the hands of the Board of Directors constituted by the total number of
directors. This body appoints one or several statutory auditors, who must review annually the
financial position of the company.
The General Meeting shall appoint at least three directors. These directors do not have to be
shareholders. There are also no residence or nationality requirements. The day-to-day
management of the company's affairs may be delegated by the Board to one or more directors
or even to one or more persons who are not on the Board, such as managers, supervisors or
other agents. The term of office they are granted by the General Meeting may not exceed six
years. The directors may be re-elected by the General Meeting but also dismissed by it at
anytime and without justification.
Private Limited Liability Company:
The Private Limited Liability Company is formed by one or more persons who are
responsible only for the assets they brought into the business. The shares are also transferable
but under certain specific conditions. The minimum capital amounts to 18,600 EUR and must
be fully subscribed and paid up to the extent of a third (6,200 EUR). This form of company
admits only one director.
Formation of a branch
Contrary to a subsidiary, a branch, although it may constitute an economic entity separate
from the head office of the foreign company, is not endowed with a distinct legal personality,
but is part of a legal entity of that foreign company.
As for the formalities of incorporation, the foreign-registered company must file, with the
Court of Commerce, a copy of its articles of association, together with its resolution to set up
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a Belgian branch and the name of the manager or chief executive of the branch and the
powers to be vested in him/her as legal representative of the company in Belgium.
The main costs include:
• the fee of the official translation into either French or Dutch of the articles of
incorporation and the by-laws of the parent company
• the fee of publication in the Belgian Official Gazette.
The financial statements of the foreign company (annual accounts and consolidated annual
accounts) have to be translated and filed with the National Bank of Belgium.
The branch must be registered with the local Trade Register and must also apply for a VAT
number (the latter does not entail any additional costs).
Share capital and organization
There is no (minimum) capital required but the parent company has to invest the necessary
amount of money in order to carry out the business in Belgium. However, for branches
having more than 100 employees, a qualified statutory auditor will also have to be appointed.
Branches are governed by the same regulations as Belgian companies for management and
operations in Belgium.
The Economic Interest Grouping
These are undertakings with incomplete legal personality that offer companies the possibility
of founding a legally independent entity for working together, in order to facilitate,
rationalize and develop their economic activities. The collaboration relationship must take
account of the economic activity of the member companies and should act as support (for
example joint accounting or canvassing). This type of association cannot be used to found a
new business or regroup all activities of the members.
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The main difference between these legal forms is that an EEIG groups entities from different
Member States, which, in principle, is not the case for the EIG.
The EEIG and the EIG are fiscally transparent: as concerns taxation of income, they are
considered not to have legal personality, so that the results of these economic groupings are
exclusively taxable to the members as profits or advantages.
This does not prevent the EEIG and the EIG from maintaining their legal personality to carry
out their other tax obligations (withholding and paying the professional withholding tax,
establishing pay slips ...).
Foreign companies that are members of a Belgian resident EIG could be liable in Belgium to
the non-resident corporate income tax if their activities in Belgium are regarded as permanent
establishment.
Bulgaria
The Bulgarian Commercial law allows for the following types of business organizations:
♦ an unlimited (general) partnership;
♦ a limited partnership;
♦ a private limited company;
♦ a public limited company (joint stock company);
♦ a public limited partnership;
♦ a sole trader;
♦ a joint venture;
♦ a branch;
♦ a holding;
♦ a co-operation;
♦ a representative office.
The most appropriate types of companies for carrying out business in Bulgaria are: a private
limited company, a public limited company, a single-person private limited company, a
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holding, a branch, and a representative office. All of these (with the exception of a
representative office) have to be entered into the commercial register kept with the relevant
district court.
Private Limited Company (a limited liability company) "OOD" is a commercial company
with share capital owned by its members whose liability is limited to the amount of the
capital subscribed. A private limited liability company may be founded by one or more
persons, including foreign natural or legal persons. The minimum foundation capital is Leva
5,000 divided into shares with nominal value of Leva 10 each and at least 70% of the capital
must be paid up on foundation. Contributions to the foundation capital may be paid in cash or
in kind. The statutory bodies of the private limited companies are the general meeting of
shareholders, which must be held at least once a year, and the managing director or board of
directors.
A single-person private limited liability company is called "EOOD". It is owned by a
natural or a legal person, the sole shareholder exercises the powers of the general meeting and
the managing director or board of directors is appointed to run the company. A private
limited company must prepare a balance sheet and financial statements each year.
Public Limited Company (a joint stock company) "AD" is a commercial company with
share capital owned by its members whose liability is limited to the amount of the capital
they subscribe. A joint stock company can be founded by two or more persons, including
foreign natural or legal persons. The only exception to this rule is when the State is the only
founder and, therefore, the sole owner of the whole capital of the company - in this case we
have a single person public limited company ("EAD"). The minimum capital of a joint stock
company is Leva 50,000, increasing to Leva 100,000 if the capital is raised by a public offer.
A capital higher in value is required for the establishment of banks, insurance companies and
investment companies:
banks - the minimum capital required amounts to Leva 10,000,000,000;
insurance companies - the minimum capital required amounts to:
- Leva 2,000,000 for life insurance and personal accident insurance;
- Leva 3,000,000 for property insurance;
- Leva 4,000,000 for reinsurance;
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Investment companies - the minimum amount and the structure of the required
capital as well as its relation to the assets and liabilities as per the balance sheet are
determined by the Securities and Stock Exchange Commission according to the Law on
Securities, Stock Exchange and the Investment Companies.
In the general case of a registration of a public limited company, contributions to foundation
capital may be paid in cash or in kind, in which case an independent valuation is required,
and at least 25% of the capital must be paid up on foundation. A joint stock company may
issue either registered or bearer shares. The general meeting of shareholders is the highest
body of the company, and must be held at least once a year. The shareholder's meeting elects
a board of directors (a one-tier management structure) or a board of directors and a
supervisory board (a two - tier management structure). A public limited company must
prepare a balance sheet and financial statements each year. Special statutory instruments
provide additional requirements to the foundation of banks, insurance companies and
investment funds in the form of joint stock companies.
A Holding is a public limited company, a public limited partnership or a private limited
company with the purpose to participate in whatever form in other companies or in their
management. At least 25% of the capital of a holding has to be entered directly in
subsidiaries. A subsidiary means a company in which the holding owns or controls directly or
indirectly at least 25% of the stocks or shares, or can appoint directly or indirectly more than
50% of the members of the managing body. The Law on Commerce explicitly names the
activities, which a holding is allowed, and those not allowed, to perform.
A Branch is foreign legal entities registered abroad, as well as foreign natural persons and
entities that are not legal persons, can register a branch in Bulgaria provided they are
registered as commercial entities in accordance with the relevant legislation in their home
country. No authorized capital is required to found a branch. A branch is not a legal entity, it
is part of the company - founder. Branches are obliged to maintain accounts as an
independent company. A branch of a foreign company must prepare a balance sheet.
A Representative Office is regulated by the Foreign Investment Law. Foreign persons who
are entitled to engage in business activity under the legislation of their own countries may set
up a representative office which is registered with the Bulgarian Chamber of Commerce and
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Industry. Representative offices are not legal persons and may not engage in economic
activity.
A Joint Venture is a company formed jointly by a Bulgarian and a foreign partner. The size
of the foreign participation in a joint venture is not limited. Joint ventures must take one of
the forms of business entities pursuant to the Bulgarian Law on Commerce. Establishment of
a joint venture is one of the forms of investing in Bulgaria.
Cyprus
Private Limited Liability Company
The nominal capital of a private limited liability company is divided up into shares that are
owned by its members. The liability of each member is limited to the sum (unpaid, where
applicable) of the shares owned. This kind of company can be set up by a single individual.
Formalities for the registration of a company:
• Deposit of the articles of association/statue, duly signed by the founding members and
certified by a lawyer.
• Deposit, by a lawyer, of a declaration of compliance with the provisions of the
Companies Law (Chapter 113). Form IE 1 must be used for this declarations.
• Submission of form IE 2 giving the address of the registered office.
• Submission of form IE 3 giving details of members of the company's board of
directors and the company secretary.
• Payment of the registration fees which amount to CYP 60 plus 0.6% of the nominal
capital.
Foreign Companies
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Foreign Companies are defined in Article 346 of the Companies Law, Chapter 113, as
"Companies registered outside Cyprus which have designated Cyprus as a place of business".
Foreign Companies, which may have legal personality in their country of establishment, are
entitled to submit supporting documents to the Companies Registrar and be registered in
Cyprus within one month of becoming established in Cyprus.
The following documents should be submitted to the Companies Registrar:
• A certified copy of the legal act or the articles of association and the company's
statute, together with a certified Greek translation thereof.
• A list of the names of the Directors and company Secretary, together with relevant
details.
• The name and address of one or more persons resident in Cyprus who are authorized
to receive, on behalf of the company, any legal documents or notices served.
• Any additional information required under the terms of Article 347(a) as amended by
the Companies Law (amending) of 2003, No 70 (J)/2003 (written report). The fees for
registering a foreign company are CYP 100.
Czech Republic
When starting a business in the Czech Republic it is necessary, first of all, to notify the
appropriate trade license office of this intention. There the applicant obtains the appropriate
forms which he has to complete. Also, the business must be registered on the Commercial
Register. The applicant may start the business on the day of registration in that Register.
An individual who is a citizen of a member state of the European Union is not required to
produce a residency permit in the Czech Republic to an Office issuing trade licenses when
submitting an application for a trade permit as required in the Act on Residence of Foreign
Nationals in the Czech Republic.
If an individual wants to carry out a licensed business in the Czech Republic he must:
• have reached the age of 18 years
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• be legally competent
• have no criminal record
• submit proof that he, as individual, does not owe tax payments when he/she runs or
ran a business in the Czech Republic. This proof is to be issued by the appropriate
local offices.
When starting a business, the following is required:
• that application is made for registration at the appropriate local tax office within 30
days of starting the business
• that the individual and employees are registered at the appropriate local social security
office within 8 days
• that the individual and employees are registered with the chosen health insurance
company within 8 days
• that the office dealing with compulsory accident insurance has been notified on behalf
of the employees.
The legislation applicable to corporate enterprises can be found under Act No. 513/1991
Coll., the Commercial Code (as last amended). Companies and corporations have the status
of being legal entities. A foreign entity’s right to conduct business in the Czech Republic
starts on the date of the registration of this entity with the Czech Companies Register. In
order to conduct business as a company, foreign nationals must possess a residence permit
issued for the purpose of membership in a legal entity (when filing an application for an
extended visa for a stay over 90 days / a long-term residence permit, the applicant provides
an abstract from the Companies Register as proof of the reason for their stay in the country).
Trading companies, cooperatives, other legal entities and foreign entities must be registered
with the Companies Register. The Companies Register is a publicly accessible database
maintained by the regional courts (the so-called ‘registry court’), based on the registered
address of the respective legal entity. Anyone has the right to access this registry and to make
copies and obtain abstracts from it. The registry contains the data on business entities, which
must be maintained in the registry in accordance with legal regulations.
The Czech Commercial Code and Civil Code specify the legal forms through which business
may be conducted in the Czech Republic. These are in particular:
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♦ Branch
♦ Joint-Stock Company
♦ Limited Liability Company
♦ Partnership (limited partnership and unlimited partnership)
Other types of business entities include cooperative, silent partnership, unincorporated
association and sole proprietor (entrepreneur). Under the Czech law, of the forms listed
above, only a joint-stock company, a limited liability company, a limited partnership, an
unlimited partnership and a cooperative are considered to be legal entities.
There is no limit on the level of foreign participation in a Czech legal entity. Foreigners can
establish both joint ventures and wholly owned subsidiaries in the Czech Republic.
All of the above legal entities as well as branches and foreign non-EU or non-EEA sole
proprietors are required to be registered in the Commercial Register. Special approval is
needed to carry on certain activities not governed by the general trade licensing regime. The
affected industries include, among others, certain financial institutions (such as banks,
securities dealers, insurance companies, investment funds, investment companies/mutual
funds, and pension funds), telecommunications, utilities, pharmaceuticals, broadcasting,
gambling, and employment mediation (recruitment, executive search etc).
Denmark
The principal forms of business structures in Denmark are:
♦ Public limited company (Aktieselskab or A/S)
♦ Private limited company (Anpartsselskab or ApS)
♦ Branch office
♦ General partnership (Interessentskab or I/S)
♦ Limited partnership (Kommanditselskab or K/S)
♦ Sole proprietor
Public Limited Company (Aktieselskab or A/S)
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The minimum capital of a public limited company is DKK 500,000. The capital may be paid
for in forms other than cash, including fixed assets, goodwill, know-how etc.
When establishing a public limited company one or more promoters must sign a
memorandum of association containing a proposal for articles of association and the
subscription of share capital. The promoters need not subscribe for any shares in the
company.
The adoption of the articles of association takes place at a following statutory general
meeting, which is also charged with the election of a Board of Directors and appointment of
an auditor.
The management is vested in a Board of Directors consisting of not less than 3 members. The
Board of Directors must appoint the general management consisting of one or more members
who will be responsible for the day to day running of the company. The majority of the Board
must be non-executive directors.
If a company has employed an average of 35 or more persons during the past three years, its
employees are entitled to elect from among themselves members to the Board of Directors.
The number of members elected by employees is equivalent to half the number elected to the
Board by the shareholders at the Annual General Meeting, but not less than two.
A public limited company must be registered with the Commerce and Companies Agency.
There are no fees for the registration, but a foreign company will have to pay for local
professional advice and assistance. A limited company, both public and private, may also be
purchased ‘off the shelf’. Such companies are already registered, but have had no prior
business activities.
Private Limited Company (Anpartsselskab or ApS)
The minimum capital of a private limited company is DKK 125,000. (There is no maximum
limit).
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A private limited company need have only one founder. Although the private limited
company is intended to appeal to one or just a few persons combining to set up a company,
no maximum has been fixed for the number of members allowed.
A private limited company is managed by executive directors or by a Board of Directors or
by both a Board of Directors and one or more executive directors. If the employees have a
right to be represented on the Board of Directors the company must have a Board of
Directors.
The employees’ right to be represented on the Board of Directors is the same as for public
limited companies.
Private limited companies must be registered with the Commerce and Companies Agency in
the same way as public limited companies.
Branch office
A foreign joint stock company, which is lawfully registered in its home country, may carry
on business activities in Denmark through a registered branch office.
The establishment of a branch office must be notified to the Commerce and Companies
Agency. One or more branch managers who can sign for the branch and grant powers of
attorney must manage the branch. The cost of establishing a branch office will be payment
for local professional advice and assistance.
General Partnership (Interessentskab or I/S)
The nature of a general partnership must be indicated by the inclusion of the initials I/S in its
name. General partners are jointly and severally liable for the obligations of the partnership.
However, an investor can minimize his risk by participating in a partnership by the
intermediary of a limited company. A partnership agreement is commonly prepared to govern
the relationship between partners as no Partnership Act exists in Denmark. When all partners
are entities with limited liability the partnership must register with the Commerce and
Companies Agency.
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Limited Partnership(Kommanditselskab or K/S)
A limited partnership consists of one or more general partners and one or more limited
partners. Any of the general or limited partners may be individuals or legal entities, foreign or
domestic.
The firm name must indicate that it is a limited partnership by including in the name the
initials K/S. The names of the limited partners may not appear in the firm name.
When the sole or all general partners are entities with limited liability, a limited partnership
must register with the Commerce and Companies Agency.
Sole Proprietor
A sole proprietor is an individual engaged in a business or profession on his own account.
Any individual is free to establish a business in Denmark.
Registration with the tax authorities must be made if the sole proprietor is engaged in an
enterprise employing staff or performing a trade or any other activity subject to VAT. Any
trading name may be selected unless this is already being used by another enterprise; the
owner’s name may, but need not, appear in the firm’s name. The conduct of certain
professions requires particular authorization and/or qualifications.
Estonia
Companies, self-employed people, branches of foreign companies, non-profit making
associations and foundations are registered in different departments and the respective
registers are kept by the registration departments of Tallinn City Court, Tartu County Court,
Pärnu County Court and Lääne-Virumaa County Court.
Self-employed persons usually register at the local Tax Board Office; they must be entered
in the Commercial Register when they become liable to value added tax (VAT) (i.e. their
annual turnover exceeds 250,000 Estonian kroons).
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Partnerships and limited partnerships are entered into the Commercial Register upon their
establishment.
Documents required to enter a private limited company in the Commercial Register:
• A formal request for entry into the commercial register that shall be signed by all
members of the management board. Signatures need to be notarized.
• The memorandum of association (or a decision of association if the private limited
company has one founder only) together with the articles of association. The
memorandum of association and the articles of association need to be signed by all
founders and their signatures must be notarized. Rural municipality secretaries are not
entitled to certify these documents.
• Specimen signatures, certified by a notary, of the members of the management board.
• The names, personal identification codes and residences of the members of the
management board on a separate sheet.
• Telecommunications numbers (telephone, facsimile, e-mail, etc.) of the company on a
separate sheet.
• A bank notice concerning the payment of share capital to the account of the private
limited company. The minimum capital of a private limited company is 40,000
kroons.
• Upon payment of a non-monetary contribution, the documents certifying the value of
the contribution and the agreement for transfer of the contribution to the private
limited company, signed by the members of the management board. If necessary, also
an auditor’s opinion concerning the valuation of the non-monetary contribution.
• If necessary, an operating licence.
• Receipt of payment of the state fee.
Documents required to enter a public limited company into the Commercial Register:
• A formal request for entry into the commercial register which shall be signed by all
members of the management board. Signatures need to be notarized.
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• The memorandum of association (or a decision of association if the public limited
company has only one founder) together with the articles of association. The
memorandum of association and the articles of association need to be signed by all
founders and their signatures must be notarized.
• Specimen signatures, certified by a notary, of the members of the management board.
• The names, personal identification codes and residences (county and rural
municipality or city) of the members of the management board on a separate sheet.
• The names, personal identification codes and residences of the members of the
supervisory board on a separate sheet.
• The names, personal identification codes, and residences of the auditors, and the
numbers of the auditor’s certificates on a separate sheet, accompanied by the written
consent of the auditors.
• Telecommunications numbers (telephone, facsimile, e-mail, etc.) of the company on a
separate sheet.
• A bank notice concerning the payment of share capital to the account of the public
limited company. The minimum capital of a public limited company is 400,000
kroons.
• Upon payment of a non-monetary contribution, the documents certifying the value of
the contribution, an auditor’s opinion concerning the valuation of the non-monetary
contribution and the agreement for transfer of the contribution to the public limited
company signed by all the members of the management board.
• An operating licence if the activities of the company, specified in its articles of
association, require an operating licence.
• Receipt of payment of the state fee.
• Other documents required by law.
Documents required in order to enter a commercial association into the Commercial
Register:
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• A formal request for entry into the commercial register which shall be signed by all
members of the management board, unless otherwise specified in the articles of
association. Signatures need to be notarized. The formal request for entry must
include the business name, postal address, and field of activity of the association,
information about the members of the management board (names, residences,
personal identification codes), and the restrictions to the right of representation of the
members of the management board.
• The memorandum of association.
• The articles of association.
• The names, personal identification codes and residences of the members of the board,
auditor and controller, and, if applicable, also of the members of the supervisory
board.
• Specimen signatures, certified by a notary, of the members of the management board.
• Telecommunications numbers (telephone, facsimile, e-mail, etc.) of the association on
a separate sheet.
• Receipt of payment of the state fee.
• Other documents required by law.
A new undertaking can apply for start-up assistance. The maximum amount of the assistance
is 160,000 kroons and self-financing must amount to at least 25% of this sum. Applications
may be submitted by undertakings or self-employed persons who, at the time of submitting
the application, may not have been registered in the Commercial Register for more than 12
months or undertakings that are still under construction.
Finland
In Finland, a business may be established in many forms. An individual engaged in business
without a partner may do so in the form of a single-member company or as a private
entrepreneur. Partnerships (general partnership and limited partnership) always require a
minimum of two partners. When there are several founders, the alternative forms of business
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are a limited liability company and a cooperative. A limited liability company may also be a
single-member company, or there can be several partners. The minimum number of founders
for a cooperative is three.
In Finland, business may be lawfully conducted in accordance with good practice without a
license from the authorities by:
• natural persons resident in the European Economic Area (EEA),
• Finnish corporations or foundations,
• foreign corporations or foundations which have a registered branch in Finland, which
have been established in accordance with the law of an EEA member country and
which have their statutory domicile, head office or main place of business in an EEA
country. The PRH may also issue a licence to parties other than those mentioned
above.
The amount of capital required for business activities depends on the type and scope of the
activities. Acting as a private entrepreneur (so-called private business name) is usually
appropriate if the amount of required capital is relatively small. A general partnership can be
established without monetary investments. Work contribution by the partners is sufficient. In
a limited partnership a monetary investment is required of the silent partner, while work
contribution is sufficient for general partners. Limited liability companies are the most
common form of business in areas requiring large amounts of capital. The minimum share
capital required of a limited liability company is prescribed in the Companies Act as EUR
2,500. The share capital must be paid to the company's account in full before the company
can be entered in the trade register maintained by the National Board of Patents and
Registration. For legal purposes, a limited liability company is established when it is entered
in the trade register. There are no minimum requirements concerning the capital of
cooperatives. The type and scope of the cooperative's activities determine the required
capital.
Businesses subject to license
Under certain circumstances, however, the right to practice a business is restricted. These
businesses are listed in the Act governing authorization to conduct business (27.9.1919/122).
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The acts and decrees governing licensed trades stipulate the licensing authorities. In some
cases, a license per se is not required - it is sufficient to send a written notification to the
authority in question. The license is usually issued by the State Provincial Office of the area
in which the business is established.
Working conditions
In employment contracts and employment relationships, employers must comply with the
minimum requirements set out in a nationwide collective agreement considered
representative in the sector regarding the terms and conditions of employment.
Under the terms of the Employment Contracts Act, employers must inform employees of the
principal terms of work, unless these are laid down in a written employment contract.
Employers must also provide employees with pension and accident insurance. Employers
must make the relevant occupational health and safety arrangements. The employer remits
PAYE and social insurance payments to the tax authorities. One can compare the Council
Directive 2001/86/EC with the working conditions in Finland.
France
France has a tradition of highly centralized oversight of its essentially market-based
economy. The government maintains a presence in industries such as aeronautics, defense,
automobiles, and telecommunications, and can still exert control over privatized firms
through the “golden share”. The “golden share” allows the French government to retain some
control of the fate of privatized companies even in the case when it holds less than 50% of the
stock. However, the European Court of Justice may declare illegal some “golden share”.
Former employees of the companies remain civil servant s after their privatization.
Considering the major differences between the status of civil servant and that of other
workers, this may lead to some difficulties in the management of the labor force.
Joint Ventures
A contractual joint venture is often only a first step and a vehicle for future expansion. In
France, co-operation within the framework of a joint venture can be organized in three
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different ways. A joint venture can either be a simple contractual relationship that does not
give rise to a common entity or it can be a common entity having either the form of a
partnership (société de personnes) or a stock corporation (société de capitaux). The choice in
this regard depends on several factors, among which are the length of the
contemplated operation as well as the extent to which parties require the independence and
autonomy of the common entity.
Limited Liability Companies
Limited liability companies are permitted in France and are incorporated under the form of
either a société anonyme (SA), a société par actions simplifiée (SAS) or a société à
responsabilité limitée (SARL). These different types of corporations are governed by the law
on commercial companies of July 24, 1966, codified in the Commercial Code.
Under this law, the SA and the SAS are stock companies whose shares are freely transferable
and negotiable unless the by- laws contain contrary dispositions. Unlike the rules applicable
to the SA, the rules governing the SARL are aimed at preserving personal bonds between
shareholders as the shares of a SARL are not freely negotiable, and any new shareholder must
be approved by a vote of the other shareholders. Since the Order of March 25th 2004, which
modified several provisions of the French Code of commerce, a SARL may issue bonds
pursuant to the conditions set out by the French Code of commerce. To act as a president,
general director, president of the directorate or managing director of a SA, SAS or SARL, a
resident who is not a national of a EU country must obtain a trader’s card (carte de
commerçant) from the Préfecture of the department where the company is registered.
The Société Anonyme (SA) or stock corporation
The SA is the French equivalent of the American Corporation or the British limited company.
It is the most common form of business enterprise in France. Incorporation as well as
management of such corporations are under strict guidelines.
Incorporation:
A minimum of seven shareholders, either individuals or legal entities, are needed to form an
SA, and this minimum must continue to exist during the life of the corporation. The
minimum legal share capital of a SA is €37,000. If the corporation wishes to offer shares to
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the public, the minimum capital is increased to €225,000. Only one half of the share capital
must be paid upon subscription of the shares, provided that the balance is paid within 5 years.
A SA is formed from the date of signature of its by-laws. However, a SA does not become a
legal entity until it has complied with all procedural requirements of law and has been duly
recorded at the Trade Registry (Registre du Commerce et des Sociétés).
Management:
For a SA, two alternative systems of management are possible. The SA can have a board of
directors, the structure most currently used in France, headed by a chairman of the board and
general manager. The Chairman has for all practical purposes the duties of both the chairman
of the board and the chief executive officer of a US corporation. He may request the board’s
appointment of at least one general manager to assist him. The law of May 15, 2001, provides
that it is now also possible to differentiate the duties of Chairman of the board of directors
and the managing director.
Another management alternative is creating a directorate (directoire), which is an executive
committee overseen by a supervisory council (conseil de surveillance).
Shareholders’ meetings:
Shareholders exercise their control over the corporation through two types of meetings:
- Ordinary meetings: held at least once a year to approve the financial statements, decide
upon the allocation of profits, appoint statutory auditors or authorize agreements between the
company and its directors or corporate executives when said agreements do not concern those
normally entered into by the company.
- Extraordinary meetings which are held to amend the by-laws, increase or reduce the share
capital, decide major corporate reorganization. French law also provides for compulsory
quorum and majority conditions.
The Simplified Joint Stock Company or Société par actions simplifiée (SAS):
The SAS is a form of corporation created pursuant to the law of January 3, 1994, which was
amended in 1999. Designed to meet the needs of large corporations with a special form of
joint venture vehicle, the SAS can be governed by tailor-made provisions of the by- laws as
far as management and shareholders meetings are concerned. The sole obligation is to
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provide for a president who is the only person entitled to represent the SAS vis-à-vis third
parties. As for the rest, the SAS is governed by the same rules as those applicable to a SA.
There is no minimum share capital required upon the incorporation of the SAS, and the SAS
cannot make public offerings. According to the recent amendments, there is no minimum
number of shareholders. An SAS held by only one shareholder is called société par actions
simplifiée unipersonnelle (SASU).
Furthermore, there is no obligation for the shareholders to be legal entities and the capital can
also be held by individuals. When shareholders are legal entities, there are no more
restrictions relating to their share capital.
Limited Liability Company or Société à Responsabilité Limitée (SARL):
A SARL is commonly used by small-to-medium size companies because it offers limited
liability for shareholders while also allowing for a rather simple governance structure.
There is no minimum but a maximum number of 99 shareholders in a SARL. A SARL which
only has one shareholder is called an Entreprise Unipersonnelle à Responsabilité Limitée
(EURL). Shareholders can be individuals as well as legal entities. The minimum registered
capital of a SARL is €7,500 which must be fully subscribed and paid upon subscription. The
incorporation of a SARL is similar in process and timing to that of a SA. In addition, a SARL
does not become a legal entity until it has been duly inscribed upon the Trade Registry. The
SARL is managed by one or more managing directors (gérant), who must be individuals but
need not be shareholders. The managing director has full authority to bind the SARL in its
dealings with third parties, whatever may be the limitations provided in the by- laws. As in
the SA, decisions made by the shareholder meetings are submitted to legal quorum and
majority conditions. As in a SA, agreements between a SARL and one of its members or
managing directors must be
authorized or approved by the company’s shareholders.
Unlimited Liability Companies
Below is a list of the primary types of companies with unlimited liability.
General Partnership or Société en nom collectif (SNC)
This unlimited liability company is an entity in which all the partners are jointly and severally
liable for all the debts of the company. The entity’s profits are taxed at the partner’s level,
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except if the company opts to be subject to corporate income tax. Each partner is deemed to
be a trader, so foreign partners must apply for a business card (carte de commerçant). No
minimum is required for the capital. The SNC is operated by one or more managing directors
who bind the company, when dealing with third parties irrespective of the scope of their
powers according to the by- laws.
Limited Partnership: Sociétés en Commandite par action (SCA) or Sociétés en Commandite
Simple (SCS)
The Société en commandite is a hybrid form of a commercial partnership where capital and
power are separated between:
- the general partners who have joint, several and unlimited liability and almost
complete control over management. These partners also have trader status and
therefore must have a carte de commerçant.
- the limited partners who receive shares for their contributions and whose liability is
limited to said contributions.
The limited partners of a SCA are comparable to the shareholders in a SA. As in a SA, the
minimum legal share capital is €37,000 or €225,000 if the SCA whishes to offer shares to the
public. The SCA is managed by one or several managers who operate under the control of a
supervisory board (Conseil de Surveillance) composed of not less than three limited partners.
The SCA must appoint at least one statutory auditor. The limited partners of an SCS are
comparable to the shareholders of a SARL.
Civil Partnership or Société Civile (SC)
A SC may not engage in commercial activities. As such, it is generally chosen as the vehicle
for a joint venture in real estate activities. Partners may be individuals as well as legal
entities. Their liability is prorated to each partner’s shareholding in the capital of the SC.
Furthermore, no minimum capital is required. Decisions that exceed the powers granted to
the manager(s) must be made by the partners, who decide unanimously unless otherwise
provided in the by-laws.
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Undisclosed partnerships, or Société en Participation (SEP)
The SEP is a typical structure for joint ventures and is the simplest form of partnership in
France. It is the appropriate vehicle when the partners wish to cooperate in limited sectors
and share profits and losses resulting from their cooperation with the intent that this
cooperation remains confidential except when dealing with the tax authorities. The SEP is
essentially a company which does not require a registration, therefore it is not a legal entity
per se. The by-laws must be sent to the tax authorities and specify the amount contributed by
each partner, the method adopted for sharing profits/losses and the duration of the
partnership. Each partner contracts in its own name and is personally liable to third parties.
The partners are jointly and severally liable for the SEP’s debts, unless the SEP is disclosed
to third parties.
Economic Interest Grouping or Groupement d’intérêt économique (GIE)
The French GIE is a type of joint venture partnership permitting two or more individuals or
legal
entities to pool their efforts in order to facilitate or develop their respective activities or to
improve the result thereof. While the purpose of a GIE is not to seek profit for its own
account, it profits are realized, they are taxed in the hands of the GIE’s members.
A GIE must register with the Trade Registry. It is not required to have a capital and must not
be for commercial purpose. The members of a GIE are each jointly and severally liable for its
debts. To be a partner in a commercial company where liability is unlimited (general
partnership, limited partnership) foreign investors who are not European Union nationals
must have a carte de commerçant.
Partnerships, General or Limited
In France, the term société or company includes all profit- making entities, i.e. partnership-
type companies (société de personnes) and corporations (sociétés de capitaux). Except for the
SEP (undisclosed partnership), partnerships in France are legal entities, like all French
companies and like GIE’s. Partnership-type companies in France are the SNC, SCS, SCA,
SEP and the GIE. As opposed to the French corporations, French partnerships are
characterized by the joint and unlimited liability
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of the partners. The liability is even joint and several in an SNC and a GIE. All partners have
joint, unlimited and in some cases, several liability for the partnership’s debts, except in the
SEP if it is not disclosed to the third parties since each partner acts in its own name.
Sole Proprietorships
In France, a foreign investor can be a sole proprietor, but a single shareholder is only possible
in a SARL and an SAS. Furthermore, sole proprietorship results from the records of the
company and liability depends whether the investor decides to form a partnership or a
corporation.
Subsidiaries/Branches/Representative Offices
A liaison office is not a legal entity distinct from the parent company. It does not conduct
commercial business but merely serves as a post address, a presence and an information
center for both the parent company and third parties. With the exception of bank and
insurance company offices, a liaison office does not need to be listed with the Trade Register.
However, in case of registration, the representative of the office who is not a EU national or a
national from certain partner countries must request a trader’s card (a carte de commerçant).
The branch, just as the liaison office, is not a legal entity distinct from the parent company.
Several formalities must be accomplished for the registration of a branch. The French branch
of a foreign company must pay corporate taxes. In addition, after tax net profits of a branch
are subject to a withholding tax which can amount to 25% in the absence of a treaty to
prevent double taxation between France and the country where the mother company is
registered. As a taxable entity, and although it is not a legal entity, a branch must hold
accounts
separate from those of a foreign company. There are other tax differences (VAT, registration
duties) but in practice, the tax differences all together are not that significant.
Germany
The first step when establishing a business as a business person is to fill out the business
registration at the local trade licensing office, as a result of which the business is entered in
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the local trade register. The office forwards the registration to the tax authority, the regional
association of professional trading associations, and the chambers of industry and commerce
or chamber of skilled crafts. A license or approval for the business registration is not
necessary in the majority of cases.
Chamber membership is automatic and mandatory. The reason for mandatory membership is
that the chambers represent the interests of their member companies in dealings with the
government. They also take on interim and final examinations for employee training, draw up
reports, and therefore carry out more than just the typical association tasks. The costs for
chamber membership are based on the company's turnover.
An entrepreneur can choose one of several forms of business when setting up the business
initiative. The options range from a representative office or small and large partnerships
through to corporations such as a GmbH or Aktiengesellschaft. Company categories include:
Representative office; Sole proprietorship; Partnerships Corporations; and Trust.
Joint ventures
There are two kinds of joint ventures allowed in Germany, the so-called equity joint venture,
and the contractual joint venture. The equity joint venture is set up through a two-step
process. Firstly, the joint venture partners set up and control a civil undisclosed
partnership, by which they regulate their relationship with each other. This partnership is the
actual joint venture. Secondly, another company is set up (the Gemeinschaftsunternehmen),
completely controlled by the partnership, and the objectives of the joint venture are actually
carried out by this company. This company can be any form of business association, limited
or unlimited, corporate or non corporate. For all practical purposes, in Germany the most
advantageous legal form for
the Gemeinschaftsunternehmen is the GmbH. In fact it offers wide autonomy as far as the
Articles of Association are concerned, and being controlled by only one shareholder (the
partnership), the joint venture partners have complete control over it. The contractual joint
venture has a simpler structure compared to the equity joint venture. In fact it is only formed
by a civil partnership, without the establishment of a second company. Both forms of joint
venture have advantages and disadvantages, and choosing the right one depends on the
investors’ needs and objectives. The contractual joint venture’s main advantage lies in its
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simplicity. It is very simple, quick and cheap to set up, for it does not need registration (other
than declaring its name and seat) and does not have a minimum capital requirement. It can be
brought to an end without undergoing liquidation procedures. It also offers the advantage of
secrecy: there is no requirement to publish the partnership agreement in the commercial
register. All these advantages are unknown to the equity joint venture, because establishing a
GmbH (or another corporation) requires more time, expenses and carries disclosure in the
commercial register or publishing accounting records. The most significant difference for the
investor between the two forms is that in the contractual joint venture the partners are subject
to unlimited personal liability for the partnership’s debts, as soon as the civil
partnership engages in external transactions. The equity joint venture (having a limited
company as the Gemeinschaftsunternehmen) offers limited liability to the joint venture
partners. They are also taxed in different ways: the contractual joint venture, being a
partnership, is not subject to corporate tax, while the equity joint venture is, since the
Gemeinschaftsunternehmen is usually a corporation.
Limited Liability Companies
Gesellschaft mit beschränkter Haftung (GmbH)
The German limited liability company (Gesellschaft mit beschränkter Haftung – GmbH) is a
corporate body with legal personality separate from that of its shareholders. Consequently,
after registration, the shareholders are not liable for the corporation’s liabilities and the
corporation is subject to corporate tax. It is statutorily regulated by the GmbH Act (GmbhG)
and by the Commercial Code (HGB). Its shareholders can be individuals, partnerships or
corporations, and it is possible for a GmbH to have only one shareholder. A GmbH needs to
have a minimum capital of o 25,000. To be incorporated, and thus come into existence as a
legal entity, it has to be registered in the commercial register maintained by the local courts.
If the activity of a GmbH requires a license (e.g. manufacturing/trading in pharmaceuticals,
real estate agency), such license has to be obtained before registration. Before applying for
registration it is necessary that the shareholders pay in the capital, which may be contributed
in cash or in kind, and at least one quarter of each capital share must be paid up. Added
together, these payments must amount to at least half of the statutory minimum capital
(i.e.o12,500).Shareholders also have to provide the Articles (statutes) of Association, which
must at least contain the name (which has to include the expression “Gesellschaft
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mit beschränkter Haftung” or “GmbH”) and registered seat of the company, an objects
clause, the amount of the stated capital and the amount subscribed by each shareholder. The
capital must be fully subscribed. The Articles of Association must be signed by all managing
directors in notarized form, and must include a statement as to whether the managing
directors are authorized to represent the company alone or jointly. The application is
submitted to the court competent for the place where the company will have its registered
seat, and if the court is satisfied that all requirements for incorporation are met, it will enter
the company (and its Articles of Association) in the register.
Every shareholder must posses at least 100 Euro worth of shares, and the shares need to be
divisible by 50 Euro. The shares are not freely negotiable, and their assignment requires a
notarized deed, both the transfer agreement and the transfer itself. All changes in the Articles
of Association, as well as capital increases or decreases, require notarial form. The notarial
fees are a fixed percentage of the actual (not stated) value of the shares, and these fees can be
enormous in case of large transfers. There is no shareholder register, but the managing
director must submit an annual correct list of shareholders to the Commercial Register,
together with the financial statements. Normally shares carry a right to vote in the
shareholders’ meeting, but it is possible to provide for non-voting shares in the Articles of
Association.
Stock Corporation (Aktiengesellschaft, AG)
The Aktiengesellschaft (AG) is regulated by the Aktiengesetz (AktG), the provisions of
which are mandatory to a much greater extent than those of the GmbH Act. This means that
an AG is much less flexible than a GmbH in its organization. To be incorporated, an AG
must have a minimum share capital of 50,000 Euro. Shareholders can be individuals or any
sort of company or corporation, and all shares may also be held by one single shareholder.
The AG, in compliance with the HGB, has full accounting and disclosure requirements. The
incorporation of an AG involves a three-step process, and in the case of the formation of a
bank, insurance and investment company, it is necessary to obtain a license. Firstly, it is
necessary to set up the Articles of Association in full notarial form. The Articles must specify
the founders, the par value, the issue price, the different kinds of shares and who subscribes
for each kind (if applicable) and the amount of capital paid in. Secondly, the incorporators
must subscribe the shares. Thirdly, the local court processes the application and enters the
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company in the commercial register, and at this point the company comes into existence as an
AG. The incorporators also appoint the first board of managers and supervisory board, and
these appointments must be registered in notarized form. It is possible for an incorporator to
become a member of either board. The governance of the AG is structured as a mandatory
three tier system, consisting of the board of managers (Vorstand), the supervisory board
(Aufsichtsrat) and the shareholders’ meeting (Aktionärsversammlung).The board of
managers is composed of one or more persons (plus a mandatory employee director if the AG
employs more than 2,000 people) and is appointed by the supervisory board. Directors can be
removed from office only by the supervisory board and only for good cause (gross breach of
duties, incapacity, vote of no confidence by the shareholders’ meeting).Appointment and
removal are to be registered in the commercial register. There are no restrictions on who can
be appointed (the appointee has to be a natural person), but members are subject to very strict
competition and conflict of interests rules. The supervisory board is composed of
representatives of the shareholders and of the employees. One third of the board, or half of it
if the AG has more than 2,000 employees, must be employees' representatives. It is composed
of a minimum of three and a maximum of 21 members. The supervisory board appoints,
supervises and removes the board of directors, but cannot be given any managing functions
or representation powers. It represents the AG vis-à-vis the board of managers. It is not
possible to be a member of both boards. The supervisory board has to give approval for
certain kinds of transactions, as required by law or by the Articles. The legal liability of the
members of the supervisory board is similar to that of the managers, but they are not subject
to competition restrictions. The shareholders’ meeting is the assembly of all shareholders and
is competent for the appropriation of retained earnings and the appointment of the annual
auditor. It has to meet at least once a year. These decisions require either simple or qualified
(2/3) majority. All resolutions have to be recorded in notarial form.
General or Limited Partnerships
There is a difference between civil and commercial partnerships. A commercial partnership
may only be established for the purpose of running a business within the meaning of sections
1 and 2 of the Commercial Code. Artists, scientists and the liberal professions cannot form a
commercial partnership. Instead, they can associate into a Partnerschaft, which is a form of
partnership virtually identical to the OHG, but specifically reserved for such professions. The
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nature and size of the business must be such as to require a commercial organization,
including book-keeping and accounting. Commercial partnerships have to register their
business name and domicile; name, domicile and status (general or limited) of all partners in
the commercial register, but only the partners’ signatures require notarized form. Therefore
the cost of registration is very low and not linked to the size of the partnership. In the case of
a limited partnership, the amount of the contribution of the limited partners has to be
specified.
Partnerships are non-corporate bodies and have no legal entity of their own, so they are not
subject to corporate tax. Nonetheless they can sue or be sued in their own name and acquire
rights and real property. They can also delegate management functions to a third party.
Sole Proprietorship
A sole proprietor (Einzelkaufmann/Freiberufler) is a natural person doing business or
exercising a profession. He bears all losses and takes all profits and personally bears all risks.
He is personally liable to his creditors without limitation, and there is no distinction between
his private and business capital. Both his private and business creditors can satisfy their debts
against the sole proprietor’s entire assets. If he is a merchant, he might be subject to the
German Commercial Code (HGB), and must apply for registration in the commercial register
where his business is registered under his trade name. He has to keep books and draw up a
balance sheet once a year. He is subject to personal income tax only.
Branches, Subsidiaries and Representative Offices
A foreign investor may undertake business activities in Germany by establishing a branch or
a pure representative office of the foreign head office, or by creating a subsidiary in the form
of a partnership or corporation. The representative office is the only form of establishment
which does not create a taxable presence in Germany, but in order to qualify as such it must
be very carefully set up: it has to perform auxiliary functions only and cannot involve a
dependent agent who has the power to enter into contracts on behalf of the foreign investor.
On the contrary, a subsidiary involves the setting up of a company controlled by the foreign
corporation, and can take the form of any German partnership or corporation, with the
relevant registration procedures, tax consequences and potential liability for the investor (see
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above). Most foreign investors structure their German subsidiaries in the form of a GmbH,
for it offers a high degree of flexibility and limited liability for the foreign head office.
Finally, a branch is considered as the German representation of the foreign corporation, not as
a separate legal entity distinct from the parent company, and it is therefore not incorporated in
Germany. The major consequence of this is that the head office is directly liable for all
obligations and claims relating to the branch. On the other hand, since the branch has a
certain degree of independence in carrying out its business, it is subject to taxes and to
German law. Even though a branch is not incorporated in Germany, it needs to be registered
in the commercial register. To register the branch, the court will request evidence of the legal
existence of the head office, copies of the Articles of Association, names of all managing
directors, the amount of the share capital, the location of the principal place of business of the
corporation and the names of the persons acting in Germany.
Other information
In many cases, companies offering skilled crafts need to be recognized by the chambers of
skilled crafts and entered in the trade register of skilled crafts (Handwerksrolle) – a list of
approved trades people in the area. In many professions, this requires a master craftsman
certificate, the highest qualification in the skilled crafts.
Foreign qualifications can be recognized in place of this, but at the moment this only applies
unconditionally to the Luxembourg master craftsman certificates. Only some French and
Austrian master craftsman certificates have been treated as equivalent to the German
qualification, depending on the trade.
Skilled trades people from an EU member state can independently practice a "master
profession" even if they do not have the relevant qualification, if they can prove that they
have already worked independently for several years.
All other aliens can go through the "exception granting procedure"
(Ausnahmebewilligungsverfahren) in Germany to receive a permit to open a company. The
submission of certificates usually suffices. In cases of doubt, the chamber of skilled crafts can
demand a sample of work or a practical test.
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Greece
Joint Ventures
Joint Ventures do not constitute a distinct type of incorporation. In practice joint
ventures take two forms:
i) A legal entity (most of the times a corporation), which is jointly held by two or
more shareholders, or
ii) A consortium or association between two or more independent entities to
dedicate
capital and resources for the completion of a specific project (e.g. construction
projects).
Such joint venture does not have legal personality, therefore is not a separate entity. In the
event that a joint venture takes the form of legal entity (namely, under i) above),its tax
treatment depends on the specific type of entity formed in Greece. If the entity qualifies as a
corporation (Société Anonyme, Limited Liability Company), then for details on its tax
treatment, please refer to Chapter XII. If it qualifies as any other legal body (General, Limited
and Silent Partnership, Civil Law Society), then please refer to Chapter XIV.
Limited Liability Companies
The Limited Liability Company is called Eteria Periorismenis Eftinis (EPE). EPE constitutes
the common corporate vehicle for small and medium sized businesses. The Limited Liability
Company has features of a partnership and a corporation. The liability of the partners is
limited to the amount of their contributions subject, however, to certain exceptions
concerning debts of the company towards the State, taxation frauds and liabilities towards
Social Security Funds.
The minimum share capital amounts to Euro 18,000, divided in company parts of a nominal
value of Euro 30 or multiples thereof, and must be paid-up in full. It can be paid both in cash
and in kind, but there is a limitation: at least ½ of the capital must be paid in cash. The
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Articles of Incorporation are executed before a Notary Public and are registered with the local
Court of First Instance and a summary thereof is published in the Government Gazette. An
EPE may be established and operate as a single shareholder entity. To be noted however that,
establishment of a ‘single– shareholder’ EPE is invalid if:
i) the founder (individual or legal entity) is the sole founder/shareholder of
another ‘single-shareholder’ Limited Liability Company in Greece or within the EU,
or if
ii) the sole shareholder of the ‘single-shareholder’ EPE is another ‘single-
shareholder’ Limited Liability Company.
The average cost for establishment of a (minimum share capital) Limited Liability Company
(EPE) in Greece amounts approximately to Euro 2,500 (excluding legal fees).
The executive and representation powers in an EPE are exercised by one or more
administrators, which may be foreign individuals.
Corporations
A Corporation is called Anonimi Eteria (AE). An AE is a stock company established under
Law 2190/1920. In such company the liability of the shareholder is limited to the amount of
its contribution to the share capital, which is represented by shares of stock. The minimum
share capital amounts to Euro 60,000, which has to be paid-up in full within two months as of
the effective date of incorporation. The payment of the share capital may take place either in
cash or other assets, including intangibles. An AE is managed by a Board of Directors, which
consists of at least three members, none of which is required to be Greek.
Partnerships, General or Limited
The general partnership in Greek law is called “Omorrythmi Etairia” (O.E.). An OE is a
company in which all partners are liable, jointly and severally for the partnership debts.
According to Greek law a General partnership (contrary to British, American and German
law), is a legal entity. Such corporate type is very flexible and requires minimum cost for
establishment and legal compliance, but entails a serious risk for the participants, as they are
subject to personal liability for corporate debts. Such type is therefore commonly used for
small family businesses.
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All of its partners are qualified as “merchants”, a qualification based on the mere fact of
their participation in an O.E. (derivative commerciality of the partners). The bankruptcy of
the legal entity of the O.E. results ipso facto to the parallel bankruptcy of its partners. A
limited partnership, in Greek “Eterorrythmi Etairia” (E.E.), is a partnership with one or more
general partners and one or more limited partners. The general partners have unlimited
liability whereas the limited partners have limited liability only. A limited partnership cannot,
by law, exist without at least one general partner and in case the general partner ceases to
exist such partner must be replaced or otherwise the company must be dissolved. However, a
limited partnership the limited partner of which has exited in any way may continue trading
in the form of a general partnership. According to the provisions of Greek Company Law,
general partners are fully liable in respect of any liabilities of the limited partnership in
parallel with the latter. Thus, any third party may seek from a general partner the satisfaction
of a claim against the limited partnership, without having to turn first against the latter.
Limited partners are liable only up to the amount of their contribution to the partnership. As
an exception to the above, a limited partner may be fully liable for the limited partnership’s
debts if he has not paid in or has withdrawn his contribution or if he assumes the duties of the
administrator of the partnership or represents, in general, the partnership towards third
parties. The name of OEs, used for commercial transactions and business, consists only of the
names of the partners. The name of EEs must consist of the names of one or more of the
general partners, while the inclusion of the name of the limited partners is strictly prohibited.
The articles of a general or limited partnership must be drawn up either by a private contract
or by public deed. The articles govern the partnership and must be made public by the
publication of an extract thereof. This extract must contain at least the full name and
residence of the partners, the registered office, the persons with authority to manage the
business and to sign on behalf of the partnership, the amounts of capital invested (there is no
minimum capital required by the law), the time of commencement and termination of the
partnership. In practice, a ratified copy of the deed is registered with the registry of
Companies of the First Instance Court of the district in which the partnership has its
registered office. The same publication is required for any amendment of the article
Partnerships, Undisclosed
As a matter of Greek law undisclosed partnerships are not regulated. However, in
practice further to an established principle of case law, undisclosed partnerships are
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treated as de facto general partnerships.
Sole Proprietorships
The sole proprietorship is in practice preferred only for very small scale businesses as they
entail a high risk of personal liability vis a vis creditors.
Subsidiaries/Branches/Representative Offices
Foreign Unlimited Liability and Limited Liability Companies, lawfully established pursuant
to their home state laws and regulations, may establish branches in Greece subject to certain
conditions laid down by article 50 of Law 2190/1920 and article 57 of Law 3190/1955
respectively.
A branch is a financially and legally dependent department of the foreign entity. It does not
have a legal personality and its activities are performed in the name and on behalf of the
foreign company. It may perform all activities provided for at the Articles of Incorporation of
the foreign company, except in case there is respective limitation at the Power of Attorney for
the establishment of the branch in Greece. Approval of the Prefecture of the branch’s
registered seat, registration with the companies’ registry kept with the Prefecture and
publication formalities are required for the establishment of a branch. Additional licensing
may also be required depending on the kind of activities performed (e.g. in case of certain
industrial establishments). The main obligations of branches of the foreign companies during
their operation in Greece are to submit to the competent Prefecture:
i) All modification of the data which have been submitted for their establishment.
ii) A copy of the annual balance sheet of the foreign company.
iii) A record for its operations in Greece during the financial year of the respective
balance sheet.
A branch of a foreign entity is managed by a legal representative, who may be a foreign
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individual, the scope of powers of whom is defined by a Power of Attorney that is issued by
the parent company. The cost of establishment of a branch of a foreign entity in Greece
amounts approximately to Euro 1,000 and the incorporation procedure normally takes one
month. Greek-located subsidiaries, being legal entities distinct from their parents, are Greek
tax resident entities. They are thus established pursuant to the forms of entity organization
available under Greek law and taxed according to the rules that apply to the specific entity
type. Branches have the same treatment (rates, tax base) as Greek corporations.
Hungary
Anyone may establish a business organization under Hungarian law: Hungarian and foreign
natural persons, as well as Hungarian and foreign legal entities or organizations without legal
personality. There are no restrictions regarding the number of nationals to participate, or on
the nationality of CEOs, directors, supervisory board members, etc. Moreover, it is possible
for a business organization registered in Hungary to be founded exclusively by foreign
persons. The state may participate in a business organization without any restrictions through
its (legally or organizationally) distinct units with the capacity to establish business
organizations set forth by law. The permitted forms of business organizations are laid down
in three main acts: the Company Act, the Civil Code and the Act XLV of 2004 on European
Company Limited by Shares, Act XLIX of 2003 on European Economic Interest Grouping,
Act I of 1992 on Co-operatives, furthermore Act LXIX of 2006 on European co-operatives,
Act CXXXII of 1997 on branch offices and commercial representative offices. The investor
as contracting party may have liability to its partners, other investors and third parties under
the Civil Code. Also, their liability to other members of the business association may be
established under the Company Act as well. Controlling members may have unlimited and
full liability under the Company Act in case of liquidation procedures, if the assets do not
cover the debts of the business association due to a cause the controlling party is liable for.
Company Act (Act CXLIV if 1997)
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The Act CXLIV of 1997 was replaced by Act IV of 2006 as of 1st July 2006 which will
result in thecreation of a more up-to-date system of corporate law by regulating several issues
in a completely innovative manner. Business associations are separate entities, with distinct
assets. The contributions provided by the members/shareholders (together: “members”)
constitute the property of the business association. The business associations must be
registered at the Court of Registration. However, the business associations exist as of the date
of the registration may operate as a pre company from the day of signing the articles of
association. Under the Company Act the following forms of business associations exist:
General (unlimited) partnership (kkt)
General partnership has no legal personality. The partners have secondary, joint, several and
unlimited liability for the obligations of the company. There is no minimum capital
subscribed.
Limited partnership (bt)
Limited partnership has no legal personality either. The company must have at least one
member with limited (limited partner) and one member with unlimited liability (general
partner) for the obligations of the company. The general partner has secondary, joint, several
and unlimited liability for the obligations of the company, the limited partner has liability
limited to his contribution to the capital of the company. There is no minimum capital
subscribed.
Joint enterprise (not the same as joint venture) (kv)
Joint enterprise has legal personality. The partners grant surety and have joint and several
liability for the obligations of the company in case the company fails to fulfill its obligations.
There is no minimum capital subscribed. It is essential to note that joint enterprise may not be
established following 1st July 2006. A joint enterprise already registered or in the process of
being registered in the Company Registry on 1st July 2006 may operate on in accordance
with the former Company Act.
Limited liability company (kft)
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A limited liability company has a legal personality as well. The liabilities of the members
towards the company is limited to their capital contributions. The members are (with certain
very specific exceptions) not liable for the obligations of the company. The articles of
associations may set forth the obligation of accessory contribution and/or additional payment.
The minimal subscribed capital is HUF 3,000,000. The capital contribution may be provided
in cash or may be contribution in kind.
Public company limited by shares (Nyrt.)
There are two forms of the company limited by shares: private company limited by shares
and public company limited by shares. The main difference is that the shares of the public
company are listed in the stock exchange. A private company limited by shares is also a legal
entity. The shareholders are not liable for the obligations of the company. The shareholders‘
liability towards the company, as in case of the limited liability companies, covers merely
their capital contributions. The subscribed amount of capital must be at least HUF
20,000,000. The capital contributions may be provided in cash or may be contribution in
kind. It is to be noted that only the capital contributions to the company (shares) limited by
shares may be embodied in securities.
Private company limited by shares (Zrt.)
A public company limited by shares is also a legal entity. The shareholders are not liable for
the obligations of the company. The shareholders liability towards the company, just like in
case of the limited liability companies, covers merely their capital contributions. The
subscribed amount of capital must be at least HUF 20,000,000. The capital contributions may
be provided in cash or may be contribution in kind.
Co-operative association (egyesülés)
The Company Act provides for a so-called co-operative association.
The aim of this association is to sustain the profitability of the members’ business through the
coordination of their business activity. The association may represent the members’
professional interests, it is a non-profit company, it does not intend to make own profit. The
members are liable for the debts of the co-operative association, exceeding the assets thereof
in this respect their liability is secondary, unlimited, joint and several. The list of the
Company Act on business associations is an itemized list, therefore other than those
mentioned above, no other types of business associations may be incorporated.
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European Economic Interest Grouping (ege)
The European Economic Interest Grouping (EGE) is regulated by the Act XLIX of 2003.
EGE haslegal personality. According to the Council Regulation (EEC) No 2137/85 of 25 July
1985 the purpose of a grouping is to facilitate or develop the economic activities of its
members and to improve or increase the results of those activities; its purpose is not to make
profit for itself. Its activity is related to the economic activities of its members and must not
be more than ancillary to those activities. If the obligations of the Grouping aren’t covered by
its assets the members‘ liability is unlimited and joint.
European Company Limited by Shares (SE)
The European Company Limited by Shares (SE) is regulated by the Act XLV of 2004. The
regulation for the establishment and the operation of SE can be found in Council Regulation
(EEC) No 2157/2001 of 8 October 2001 in addition to the beforementioned Act XLV of
2004. SE has legal personality. According to the Council Regulation (EC) No 2157/2001 of 8
October 2001 the capital of SE is divided into shares. No shareholder is liable for more than
the amount he has been subscribed.
Sole proprietorships
A foreign investor, as a Hungarian one, may be a sole proprietor. Only a company limited by
shares or a limited liability company may be a sole member company. There are no special
provisions regarding foreign investors being sole proprietors of companies registered in
Hungary.
Non-profit companies
The foundation, activity and termination of non-profit companies is governed by the
provisions of the Civil Code, the relevant sections of the Company Act and Act CLVI of
1997 on Non-Profit Organizations. These entities shall be registered at the Court of Firms.
Non-profit companies are legal persons, serving the common interests of society on a regular
basis, without aiming to acquire profits or accumulate assets. Non-profit companies may
engage in business type economic activities in the interest and for the benefit of their non-
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profit activities. Profits generated by a company's activities may not be distributed among the
members. It must be noted that non-profit company (kht.) may not be established following
1st July 2007. The non-profit companies already registered or in the process of being
registered may operate until 30 June, 2009 in accordance with the rules relative thereto.
Ireland
Irish laws are very liberal toward trade and industry. There are no general prohibitions
against the acquisition of majority holdings by foreign interests in Irish companies or against
foreign ownership of either business entities or real property. Moreover, there are no
nationality requirements for directors or shareholders in Irish commercial entities. The
Central Bank of Ireland (CBI) does screen and approve all foreign investment. Remittance of
dividends and profits and the repatriation of capital must also have prior Central Bank
approval but approval is mainly a formality. Royalty agreements between resident and non-
resident companies must be approved by the central bank. These approvals are routinely
granted and serve more asa monitoring function than as a method of capital control.
The type of business most widely employed is the private limited company. Forms of
Business include:
Public Limited Company
This is the main form of incorporation for firms issuing stocks or bonds, having stockholders,
and directors that manage the company. The company is incorporated under a Memorandum
of Association (Articles of Incorporation), providing the name, share capital, and commercial
objectives. The bylaws state the relationship between the company and the shareholders.
Minimum share capital is IR163,30,000, of which at least 25 percent must be paid up. Shares
must have a par value, usually IR163,1 00 or less, and there must be seven or more
stockholders. Shares may be issued in several classes such as common or preferred. The
company must have a minimum of two directors that manage the daily affairs of the firm and
who are usually selected by the shareholders. Annual meetings are required with 21 days
advance notice provided. Disclosure of financial statements and meeting statutory
requirements for reporting are required.
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Private Limited Company
The requirements for formation and reporting of private limited companies are generally the
same as for the public limited companies. This form is the most popular type of commercial
organization in Ireland and is popular for the establishment of an Irish subsidiary of a foreign
parent. There must be 2 to 50 shareholders, no debentures or shares being issued to the
general public, and no minimum level of share capital.
Partnership-In Ireland, the partnership form tends to be used for professional practice, such as
attorneys and accountants. Partnerships are normally formed by a Partnership Deed setting
out the agreement and conditions of the partnership. A less common form is the limited
partnership, which allows one or more general partners who manage the daily affairs of the
business and one or more limited partners who provide a fixed capital investment with
financial liability limited to the capital investment.
Joint Venture
There are no direct statutory regulations regulating joint ventures as such. The joint venture
agreement should be carefully constructed to define the terms, rights, and responsibilities of
each party.
Foreign Branch
All foreign incorporated companies establishing a branch in Ireland fall under the Companies
Acts of 1963 and 1986. These regulations require the filing of documents with the registrar of
Companies. If the foreign branch is the equivalent of a public limited company if
incorporated in Ireland, it must also file annual reports. A branch is not considered a separate
entity from the parent company. It carries the legal status of the foreign parent and has
disclosure and registration requirements.
Sole Proprietor
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This is an unincorporated business organization owned by one person who receives the
profits and incurs the liabilities personally. If the business name differs from the owner's
name, this information must be registered. Foreign investors may establish a sole
proprietorship in Ireland.
Italy
Following a thorough reform of Italian business law in early 2003, the legal framework for
companies can now be considered one of the most modern and dynamic in Europe. The
reform amended and supplemented portions of the Italian Civil Code (ICC) and modified
Italy’s Unified Rules on financial intermediation (Law 58/1998, known as the Testo Unico
Finanziario - TUF) which now include specific provisions for listed companies. The TUF has
been significantly amended by means of law No. 262 dated December 28, 2005 which
provides rules aimed to safeguard savings.
Prospective foreign investors wanting to set up a business in Italy may either:
a) establish a representative office, branch; or
b) incorporate a company with a more permanent presence.
It may also set up a representative office to explore local marketing and business
opportunities and later decide to incorporate a company. Foreign investors that prefer to
establish a more stable organization may incorporate a company. The Joint Stock Company
(Società per Azioni - SpA) and Limited Liability Company (Società a Responsabilità
Limitata - Srl) are the most common types. For both, liability for social obligations is limited
to the company’s corporate assets.
Representative Office
Foreign companies intending to establish a representative office must & Branch comply with
certain formalities at local Company Registries. The following information should be filed:
corporate details of the representative office, personal details of the individual(s) accountable
for the representative office, together with the responsible Company Registry. Failing to
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comply, the individual(s) accountable for the representative office are personally liable,
without limitation, for the office’s obligations.
Branch Office Foreign investors not intending to incorporate an Italian subsidiary may
conduct their business in Italy through a branch office. It’s considered as a
permanent establishment and is consequently subject to corporate
income tax and must keep proper books and file its VAT returns as well as the annual
financing statement of the parent company
including profit and loss accounts.
The following documents are required to register a branch office in Italy:
a) Certified copy of the deed of incorporation and by-laws of the parent
company
b) Certificate of good standing of the parent company
c) Application for the VAT number of the branch and for the tax code
number of the legal representative of the parent company and of the
manager
d) Registration of the deed of deposit in an official foreign Companies’ Register of Chamber
of Commerce.
Types of Companies
Joint Stock Company (Società per Azioni - SpA)
An SpA has autonomous legal personality and is therefore a separate entity from its
shareholders. It has its own assets and resources, on which its creditors must rely completely
for redress. The participation of stockholders is represented by shares of stock.
Incorporation
One may establish an SpA either by executing a contract or by the unilateral act of a single
shareholder. An SpA can also be participated by partnerships (provided they are not informal
partnerships) or by other SpAs. The minimum equity capital required is 120,000 Euro. There
is no limit on the company’s lifetime.
A summary of the main steps:
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• Executing contract (or unilateral act) with articles of association and bylaws, in the form of
a notarial public deed
• Full underwriting of the equity capital
• Bank deposit of one-fourth of the financial contribution or the entire contribution in case of
unilateral formation
• Checking for special legal requirements, e.g. Government authorization for activities
envisaged by the company
• Checking with the Notary Public about the essential conditions, required by law, to form the
company
• Filing by the Notary Public of all documentation with the Company Registry within 20 days
of the signing of the articles of association. Contributions can be in money, in kind and/or by
assignment of credits, of which, the latter two must be paid in full when underwriting the
articles of association.
The Board or the Managing Director represents the company vis-à-vis third parties. Unless
bylaws provide otherwise, a majority of the Board’s members is necessary to validate Board
meetings, and resolutions require approving by a majority of attending members. The bylaws
of listed companies which have adopted the ordinary model should provide that members of
the Board of Directors are elected on the basis of candidates list and that at least one member
is elected amongst the candidates of the list presented by minority shareholders. Furthermore,
in case the Board of Directors is composed by more than seven members, at least one
member should meet the integrity, experience and independence requirements provided for
the members of the Board of Statutory Auditors. In listed companies which have adopted the
one tier model candidate elected by minority shareholders should meet the integrity,
experience and independence requirements provided for the members of the Board of
Statutory Auditors. The election of the members of management bodies of listed companies
shall occur by secret ballot. Directors hold office for three financial years. The directorship
may end by natural expiry, resignation, removal, death or personal inability (e.g.
ineligibility).
Directors are jointly liable for the company if they:
• Act outside the duty of diligence imposed by law and the company’s bylaws
• Fail to supervise or intervene where necessary in the actions of their subordinates
• Fail to avoid prejudices to the company
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• Fail to comply with the duties imposed by law.
Limited Liability Company
(Società a Responsabilità Limitata - Srl)
Quotas represent the extent of member participation. The Srl is accountable with its own
assets for the obligations it undertakes. The minimum capital required is 10,000 Euro.
Incorporation
The Srl can have unlimited duration. Contributions include money and, depending on the
articles of association, any items of economic value including services supplied by quota
holders, if adequately guaranteed. Upon formation, each quota holder shall pay in one-fourth
of his/her money contribution and the full premium. The articles of association and the
bylaws shall be in the form of notarial deeds.
LIMITED LIABILITY COMPANY WITH SOLE QUOTA HOLDER
A sole quota holder Srl requires a unilateral deed, full payment of the capital contribution,
and certain disclosure requirements. Should a sole quota holder acquire an existing, non-sole
quota holder Srl, he/she must disclose publicly the changes of quota holders and cover
outstanding contributions. During insolvency, sole quota holders are liable without limitation
if contributions remain unpaid or disclosure requirements about them are incomplete.
Other Types of Companies
General Partnership
All members of a Società in nome collettivo (SNC) are jointly and severally (Società in nome
collettivo) liable for the obligations assumed by the company. Nonetheless, creditors of the
SNC cannot claim payments from the members until after all remedies against the SNC have
been exhausted. The SNC, although it is not a legal person (it is not incorporated), can to
certain extents be regarded as an autonomous entity distinguished from its members.
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Limited Partnership
Limited partnership both having unlimited liability for the partners.
(Società in accomandita General members are jointly and severally liable without limits for
the semplice) obligations of the partnership whilst silent partners are only liable to the extent
of their contributions. The business name must consist of at least the name of a general
partner, and a mention of the limited partnership status. The rules governing the general
partnership are applicable to the limited partnership insofar as they are compatible with this
model. The article of association must include the names of the general members as well as
those of the silent partners.
Partnership Limited by Shares
There are two categories of members: general partners, who are liable (Società in
accomandita jointly and severally liable without limitation for the partnership obligations, per
azioni) and special partners who are liable within the limit of subscribed capital. Creditors of
the Società in accomandita per azioni (SAPA) cannot claim payments from the general
partners until after all remedies against the company have been exhausted. Participations are
represented by shares. General partners are directors by operation of law and are subject to
the same duties as the directors of an SpA. Rules concerning the Shareholders Meeting and
the Board of Statutory Auditors of the SpA are also applicable, to the extent compatible, to
the SAPA.
Latvia
In the territory of Latvia, merchants are required to register their activity. All changes in basic
company documents are registered and other actions set by laws and regulations are
performed by the Republic of Latvia Register of Enterprises (Commercial Register), which is
an administrative state authority. A merchant is entitled to freely choose its type of business
activity. Certain types of business activity may require licenses or permits (for example,
banking, insurance, public utilities, freight transportation and passenger transportation) issued
by various authorities (for example, the Financial and Capital Market Commission). In
certain limited cases the law may set restrictions on foreign investors (for example, foreign
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investors except for investors from EU member states and associated countries cannot own
more than 49% of the share capital of companies organizing lottery and gambling
operations.)
Local representation of foreign companies
Foreign merchants can choose to perform business activity in Latvia in the following
forms:
1) registration of a branch;
A branch is an organizationally independent part of a company, which is territorially
or otherwise separated from the head office and which systematically performs
business activity in the name of the company. The branch of a merchant can have its own
name (firm name), containing the name of the merchant, the name of the branch or reference
to its location and the word “branch”. A branch is not a legal person and the merchant is
responsible for liabilities of the branch. The branch is registered with the Commercial
Register. The application for registration with the Commercial Register must designate a
person that is authorized to represent the merchant in all activities related to the branch and
the scope of such authorization. In order to register a branch of a foreign merchant with the
Commercial Register, a state fee in the amount of LVL 20 must be paid in addition to a fee of
LVL 16 for publication of the registration of the branch in the official newspaper. As a
general rule, the Commercial Register reviews an application for the registration of a branch
of a foreign merchant within three business days. However in certain cases the review of the
application can take up to 30 days. It is also possible for merchants registered in an EU
member state to provide services in Latvia without opening a branch in accordance with the
principle of freedom to provide services.
2) Establishment of a subsidiary (controlled company)
A foreign merchant can also open a representative office in Latvia. A representative office is
not a legal person and it does not have the right to perform business activity in Latvia. A
representative office is normally understood to act as a distributor of information or
“mailbox” for communication between the non-resident merchant and its clients in Latvia. If
a merchant opens an office in Latvia, which it calls a representative office, but which actually
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performs business activity, then such office must be registered as a branch or a subsidiary
should be founded.
An individual merchant (sole proprietor) is a natural person, registered as a merchant with
the Commercial Register. A person may register as an individual merchant at anytime but is
required to register if annual turnover from economic activity exceeds the amount of LVL
200,000 (approximately EUR 284,574), or if annual turnover from this activity exceeds the
amount of LVL 20,000 (approximately EUR 28,457) and the individual merchant
concurrently employs more than five employees.
A general partnership and limited partnership do not have the status of a legal person,
however they have legal capacity and can obtain rights and undertake liabilities, acquire title
or other property rights, and act as a plaintiff or defendant in court.
A limited liability company and joint stock company are capital companies that are legal
persons. Liability is limited to shareholders’ investments in the capital of the company.
Creditors of a capital company cannot bring claims against the shareholders. There is an
exception if a capital company is founded as a company with supplementary liability, where
at least one shareholder is personally liable for the company’s obligations with his/her entire
property. The procedure to register a capital company is more complicated than establishing a
partnership, requiring additional documents to be submitted to the Commercial Register. A
limited liability company is the most common type of business form used in Latvia.
Lithuania
The registration of undertakings is regulated by the Regulation of the Register of Legal
Entities, laws on undertakings of various legal forms (types) as well as other legislation. On 1
January 2004, the Register of Legal Entities (hereinafter - Register) was established to serve
the purpose of registering legal entities, collecting, systematizing, filing and providing
information and data on legal entities. The Register was established to simplify registration,
to ensure publicity of the data and documents and to guarantee adequate protection of the
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interests of third parties. The Register Centre was given the authority to administer the
Register.
Once a decision is made to establish a company and select its most suitable legal form (type),
the company shall be registered with the Register. From the date of registration, the company
becomes a legal entity, receives rights and obligations, may take legal action or be taken to
court. Therefore, from the date of registration, the company may engage in economic-
commercial activities, conclude transactions, etc. Different types of incorporation documents
shall be submitted for the registration of companies of various legal forms; the incorporation
procedure itself is also different.
There are several administrative bodies that are entrusted with the registration of enterprises,
although registration is but one of their functions.
All enterprises with foreign capital invested, as well as branches and representative offices of
foreign enterprises, are registered with the Ministry of Economy of the Republic of Lithuania.
Permission to commence commercial activities must be received from the local municipal
authorities prior to registration. Firm names are registered with the State Patent Bureau.
However, the newly enacted Civil Code (effective from 1 July 2001) provides that a separate
registration of the trade names will not be required when the new Register of Legal Persons is
established and certain provisions of the Civil Code regulating the names of the legal persons
come into force. Other administrative bodies are responsible for specialized sectors. For
example, the Bank of Lithuania is responsible for the registration of commercial banks,
subsidiaries of foreign banks and representative offices of Lithuanian and foreign banks.
Local Representation of Foreign Companies
Representative Offices
A foreign company may operate in the Republic of Lithuania through a representative office
or a branch. The representative office of a foreign enterprise (company) may be established
for representational and promotional purposes only and may not engage in commercial -
economic activities. The representative office does not have the capacity of a legal person
and therefore may not conduct independent commercial activity. It may not have a settlement
account, but may open an account solely to cover the necessary expenses of the office. The
representative office is not required to keep a separate balance sheet. The foreign parent
enterprise is liable to the extent of all of its assets for the obligations of its representative
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office. The representative office may perform various actions that are within the competence
of the managing body of a representative office and are set forth in its regulations. The
regulations of a representative office are approved by the authorized body of the enterprise
which has established the representative office. The representative office may enter into
transactions on behalf of the foreign parent only for the purpose of meeting the needs of the
representative office and within the scope of the powers granted to it. Export and import
operations may be performed between the representative office and its foreign parent or the
entities that are related to such foreign parent. At least one of the persons authorized to act on
behalf of a representative office must reside in Lithuania.
Representative offices of foreign enterprises are registered with the Ministry of Economy.
After the submission of an application and related documents, the Ministry of Economy must
decide on registration within 15 days. The representative office is considered established as
of the date of its registration. A foreign entity, that has established a representative office in
Lithuania, is required to provide the Ministry of Economy with its annual financial statements
(including the consolidated statements, if any), if such statements are mandatory according to
the legal requirements applicable to such foreign entity. The foreign entity also has to inform
the Ministry of Economy about changes in the documents, information, and legal status of
such entity.
Branches
Branches, as a form of representation of foreign enterprises, have been introduced in
Lithuania since 22 December 1999 when respective amendments to the Law on Enterprises
took effect. The provisions of the Civil Code also regulate the status of the branches of
foreign enterprises.
A branch of a foreign enterprise is a division of a foreign enterprise which has its seat in
Lithuania. The branch of a foreign enterprise may engage in commercial - economic
activities, enter into transactions and assume obligations only within the scope of the powers
granted by the foreign parent enterprise. The foreign parent is liable to the extent of all of its
assets for the obligations of its branch, and the branch is liable with all of its assets for the
obligations of the foreign parent. The branch does not have the capacity of a legal person.
The activities of the branch are organized and carried out by the manager of the branch who
has the right to represent the branch in relations with third parties only upon registration of
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the branch. At least one of the persons authorized to act on behalf of the branch must reside
in Lithuania.
The registration and information filing requirements described above in relation to
representative offices are similar to those applicable to the foreign companies' branches
registered in Lithuania.
Corporate Legal Entities
According to the Lithuanian law, the following eight types of enterprises may be established:
(1) a personal enterprise; (2) a general partnership; (3) a limited partnership; (4) a public or
private stock company or an investment company; (5) a State enterprise; (6) a municipal
enterprise; (7) an agricultural company; or (8) a cooperative company. Enterprises of all types
are considered to be legal persons.
A personal enterprise may be owned by a single individual or, jointly and equally, by
spouses. Non-profit organizations, which have the capacity of a legal person and do not
engage in production activity, may also own personal enterprises. The owner's liability for the
obligations of its personal enterprise is unlimited and applies to all "personal property" (e.g. a
personal house or other property not utilized by the personal enterprise). The owner remains
liable for the obligations of its personal enterprise even after its liquidation.
General partnerships are enterprises with unlimited liability established on the basis of a
partnership or joint venture agreement between several individuals and/or legal persons. The
general partnership is created through transfer of property from individual ownership to co-
ownership within the partnership, with the purpose of conducting business activities under a
common name of the firm. All partners of a general partnership are jointly and severally
liable for the obligations of the general partnership, including with their personal property.
The partners remain liable even after the liquidation of the general partnership. The general
partnership, however, is not liable for the obligations of its partners if such obligations arise
in their activity unrelated to the activities of the general partnership.
A limited partnership consists of general and limited partners. The difference between limited
and general partnerships lies mainly in the degree of liability of their respective partners.
General partners of the limited partnership have unlimited joint and several liability, identical
to the unlimited liability of the partners of a general partnership as explained above. In
contrast, limited partners are liable only to the extent of their contributions to the partnership
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under the agreement. The limited partnership must have at least one general and one limited
partner.
Under the Company Law, public and private stock companies are enterprises with authorized
capital divided into shares. Public and private companies may be formed for any type of
business not prohibited by the laws of Lithuania. Shareholders of stock companies enjoy
limited liability. The company is liable for its obligations only to the extent of its assets. The
shareholders are liable only to the extent of the amounts due to be paid for the shares
subscribed. However, the Civil Code introduces a provision that in the case when a company
is unable to perform its obligations due to unfair actions of a shareholder, the shareholder
may incur subsidiary liability for the obligations of the company with its personal property.
An investment company is a public company providing a specific financial holding service. A
special law, the law on Investment Companies, regulates the formation and activities of
investment companies.
Incorporation of Enterprises
All enterprises, with limited exceptions, must record their trade names with the State Patent
Bureau prior to their registration. Temporary protection of a registered trade name is given
for a period of one year before the registration of the enterprise itself. The registered name of
a registered enterprise is given protection during the active life of the enterprise and for an
additional one year after termination of its activities. When the new Register of Legal Persons
is established and certain provisions of the Civil Code regulating the names of legal persons
come into force, trade names will not require separate registration and shall be protected from
the date of submission of the application to register a legal person with the register.
Incorporators of the legal person will then be able to apply for the temporary protection (6-
month) of the name of the legal person under formation.
All enterprises with foreign capital are registered with the Ministry of Economy. Prior to
registration with the Ministry, the incorporators must obtain consent from the local municipal
authorities for the stated activity of the enterprise. The municipal permission is valid for up to
1 year.
Depending on the type of an enterprise, other actions must also be taken prior to the
registration: in public companies, a public offering of shares should be registered with the
Securities Commission; the initial contributions to the authorized capital should be paid to the
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company's accumulative account (a temporary account opened only for the purposes of
collecting the initial capital); a permission of the owner of rented premises, at which the
enterprise will be registered, should be obtained; in public companies, the incorporation
reports should be prepared and audited; the statutory general meeting of shareholders of a
founded company should be convened, the Articles of Association should be adopted and
managing bodies elected; etc.
Group Enterprises
Lithuanian law provides for the establishment of three types of group enterprises: concerns,
consortia and associations.
A concern is an economic structure that unites independent companies related by common
interests, agreements on patents and licenses, joint scientific research and production
technology programs or other close co-operation. The concern is established through
acquisition of shares in other companies. The largest member company or a special holding
company is responsible for the management of the concern.
Consortia are temporary, voluntary groups of enterprises brought together to implement large
projects and programs or resolve specific issues. The consortium may be established as a
partnership or by a joint-venture agreement.
An association of enterprises is a voluntary group of enterprises that represents the economic
interests of its members, co-ordinates and executes matters brought to its attention by the
membership. The following forms of associations are recognized: an association of
enterprises; and a chamber of industry and commerce.
The association is a legal person, has its Articles of Association and is registered with the
Register of Enterprises. The association has its own assets derived from income generated
from its activities as well as other resources. The association may use its assets and financial
resources to further the aims established in its Articles of Association, but income generated
by the association may not be distributed to its members.
Enterprises may form groups only in compliance with the market concentration regulations
established by the Law on Competition.
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Luxembourg
The Act of 10 August 1915 on commercial companies as amended provides for six forms of
commercial companies, each with a legal personality and forming an entity separate from that
of the shareholders. The choice of one of these six forms depends both on financial
considerations (credibility for example) and legal considerations (for example the extent of
shareholders’ liability or the transferability of equity interests).
Luxembourg law provides for the following forms of commercial companies:
- a partnership (société en nom collectif),
- a limited partnership (société en commandite simple),
- a public company (société anonyme),
- a partnership limited by shares (société en commandite par actions) 17,
- a limited liability company (société à responsabilité limitée),
- a cooperative company (société coopérative),
- European company (société européenne).
The most widely used forms of companies are the public company and the limited liability
company. The company’s name must be different from that of any other existing company.
A public company (société anonyme or “SA”)
A public company is a company which shall be described by a particular corporate
denomination (dénomination particulière) or by the designation of the object of its
undertakings. Its share capital is divided into shares and its shareholders are only liable up to
the amount of their contributions to the company. It must be formed by means of a notarized
deed disclosed in full.
The promoters of the company may choose between a one-tier structure (“structure moniste”)
and two-tier structure (“structure dualiste”):
- one-tier structure
The company is managed by a board of directors (conseil d’administration) with at least three
members whose term of office may not exceed six years. In a public company with a sole
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shareholder a single person may exercise the powers of the board of directors. The board of
directors has the power to take any action necessary or useful to realize the company’s
objects, except those reserved by law or by the charter for general meetings of the
shareholders.
The day-to-day management of the company and the power to represent the company with
respect thereto may be delegated to one or more directors, officers, managers or agents who
may but need not be shareholders, acting either individually or jointly.
- two-folded organization:
The management board (“directoire”) is in charge of the management of the company,
whereas the supervisory board (“conseil de surveillance”) is responsible for the supervision
of said management. The supervisory board is prohibited to carry out any act of management.
The members of the supervisory board are appointed by the general meeting of shareholders,
whereas the members of the management board are appointed by the supervisory board,
unless the charter provides to the contrary. The same goes for their removal. The number of
members of the management board is either determined by the charter, or by the supervisory
board. The management board must be composed of at least two persons. In public
companies with one single shareholder but with a two-folded organization and in public
companies with a two-folded system with a share capital less than € 500,000 one single
person may exercise the powers of the management board. The supervisory board is
composed of at least three members, unless in a public company with one single shareholder,
in which case one single person may exercise the powers of the supervisory board.
A limited liability company (société à responsabilité limitée or “S.A.R.L.”)
A limited liability company is one in which the shareholders are only liable up to the amount
of their contributions to the company and whose equity interests may only be assigned in
accordance with the provisions of the law. The certificate of incorporation must take the form
of a notarized deed disclosed in full. The capital must be at least EUR 12,394.68, fully
subscribed for and paid up in full.
A limited liability company with a sole equity holder (société à responsabilité limitée
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unipersonnelle )
An Act of 28 December 1992 allows companies with a sole equity holder to be created that
are generally subject to the same rules as a limited liability company. A limited liability
company can also be converted during its life to a “société à responsabilité unipersonnelle” in
the event one or several equity holders leave the company such that there is only one equity
holder. A société à responsabilité unipersonnelle operates in exactly the same way as a
limited liability company, apart from the fact that the sole equity holder exercises the powers
given to general meetings of equity holders.
A partnership (société en nom collectif or “S.E.N.C.”)
A partnership is formed by two or several persons, natural or legal persons, under a business
name. All the partners are personally, jointly and severally liable for the partnership’s debts,
with unlimited liability. It is formed by a private deed or by a notarized deed. Excerpts from
the certificate of incorporation are disclosed. This form of company is traditionally used in
small and medium-sized family enterprises that are commercial or involve skilled crafts. It is
subject to simple rules which are not expensive to implement. There are almost no
restrictions on the contents of the charter. As the partners are jointly and several liable for the
partnership’s debts, with unlimited liability, on their private assets, the Act of 10 August
1915 on commercial companies as amended does not lay down a minimum amount for the
capital.
A limited partnership (société en commandite simple or “S.E.C.S.”)
A limited partnership is created under a business name by one or several partners who are
jointly and severally liable, with unlimited liability (ordinary partners) with one or several
other partners (silent partners), who are only liable up to the amount of their stake (limited
partners). It is formed by a private deed or by a notarized deed. Excerpts from the certificate
of incorporation are disclosed. This type of company is used for all kinds of business. As
ordinary partners are jointly and several liable for the partnership’s debts, with unlimited
liability, on their private assets, the law does not lay down a minimum amount for the capital.
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A cooperative company (société coopérative or “S.C.”)
A cooperative company is a company which does not exist under a business name and which
is made up of members whose number and contributions are variable and whose shares may
not be transferred to third parties. The members freely determine their liability in the Charter.
Liability may therefore be joint and several or not, unlimited or not. It is formed by a private
deed or by a notarized deed. However, the certificate of incorporation must be disclosed in
full. In practice, this form is usually used by a group of professionals who are active in the
same sector of activity or similar sectors of activity to enable them to pool some of their
activities, for example to set up a central purchasing or sales group. The law does not provide
for a minimum amount of capital. The certificate of incorporation must state how the capital
has been formed and the minimum amount required for immediate subscription.
Alongside these six types of commercial companies, there are other forms of associations and
groups, that is:
- a holding company (holding),
- a venture capital investment vehicle (société d’investissement en capital risque or
“SICAR”),
- a branch (succursale),
- an economic interest grouping (groupement d’intérêt économique) and a European
economic interest grouping (groupement européen
d’intérêt économique),
- a non-commercial company (société civile),
- a temporary partnership (association momentanée),
- a joint venture (association en participation).
Malta
The Limited Liability Company
Maltese company law is essentially regulated by the Companies Act, 1995 (Chapter 386 of
the Laws of Malta) (the Act) which, as stated earlier, is similar in many respects to the British
Companies Act, 1985 and the Insolvency Act, 1986 although its provisions have been
harmonized with applicable EU Directives on the subject. The Act totally revised the earlier
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Commercial Partnerships Ordinance, 1962 (Chapter 168). Under the Act, the official
statutory body which regulates all legal aspects of companies and their registration,
maintenance, winding up and legal compliance is the Malta Registry of Companies (the
Companies Registry) within the overarching structure of the Malta Financial Services
Authority (the MFSA).
Legal Personality
The most commonly used and by far most regulated corporate legal entity under our law is
the limited liability company. A limited liability company can be either private or public;
while private companies may be either exempt or non-exempt. Limited liability companies
may also take the form of an investment company with variable share capital (SICAV) or an
investment company with fixed share capital (INVCO). Apart from the limited liability
company, whether public or private, the other commercial legal entities include:
• an unlimited partnership (en non collectif);
• a partnership having both limited and unlimited partners, also called limited partnerships (en
commandite); and
• a public corporation established with separate legal personality by virtue of a specific Act of
Parliament (typically used by the Government for the purposes of conducting the activities of
a public service utility or authority). Overseas branches of a foreign company in Malta may
also be added to the list of corporate structures in a general sense, but these do not have a
legal personality separate from the foreign company of which they are a branch nor are such
branches re-incorporated in Malta.
Any person authorized by the shareholders may register a company. The actual delivery to
and registration of the company documents with the Company Registry may be made by one
of the subscribers to the Memorandum and Articles of Association or the authorized agent of
such subscriber. There are no restrictions (other than the general rules on legal capacity) as to
who can act as the promoter of a company. It is, however, usual for a company to be
registered through lawyers or accountants. Certain company activities or objects may
necessitate licensing by government or other competent licensing authority in Malta (e.g.
appropriate licenses are required for banking, financial and investment services, gaming
activities etc.).
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If the Foreign Entity carries on any activities which are licensable in Malta (namely banking,
investment services, insurance, stock-broking, and acting as a nominee (fiduciary or
mandatory) or trustee to hold shares in Maltese companies), and the said activities are also
licensable in the Foreign Country of incorporation, then, it must provide evidence of the
consent of the competent authorities of that Foreign Country to the continuation of the
Foreign Entity in Malta (to be translated into English if the original is not in that language). If
the Foreign Entity is not licensable in the Foreign Country but its activities would be
licensable in Malta, then a licence must be obtained in Malta before it can commence
operations.
The Netherlands
Has abolished capital taxes. It spends 11% of its budget to regulate business. If you decide to
set up a business, you will need to register with the Chamber of Commerce.
Governmental Participation
The Dutch economy is a market-based economy, and the government will not as a rule seek
to participate in the ownership or operation of the entity. However, the government does own,
or participate in, companies which render services to the, general public which the
government deems essential (such as public transport and energy). The investor's potential
liability depends on the legal form of the entity; see hereafter. There are no restrictions on
capitalization as such.
Joint Ventures
Joint ventures are very common in the Netherlands. Typically, a joint venture company will
be a BV. Dutch law does not impose rules on the nationality or residence of shareholders and
managers. In order to create sufficient substance, it may be advisable for tax reasons that the
majority of the managers of a Dutch company are Dutch nationals or Dutch residents.
Limited Liability Companies
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Dutch law provides for two limited liability companies:
(i) a private company with limited liability ("besloten vennootschap met beperkte
aansprakelijkheid");
(ii) a public limited company ("naamloze vennootschap").
Both the BV. and the N.V. are legal entities which are incorporated by notarial deed. The
Dutch Ministry of Justice checks the credentials of both the managers and incorporators of
the company prior to each incorporation. A "declaration of no objections" from the Ministry
of Justice is required in order to incorporate a company. The procedure with the Ministry of
Justice typically takes one or two weeks, but may be expedited if certain criteria (e.g. size)
are met. Following the incorporation, a N.V. or BV. must be registered at the local Chamber
of Commerce.
Partnerships, General or Limited
Dutch law provides for several types of partnerships:
(i) a "maatschap": a partnership used by partners to jointly exercise a profession (such as the
medical or legal profession);
(ii) a "vennootschap onder firma": a partnership used by partners to jointly set up a business;
(iii) a "commanditaire vennootschap", entered into by one or several "managing partners" and
one or several "silent partners".
None of these partnerships is a legal entity under current Dutch law. The investor's potential
liability is as follows:
(iv) maatschap: each of the partners is liable for equal parts;
(v) vennootschap onder firma: all partners are jointly and severally liable;
(vi) commanditaire vennootschap: the "general partners" are jointly and severally liable; the
"silent partners" are only liable up to the amount of their financial contribution to the
partnership (i.e. partners who contribute money, but who are not involved with the business
of the partnership). A change to the law on partnerships is pending, which includes the
possibility for a partnership to opt for the status of legal entity. This, however, does not
change the liability position. There are no requirements as to residence or nationality.
Partnerships, Undisclosed
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Dutch law provides for an undisclosed partnership ("stille maatschap"). Liability of the
partners: each partner is liable for his own actions; there is no joint and/or
several liability. There are no requirements as to residence or
nationality.
Sole Proprietorships
An individual can set up a business as a sole proprietor. Such a business must be registered
with the local Chamber of Commerce.
Subsidiaries/Branches/Representative Offices
An investor can establish a branch, subsidiary or representative office. The business may be
structured as a "BV."; see above under 3. A branch office, also if not set up as a subsidiary,
needs to be registered at the local Chamber of Commerce. The investor will remain liable for
the acts of the branch office, unless it has been incorporated as a subsidiary.
Trust and Other Fiduciary Entities
Dutch law does not recognize a legal institution directly equivalent to the common law trust.
The Netherlands is, however, party to the The Hague Trusts Convention and as such shall
recognize trusts governed by foreign law, also with respect to assets situated in the
Netherlands. If, however, all facts are connected solely with the Netherlands, except for the
domicile of the trustee and the governing law of the trust, the recognition of the trust can be
refused. The Hague Trusts Convention also provides for rules that prevent that the trust is
used in nontrust countries to circumvent mandatory rules in the field of succession law,
securities law and such.
Poland
The principal legal act governing business activities in Poland is the Economic Freedom Act
of 2nd July, 2004. It regulates the conduct, running and closure of business activities in
Poland, as well as the tasks of public administration in this domain. Foreign persons1 from
the European Union and the European Free Trade Association zones belonging to the
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European Economic Area (EEA) may establish and conduct business under the same rules as
those which apply to Polish entrepreneurs.
The same rules also apply to foreigners living outside the EU and the EEA who:
- have received a permit to settle in Poland;
- have a residence permission or the status of a refugee granted by the Republic of Poland, or
- enjoy temporary protection on the territory of the Republic of Poland.
Unless international agreements state otherwise, foreign persons other than those indicated
above have the right to establish and conduct business activities only in the form of:
- a limited partnership;
- a limited joint-stock partnership;
- a limited liability company;
- a joint-stock company.
Such foreigners also have the right to enter into the types of partnerships and companies
listed above, as well as acquire shares in them. Furthermore, foreign entrepreneurs may
conduct business activities in the form of a branch office, or they may establish representative
offices in Poland. Work is currently in progress to amend the laws governing starting up
business in Poland. The changes in question are envisaged to reduce the number of
formalities required to establish a company. Parliamentary discussions are currently in
progress on the draft amendments to the applicable laws.
A limited liability company (sp. z o.o.) is the basic type of company in Poland. A sp. z o. o.
has a separate legal personality from its shareholders, which means that when acting
through its governing bodies (mainly the management board), it can acquire rights and incur
liabilities on its own behalf. A sp. z o. o. has capital which is created from shareholder
contributions. Shareholders of a sp. z o.o. are not liable for liabilities of the company.
Management of a sp. z o.o. is less formal than that of a joint-stock company. It is, therefore, a
significantly more popular form of conducting business than a joint-stock company. Such a
company is established in order to conduct all activities permitted by law, by way of
notarized Articles of Association which specify:
- the name of the company and its registered office;
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- the description of the nature of business which must be specified in accordance with the
Polish Classification of Activities (Polska Klasyfikacja Dzia³alnooeci, PKD);
- the amount of share capital;
- the number of shares that one shareholder can hold;
- the number and nominal value of the shares acquired by each of the shareholders;
- the duration of the company (if limited).
Both individuals and legal entities may be founders. A limited liability company may also be
formed by a single shareholder, but it may not be established solely by another single-
shareholder limited liability company. Shareholders are not liable for the company’s
liabilities. A limited liability company acquires legal personality from its registration in the
National Court Register and is represented by its Management Board. However, it comes into
existence on the implementation of the company’s deeds, and, although it does not have a
legal personality, it can start operating before its entry into the National Court Register as an
“entity in organization”. If the company generates a profit after the annual balance sheet has
been approved and the due taxes have been paid, a foreign shareholder is permitted to transfer
the entire amount of the profit due to him abroad. Contributions to a limited liability company
may be made in cash or in kind.
A joint-stock company has a separate legal personality from its stockholders, which means
that when acting through its governing bodies (mainly the management board) it can acquire
rights and incur liabilities in its own behalf. A joint-stock company has capital which is
created from stockholder contributions. Stockholders of a joint-stock company are not liable
for the company’s liabilities. Management of a joint-stock company is more formal than that
of a limited liability company. Therefore, this type of company is used businesses where this
form is required by law (e.g., a bank, or insurance company), or where the company is
planning floatation on capital markets.
Civil partnership
A civil partnership is the most basic type of partnership. It is generally used for small scale
businesses. A civil partnership may be established under the regulations of the Civil Code by
at least two private individuals or legal entities. An important feature is the lack of legal
personality and the inability to act in its own name in the economic exchange of goods and
services. The partners are jointly and severally liable for the partnership’s liabilities. The
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income of a civil partnership is subject to personal income tax. The partners in civil
partnerships must be registered in the Business Activity Register. The civil partnership must
be transformed into a registered partnership and registered at the National Court Register
when its annual income in two consecutive financial years amounts to at least EUR 800,000.
The partners in the partnership are obliged to file a motion with the National Court Register
within three months of the end of the second financial year.
Registered partnership
A registered partnership is a personal partnership, established under the regulations of the
Code of Commercial Partnerships and Companies to conduct economic activity on a larger
scale than that of a civil partnership. It is subject to registration in the Register of
Entrepreneurs at the National Court Register. Despite the lack of legal personality, a
registered partnership has the right to act in its own name in the economic exchange of goods
and services. Every partner has unlimited liability for the partnership’s liabilities.
Limited partnership
The main feature of a limited partnership is that at least one partner has unlimited liability for
the partnership’s liabilities (General Partner), while others are only liable up to the amount
specified in the partnership agreement (Limited Partners). The business name of a limited
partnership must include the names, or business names of one or more general partners and
the additional designation of “spó³ka komandytowa” (“limited partnership”). The name of a
limited partner may not be included in the partnership’s business name. If it is included in the
partnership’s business name, this limited partner will be liable to third parties as if he were
the general partner. A limited partnership has the right to act in its own name in the economic
exchange of goods and services despite the lack of legal personality. A notarial deed is
required to establish a limited partnership. A limited partnership comes into existence at the
time it is entered into the National Court Register. An advantage of this form of business
activity is that it is less formal than operating a company. A negative side is that the
partnership does not have separate legal personality and the liability of the partners is
unlimited.
Professional partnership
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A professional partnership is a partnership established by partners for the purpose of
working in a profession. A partner may only be a natural person who is authorized to
practice in a ‘profession’, such as an attorney, a pharmacist, an architect, a building engineer,
a chartered accountant, an insurance broker, a tax adviser, an auditor, a doctor, a dentist, a
veterinary surgeon, a notary public, a nurse, a midwife, a legal adviser, a patent agent, a
property valuer, a sworn translator or a psychologist. The business name of a professional
partnership must include the name of at least one partner, the additional designation “i
partner” (“and partner”) or “i partnerzy” (“and partners”) or “spó³ka partnerska”
(“professional partnership”) and a specification of the profession practiced in the partnership.
A notarial deed is required to establish a professional partnership. The professional
partnership comes into being at the time it is entered into the National Court Register. An
attractive feature of this form of business is that one partner is not liable for liabilities
incurred by the other partners in the course of professional activities. A negative side is that
the partnership does not have separate legal personality.
Several countries in Europe aligned their regulations with EU directives. Poland, for
example, replaced its securities law with 4 new acts that more closely track EU regulations.
Among other things, shareholders holding 5% of a company’s shares can now ask external
auditors to investigate suspicious business activities. Poland also simplified its stock market
listing requirements. In response, 27 new companies listed in 2005, infusing more than $1.5
billion in new capital into the Polish market. In comparison, only 3 new companies listed in
2004-for $212 million.
Portugal
Portugal was the top reformer in business entry in 2005-06. In Portugal, now one of the
fastest economies for startup, an entrepreneur using the new fast-track service simply chooses
a preapproved name from the registry’s website, then goes to the one-stop shop to register the
company. The registry deals with tax, social security and labor registration and publishes the
incorporation notice on the Ministry of Justice website. Standard articles of association make
the application fast and error-free—with no need for a notary. More and more businesses are
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taking advantage of the new service. Within a year the number of companies using it rose
from 12 a day to 75.
Reformers who want to start simple could consider administrative reforms first: cut
unnecessary procedures, create a one-stop shop for business registration, introduce standard
application forms and a single business identification number and move any tax payments to
after the business has started operations. Portugal followed this track and reformed in 5
months. As soon as the new government came into power in March 2005, it formed a
working group in the Ministry of Justice. The aim was to reduce the number of approvals and
government visits in business start-up as much as possible.
The two most common forms of business entity used by foreign investors to conduct business
in Portugal are:
♦ Stock companies (sociedade anónima) (SAs).
♦ Limited liability companies (sociedades por quotas) (LDAs).
There are five different types of companies in Portugal, and every company which is
incorporated in Portugal must conform to one of these types These five different types of
companies are the following: the corporation (a company limited by shares), the limited
liability company (by quotas), the general partnership (sociedade em nome colectivo ), the
simple commandite, or limited liability partnership (sociedade em comandita simples) and the
stock commandite, or partnership limited by shares (sociedade em comandita por acções).
The Corporation (company limited by shares)
A Corporation (Sociedade Anónima or SA) is one of the two most common investment
vehicles used in Portugal in commercial transactions. It provides for shareholders’ liability to
be limited to the amount of their investment (represented by the number of shares subscribed)
in the corporation – their participation in its share capital – and for that participation to
qualify as negotiable securities. Shares in an S.A. may be listed on the Lisbon Stock
Exchange (Bolsa de Valores de Lisboa).
The Limited Liability Company (by quotas)
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The limited liability Company (Sociedade por Quotas or LDA) has traditionally been the
investment vehicle used in Portugal for small businesses, usually of a family nature. Quota -
holders are jointly and severally liable for the paying up of the company’s entire quota-
capital, but their liability extends no further than that. This type of business entity does not
allow participations to be represented by shares and thus may not be listed on the Lisbon
Stock Exchange. A limited liability company with a sole quota -holder (Sociedade
Unipessoal por Quotas or SUQ) has basically the same regime as a regular limited liability
company but with certain particularities with respect to: (i) the relationship between the sole
quota-holder and the company and the possible enlarged liability of the former, and (ii) the
formalities required for its incorporation.
The General Partnership (Sociedade em Nome Colectivo)
The firm’s name must end with the phrase e Companhia or & C.ia , or another collective
term, indicating the fact that the partners’ liability is unlimited. Contributions of labor or
services are allowed. This type of company is frequently used by professional individuals
who are associated in firms, such as lawyers, accountants and auditors, because the law so
requires. The inter vivos transfer of a partner’s participation can only be effected with the
express consent of the other partners. Unanimous approval is also required, inter alia, for the
admission of a new partner.
The Simple Commandite, or Limited Liability Partnership (Sociedade
em Comandita Simples)
The simple commandite is a hybrid partnership and corporation in which, at least, one of the
partners must have unlimited liability (the full partner, or sócio comanditado ), whereas the
liability of the other partners (the dormant partners, or sócios comanditários) is limited to the
amount of capital each of them has subscribed. The full partner may itself be a corporation or
a limited liability company. Only the full partners can be directors of the company. The
combination of these two features may transform this type of company into an instrument to
exercise the control/management power within a company. The company’s name must
contain the words em Comandita or & Comandita .
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The Stock Commandite, or Partnership Limited by Shares (Sociedade
em Comandita por Acções)
Like the simple commandite, the stock commandite also has one or more full partners and
one or more dormant partners, but the latter’s participation is represented by shares. The
company’s name must contain the words Sociedade em Comandita por Acções & Comandita
por Acções. The remark made above, with respect to the fact that the full partner may be a
limited company and has sole management powers, may render this type of company a useful
instrument to consolidate power within a stock company. In Portugal, the commandite –
whether simple or by shares – is a particularly
rare type of company, and as a result the relevant legal provisions have scarcely ever been the
object of judicial or academic analysis.
The Limited Liability Individual Undertaking
An individual entrepreneur may also limit his liability to the firm's registered capital through
the incorporation of a limited liability individual undertaking (Estabelecimento Individual de
Responsabilidade Limitada , or EIRL) by means of a notarized deed. The EIRL is regulated
by Decree-Law 248/86 of August 25 1986, as amended. The minimum capital for an EIRL is
€ 5,000, two thirds of which must be paid in cash and deposited in a blocked account with a
local bank until the notarized deed is registered at the local Commercial Registry Office.
Twenty percent of after-tax profits must be allocated annually to a legal reserve until the
amount in such reserve is at least 50 % of the EIRL's registered capital. The remuneration of
the manager (who must be the individual holder of the firm) is limited to three times the
official Portuguese “annual minimum salary”.
Branches / Representative Offices
A foreign company wishing to conduct business in Portugal may do so through
the establishment of a subsidiary in Portugal. The subsidiary will have to assume the
character of one of the above outlined types of company, and it will be an autonomous legal
entity with a separate corporate personality. Any foreign company wishing to carry out
business activities in Portugal for more than one year, without recourse to a subsidiary, is
legally required to establish a Portuguese branch (sucursal) or permanent representative
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office (escritório de representação) and to comply with the appropriate registration
requirements. Branches are not autonomous legal entities nor do they have a separate
corporate personality, hence the foreign company will always be liable for its
operations and debts.
Joint ventures
Portuguese law allows for the creation of joint ventures using any of the above
outlined types of company. Parties may also contractually agree to share
interests in a business venture without creating an autonomous legal entity, a
possibility which is often resorted to in public works construction or service
projects.
The ACE (agrupamento complementar de empresas) is a non-prof it making type of joint
venture which, in certain circumstances, must be created by means of a notarized deed. The
name must contain the initials “ACE”. An ACE’s main business interest is that of its
members. An ACE may not hold any participating interest in other companies, enterprises or
ACEs. Unanimous approval is required for admission of any new member.
Romania
Romanian law does not contemplate joint venture agreements as this term is understood in
common law jurisdictions. One type of agreement available under Romanian law contains
certain features common to joint venture agreements is thee. the asocierea in participatiune.
Under Romanian law, the asociere in participatiune (which shall be referred to, for ease of
reference, as a “joint-venture agreement”) represents the commercial-oriented counterpart of
a civil partnership, in that joint ventures represent a commercial agreement, and not a civil
agreement, the activities to be carried out by the parties consisting of commercial activities
within the meaning of the Commercial Code. The joint venture has no legal personality and
consists of an active partner and a silent partner. The silent partner loses its ownership right
over the contributions to the joint-venture, the ownership over such contributions being
transferred to the active partner. However, the partners may stipulate in the joint-venture
agreement that the contributions shall be restituted in kind to the contributing partner. This
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represents a difference from the civil partnership, which possesses a social patrimony. Apart
from the right to request explanations as to the contributions to the joint venture and the
benefits and losses, the silent partner has no rights in relation to the management of the joint
venture. All transactions are carried out by the active partner in its own name but on behalf of
the joint venture. The participation of both partners in the losses, as well as the profits,
represents a condition for the validity of
Traditionally, a joint venture is represented by a business undertaking by two or more person
s engaged in a single defined project, the necessary elements being (i) an express or implied
agreement; (ii) a common purpose that the group intends to carry out; (ii) the share of profits
and losses; and (iv) each member’s equal voice in controlling the project. For partnerships
without legal personality (including joint ventures), the expenses and incomes incurred are
attributed to each partner, pro rata to its participation in the partnership. Moreover, any
partnership without legal personality between foreign legal persons carrying out its activity in
Romania must designate a person which shall register the partnership with the legal
competent tax authority, prior to the beginning of the activity, shall keep the books of the
partnership, shall pay the taxes on behalf of the partners, shall file a quarterly tax return and
shall provide information in writing to each partner with respect to the incomes and expenses
of the partnership which are attributable to the respective partner, as well as the taxes which
were paid on behalf of the partner. In partnerships without legal personality in which one of
the partners is a Romanian legal person, such obligations of the partners shall be fulfilled by
the respective Romanian partner. No restrictions are provided in respect to capitalization,
except for the requirement to restitute the contribution of a partner in kind in case such is
provided under the joint-venture agreement.
The Company Law (the “Company Law”) provides the following types of commercial
companies:
i. joint stock companies (“societati pe actiuni” or “SA”);
ii. limited liability companies (“societati cu raspundere limitata” or “SRL”);
iii. general partnerships (“societati in nume colectiv” or “SNC”);
iv. limited partnerships (“societati in comandita simpla ” or “SCS”);
v. partnerships limited by shares (“societate in comandita pe actiuni” or “SCA”).
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In practice, investors use the limited liability company or the joint stock company almost
exclusively, because these two forms offer limited shareholder and founder liability. Which
of these two forms an investor will prefer depends on the scale of the activity of the company,
the number of participants and the level of trust between the participants to the undertaking.
As no express provision exists under the Company Law in respect to the manner in which the
associates or shareholders shall divide between themselves the benefits and losses, as a rule,
such parties are free to decide on this aspect, by including relevant provisions in the
company’s statutes or article of incorporation. Nonetheless, under Romanian law, it is
prohibited to provide that only one associate or shareholder shall receive all benefits (the so-
called “leonine clause”). As a rule, the associates or shareholders in one of the types of
commercial companies referred to above shall be entitled to receive share the benefits and
losses obtained by such company proportionally to their respective participation in the
company.
Limited Liability Companies
Joint Stock Companies (SA)
Joint stock companies are generally used for larger scale operations, allowing for the
concentrations of capitals by means of public offerings. The minimum number of
shareholders in a joint stock company is five and there is no statutory maximum number of
shareholders. The minimum share capital of joint stock companies is the RON equivalent of
Euro 25,000. The current amount of the minimum share capital was set in October 2005 and
the relevant enactment provided a one -year transition period for existing companies to
comply. Failure to comply with such requirement will result in the dissolution of the non-
complying companies. The Company Law does not impose any maximum share capital
requirement.
In respect to the manner in which share capital is formed, the Company Law requires that
upon the set up of a new joint stock company, at least part of the share capital should be
funded with a cash contribution. Work contributions cannot be qualified as contribution to the
share capital. Also, the contributions in receivables are not permitted in case of joint stock
companies set up by way of public subscription. Shares may be issued in either materialized
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or dematerialized form and their nominal value may not, in the case of joint stock companies,
be lower than RON 0.1.
A joint stock company may be set up either by means of a simultaneous subscription (in
which case at least five shareholders subscribe the entire share capital and pay the entire
issuance premium, if any, and at least 30% of the subscribed share capital) or by means of
public offering. A joint stock company gains its legal personality upon its registration with
the local office of the Trade Registry. In respect to the constitutive document(s) of a joint
stock company, such are formed of either two documents—Articles of Association and
Statutes—or a single, consolidated constitutive act (act constitutiv). The minimum content of
such documents are regulated by law. Upon their execution, the company enjoys a limited
legal capacity and may conclude certain legal acts in view of its establishment through its
founders or appointed representatives. The founders and any representatives that acted on
behalf of the company for the purpose of its incorporation are jointly liable towards third
parties for the operations concluded prior to incorporation, except in the event that, following
its incorporation, the company, through its corporate bodies, agrees to undertake all liabilities
related to such operations.
The establishment of a company or partnership entails costs for various services rendered,
such as: translation of documents, notarization, registration with the Trade Registry,
publication of documents in the Official Gazette of Romania, etc, and related stamp duties
that are estimated at around USD 200. Depending on the specific features of the company to
be established (such as the extent of the object of activity and the registered capital), the
incorporation expenses may exceed such an amount As a rule, no restrictions are provided in
respect to the nationality and/or citizenship of the persons acting as participants, managers or
directors within joint stock companies.
Limited Liability Companies (SRL)
In limited liability companies, the mutual trust of the associates is central to the establishment
and operation of the company, as the intuitu personae character of the limited liability
company entails restrictive rules regarding aspects such as the manner in which the social
parts may be transferred, the decis ion making process or the amendment of the constitutive
documents of the company. As a rule, the limited liability company may have between one
and fifty shareholders (generally referred to as “associates”).The rules on the set up of a
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limited liability company are generally similar to those provided for joint stock companies.
Resolutions may be validly taken in a general meeting of associates of a limited liability
company with the vote of the absolute majority of associates and of social parts (a double
majority requirement), unless otherwise provided by the constitutive act. Resolutions
amending the constitutive act of a limited liability company are taken by vote of all
associates, unless otherwise provided by law or the constitutive document. Taking into
account the intuitu personae character of the limited liability company, the Company Law
sets forth certain restrictions on the transferability of social parts. Thus, the transfer of social
parts towards third parties who are not associates in the company requires the approval by
shareholders representing at least three-quarters of the social capital.
Companies with Unlimited Shareholder Liability
General Partnerships (SNC)
The general partnership is generally set up by a small number of participants, bound by trust,
such participants assuming the risks flowing from the activity of the company. The
obligations of the company are secured by its social patrimony and by the unlimited, joint and
several liability of the partners. The rules on the set up of a general partnership are generally
similar to those provided for joint stock companies.
Limited Partnerships (SCS)
Limited partnerships represent a hybrid between limited liability companies and unlimited
liability companies. The SCS is composed of full partners and limited partners, the
administration of the company being entrusted the one or several full partners. While the
Company Law does not set forth a minimum number of associates, there should be at least
one full partner and one limited partner, and the constitutive documents should stipulate the
category of each partner. Pursuant to the Company Law, the obligations of the limited
partnership are secured with its social patrimony and with the unlimited, joint and several
liability of the full partners. The liability of the full partners is subsidiary in nature to that of
the company and the creditors of the company may raise claims against the full partners only
if the company did not satisfy their claims within 15 days. On the other hand, the liability of
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the limited partners is capped by the value of the subscribed share capital. The rules on the set
up of a limited partnership are generally similar to those provided for joint stock companies.
Partnerships Limited by Shares (SCA)
As in the case of the limited partnership, the partnership limited by shares has as shareholders
both full and limited partners, the main difference between the SCA and the SCS consisting
in the fact that the share capital of the SCA is divided into shares. As in the case of joint stock
companies, the share capital of a partnership limited by shares cannot be lower than the
equivalent in RON of Euro 25,000. Moreover, as in the case of the limited partnership, the
liability of full partners is unlimited, joint and several and subsidiary to that of the company,
while the liability of limited partners is limited by the subscribed share capital. The rules on
the set up of a partnership limited by shares are generally similar to those provided for joint
stock companies.
Sole Proprietorships
Although the practice is rare, natural persons may register themselves as an unincorporated
business with the Trade Registry. More typically, a natural person will establish a limited
liability company in which he/she is the sole associate. However, a person may be sole
associate in only one limited liability company, and a SRL may not have as sole shareholder
another limited liability company with a sole shareholder. In a company set up by a sole
associate, the value of the in-kind contribution shall be assessed by way of an expert’s
appraisal. The general rules on incorporation of Romanian companies also apply in case of
the limited liability company with sole associate.
Subsidiaries/Branches/Representative Offices
Foreign commercial companies having the capacity to create secondary establishments may
establish branches and representative offices on the Romanian territory. Neither the
representative office, nor the branch enjoys legal personality. The representative office is
both legally and economically dependent on the parent company on behalf of which it acts,
the scope of its activity being limited to marketing, auxiliary and assistance services for the
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activities of the parent on Romanian territory. Moreover, it does not have its own social
capital, but only such assets as are necessary for representing the parent company in
Romania. Prior to registration with the fiscal authorities, an authorization issued by the
Ministry of Foreign Affairs should be obtained. A branch has a limited legal capacity, as it
may be sue d directly for the activity performed in Romania and it may be subject to a
separate dissolution and liquidation procedure.
Slovakia
The main source of commercial law is the Commercial Code – Act NO 513/1991 Collection
of laws amended by later legislation. In accordance with the Commercial Code an
entrepreneur is:
♦ A person recorded in the Business Register
♦ A person who is conducting business with a business license
♦ A person who is conducting business without a license but in accordance with special
rules (e.g. the practicing of the free professions)
♦ A person who is active in agriculture and registered in accordance with special rules
Foreigners can start a business in Slovakia under the same conditions and standards as Slovak
citizens. Foreign entrepreneurs, companies, or ordinary people can trade or do business in
Slovakia in the following ways:
♦ By establishing a branch of their company in Slovakia
♦ By moving of foreign company's headquarters to Slovakia
♦ By establishing a business with 100% investment by a foreign person in Slovakia
♦ By investing capital investment into a company registered in Slovakia
♦ By conducting business under the rules of the trade law
♦
The Commercial Code defines Business Register as a public list of legally enacted statements
including a collection of legally enacted documents. Everyone is permitted to have access to
the Business Register.
Unlimited Partnership
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(verejná obchodná spoločnosť, ver. obch. spol., v.o.s.)
An unlimited partnership is a company where at least two persons conduct business under a
common business name and guarantee the liabilities of the company conjunctim et divisim
[together and nonseparately] with their entire property. The Commercial Code does not
specify the obligation of basic capital formation. The property of the company includes the
monetary and non-monetary investments of the partners. The amount of investment is not
specified by law.
Limited Partnership
(komanditná spoločnosť, kom. spol., k.s.) A limited partnership is a company where one or
more partners guarantee the liabilities of the company by the value of the unpaid investment
recorded in the Business Register (limited partners-komanditisti) and one or more partners
with all of their assets (general partners-komplementári). The basic capital includes the
investments of limited partners and general partners. The amount of the investment of the
limited partner, including the unpaid investment, is recorded in the Business Register. The
value of the investment by the general partner is not specified by law.
Limited Liability Company
(spoločnosť s ručením obmedzeným, spol. s r.o., s.r.o.) A limited liability company is the
most common type of business and is described by the Commercial Code in detail. A limited
liability company is a company where the basic capital includes the predetermined
investments of the partners. The company can be established by one natural person or by one
legal entity whether domestic or foreign. The company can consist of no more than 50
partners. The company guarantees against the breach of obligations with its entire property.
Partners guarantee the liabilities of the company with the amount of their unpaid investments,
which are recorded in the Business Register. The value of the basic capital of the company
must be made. The investment can also be non-monetary.
Joint-stock Company
(akciová spoločnosť, akc. spol., a.s.)
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A joint-stock company is a company where the basic capital is divided into a specific number
of shares with a designated nominal value. The company guarantees against the breach of its
obligations with its entire property. Shareholders are not liable for the obligations of the
company. The shareholder has the right to receive his share of profit (dividend) resulting
from the economic results of the company. The statutory body of the company is the board of
directors, which is elected by a general meeting. The board of directors can also be
nominated by a supervisory board depending on the company’s internal statutes.
Cooperative(družstvo)
A cooperative is a partnership of an unlimited number of persons. Openness is a basic
characteristic feature of a cooperative, according to the statutes new members may join the
cooperative during its existence and any members may leave it. Most frequently, this form of
doing business is used in the area of food industry, agriculture, and housing.
Process of Establishing a Company
The current legislative arrangement enables foreign persons to do business in Slovakia,
giving them a choice of several different business forms. A foreign national may carry on
activity as a sole trader (živnostník, fyzická osoba) pursuant to the current version of Act on
Trading 554/2001 of Collection of Law (Živnostenský zákon, amending Act No 455/1991
Zb.) or do business in the SR either individually or collectively (spoločnosť), in accordance
with the currently applicable version of Act 500/2001 of the Commercial Code (Obchodný
zákonník, amending Act No 513/1991 Zb.), or in accordance with the Civil Code. According
to the Act on Trading 554/2001 of Collection of Law (Živnostenský zákon, amending Act No
455/1991 Zb.), § 18, trades are divided into:
a) notifiable trades (ohlasovacie živnosti – no professional or other skills are required)
- craft trades (remeselné živnosti)
- trades requiring evidence of certain professional skills (viazané živnosti)
- free trades (voľné živnosti)and
b) trades subject to concessions (koncesované živnosti).
A limited liability company or a joint-stock company is established when the signatures on
the partnership contract are authenticated by a notary public. If the company is established by
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only one partner the notary public authenticates the foundation charter. The documents
authenticated by the notary public are called notarial deeds. The established company submits
the application for registration to a competent court with jurisdiction of the area where the
company has its place of business or where the businessperson has his residence. The
application must contain authenticated signatures of the legal agents of the company listed in
the partnership contract.
Slovenia
In conducting business in Slovenia, foreign companies have the same rights, obligations, and
responsibilities as domestic companies. The principles of commercial enterprise, free
operation, and national treatment apply to the operations of foreign as well as domestic
companies. Basic rights are guaranteed by the Law on Commercial Companies and the Law
on Foreign Transactions, including: the right to manage or participate in the management of
companies in proportion to invested funds; the right to transfer contractual rights and
obligations to other foreign and domestic natural and legal persons; the right to participate in
profits in proportion to invested funds; the right to free transfer and reinvestment of profits;
and the right to recover investments in companies and their share in net assets after the
dissolution of companies.
However, restrictions are placed on foreign investments in certain sectors of strategic or other
special significance. Foreigners cannot establish their own companies in the manufacture or
sale of arms and military equipment, or in pension or medical security insurance. Majority
foreign-owned insurance companies cannot engage in reinsurance.
In Slovenia, foreigners may establish any legal-organizational form provided for in the Law
on Commercial Companies (limited-liability companies, joint-stock companies, limited
partnerships with share capital, limited partnerships, general partnerships, and silent
partnerships). All companies acquire the status of a legal person upon their entry into the
court register. Prior to the entry into the court register, a number of formalities must be
performed. It is therefore beneficial to consult a lawyer as soon as possible to prevent
unnecessary difficulties that may arise during the process of founding a company (from
adopting the memorandum and articles of association to their certification by a notary public
and entry into the court register). Foreigners may be exclusive or part owners of companies.
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In addition to establishing their own companies, foreigners can also invest in existing
companies. For companies in which partners’ shares are not in the form of shares/stocks (i.e.,
private companies and limited-liability companies), investments are allowed with the
agreement of the partners and by joining in the partnership agreement. Takeovers of joint-
stock companies are much more frequent and depend less on the individual
partners/shareholders as the shares are in the form of stocks and are quoted on the Stock
Exchange (shares of closed companies are an exception).
Takeovers can be accomplished through mergers or acquisitions. The approval of the
management board is required. For company takeovers, bidders address their tenders directly
to shareholders, either with or without the approval of the management board. The 1997 Law
on Takeovers and the Law on Commercial Companies regulates takeovers. This law
establishes conditions for the purchase of stocks/shares sold by individual companies and
issuers of stocks, when specific legal or natural persons acquire or wish to acquire a stake in
company that gives the buyer more than 25% of voting rights. Takeovers occur of both:
public companies with stocks quoted in the market and private companies through direct
offers to shareholders. If the company conducting a takeover acquires a controlling interest
in another company, it is obliged to inform the issuer of shares, the Securities Market Agency
(SMA), and the Stock Exchange within seven days of the date that it acquires a controlling
number of shares. The issuer, who has received such a notice, must publish it publicly within
ten days in daily newspapers or on the premises of the Stock Exchange (Official Gazette no.
47/97).
Both domestic and foreign legal and natural persons may freely conclude all types of
commercial contracts (agency contracts, distribution contracts, license contracts, etc.).
Slovene legislation does not stipulate different administrative procedures for the performance
of individual foreign trade transactions or contracts. Contractual parties in international legal
transactions may select the law that will regulate their mutual relationships and the court
(arbitration tribunal) of competent jurisdiction that will hear disputes.
Spain
Joint Stock Company
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The joint stock company ("Sociedad Anónima” or "SA”), governed by the Joint Stock
Companies Law of 1989 and the amendments of the Limited Liability Companies Law of
1995, used to be the most common legal vehicle used to set up a company in Spain. However,
the Limited Liability Company ("Sociedad de Responsabilidad Limitada” or "SL”) has now
become the most popular business entity in Spain. SAs limit the liability of shareholders to an
amount corresponding to their investment in the company. This shareholding is represented
by shares that qualify as negotiable securities. Furthermore, shares of an SA may be listed on
Spanish stock exchanges ("Bolsas de Valores").
Incorporation and Registration
SAs must be incorporated by a deed executed before a Public Notary and subsequently
registered at the Commercial Registry ("Registro Mercantil"). The minimum capital
requirement, established by statute, for a joint stock company is €60,101.21, which must be
fully subscribed at the time of incorporation. In addition, non-resident founders are generally
required to execute a power of attorney before a notary public in the jurisdiction where the
non-resident founder is incorporated or domiciled. The power of attorney must be legalized
by the Spanish Consulate or by an Apostille pursuant to The Hague Convention of 1961. The
deed of incorporation must include the by-laws of the company, which have been approved
by its founders. The by-laws must state: (i) the name of the company; (ii) the corporate
purpose, specifying the activities of the company; (iii) the duration of the company; (iv) the
date on which it begins its operations; (v) the registered address and the body of the company
which will be competent to decide the creation, dissolution or transfer of branches; (vi) the
share capital, indicating the part of its value, if any, which is not paid up, as well as the
manner and the maximum period within which uncalled capital must be paid; (vii) the
number of shares, their face value and the rights attached to them; (viii) the structure and
rules governing the management of the company; (ix) method of discussion and adoption of
resolutions by the collegiate bodies of the company; (x) the date on which the company’s
financial year ends; (xi) any existing restrictions on the free transferability of shares; (xii) any
existing rules on ancillary obligations of shareholders; and (xiii) any existing special rights of
the company founders or promoters. The deed of incorporation must identify the persons
(either natural persons or legal entities) initially entrusted with the management and
representation of the company, including their name, nationality and address. Likewise,
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information identifying the company’s auditors, if auditors are required, should be stated.
SAs must be registered at the Commercial Registry corresponding to their registered address.
Limited Liability Company
The Limited Liability Company ("Sociedad de Responsabilidad Limitada" or "SL), governed
by the Limited Liability Companies Law of 1995, has been the traditional investment vehicle
used in Spain for small, family-run businesses. Shareholder liability is limited to the
shareholders’ investment in the company. However, shares are not represented by certificates
and may not be listed on the Spanish stock exchanges. SLs have become the most common
type of business entity for non-listed companies. A Limited Liability Company must be
incorporated by a deed executed before a notary public and subsequently registered at the
Commercial Registry. The minimum capital required by statute for a Limited Liability
Company is €3,005.06, which has to be subscribed and paid up in full at the time of
incorporation.
The major differences between of an SL and an SA can be summarized as follows:
a) The capital is divided into parts (shares) that are indivisible and accumulative. The shares
may not be represented by means of certificates nor considered securities. The capital of an
SL must be fully paid up when subscribed.
b) Whereas all the equity shares of an SA must (with some exceptions related to economic
rights) have the same rights attached to them, the shares of an SL may have
disproportionate voting and economic rights.
c) Holders of shares ("shareholders") may be removed by the General Meeting in the
following cases (or in such cases as the by-laws provide): (i) non-compliance with the
ancillary duties attached to their shares; (ii) breach of the non-compete covenant imposed on
directors (if the shareholder is a director); and (iii) if there is a judgment ordering the
shareholder to indemnify the company for damages arising from acts which
are contrary to the law or the by-laws or from acts carried out without the appropriate
diligence.
d) The transfer of shares to third parties is subject to the prior authorization of the company
or to any other conditions established in the by-laws. Unless otherwise established in the by-
laws, the company may only refuse authorization if it provides another participant or a third
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party which undertakes to acquire the shares in the terms communicated to the company by
the transferor. e) The company may not issue bonds or securities.
f) Meetings are called by notice published in the BORME and in a daily newspapers with
one of the largest circulations in the municipality at least 15 days in advance. The bylaws
may change this system to a single publication in a newspaper or one requiring
written notice sent to all shareholders individually.
g) No quorum requirements are provided for by law.
h) Resolutions are passed by a majority of the votes validly issued, provided that they
represent at least 1/3 of the voting capital. However, the following resolutions require
reinforced majorities: (i) the increase or reduction of capital and any other amendments to the
by-laws (except those listed under (ii) below) require the affirmative vote of more than 50%
of the voting capital; (ii) the transformation, merger or spin-off of the company, the
suppression of the pre-emptive rights when there is an increase in capital, the removal of
shareholders and the granting of authorizations to the directors in order to engage in activities
that are similar to those performed by the company, require the affirmative vote of at least 2/3
of the voting capital. Voting requirements may be increased by the by-laws.
i) The company may be managed by: (i) a sole director; (ii) several directors acting jointly or
jointly and severally; or (iii) a Board of Directors composed of between three and twelve
members. The by-laws may provide for several of these alternatives and the
shareholders may choose one at the General Meeting. In this case, a change in the
management body would not entail an amendment of the by-laws.
j) Unless otherwise stated in the by-laws, directors do not have to be shareholders. The term
of office is indefinite, unless the by-laws provide for a specific term. Directors may only be
appointed at the General Meeting, where they may also be removed. Deputy directors may be
appointed as alternates in the event that a Director resigns or is removed. Unless expressly
authorized by the General Meeting, directors may not engage, on their own behalf, in any of
the activities engaged in by the company.
k) An auditor's report is required when the capital is reduced to off-set losses. An independent
appraiser's report is only required for a proposal of merger or spin-off when the company,
which is dissolved pursuant to the merger or the new company resulting from the spin-off or
merger, is an SA. No independent expert’s report is required for
contributions in kind to the company.
l) Only shares of SAs can be listed on a stock exchange. Shares of an SL cannot.
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Partnership
There are two main types of partnerships in Spain:
a) The general partnership ("Sociedad Regular Colectiva" or "S.C.”) is a business
organization in which its partners are jointly and severally liable in respect of the
partnership’s debts. Any transfer of a partnership interest requires the consent of every
partner. General partnerships are governed by the Commercial Code. No mandatory
minimum capital amount is established by statute, therefore, the partners of a general
partnership are free to establish any capital requirements.
b) The simple limited partnership and the limited stock partnership ("Sociedad
Comanditaria Simple" or "Sociedad Comanditaria por Acciones") are types of business
organizations governed by the Commercial Code. The shares of the latter are also governed
by the Joint Stock Companies Law. Both types of partnership have two types of partners.
There is always at least one partner with unlimited liability who is in charge of the
management and representation of the partnership, while there is also at least one limited
partner who is liable only to the extent of his shares for the losses or other liabilities of the
partnership. Limited partners may neither perform management functions nor act in the name
and on behalf of the partnership. No mandatory minimum capital is established by statute,
which allows the partners of these two forms of partnerships to decide on capital
requirements.
Joint Venture
Spanish law allows for the creation of joint ventures using any of the legal forms described
above. Parties may also contractually agree to share interests in a business venture without
creating a separate legal entity. This possibility is often used in public construction works or
service projects under the name "UTE" ("temporary union of undertakings").
Individuals and sole shareholders
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A non-Spanish resident may freely carry out commercial activities in Spain as long as the
national law applicable to him/her states that they have capacity to do so. Such individual
may register corporate documents in the Commercial Registry.
Branches
The incorporation of a company or the opening of a branch are two options available to
foreign investors wishing to do business in Spain. The main difference between these two
vehicles is that the branch, unlike a company, has no separate legal personality. Nevertheless,
for certain administrative, tax and other purposes the branch is treated as if it were a separate
entity. The branch must operate on the basis of powers of attorney. The establishment of a
branch in Spain by a foreign legal entity is subject to requirements established in foreign
investment regulations. The establishment or attribution of capital to a branch of a foreign
company in Spain is considered a foreign investment according to Royal Decree 664/1999,
although (except for some types of branches, such as non EU banks) it is not necessary to
make an attribution of capital. The establishment of a branch requires the execution of a
public deed that must be registered with the Commercial Registry.
Sweden
Sole trader
A sole trader's business is run by one person (spouses may run a sole trader's business
together), who is personally responsible for all the commitments of the business, for example
debts and agreements made. This means that you must pay the debts of your business
yourself if its funds are not sufficient.
A sole trader's firm is not a legal entity. Consequently it is not the firm, but you, who for
example rent premises or become a party in a legal process involving the business. Your own
national registration number also identifies your firm. PAYE tax and social security
contributions are paid in the form of F-tax to the Tax Agency every month. In an appendix to
your income tax return form, you report on the year's result. VAT is paid either monthly or
annually. Normally no auditor is required for a sole trader's business.
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Trading partnership and limited partnership
A trading partnership requires at least two co-owners. The co-owners have unlimited joint,
several, and personal responsibility. This means that each one of the co-owners is responsible
for all the commitments of the business, for example debts and agreements made.
Consequently, if the company funds are not sufficient to cover the debts, any one of the
partners can be forced to pay all the debts of the company personally. (The partner can in turn
demand to be refunded by the other partners for their share of the debt.)
Since the partners are supposed to work together in the business, it is advisable to draw up a
written partnership agreement, even in the case where an oral agreement has been made. It
may cover, for example, division of labor, sharing of profits, and procedure if one co-owner
wants to leave the partnership.
A trading partnership is a legal entity, which means, among other things, that it can enter into
agreements with external parties. The partners decide which one, or which ones, of them shall
have the right to represent the company and enter into agreements in the name of the
company.
Registration by the Companies Registration Office is a requirement and protects the company
name within the county. A trading partnership does not exist before registration and therefore
cannot, for example, buy or sell goods or services before it has been registered. A trading
partnership has a company registration number.
Inform the Tax Agency that you are going to start a business activity in the form of a trading
partnership. Just as in the case of a sole trader, no real salaries are paid, but the profit is
shared by the partners, each of whom is taxed for his or her share. Here, too, there are certain
possibilities of partially postponing the taxation for a few years. Each co-owner's profit is
counted as income qualifying for sickness benefit.
A trading partnership pays VAT every month, but may do so annually if the activity is not
very extensive. At the end of the year, the trading partnership must balance the books and the
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partners append a copy of the accounts to their own income tax returns. Normally no auditor
is required for a trading partnership.
Limited company
In a limited company (also called "limited liability company") a clear distinction is made
between the company and the owners. The latter may be one or more persons and/or
enterprises. At least SEK 100 000 is tied to the company in the form a share capital. (Invested
capital may have the form of machinery and equipment required for the business activity. The
value of capital contributed in this way (contribution in kind) is assessed by an accountant.)
The owners are not personally responsible for the company's commitments, which means that
their financial risk is in principle limited to the capital invested. A limited company is a
business form that is well regulated by legislation.
A limited company is a legal entity, which means that it can, for example, enter into a rental
agreement. It has a company registration number.
A limited company must be registered by the Companies Registration Office. This also gives
protection of the company name within the whole country. Before the company name is
registered, it should not be used in any context.
A limited company has three important parts:
- shareholders
- board of directors
- registered or chartered accountant
The shareholders invest capital and decide, at the general assembly, on basic rules for the
company. At the same time they elect the management, that is the board of directors, possibly
a managing director, and the accountant. It is the management's job to handle the current
operations and to represent the company externally. The task of the accountant is to examine
the company's accounting and the management's way of running the business.
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The owners of a limited company can be employed by the company. For all employees,
social contributions and PAYE tax must be paid. The employees' salaries or wages are
regarded as income qualifying for sickness benefit. The profit of a limited company is subject
to corporation tax. After that, the company can pay part of the profit to the shareholders in the
form of dividends. VAT is paid either monthly or annually. A limited company submits its
own income tax return to the Tax Agency. After each financial year the books are balanced.
The annual account reports must be submitted to the Companies Registration Office.
Economic association
An economic association (also called an "incorporated association") comprises at least three
members. The aim of the activity is to safeguard the members' economic interests through
economic operations. The members are expected to take an active part in the business by
contributing their knowledge and work. They only risk losing their membership investment.
The association is open to persons fulfilling the requirements stated in the statutes of the
association and that thus have the right to become members.
An economic association is a legal entity, which means, for example, that it can enter into
agreements. It is given a company registration number.
The association must be registered by the Companies Registration Office. This gives
protection for the name of the association within the whole country.
An economic association has three important parts:
- annual general assembly
- executive committee
- auditor (in certain cases a registered or chartered accountant)
The members make a membership investment and decide at the general assembly on basic
rules for the association. The executive committee and the auditor/accountant are elected at
the general assembly. The committee handles the current business and represents the
association. The committee may appoint a CEO (chief executive officer), who will run the
day-to-day business. The task of the auditor/accountant is to examine the association's
accounting and the executive committee's administration of the association's affairs.
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The members of an economic association can be employed by the association. For all
employees, social contributions and PAYE tax must be paid. The profit of the association is
taxed. The members may receive a share of the profit in the form of dividends. VAT is paid
either monthly or annually. An economic association submits its own income tax return to the
Tax Agency. After each financial year the books are balanced and annual account reports
presented.
United Kingdom
The principle forms of businesses that can be established in the United Kingdom are sole
trader, partnership, limited liability partnership, limited liability company, franchise, or social
enterprise. The UK spends 10% of its budget regulating business. Before a business can begin
operating as a limited company, it has to be registered with the Registrar of Companies -
Companies House. Incorporation is the process by which a new or existing business is
converted into a corporate body.
Sole Trader
A sole trader engaged in a business or profession may establish themselves in the United
Kingdom as self-employed subject to certain registration requirements. In order to legally set
up as a self-employed sole trader an individual must register as self-employed with HM
Revenue & Customs (HMRC) and obtain any permits and planning permission that may be
needed from the local authority. Certain types of work may need a license or permission from
the local authority. A sole trader must contact the local authority to find out whether business
rates must be paid and register for VAT if expected turnover is more than £64,000 per year.
Income tax is paid through the Self Assessment system, as well as Class 2 and Class 4
National Insurance –and VAT if registration threshold is reached. The government provides
help for those who wish to establish themselves as self-employed.124
Partnership
124 For further information see Newly Self-Employed at www.hmrc.gov.uk/startingup/index.htm, National Insurance at www.hmrc.gov.uk/nic/, and Self Assessment at www.hmrc.gov.uk/sa/
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A partnership business relationship may be formed between tow or more persons or
corporations. Each partner pays income tax, through the Self Assessment system, as well as
Class 2 and Class 4 National Insurance – and the business itself pays VAT once you reach the
registration threshold.
Limited company
You can use a company registration agent to buy a company ’off the shelf’ or you can create
your own and register it at Companies House – see contact information opposite.
Limited companies should always display their full corporate name outside the business
premises, and registration details must also appear on the stationery. Company directors have
certain obligations. They need to file statutory documents, such as accounts and annual
returns. There’s also Corporation Tax to think about, which we charge on company profits.
Company directors are also employees of the company, so there are different National
Insurance and PAYE obligations. Even though a company director is an employee, they still
need to register for Self Assessment. The same applies to each director in a limited company.
Solicitors or accountants will be able to offer advice on all of this, and we also provide a
helpful leaflet on Corporation Tax – see contact information opposite.
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xii) Other Non Tariff Measures
Standards and technical regulations in the EC have not been fully harmonized. Products
placed on the market of a Member State must comply, where necessary, with relevant
national and Community-wide legislation. Compliance is established by means of conformity
assessment procedures. Product regulations at the Community level are of two main types:
those laying down detailed specific technical requirements (old-approach directives), and
those limited to the setting up of essential requirements (new-approach directives) defined to
meet health, safety, and environmental objectives. Under the new-approach directives, the
use of "specific standards" (harmonized standards) confers presumption of conformity to
these essential requirements. The new-approach directives cover a wider range of products
than the old-approach directives. Under the New Approach, Member States are obliged not to
prohibit, restrict or impede the placing on the market and putting into service of products that
comply with the applicable New Approach directives, and to take any measures necessary to
ensure that products are placed on the market and put into service only if they do not
endanger the safety and health of persons, or other interests covered by the applicable
directives, when correctly constructed, installed, maintained, and used in accordance with
their purpose.
The CE marking125 is mandatory and must be affixed before any product subject to it is
placed on the market and put into service, except where specific directives require otherwise.
The CE marking symbolizes the conformity of the product with the applicable Community
requirements imposed on the manufacturer. The obligation to affix the CE marking extends to
all products within the scope of directives providing for its affixing, and which are intended
for the Community market Thus, the CE marking must be affixed:
• to all new products, whether manufactured in the Member States or in third countries;
• to used and second-hand products imported from third countries; and
• to substantially modified products that are subject to directives as new products.
125 The term “CE marking” (previously “EC mark”) was introduced by Directive 93/68/EEC
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Directives may exclude the application of the CE marking on certain products, even if the
directive otherwise applies to the product. As a general rule, such products are subject to free
circulation, if:
• they are accompanied by a declaration of conformity (as is the case for safety
components referred to in the Directive on machinery and partly completed boats
referred to in the Directive on recreational craft);
• they are accompanied by a declaration of compliance (as is the case for products
playing a minor part with respect to the health and safety listed in accordance with the
Directive on construction products);
• they are accompanied by a statement (as is the case for custom-made medical devices
and devices intended for clinical investigations referred to in the Directives on active
implantable medical devices and medical devices, and devices intended for
performance evaluation referred to in the Directive on in vitro diagnostic medical
devices);
• they are accompanied by a certificate of conformity (as is the case for components
referred to in the Directive relating to potentially explosives atmospheres which are
intended to be incorporated into equipment or protective systems, and fittings referred
to in the Directive relating to gas appliances);
• the product bears the manufacturer’s name and an indication of maximum capacity (as
is the case for instruments not subject to conformity assessment according to the
Directive relating to non-automatic weighing instruments); or
• the product is manufactured in accordance with sound engineering practice (as is the
case for certain vessels referred to in the Directives relating to simple pressure vessels
and pressure equipment).
Member States are obliged to take all appropriate measures to prohibit or restrict the placing
on the market of products bearing the CE marking or to withdraw them from the market, if
these products might compromise the safety and health of individuals or other public interests
covered by the applicable directives, when the products are used for their intended purpose.
Member States must inform the Commission when they take such a measure. Where the
Commission considers the national measure justified, it informs all Member States who must
take appropriate action in view of their general obligation to enforce Community legislation.
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Mutual recognition agreements with third countries concerning testing and certification in the
non-regulatory sphere are promoted by the EU. The European standards organizations are
independent organizations established at different points in time. The European Committee
for Electrotechnical Standardization (CENELEC), the European Telecommunications
Standards Institute (ETSI) and the European Committee for Standardization (CEN) are all
recognized by the EU as Community standardization bodies through Directive 83/189/EEC126
and amendments. They have also adopted the WTO Code of Good Practice for the
preparation, adoption, and application of standards. CEN was founded by the national
standards bodies in the European Economic Community and EFTA countries CEN covers
almost all sectors of industrial activity. CENELEC’s mission is to prepare voluntary
electrotechnical standards that help develop the Single European Market/European Economic
Area for electrical and electronic goods and services removing barriers to trade, creating new
markets and cutting compliance costs.
Sanitary and Phytosanitary (SPS) measures
EC legislation on SPS issues is implemented by Member States in coordination with the
Commission. The common SPS regime aims to provide EC exporters with technical support
in SPS-related issues in third countries; provide technical assistance to developing countries
in institutional capacity-building on SPS matters; comply with WTO rules and rulings; and
maintain EC SPS legislation in line with international guidelines. The EC and its Member
States participate in most committees and task forces in the Codex Alimentarius Commission
and other international organizations in the SPS field (World Organisation for Animal Health,
International Plant Protection Convention).
The Sanitary and Phytosanitary Agreement (SPSA) of the World Trade Organisation (WTO)
applies to all measures in the areas of food safety, animal health and plant health which,
directly or indirectly, are affecting international trade. Every Member State has the right to
take measures to protect the health of its human population, fauna and flora, providing these
are in line with the SPS Agreement. The key principle in the Agreement is that protective
126 Council Directive 83/189/EEC of 28 March 1983 laying down a procedure for the provision of information in the field of technical standards and regulations: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31983L0189:EN:HTML
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measures must be science-based, in proportion to the potential risk and non- discriminatory
between Member States including the country itself.
Several regulations were enacted to implement SPS legislation. Five general principles are
laid down by Regulation (EC) No. 178/2002127 for the EC's food safety regime: (i) a high
level of food safety at all stages of the food chain, from primary production to the consumer;
(ii) risk analysis as a fundamental component of food safety policy; (iii) full responsibility of
operators for the safety of products they import, produce, process, place on the market or
distribute; (iv) traceability of products at all stages of the food chain; and (v) entitlement of
citizens to clear and accurate information from public authorities. The regulation also
provides for the establishment of the European Food Safety Authority (EFSA); strengthens
the rapid alert system for human food and animal feed ; and gives special powers to the
Commission to implement emergency measures to contain serious risks to human or animal
health, or to the environment in the EC. Food safety activities cover the entire food
production chain, ranging from animal and plant health to the labelling of food products, as
well as animal welfare.
An extension of the transitional period to allow for the implementation of collection systems
for animal by-products was granted to Cyprus until 1 January 2007. Another transitional
measure was enacted to allow Member States to collect, transport, treat, use and dispose of
some foodstuffs as long as these do not come into contact with any animal by-product; the
measure is to be in place from 1 January 2006 to 31 July 2007. The use of organic fertilizer
and soil improvers (other than manure) was regulated to, inter alia, eliminate the possible use
of animal tissues that might contain transmissible spongiform encephalopathy agents.
In order to help its exporters, the EC established data base on "trade-distorting" SPS measures
in third countries. These trade-distorting SPS measures relate to, inter alia, bovine
spongiform encephalopathy, highly pathogenic avian influenza, certification, foot-and-mouth
disease, food additives, classical swine fever, and listing of establishments. Under Article 7
127 Regulation (EC) No 178/2002 of the European Parliament and of the Council of 28 January 2002 laying down the general principles and requirements of food law, establishing the European Food Safety Authority and laying down procedures in matters of food safety, O.J. (31)1 available at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32002R0178:EN:HTML
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of the Annex B to the WTO SPS Agreement, the EC and its Member States (EC-25) made
107 notifications in 2004, 44 in 2005 and eleven in 2006 (up to October 2006). Of these,
eight (including addendums) were emergency SPS measures.
The European Food Safety Authority’s (EFSA) independent advice concerning risks
associated with the food chain provides the main scientific basis for the European food safety
system and aids the formulation of food safety policies in the EU. Its Scientific Expert panels
support the European Commission, the European Parliament and Member States with a sound
scientific basis on which legislation and policies are formulated and applied. EFSA
contributes to the advancement of food science by developing, promoting and applying new
and harmonised scientific approaches to food and feed risk assessment. With the general aim
of reaching consensus on methodologies and to generate recommendations that can be
incorporated into EFSA’s scientific activities, the Authority’s work includes the Scientific
Colloquium Series. This provides a forum for debate and exchange of experience and
viewpoints between experts in specialised fields.
Regulation No. 1774/2002128 provides that the importation and transit of animal by-products
and processed products (not intended for human consumption) are to be prohibited unless in
accordance with Community legislation. It thus establishes conditions ensuring that products
imported from a third country are of hygiene standards equal or equivalent to those applied
within the EC. To this end, the regulation introduces a system of approval for imports of
animal by-products from third countries, including an inspection procedure, health
certificates and relevant animal institutions. The regulation has been applied since 1 May
2003.
Council Directive 2002/99/EC129 of 16 December 2002 deals with the prevention of the
spread of transmissible diseases to animals, and veterinarian certification of animal products
intended for human consumption. Several regulations established procedures for the
128 Regulation (EC) No 1774/2002 of the European Parliament and of the Council of 3 October 2002 laying down health rules concerning animal by-products not intended for human consumption, O.J. (L 273) 1 available at http://eur-lex.europa.eu/LexUriServ/site/en/consleg/2002/R/02002R1774-20070101-en.pdf
129 Council Directive 2002/99/EC of 16 December 2002 laying down the animal health rules governing the production, processing, distribution and introduction of products of animal origin for human consumption, O.J. (L 18) 11 available at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32002L0099:EN:HTML
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implementation of the principal legislation on health concerning animal by-products not
intended for human consumption.
There is restriction on the importation of Brazilian nuts in shells. The Commission extended
controls on Sudan dyes to include imports of curcuma and virgin palm oil, as well as chilli,
chilli products, and curries that may contained such dyes. These dyes are not found naturally
in food and have been classified as carcinogens by the International Agency for Research on
Cancer. As a consequence, EFSA and Member States have carried out systematic
toxicological reviews on dyes since mid 2005. Council Directive 2005/94/EC130 sets out
preventive and control measures relating to the surveillance, early detection, and control of
avian influenza.
Import prohibitions, Quotas and licensing restrictions
The EC implements trade and economic sanctions in accordance with resolutions of the
United Nations Security Council (UNSC). For instance, the EC prohibited direct or indirect
imports of rough diamonds, as well as round logs and timber products, from Liberia (whether
of Liberian origin or not). The EC has also prohibited the importation of rough diamonds
from Côte d'Ivoire, whether of Côte d'Ivoire origin or not.
The EC also restricts trade under treaties and international conventions to which it is a
signatory. The EC has signed two treaties that may impose restrictive trade measures. These
were: the WHO Convention on Tobacco control, and the Convention on the Conservation of
Highly Migratory Fish Stocks in the Western and Central Pacific Ocean. The EC
implemented recommendations by the International Commission for the Conservation of the
Atlantic Tunas (ICCAT) to impose trade sanctions upon Bolivia, Cambodia, Equatorial
Guinea, Georgia, and Sierra Leone, and to lift sanctions earlier imposed upon Belize,
Honduras, and Saint Vincent and the Grenadines. Following a recommendation by ICCAT,
the EC lifted trade sanctions on Cambodia, Equatorial Guinea, and Sierra Leone. The EC has
also transposed into Community law conservation measures adopted by the Convention on
130 Council Directive 2005/94/EC of 20 December 2005 on Community measures for the control of avian influenza and repealing Directive 92/40/EEC, O.J. (L 10)16 available at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2006:010:0016:01:EN:HTML
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the Conservation of Antarctic Marine Living Resources, which included some trade-related
elements. The EC continues to carry out import surveillance, controls, and prohibitions on,
inter alia, technical, sanitary, phytosanitary, and environmental grounds.
The EC is member of the Kimberley Process. The KPCS has been in operation since January
2003, and now has some 50 Participants, including all major diamond producing, trading and
processing countries. Council Regulation (EC) No. 2368/2002131 implemented the Kimberley
Process certification scheme. The Regulation lays down the procedures and criteria to be
followed in the import and export of rough diamonds into and from the EC, and creates a
uniform EC Kimberley Process certificate which is used for all shipments. The Regulation
also provides for EU Member States which wish to do so to designate ‘Community
authorities’ which can then carry out the import and export procedures foreseen under the
KPCS. The Regulation further sets out provisions for self-regulation by the diamond industry
in the EC.
The EC import licensing system is in place to manage imports of specific products subject to
quantitative restrictions, safeguard measures or import surveillance. In addition, certain steel
and agricultural products are subject to Community surveillance for statistical purposes,
according to the Commission. As regards non-WTO Members, the EC maintains quantitative
restrictions on certain steel imports from Russia, Ukraine, and Kazakhstan. The EU import
licensing system is based on the premise that no import licenses are required unless specific
products are subject to import surveillance, quantitative restrictions or safeguard measures.
As regards import surveillance, specific products may be monitored by the EU in order to
increase transparency in trade, but without the purpose of imposing limits on access to the EU
market. As a result of this surveillance, statistical controls and further controls on the origin
of the products are established. In such cases, the objective is to avoid eventual diversion of
trade and customs fraud. EU surveillance measures apply to certain iron and steel imports
from countries other than the countries of the European Free Trade Association (EFTA),
131 Council Regulation (EC) No 2368/2002 of 20 December 2002 implementing the Kimberley Process certification scheme for the international trade in rough diamonds, O.J. (L 358) 28 available at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32002R2368:EN:HTML
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countries which are parties to the Agreement on the European Economic Area (EEA), and
Turkey. Surveillance measures also apply to certain agricultural and textiles products.
Import licenses authorize the import of products which are subject to certain restrictions in
the EU. Licenses are issued immediately by the competent authorities in all the Member
States when the "first come, first served" basis is used. In other cases, they are issued within
10 days of notification of the EU decision indicating the quantities to be distributed. They are
valid throughout the EU, except in situations where a quota is limited to one or more
countries of the EU, where these licenses are only valid in the Member State(s) or the
region(s) in question. The licenses are valid for four months and are free.
Regulation 738/94132 lays down common rules concerning the formalities for lodging
applications for licenses and also the use of licenses. It also establishes an EU license and a
common form for licenses. Finally, it provides a list of the competent administrative
authorities in each Member State dealing with the issuance of import licenses.
Applications for import licenses must be submitted to the relevant department of the Member
States, on a prescribed application form and, in most cases, be accompanied by an original
export document provided by the supplier and a copy of an invoice. The licensing authorities
have to issue an import authorization within a maximum of five working days of the
presentation by the importer of the original of the corresponding export license. Import
licenses are valid for a period of six months from the date of their issue. The validity of a
license may only be extended in case of "force majeure". Member States have to send all
applications to the European Commission and will only issue a license after the application
has been approved by the European Commission.
Tariff quotas may apply to imports of a specified origin, normally within the framework of
preferential tariff arrangements, or to imports of all origins. Recourse to tariff ceilings is
normally confined to preferential tariff arrangements. The EC currently maintains 98 tariff
132 Commission Regulation (EC) No 738/94 of 30 March 1994 laying down certain rules for the implementation of Council Regulation (EC) No 520/94 establishing a Community procedure for administering quantitative quotas, O. J. (L 87) 47 available at http://eur-lex.europa.eu/LexUriServ/site/en/consleg/1994/R/01994R0738-19960601-en.pdf
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quotas, of which 91 are on agricultural products. These quotas are administered through
import licenses, and include beef, sheep, goats, chicken, turkey, milk products, eggs,
potatoes, fruit and vegetables, wheat, barley, rice, maize, starch, mushrooms, sausages, sugar,
and grape juice.
Following the phase-out of the WTO Agreement on Textiles and Clothing on 31 December
2004, the EC maintains no quotas or double-checking on textiles and clothing imports with
WTO Members. However, for ten textile and clothing products originating in China, specific
agreed levels have been set until the end of 2007. These ten products, i.e. cotton fabrics, T-
shirts, pullovers, men's trousers, blouses, bed linen, dresses, brassieres, table and kitchen
linen, and flax or ramie yarn, were subject to the most significant surge of imports into the
EC in the first semester of 2005 or were considered sensitive by EC producers. The import
quota regime is administered through a double-surveillance license system, both in China (at
the export point) and in the EC (at the import point). The MoU was incorporated into the
EC's textile import regime. Trade in the products not covered by the MoU is to remain
unaffected and thus quota free.
The EC extended the bilateral agreement with Belarus on trade restrictions on textile and
clothing products, including on economic outward processing traffic. The bilateral textile
agreement with Ukraine was also extended, but double-checking requirements were ended;
double-checking requirements were also ended for Viet Nam and the Russian Federation. A
bilateral textile agreement with Serbia suspended all quantitative restrictions. On an
autonomous basis, the EC continues to apply quantitative restrictions on imports of textile
and clothing products from the Democratic People's Republic of Korea, Montenegro, and
Kosovo. In the light of global liberalization of trade in textile and clothing products,
bilateral and other arrangements with Azerbaijan, Bosnia and Herzegovina, Kazakhstan,
Laos, Tajikistan, and Turkmenistan and Uzbekistan were no longer extended.
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III) Taxes, Surcharges and Fees on Imports (TOR 8)
As a general rule, other than the common customs tariff, there are no other fees or charges
levied specifically on imported products. Other charges such as Value-added tax (VAT) and
excise duties apply to imports and locally produced goods (VAT also applies to services) at
the same rates. The bases for these taxes are set by the EC, but the rates are set by the
Member States within the provided range.
Austria
The standard VAT rate is 20%. A reduced rate of 10% applies to basic foodstuffs, books and
newspapers, public transport and renting of residential property. The quantitatively most
important excise duties are on mineral oil, tobacco and energy.
Belgium
The standard VAT rate is 21%. A reduced 6% rate applies to public housing, refurbishment
of old houses, food, water, pharmaceuticals, animals, art and publications, and some labour
intensive services. An intermediate rate of 12% applies to a limited number of transactions. A
0% rate applies to waste products and newspapers. Excise duties does not bring much
income in Belgium.
Bulgaria
The general VAT rate is 20%. Only one reduced rate of 7% is applied to hotel
accommodation. Excise duty rates have been gradually increased but are still below EU
minimum ones.
Cyprus
The current VAT rate is 15%. reduced rates range from 0% to 8%. Cyprus has requested
transitional measures, a 0% VAT rate on foodstuffs and pharmaceuticals, a reduced VAT rate
on restaurants. The excise duties on unleaded petrol and diesel fuel will be gradually aligned
with the EU minima.
Czech Republic
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The standard VAT rate is 19% and applies to most goods and services; a 5% rate applies to
certain services and essential goods (foods, drugs). Certain supplies, such as banking
services, insurance, financial operations, are exempt.
Excise tax is imposed on mineral oils, lubricants, spirits, beer, wine, tobacco products.
Czech Republic is planning an environmental tax reform for 2008 that will lead to an increase
of excise duties on fuels and energy, and stimulate environmentally-friendly behaviour.
Denmark
The VAT rate is 25% and only newspapers are taxed at 0%. Excise duties on tobacco, alcohol
and soft drinks have been recently reduced.
All energy products, are subject to both CO2 tax and energy tax.
Estonia
Standard VAT rate is 18%. A 5% reduced rate applies to certain goods and services, such as
books, newspapers, medicines, heating and accommodation. All excise duties exceeds
minimum EU levels.
Increases in environmental tax and excise duties are expected.
Finland
The standard VAT rate is 22%. A 17% rate applies to food and fodder, and 8% rate applies to
a list of goods, including medicines, books, newspapers. In 2007-2010, the 8% rate also
applies to hairdressing and small repair services.
Excise duties are one of the highest in EU on beer, wine, petrol and tobacco.
France
Standard VAT rate is 19.6%. A reduced rate applies to essential goods and certain
periodicals. A reduced rate of 2.1% applies to daily newspapers, certain theatre performances
and approved medicines.
Germany
Standard VAT rate is 19%. Reduced rate of 7% applies to staple food and books. Doctor’s
services and rents are exempt.
Greece
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The standard VAT is 19%. Greece also applies 9% reduced rate to goods such as fresh food
products, pharmaceuticals, transportation, electricity, as well as to certain professional
services, such as those supplied by hotels, restaurants, coffee shops. Excise duty is levied on
mineral oils, gasoline, tobacco, alcohol, beer and wine.
Hungary
Standard VAT rate is 20%. A reduced rate of 5% applies to a few products.
Ireland
Standard VAT rate is 21%. A 0% rate applies to basic food, children’s clothing, children’s
footwear and books.
Italy
VAT standard rate is 20%. A super reduced rate of 4% applies to foodstuffs, newspapers,
medical appliances, residential housing, and a reduced rate of 10% applies to other housing,
other foodstuffs, electricity, mineral oil, medicines, and artistic performances.
Latvia
Standard VAT rate is 18%. A reduced rate from 9 to 5% applies to medicines, medical
equipment, goods for the disabled, books, products for infants, water and sewerage services,
hotel services, sport events.
Lithuania
The standard VAT rate is 18%. A reduced of 9% applies to construction services, and a rate
of 5% applies to transport services, media products, medicines, hotel accommodation, chilled
meat, poultry and fish, organic food, and artistic, cultural and sporting events. A 0% rate
exists for the export sector. Excise duties exist on cigarettes and energy products. As of 2007,
coal, coke and lignite were taxed, and from 2010 natural gas and orimulsion will be taxed.
Luxembourg
The standard VAT rate is 15%. A reduced rate applies to food and beverages, pharmaceutical
products, books and newspaper, and passenger transport. A 6% reduced rate applies to gas,
electric power, flower and labour-intensive services such as hairdressing and window
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cleaning. A 12% rate applies to clothing, wine and coal, while a flat rate of 4% or 8% applies
to farmers subject to a specific regime.
Malta
The standard VAT rate is 18%. A reduced rate of 5% applies to holiday accommodation,
electricity, printed matter, medical accessories and goods intended for the use of disabled
persons. A 0% rate applies to food, pharmaceutical goods and local transport.
Excise duties exist on fuels and light alcoholic beverages, with higher excise duties on strong
liquors and tobacco.
The Netherlands
The standard VAT rate is 19%. A reduced rate of 6% applies to food, water, pharmaceuticals,
art, cultural events and publications. A flat rate of 5.1% applies to the sale of agricultural
products.
Poland
The standard VAT rate is 22%. A reduced rates of 0%, 3% and 7% also exist. By 2008, the
3% rate will apply to the supply of selected agricultural products and certain agricultural
services. A special reduced rate of 5% applies to lump-sum refunds to flat-scheme farmers.
Portugal
The standard VAT rate is 21%. A reduced rate of 12% applies to restaurants, some wines and
foodstuffs, and oil. A 5% rate applies to basic foodstuffs, books, periodicals and newspapers,
water and electricity. A standard rate of 15% is applicable in the Azores and Madeira, as well
as reduced rates of 8% and 4%.
Excise duties exist for the consumption of goods such as oil and energy products, tobacco,
alcohol and alcoholic beverages, and motor vehicles.
Romania
The standard VAT rate is 19%. A reduced rate of 9% applies to certain goods.
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Slovakia
The standard VAT rate is 19%.
Excise duties exist for mineral oils, tobacco and tobacco products, and beer.
Slovenia
The standard VAT rate is 20%. A reduced rate of 8.5% applies to food, agricultural products,
and pharmaceutical products.
Excise duties exist above the EU minima for fuel.
Spain
The VAT standard rate is 16%. Two reduced rates, 4% and 7%, apply to sports activities,
food, health products, housing, entertainment services, hotels and restaurants, agricultural
services, and some essential goods and books. In the Canary Islands the standard rate is 5%.
Sweden
The standard VAT rate is 25%. A reduced rate of 12% applies to foodstuffs, and services
related to tourism. A 6% reduced rate applies to domestic daily and weekly newspapers and
periodicals, domestic transportation of persons and ski-lift services, and to cinema, circus,
and concert tickets.
United Kingdom
The standard VAT rate is 17.5%. A reduced rate of 5% applies to fuel and power. An
insurance premium tax has a standard rate of 5%, while a 17.5% rate applies to insurance sold
by suppliers of vehicles and domestic appliances, and travel insurance sold by travel agents
and tour operators.
Excise duties exist on petrol, vehicles and cigarettes.
Further to the import duties levied at the border, and upon release for free circulation in the
Community, imported products may be subject to other product-specific taxes, fees and
surcharges, such as registration taxes, environmental taxes, waste-collection fees and etc. for
the purpose of placing these products on the market. As previously noted, such taxes, fees
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and surcharges are applicable to all products regardless of origin. Such taxes, fees, and
surcharges are product-specific and vary in different Member States.
For example, motor vehicles, a product group of special interest to Thailand, are levied with
number of taxes, such as VAT, registration tax, road tax, fuel consumption and CO2 emission
tax. The basis for calculation, the rates, as well as the applicability differ among Member
States. However, a Member State would levy the same taxes and tax rates on the same
category motor vehicle, regardless whether the vehicle is produced in this certain Member
State, in another EU Member State, or imported from third non-EU country. Please refer to
Annex X for details on taxes on motor vehicles in each Member State.
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IV) Sensitive Issues, Products, and Services (TOR 9)
EU
It is clear that the EU agenda for the new generation of bilateral FTAs, including that with
ASEAN, is an aggressive one in which the key objective is economic. The main aim of the
agenda is to expand business opportunities and enhance the competitiveness of EU
companies abroad through the removal of unfavorable global regulatory environment.
Therefore, as is indicated in the EU Commission Communication “Global Europe:
Competing in the World, “ the issues that the EU will place special emphasis in the new
bilateral trade agreements will be to: enhance and secure market access for important EU
goods and services; tackle non-tariff barriers to EU exports and investment with the aim of
regulatory convergence, such as in the areas of sanitary and phytosanitary measures (SPS),
technical barriers to trade (TBT), and intellectual property rights (IPR); further
strengthening of EU commercial presence in third countries and investment liberalization;
open up public procurement markets, including transport equipment, public works, and
utilities; and ensure fair competition and usage of trade defense instruments, such as anti-
dumping, anti-subsidy, and safeguard measures.133 Essentially, these issues are line with
the EU’s intent to ensure that the new generation of bilateral free trade agreements with key
partners will be WTO-Plus by tackling issues which have proven not ready for multilateral
discussion, such as investment, competition policy, and government procurement, or have
made little progress at the multilateral level, such as regulatory issues and IPR enforcement.
Furthermore, the Communication mentions that the FTAs will need to cover the issue of
sustainable development to promote decent work for all by addressing environmental and
social issues and role of civil society and seek to include the provisions on good governance
in the financial, tax, and judicial areas where appropriate.134
However, considering the EU’s ambitious agenda together with the principle of give
and take in trade negotiations, it can be expected that the negotiating partners will also place
demands in areas which are sensitive to the EU and/or compel the EU to accept a lower
threshold for the sake of reaching a compromise. This account is by no means exhaustive. 133 Maes, Marc. The EU approach to bilateral negotiations. A quick snapshot, TNI presented at EU-ASEAN Seminar, Bangkok, 7-8 February 2007; p. 10.
134 http://ec.europa.eu/trade/issues/sectoral/competitiveness/global_europe_en.htm
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For instance, in the liberalization of trade in goods, it is clear that the EU, as a member of
the WTO, would need to find a balance between Article XXIV of the GATT 1994, which
requires that bilateral trade arrangement covers “substantially all trade" and its highly
protected sectors, especially under the Common Agricultural Policy (CAP) and the Common
Fisheries Policy (CFP). Since the EU tariffs on most industrial products are already low, the
pressure will no doubt fall on the opening of the well guarded agriculture sectors and
commodities, such as sugar, dairy products, cereal, rice, beef, certain fruits and
vegetables, and fisheries products. In 2006, while the EU’s protective average tariff on
industrial goods is around 3 per cent, that of agriculture imports range between 18 per cent
and 28 per cent, such as around 25 per cent for animal products and cereal and preparations,
33 per cent for sugars and sugar confectionary, and up to 50 per cent for dairy produce.135
As depicted in Exhibit 1, many of these products are the ones that the EU has sought to
protect and exclude from trade liberalization in its FTAs with South Africa, Mexico, and
Chile.136
Exhibit 1: EU Exceptions from Trade Liberalization under FTAs
EU-South Africa FTA EU-Mexico FTA EU-Chile FTA
beef/sugar/some dairy
(powdered milk
products)/sweet corn/maize
and maize products/rice and
rice products/starches/ some
cut flowers/ some fresh fruits
(certain citrus, apples, pears
grapes, bananas)/prepared
tomatoes/some prepared
fruits and fruit juices/some
wines/vermouth/ethyl alcohol
bovine animals, beef, swine,
poultry/dairy/eggs/honey/cut
flowers/some fruits and
vegetables (olives for
production of oil, sweet corn,
asparagus, peas, bens, apples,
pears, strawberries, grapes,
bananas)/ cereal except
buckwheat/sugar/some juices
(tomatoes, citrus fruits,
pineapple, apple,
pear)/vermouth/ethyl
alcohol/vinegar
beef, swine, sheep and goats,
poultry/dairy/eggs/some
fruits and vegetables (beans,
mushrooms, olives for
production of oil, sweet
corn, manjoc)/cereals and
corresponding products of
the milling industry/sugar/
vermouth/ethyl
alcohol/vinegar
135 http://www.wto.org/english/thewto_e/countries_e/european_communities_e.htm
136 Rudloff, B. and J. Simons. 2004. Comparing EU free trade agreements : Agriculture. (ECDPM InBrief 6A). Maastricht : ECDPM with CTA -the Technical Centre for Agriculture and Rural Cooperation ACP-EU
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Indeed, the EU’s tariff structures and pattern of product coverage in its FTAs does
not only reflect EU’s sensitive products but also the degree of EU’s domestic support and
protection. In this connection, it is important to note that the issue of domestic support is not
a part of the EU’s FTAs and no domestic support related provisions are found under the
agreements but there exist a common and/or specific safeguards clause for sensitive
agriculture products, which allow additional tariffs to be triggered in cases of a surge in
imports quantities or an unusual decrease in import prices.
In order to grant minimum market access to many of its protected agriculture
products, the EU uses various product-specific trade preferences, especially tariff rate
quotas (TRQs) which allows certain quantity of goods to be imported with lower duty but a
much higher tariff is applied to quantities above this amount. Yet it is evident that the EU’s
trade preferences regime is highly complex. For example, there is a combination of
preferences in agricultural products which may include: tariff reductions with or without
quotas or the possibility of reference quantities being defined; a reduced tariffs for quantities
outside the quotas; a reduced entry prices with or without quotas; and all these quantities
may be limited within a calendar periods but with the possibility of concession. Moreover,
different schemes may also be used on different products and for different partner countries,
such in the case of beef, in which a number of African ACPs are subject to a special tariff
quota of 52,100 tons with a tariff of 8 per cent, while imports from the Central and Eastern
European Countries (CEECs), Switzerland, some South American countries, as well as
North America, Australia, and New Zealand are granted different special trade preferences
depending on suppliers, and duty-free access is available for Everything but Arms (EBA)
countries. Considering that the EU could expand the usage of these preferences so as to
replace the removal of protective tariffs for sensitive items, partner countries could call on
the EU to revise these complex access provisions.137
Similarly, the fact that the EU insists on its own complex PanEuro system of rules of
origin being applied in all its preferential trade agreements could invite calls
137 Kuzweil, M., Lebebur O., and Salamon, P. Review of Trade Agreements and Issues, ENAPPRI Working Paper No. 3, November 2003, p. 23-25.
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for simplification from the partner countries, especially with developing partners, it the trade
agreements are to be mutually beneficial to both sides. In general, the EU uses two
guidelines to determine the rules of origin; 1) goods must be manufactured from the raw
materials or components of the partner country or 2) undergo a specified amount of work or
processing in the partner country, and it is the latter criteria which is highly complex. For
the process criteria, the EU has set out the “list rules” on numerous products where specific
conditions must be met, such as the starting materials used in the production must originate
in the partner country, non-originating materials are permitted in some cases, the
combination of starting and non-originating materials, and maximum percentage for non-
originating inputs. Although the EU has attempted to ease these requirements for developing
countries given their relatively small production base, such as through bilateral, regional,
diagonal, and full cumulation rules of origin, the system has remained complex. For
instance, in the EU-South Africa FTA, diagonal cumulation is allowed only with one ACP
partner country and not to the Southern African Development Community (SADC) regional
group as a whole but full cumulation is permitted among the SADC countries, and
significant relaxations of the rules were allowed in the EU-Mexico FTA for a large market
access package. In this respect, the EU system has also come under considerable degree of
criticism as being trade restrictive and used for protectionist purposes.138
On the other hand, trade in services is an area of comparative advantage for many
EU members, particularly on telecommunication and financial services, and in which the
EU will have an offensive interest to go beyond the GATS obligations. Although the recent
bilateral arrangements with South Africa, Mexico, and Chile, closely follow the GATS
provisions and the liberalization of trade in services is postponed for a period of 3-5 years
after the agreements enter into force, these agreements contain significant provisions on
further liberalization, as well as cooperation mechanisms, to ensure that actual and deeper
liberalization will take
place in the near future.139 Yet, it is clear that there are some services sectors that the EU are
still reluctant to keep from open competition and external influences and are likely to face
138 Naumann, E. 2006. Comparing EU free trade agreements - Rules of origin. (ECDPM InBrief 6I). Maastricht : ECDPM (http://www.ecdpm.org/inbrief6i)
139 Ullrich, H. Comparing EU free trade agreements : Services. (ECDPM InBrief 6C). Maastricht : ECDPM
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pressure from partner countries to liberalize. These sectors include maritime, air services,
audio-visual, cultural services, health, and education.
Meanwhile, there is likely to be request from the partner countries, especially developing
ones, on the EU to open up or ease the admission criteria on its Mode 4
of services trade, or the movement of natural persons, which have more or less been
preserved for EU nationals, so that high to semi skills workers could gain greater access into
the EU. At the same time, the aim of the EU to increase the commercial presence of its
companies in third countries with the inclusion of investment liberalization provisions in
bilateral arrangement is likely to encounter some difficulties. Basically, this is due to the
fact that the competence for investment still resides with the EU member states which have
been reluctant to give up their negotiating power to the European Community. As such,
except for some provisions on capital market liberalization, the EU investment agreements
usually refer directly to the investment provisions under the bilateral investment treaties
(BITs) of the member states or to their commitments in international agreements, such as in
the OCED and the IMF. However, most BITs concluded by the member states are
concerned with the issues of investment protection and promotion, while leaving market
access or “establishment” provision to the EU Commission to negotiate. Nonetheless, the
EU Commission is currently drafting a template encompassing the issues of trade in services,
investment, and E.commerce, which is to be used for all bilateral negotiations.140
Finally, as explicitly stated in the Global Europe Communication, one of the key
component of the EU’s modern trade strategy is the establishment of a linkage between
policies at home and abroad and the achievement of regulatory and administrative
harmonization with its partner countries, such as on standards and conformity assessment,
quality control, competition policy, IPR enforcement, and public procurement. While
greater policy coherence might be beneficial to both the EU and the partner countries, such
as in terms of bilateral trade and investment expansion, greater regulatory transparency and
accountability, and enhance competitiveness, empirical evident suggests that the EU might
have to settle for the
140 Woolcock, S. European Union towards Free Trade Agreements. ECIPE Working Paper No. 3/2007. Brussels: ECIPE and Szepesi, S. 2004. Comparing EU free trade agreements : Investment. (ECDPM InBrief 6D). Maastricht : ECDPM
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lowest common denominator as partner countries, especially developing ones, are not likely
to be able to, nor want to, adapt to the high standards of the EU.141 Undoubtedly, one
important lesson here is the almost decade-long effort of the EU as the demandeur of the
multilateral framework on investment and competition policy under the WTO, which had
generated a great deal of opposition from most developing members and was later dropped
from the Doha Development Agenda (DDA).142 Likewise, the EU’s advocacy on the
essential principles of human rights, good governance, the rule of law, and democracy, has
been and will continue to be a potential divisive issue with partner countries which could
obfuscate the overall negotiation, such as in the case of Myanmar in ASEM and the EU-
ASEAN FTA. It has been noted that one of the EU’s prerequisite to starting an FTA is to
first negotiate an overall Association Agreement which contains provisions on political,
economic, and development cooperation along with a special focus on the essential
principles. This implies that the non execution of certain essential elements on the part of the
partner country, such as no respect for human rights, can have adverse effect on bilateral
relations and hinder the negotiation process.143 Lastly, while the EUs’ commitment to
sustainable development through trade is long-established, the fact that the aim of the new
generation of bilateral trade arrangement is economic in nature indicates that the EU could
also sideline social and development issues in order to expedite the negotiation process. As
one author clearly indicates in a comparative analysis between the EU and US FTAs, “On
the sensitive issues surrounding social, labor, and environmental obligations in future FTAs,
the (EU) commission couches its intentions in cautious diplomatic assurances, stating that it
will work to strengthen sustainable development through our bilateral relations, but adding
that this could include incorporating new co-operative provisions in areas relating to labor
standards and environmental protection. This emphasis on cooperation contrasts with the
U.S. Democrats’ demand that future FTAs include legally enforceable bludgeons in these
areas”.144 Indeed, the slightest insinuation that these essential principles and the social and
development dimension would be put on the backstage for trade and commercial interests
141 http://ec.europa.eu/trade/issues/sectoral/competitiveness/global_europe_en.htm and Francois J., McQueen M., and Wignaraja, G. EU-Developing Country FTA’s: Overview and Analysis. http://www.dfid.gov.uk/pubs/files/itd/eu-rta.pdf
142 Investment, competition policy, transparency in government procurement and trade facilitation are the so called Singapore issues under the WTO. http://www.wto.org/english/thewto_e/whatis_e/tif_e/bey3_e.htm
143 Knottnerus, R. The EU-ASEAN – Entering a New Phase in Trade Relations: TNI presented at EU-ASEAN Seminar, Bangkok, 7-8 February 2007; p. 18.
144 Barfield, C. Europe (Re)Joins the FTA Bandwagon. American Enterprise Institute for Public Policy Research No. 1 January 2007: AEI; p. 3.
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would incite strong opposition towards any proposed bilateral trade arrangements from the
well organized EU’s non-profit organizations, activists, and civil society.
Member States
AUSTRIA
Austria is part of the EU Harmonized trade system and Common External Tariff (CET) is
applicable to goods from non-EU countries. Import licenses are required for some sensitive
items, mainly agricultural products, namely, cereals, rice, beef and veal, sugar, isoglucose,
oils and fats, seeds, milk and milk products, wine, processed fruit and vegetables, and sheep,
buffalo, and goat meat. A range of alcoholic beverages is also subject to quota arrangements
or the EU wide arrangements and many items are subject to compulsory standards testing,
and an approval must be obtained prior to importation, such as drugs and pharmaceuticals.
There is EU and Austrian legislation covering almost every aspect of food production and
sale, such as ingredients, label design and content, packaging size and materials, product
descriptions and names, and products of animal origin.
Austrian authorities have also introduced legislation on packing, marking, and labeling. For
instance, packaging regulations require suppliers of goods to arrange for the retrieval and
recycling of transport and sales packaging. Similarly, the 1975 Food Law regulates the
marking and labeling of foods and food products and certain products can only be sold in the
EU if they conform to the appropriate EU directives and show a CE Mark. Specific labeling
regulations are also applied to imports of most consumable items, e.g. labeling on canned
foods should be in German indicating country of production, canner's name, recommended
date of consumption, net contents, and contents at the time of canning
Furthermore, 99 per cent of Austrian public health requirements are covered by the EU
veterinary legislation and one per cent by Austrian legislation. Livestock, food, animal
products, plants, and plant products are subject to detailed regulations and controls and their
imports must be accompanied by sanitary health certificates issued by the approved authority
in the country of origin. Certificates accompanying carcasses and cuts of meat must also
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indicate the number and nature of packages, a description of the meat, gross weight, and net
weight.
BELGIUM
Belgium is part of the EU Harmonized trade system and Common Exernal Tariff (CET) is
applicable to goods from non-EU countries. As a member of the EU, Belgium accords
preference to associate members of the Union and to developing countries and European Free
Trade Association (EFTA) members. The European Community has steadily replaced
national rules and regulations with European-wide directives which must be met in addition
to all local and national regulations in Belgium.
More specifically, Belgium maintains import restrictions on some sensitive products, mainly
animal, plant, and food products, which are protected by quota and managed by a licensing
system. These products include cereals, rice, beef and veal, sugar, isoglucose, oils and fats,
seeds, milk and milk products, wine, processed fruit and vegetables, and sheep, buffalo, and
goat meat. Import of these specified products without a quota license is prohibited. Other
imports require only notification of intent to import include textiles, steel, footwear, ceramic
products, toys, porcelain, and glass products, which are subject to quota restrictions.
On packing, marking and labeling, Belgium applies normal commercial practices on most
goods. Pre-packed goods and spirits (except perfumed or medicated cordials) must be packed
in quantities specified by regulations and quantities must be shown in metric measures,
although imperial measures can also be displayed. Certain items also require specific
markings, e.g. certain products can only be sold if they conform to the appropriate EU
directives and show a CE mark. Also prohibited are goods having forged trademarks or false
or misleading trade descriptions, or any trademark or mark so nearly resembling a trademark
as to be deceiving. For instance, eggs in shells must be marked with the country of origin,
butter, honey, and similar products must be marked as being of foreign produce, and special
labeling regulations apply to canned food, medicaments, and cosmetics.
Moreover, like other EU members, Belgium places a special emphasis on issues of health and
sanitary for imports. For example, food items of animal origin must be presented at an
inspection port of the Ministries of Agriculture and Public Health. Fresh meat requires prior
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authorization by the Chief Inspector of the Veterinary Services, Belgian Ministry of
Agriculture. Meat, meat products, and animal casings also require certificate of ante- and
post-mortem inspection, issued by the appropriate authority in the country of origin and
bearing a special label showing that inspection has been made. Imports of prepared or
preserved meat must also be accompanied by a special health certificate written in the
language of the country of origin and the two official languages of Belgium: French and
Dutch. Oysters, mussels, and other invertebrate sea animals to be eaten raw must also comply
with a detailed health certificate issued by the Health Authority of the country of origin. In
addition, the import of fabrics and clothing treated with tris-phosphate is prohibited and a
wide range of products (consumer goods, furniture, electrical goods, toys, etc.) are subject to
Belgian safety standard regulations and more than 150 EC technical standard directives.
BULGARIA
Bulgarian tariff is based on the Harmonized System of tariff classification. The value for duty
is assessed on the CIF value and ranges from 0 to 40 per cent. The Bulgarian customs law is
based on the European Union Customs Code and the customs tariff was modified as a part of
the Bulgarian national strategy for joining the EU in 2007. Bulgaria also applies the General
System of Preferences which sets lower tariffs for imports from developing countries.
Bulgaria imposes few import restrictions and import declaration is required only for
monitoring purposes. Nevertheless, import licenses are required for certain sensitive goods,
which are tobacco and tobacco products, alcoholic beverages, essential oils, military
equipment and related goods, antiques, protected flora and fauna, intellectual property, and
precious metals and stones. Minimum import prices also apply to a number of goods
including pork, poultry meat, some alcoholic beverages, cigarettes and a number of fruits and
vegetables.
At the same time, Bulgaria requires that imports of animals, animal products, plants and plant
products are accompanied by a health certification issued by the approved authority in the
country of origin. Phytosanitary certificates are also required for shipments of plants and
plant products must be issued in English with either a German or French translation.
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Moreover, authorization permit must be obtained prior to import any products which
originate in an area infested with injurious plant diseases or pests.
CYPRUS
Cyprus tariff is based on the Harmonized System and most duties are ad valorem based on
the GATT Valuation Code. Cyprus maintains few import restrictions and most goods may be
imported under an open general license. Some sensitive items which require specific import
licenses include fresh fruit and vegetables, fresh meat, and plants and equipment. The import
of salt is restricted to government monopoly. Furthermore, Cyprus prohibits the imports of
citrus fruits and peel (except citrus seeds and processed peels of fruit), vine plants and grapes
(excluding dry currants and raisins), raw vegetables, cut flowers, mushrooms, soil, animal
and vegetable manures, and walnuts, almonds, hazelnuts, and groundnuts in shells
Cyprus applies normal commercial practices on packing, marking, and labeling of imported
products, while pre-packaged processed food imports must have an expiration date and
packing of hay and straw is prohibited unless accompanied by an official certificate issued by
the country of origin, stating that the packing has been thoroughly disinfected. At the same
time, the country of origin must be clearly and indelibly marked on all imports and food must
also be marked with the name of the manufacturer, the ingredients, and the net weight, while
import of goods bearing a forged trademark or false trade description are prohibited.
On the other hand, certain agricultural products are restricted unless accompanied by an
appropriate health certificate issued by the authority of the country of origin, which include
livestock, plants and seeds, and certain foodstuffs for animals. A phytosanitary certificate
from the pertinent authorities is also required for imports of cotton, hay and straw, fodder,
various plant seeds, fresh fruit, honey in an uncooked state, and seed potatoes. In addition,
drugs and foodstuffs for human consumption are subject to strict controls.
CZECH REPUBLIC
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The Czech Republic became a member of the EC in 2004 and since then all monopoly on
foreign trade and all price controls have been abolished. The Czech tariff is now based on the
Harmonized System and most duties are ad valorem based on the GATT Valuation Code.
Accordingly, as an EU member, the exchange of goods with the EU members is duty free,
while most imports from the non-EU countries are subject to rates of duty ranging from 0 to
15 per cent, with an average rate around 5 per cent.
The Czech Republic do not require import licenses for most goods but certain items are still
subject to this requirement, such as electric power, steel, crude oil, natural gas and some other
chemicals, firearms, and narcotics. On the other hand, the Czech Republic applies normal
commercial practices and requirements on the packing, marking, and labeling of imports, i.e.
goods must be securely packed, bear the consignee's mark, port mark, sales contract number,
and country of origin, as well as contain instructions for use, description of a product, and a
warranty, which must be written in Czech.
Likewise, the Czech Republic follows the EU rules and directives with respect to public
health requirements which require that imports of animals and animal products and plants and
vegetable products must be accompanied by health/veterinary certificates issued by the
appropriate authority in the country of origin and electrical appliances, toys, fireworks and
cosmetics must conform to safety regulations being identical with those of the EU.
DENMARK
Denmark’s tariff is based on the Harmonized System and most duties are ad valorem based
on the GATT valuation system. As a member of the EC, Denmark offers duty free access to
other full members of the EC. Preferences are also given to associate members of the
Community, developing countries, and European Economic Area (EEA) members, while
Common External Tariff (CET) is applicable to all other countries.
Accordingly, as a full member of EU, most of Denmark’s import requirements correspond to
EU Commission regulations. Most goods may enter Denmark free from restriction and
import licenses are required only for a limited range of sensitive items, such as agricultural
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products and textiles, while electrical equipment is subject to testing and approval prior to
sale.
Nevertheless, due to Denmark’s high veterinary standards, food and most other consumer
commodities are subject to strict packing, marking, and labeling controls, such as hay, straw
or grass may not be used for packing plants and their parts and used sacks may not be used
for packing potatoes, fodder, meal or bran. Moreover, Denmark imposed strict health and
sanitary requirements on a number of products, such as livestock, food, animal products, and
plants and plant products, which require health certifications issued by an approved authority
in the country of origin. The use of coloring materials, preservatives, and other additives in
food is also strictly controlled.
FINLAND
Finland’s tariff is based on the Harmonized System and most duties are ad valorem assessed
on CIF value. Finland’s import trade was not greatly affected by EU membership in 1995.
The country has also adopted the Generalized System of Preferences (GSP) of the EU, as
well as applies import taxes imposed by the EU.
In general, Finland applies the same import restrictions as other EU countries which are
mostly in the form of quotas and licensing, of which quotas are EU-wide. For example,
import licensing is required for textile products, some Chinese products (other than textiles),
foodstuffs, and some iron and steel products from the Commonwealth of Independent States
(CIS). Imported goods are also required to abide with the regulations on the packing,
marking, and labeling of products, such as specific labeling requirements for pre-packed
foods which must indicate all additives and residues as well as nutritional nature.
Furthermore, Finland maintains various health and standard controls on imports, such as
veterinary border controls on meat and meat products, milk and milk products, and fish and
fish products, phytosanitary controls on living plants, and compulsory technical regulations
and standard controls on some consumer and utility products, foodstuffs, cosmetics, and paint
products. Sanitary certificates issued by the appropriate authority in the country of origin are
also required for goods which may introduce contagious animal or plant diseases into the
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country, such as live plants, animals, raw animal products, and processed animal products.
FRANCE
France is a member of the European Union and gives preference to associate members of the
Union, as well as to developing countries and European Free Trade Association (EFTA)
members. France applies the Common External Tariff (CET) to imports from non-EU
countries and most duties are ad valorem based on the GATT Valuation Code.
Products requiring special authorization or import formalities in France include: arms and
military equipment; explosives; farm products; drugs and medicines; measuring equipment;
certain types of medical equipment; products subject to safety standards (such as video
games, toys, protective headgear and television sets); precious metals; live animals; and some
animal and vegetable products.
Furthermore, besides the EU Directives, imports must also conform to local and national
regulations in France, such as: livestock, animal products, plants and plant products must be
accompanied by health certificates issued by the approved authority in the country of origin;
plants and shrubs (excluding seeds) are required to have trilingual phytosanitary certificates
issued by the approved authority in the country of origin and approval from the French
Department of Agriculture; fresh fruit requires quality and phytosanitary certificates; and iron
and steel products and carded woolen fabrics are subject to the issue of a technical visa prior
to importation.
GERMANY
Germany’s tariff is based on the Harmonized System and most duties are ad valorem based
on the WTO Valuation Code. Preferences are given to EU associate members, developing
countries, and EFTA members, as well as to Poland, the Czech Republic, Hungary, Bulgaria,
and Romania, while the Common External Tariff (CET) is applicable to other countries. In
general, duties under the EC Common Agricultural Policy (CAP) are applied to imports of
agricultural products.
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Certain items require specific import licenses, include a range of agricultural products,
foodstuffs, and textiles, while quotas are imposed on goods and apparel from developing
countries. Imports are also subject to quantitative restrictions.
In terms of packing, marking, and labeling of imports, German regulations, apart from
normal commercial practices, require the suppliers of goods to arrange for the retrieval and
recycling of transport and sales packaging. An environmental mark, e.g. the 'Green Spot' (der
grune punkt) informs the consumer that the packaging can be recycled. Likewise, labeling
must correspond with EU regulations e.g. include product's trade name, net weight, minimum
shelf life, a list of the ingredients in order of prominence, name of the producer, and packer or
EC distributor.
Furthermore, livestock (other than horses, dogs and cats), foods, animal products, plants and
plant products are subject to detailed regulations and controls, and imports must be
accompanied by special certificates issued by the approved authority in the country of origin.
Fruit and plants also require phytosanitary certificates issued by the approved authority in the
country of origin.
GREECE
Greece’s tariff is based on the Harmonized System and most non-EU goods may be imported
on a similar basis to those from the EU subject to the Common External Tariff. Import duty is
around 5-7 per cent for most products while most raw materials for processing and re-
exportation to non-EU countries can be imported with minimal or without duties.
In general, EU regulations, directives and legislation apply but there are also Greek
government-initiated trade barriers. For instance, most agricultural product imports, such as
cereal grains, rice, milk and milk products, beef and veal, olive oil, and sugar, are covered by
the Common Agricultural Policy (CAP) under which many items are subject to variable
levies and a complicated protection system. Besides the use of import licenses for some
products, special licenses are also required for imports from low-cost countries, such as
textile and iron and steel products, and a number of services, such as legal and business
services. These commodities are under surveillance according to EU quotas. Occasionally,
Greece also bans imports of some types of products that compete with similar domestically
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produced ones, as well as maintains nationality restrictions on a number of professional and
business services, including legal advice from non-EU members.
Greece’s labeling and marking requirements are in accord with EU requirements. On the
other hand, health certificates issued by appropriate authorities in the country of origin are
required for the imports of animal products, including poultry, meat, fish and dairy products.
Phytosanitary certificates are also required for plants and plant products, including vegetables
and seeds, meat and poultry products, nuts, and dairy products.
HUNGARY
Hungarian tariff system is the EU's TARIC system which maintains a global quota on imports
of consumer goods, while duties are ad valorem assessed in harmony with the GATT.
Following Hungary’s accession to the European Union in 2004, several goods traded by
Hungarian enterprises require an import license and are subject to quotas, especially
agricultural products such as pork, beef, calf, sheep, goat, poultry, eggs, milk and dairy
products, fresh and processed fruits (such as bananas or tangerines) and vegetables (such as
garlic), sugar, oil and fat, seeds and grains, flowers, wine. and ethyl alcohol. Companies can
import these products only up to certain limits or quotas, which the EU determines. A prior
deposit is also required to import most agricultural goods.
Although Hungary has no general requirement on the packing, marking, and labeling of
imports, strict rules apply to the labeling and marking of food, cosmetic, household products,
and human and animal pharmaceuticals. The primary requirement for food is that labeling
information must be in Hungarian, while special labeling regulations also apply for the retail
sale of food and some other products.
For the imports of plants and animals, Greece apply the EU health regulations. Plants and
plant products require phytosanitary certificates and live animals, meat, and meat products
require veterinary certificates issued by the approved authority in the country of origin to be
imported into Hungary. In addition, medicinal products, cosmetics, foodstuffs and
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agricultural machines and equipment may also require testing and approval by the Hungarian
Authorities before import is allowed.
IRELAND
Ireland is part of the EU harmonized trade system and gives preference to associate members
of the Union, developing countries, and European Free Trade Association members, while
Common External Tariff is applicable to other countries. Most duties are ad valorem based
on the GATT Valuation Code.
Import licenses are required for a limited number of sensitive items including agricultural
products. Animals, plants and their products are subject to detailed regulations, including EU
directives and legislation. Agricultural products are protected by quota, managed by a
licensing system. Import of specified products without a quota license is prohibited. These
products include cereals and rice, beef and veal, sugar and isoglucose, oils and fats, seeds,
milk and milk products, wine, processed fruit and vegetables, and sheep, buffalo and goat
meat. Imports of certain goods (including textiles, steel, footwear, ceramic products, toys and
porcelain and glass products) originating in certain non-EU countries are also subject to
either quantitative restrictions or surveillance measures and products covered by the Common
Agricultural Policy may be subject to various charges.
In terms of packing, marking and labeling of imports, all the directives of the European
Council, such as on CE mark, must be met as well as local and national regulations. On the
other hand, animals and animal products require sanitary certificates and plant and plant
products require phytosanitary certificates issued by the appropriate authorities in the country
of origin.
ITALY
As a member of the EU, Italy is part of the EU Harmonized Coding System and EU rates are
applied to imports from all third countries. Preference is given to associate members of the
Community, developing countries, and EFTA members, and a Common External Tariff
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(CET) is applicable to other countries. Most duties are ad valorem, based on the GATT
Valuation Code.
There are a number of Italian regulations and European Union (EU) directives that prohibit
certain foodstuffs, food colorings, drugs and narcotics, animal products, plants, seed grains,
alcohol, cosmetics, and toiletries. Quotas are also established on an EU basis for a range of
goods, such as textiles, agri-foods, and steel and iron industry products.
Italy applies normal commercial practices in the packing, marking, and labeling of products
that conform closely with the EC rules, such as: foodstuffs, articles, or substances coming
into contact with foodstuffs, are subject to specific packing requirement; foodstuffs,
cosmetics, chemicals, veterinary pharmaceuticals and medicines, rubber and plastic products,
scientific and musical instruments, television receivers and goods manufactured in precious
metals require special marking and labeling; fish and fish products must be labeled in Italian;
and Italy also conforms to the mandatory EU requirement on CE mark which must be placed
on all regulated products by the manufacturer prior to being sold in the EU market so as to
protect the health and safety of consumers and the environment.
Furthermore, products that are directly imported into Italy must meet all Italian food safety
and quality standards, which many have been harmonized within the EU. For example,
animals imported from countries which permit the use of oestrogen must be accompanied by
health certificates stating that the livestock has not been treated with either natural or
synthetic oestrogen. Most foodstuffs, such as animal feed, including canned meat and canned
fish, are also subject to strict regulations controlling quality, handling, and the use of
chemical additives or coloring. Likewise, live animals, fish, shellfish, fresh or cold storage
meat, lard, fresh or pickled or dried hides and skins, wool and hair as well as plants and parts
of plants, seed grains and seed potatoes require health and phytosanitary certificates issued by
the approved authority in the country of origin. In this regard, there are also Italian
requirements for meat and poultry products, such as bovine animals must be accompanied by
a health certificate certifying that the animal is free of diseases e.g. bluetongue, foot and
mouth disease, cattle plague and pleuropneumonia, and bovine spongiform encephalopath
(BSE). In addition, while imports of fish must be accompanied by a certificate specifying the
permitted mercury content, electrical and electronic apparatus must comply with the Italian
Electrotechnical Committee standards and must have an EU mark in respect of electrical and
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electromagnetic safety standards and toys and related articles must comply with safety
standards published by the European Standards Committee.
LUXEMBOURG
As a member of the EU, Luxembourg applies the EU’s Common External Tariff and all
regulations affecting customs legislation, as well as the Common Agricultural Policy.
Import licenses are required for a limited number of sensitive items, mainly agricultural
products.Livestock, food, animal products, plants and plant products are subject to detailed
regulations and controls. Foodstuffs are also subject to special labeling regulations, which
must show the name of the manufacturer, composition, content, and country of origin, while
certain products can only be sold if they conform to the appropriate EU directives and show a
CE Mark.
Moreover, in line with EC regulations, imports of animals and animal products must be
accompanied by sanitary health certificates and fruits and plants for propagation and some
plant products require phytosanitary certificates issued by the approved authority in the
country of origin.
MALTA
Malta became a full member of the EU in 2004 and has since adopted the EU’s Harmonized
Trade System and the Common External Tariff.
There are no import restrictions in force, but certain products are subject to specific import
license for health, safety, security, and environmental reasons, as well as for sensitive items,
such as wheat, flour, cakes and pastries, gold and silver, and furniture and lace. Certain goods
similar to those manufactured in Malta are also either restricted or have import levies placed
on them.
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Apart from special approval requires for plastic packaging on foods, Malta’s packing and
marking rules are also fairly straightforward. Meanwhile, Malta’s health and standards
regulations on imports are similar to that of other EU members, such as; live animals and
meat require a veterinary certificate showing there were no cases of contagious diseases in
any area of the country of origin at the time of shipment and are subject to quarantine control;
plants and plant products (e.g. fresh tomatoes, seed potatoes, hay, straw, cottonseed, rags, and
flour) require a phytosanitary certificate and are subject to special quarantine regulations and
to examination on arrival; frozen fruits and vegetables require a certificate to confirm that the
goods have been deep frozen; and the imports of raw oysters, clams, sea urchins, mussels,
crustaceans, and other marine invertebrates must have a special permit from the
Superintendent of Public Health for import clearance.
POLAND
Poland’s adheres to the GATT and tariff is based on the Harmonized System, while customs
regulations comply with the EU-wide directives. The majority of goods are subject to rates up
to 30 per cent, although tariffs on spirits are more than 300 per cent and on some luxury items
are more than 100 per cent.
Import licensing is required only for a limited range of sensitive products, such as military
items, radioactive materials, explosives, arms and munitions, and highly flammable materials.
Poland also has import quotas for certain products, such as the annual tariff quotas for grains
and meat depending on the demand and supply situation.
Poland applies normal commercial practices on packing, marking, and labeling with specific
labeling requirements applies to foodstuffs, pharmaceuticals, and cosmetics. On the other
hand, animals, plants and their products require both Polish and English language health
certifications issued by the approved authority in the country of origin to protect the natural
environment, national security, public order, human, plant, and animal health. In this respect,
all foods must conform to sanitary and other requirements before importation is permitted
and many foods are also subject to sanitary inspection on arrival by the State Sanitary
Inspection Agency.
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PORTUGAL
Portugal is part of the EU Harmonized Trade System and preferences are given to associate
members of the Union, developing countries, and European Free Trade Association (EFTA)
members, while a Common External Tariff (CET) is applicable to goods from non-EU
countries. Apart from local and national regulations, imports must also meet the European-
wide directives. Special tariffs also exist for tobacco, alcoholic beverages, petroleum, and
automotive vehicles
On import restrictions, Portugal requires import licenses for restricted products and goods
that are subject to quotas as required by EU regulations, as well as import certificates for
some agricultural and industrial product, such as cereals, rice, beef and veal, sugar and
isoglucose, oils and fats, seeds, milk and milk products, wine, processed fruit and vegetables,
and sheep, buffalo, and goat meat. Under the EU directive, import license is also required for
dual- purpose products.
On packing, marking, and labeling, CE marking protects consumers by ensuring that there is
a common standard across Europe. Labeling must also be in compliance with EU directives.
Special marking and labeling requirements, such as content materials and weigh, are needed
for some products, including margarine, pharmaceuticals, yarns, textiles and textile
manufacturers, fertilizers, tobacco, wines, brandy and foodstuffs.
On the other hand, foods and other items of animal origin require sanitary certificates issued
by the approved authority in the country of origin. A health certificate must also accompany
food products and phytosanitary certificate must accompany shipments of plants including
cut flowers, rooted plants, trees and shrubs, and plant products such as hay, straw and peat
moss litter used as packing materials.
ROMANIA
The Romanian market is open requiring no special conditions for access or operation.
Romania is a GATT member and most custom regulations comply with the European Union.
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The monopoly of state organizations in foreign trading has been abolished and private
companies are now legally authorized to transact foreign trade, and the functions of the
Ministry of Trade and Tourism are mainly for statistical purposes.
Prohibited imports include products such as firearms, ammunition, illegal drugs and other
similar items that can affect national security, public health or good morals and import
licenses are required for all permitted goods.
Romania follows normal commercial practice in packing goods and there are no specific
marking or labeling regulations, except for implements for animal traction and machinery
which must bear the name and trade mark of the makers. Romania also observes normal
quarantine and health requirements, food, drug and pharmaceutical regulations. Plants, plant
parts, and plant products require phytosanitary certificates issued by the approved authority in
the country of origin and quality control certification, when applicable, is required.
SLOVAKIA
A customs union between the Slovak and Czech Republics has been established in
accordance with GATT which allows the duty free exchange between the two countries,
while the Common External Tariff (based on the previous Czechoslovakian tariff) is in place
for imports from third countries entering both countries that based on the Harmonized System
and the GATT Valuation Code.
The Slovak has abolished all monopoly on foreign trade and all price controls and any firm or
individual that is registered may now import goods from any country. Import licenses are not
required for most goods, although certain items are still subject to this requirement, these
include crude oil, natural gas, black and brown coal and some other chemicals, poisons and
narcotics, firearms and some agricultural products are subject to an automatic licensing
system.
Normal packing, marking and labeling requirements are applied by the Slovak republic and
since its EU accession import policy generally follows EU rules. According to Public Notice
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#15/98 and Act 576/2001 of Ministry of Economy of the Slovak Republic, import license is
required for animals, animal products, plants and vegetable products. These products are
divided into two groups: the first group covers live animals, foodstuffs and foodstuffs of
animal origin and fodders, and requires veterinary certificates; and the second group, includes
plants and seeds, and requires phytopathological sanitary certificate. These certificates are
required before distribution and are issued by the approved authority in the country of origin.
Since 1 September 1997, a new law covering general product safety, being identical with the
law prevailing in the EU, has been launched, such as for electrical appliances, toys,
fireworks, and cosmetics which must conform to safety regulations being identical with those
of European Union.
SLOVENIA
Slovenia joined the EU in May 2004 and is part of the EU harmonized trade system and
applies Common External Tariff to goods from non-EU countries. Excise duty is applied to
the end-user or consumer of alcohol and alcoholic beverages, mineral oils, and gas and
tobacco products.
Slovenia applies import quotas to a few categories of goods. Import quotas for industrial
products of EU origin were abolished when the free-trade agreement came into force, while
import quotas for agricultural products are provided depending on the product. According to
the Decree on Determination of the Import/Export Regime for Certain Goods, special permits
are also required for the importing of certain types of goods, such as processed foodstuffs,
products for general consumption and livestock. On the other hand, non-customs duty
barriers for countries which have not concluded free-trade agreements with Slovenia are
determined according to the GATT/WTO agreement.
Slovenia’s packing, marking and labeling are mainly covered by EU guidelines. However,
there are special labeling rules for foodstuffs, cosmetics, cleaning products and similar goods.
Likewise, most imported goods need to follow the EU requirements on standard technical
regulations before being put into circulation, such as the EU veterinary or sanitary
certifications for consignment of livestock, meat and meat products, animal raw materials,
seeds, plants and fruit.
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SPAIN
Spain is part of the EU harmonized trade system and preference is given to associate
members of the Union, developing countries and EFTA members, while Common External
Tariff (CET) is applied to goods from non-EU countries. Levies established under the EC
Common Agricultural Policy (CAP) are commonly applied to agricultural imports.
In addition to normal European Union (EU) restrictions, all Spanish importers must be
licensed. A small range of products are prohibited (eg. narcotics) and some are subject to
quotas or other special import licensing requirements, including some agricultural products,
explosives, seed oil, and gold.
Likewise, imports must comply with Spanish marking and labeling requirements, such as
labeling must be in Spanish and some items require special markings, such as: milk products,
margarine, chocolate, coffee, and wine may have more technical labeling requirements;
textiles and clothing imported with foreign labels/wrappers must also have labels/ wrappers
in Spanish; and imported tires and tubes, except solid tires mounted in metallic rims, must all
bear a serial number that is wrought into the metal of motor car engines and chassis.
On the issue of public health requirements and standards, Spain requires that live animals,
meat, live plants or their parts must be accompanied by health/phytosanitary certificates
issued by the competent authority in the country of origin and obtained visa by the Spanish
Consul before shipment. Food products must also be registered with the health authorities and
must conform with Spanish standards and live poultry and eggs for hatching may only be
imported with a comprehensive health certificate from the official veterinary authority in the
country of origin. In addition, sanitary certificates, issued by the appropriate health
authorities in the country of origin, attesting to freedom from diseases and pests are required
for imports of crude animal products (hides, bones, etc.) and rags.
SWEDEN
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Since EU membership in 1995, the European Customs Tariff has fully replaced the former
Swedish system of tariff codes, levies and duties and the Generalized System of Preferences
(GSP) in favor of developing countries now follows the EU GSP system. Customs and tariffs
for manufactured goods are generally not significant barriers and EU quotas apply to some
foodstuff and agricultural products, such as beef and dairy products.
Sweden applies import levies on agricultural products and many fruits, vegetables, and
horticultural products are also subject to seasonal duties. Most agricultural products require a
license and textiles, which were totally deregulated, are now subject to the EU rules, i.e.
quotas and import licenses have been reintroduced.
In general, Sweden applies normal commercial practices on the packing, marking, and
labeling of imported products with some additional regulations, such as foodstuffs must be
properly labeled in Swedish and provide specific details of the type and composition of the
food, labels for foods containing sugar must show the types of sugar, labels for frozen foods
must show storage and thawing instructions, and labels for cheese must show the country of
origin and fat content.
Apart from the labeling requirement, imports must also adhere to Spanish food and health
standards. For instance, importers are required to submit a written declaration that the
products are free of non-approved preservatives and additives. Meat, fats, dairy products,
eggs, margarine, flour, bread, sugar, honey, juices and jams, marzipan, nuts and nut pastes
must also satisfy prescribed standards of quality. Meat and meat products and plants and
plants products must also be accompanied by respective veterinary and phytosanitary
certificates issued by the approved authority in the country of origin. Imports of cereal and
bakery products containing potassium bromate are prohibited and cadmium and products
containing cadmium are banned. Moreover, other goods which may be suspected of
introducing contagious animal or vegetable diseases or goods subject to special quality
controls, such as certain animal products, used sacks, dairy containers, and various foods and
fatty emulsions require a certified health certificate for importation.
UK
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The UK is part of the EU harmonized trade system and gives preference to associate
members of the Union, developing countries, and European Free Trade Association (EFTA)
members, while Common External Tariff (CET) is applied to other countries.
The UK requires import licenses for a limited number of sensitive items, including
agricultural products. Animals, plants and their products are subject to detailed regulations,
including EU directives and legislation. All agricultural products are also subject to quotas
and import licenses under the Common Agricultural Policy (CAP) and all products of animal
origin for human consumption must come from an EU approved establishment. Specified
products, such as cereals and rice, beef and veal, sugar and isoglucose, oils and fats, seeds,
milk and milk products, wine, processed fruit and vegetables, and sheep, buffalo and goat
meat, cannot be imported into the UK without a quota license. Imports of textiles, steel,
footwear, ceramic products, toys, porcelain, and glass products are also subject to quota
restrictions and also require an import license.
The UK applies all directives of the European Council, such as CE marking, as well as some
local and national regulations, such as pre-packed goods and spirits (except perfumed or
medicated cordials) must be packed in quantities specified by regulations and quantities must
be shown in metric measures, although imperial measures can also be displayed. On the other
hand, livestock and other animals require health certificates issued by the approved authority
in the country of origin to be imported, while imports of plants, seeds and plant products,
including fruit, vegetables and cut flowers, may require import permits as well as
phytosanitary certificates issued by the approved body in the country of origin.
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V) Industry-Specific EU Policies (TOR 12)
This chapter reviews EU policies, measures, laws, rules and regulations relevant to products
identified in TOR 12 of the study, and in particular fresh, chilled, frozen fruits, vegetable and
meat; processed food; rubber and products; textile and clothing; footwear; glass; jewelry;
electronics and electrical products; motor vehicles and parts; and furniture.
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(i) Fresh, Chilled, Frozen Fruits, Vegetables and Meat; Processed Food
The cornerstone of current European food law is food safety with a goal of providing a high
level of protection of human health. To this end, the European Food Safety Authority
(EFSA) was created in 2002 by Regulation (EC) No 178/2002145, as amended by Regulation
(EC) No 1642/2003. The EFSA is charged with the responsibility to provide independent
scientific advice and scientific and technical support in all areas impacting on food safety and
to give clear communication to the public of existing and emerging risks. The EFSA is an
independent agency and has no regulatory power.
EU food legislation since 2000 has adopted a comprehensive and integrated “from Farm to
Fork” approach with a view to covering all aspects of the food chain: primary production,
processing, transport, distribution through to the sale or supply of food and feed. At all
stages of this chain, the legal responsibility for ensuring the safety of foodstuffs rests with the
operator.
General food law regulations in the EU are very broad in scope. They apply to all “food”
which is defined as “any substance or product, whether processed, partially processed or
unprocessed, intended to be, or reasonably expected to be ingested by humans.” Food
includes drink, chewing gum and any substance including water, intentionally incorporated
into the food during its manufacture, preparation or treatment. Food may not be placed on
the market if it is unsafe, which means if it is injurious to health or unfit for human
consumption. Health assessment must be based on probably immediate, short-term and long-
term effects; probable effects on subsequent generations; probable cumulative toxic effects;
or the particular health sensitivities of specific categories of consumers. Fitness assessment
must be based on unacceptability due to contamination by extraneous matter or to
putrefaction, deterioration or decay. If a particular item is deemed unsafe, the whole batch,
lot or consignment of the same class or description is deemed unsafe.
Risk analysis based on available scientific evidence is the basis for much of the current
legislation. Under the “precautionary principle”, member states may take appropriate
145 Regulation (EC) No 178/2002 of the European Parliament and of the Council of 28 January 2002 laying down the general principles and requirements of food law, establishing the European Food Safety Authority and laying down procedures in matters of food safety http://eur-lex.europa.eu/pri/en/oj/dat/2002/l_031/l_03120020201en00010024.pdf
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provisional risk-management measures when an assessment points to the likelihood of
harmful health effects, but scientific uncertainty persists. Any such measures are subject to
the TBT and/or SPS agreements of the WTO. As a member of the WTO, the EU strive to
ensure that the rules of international trade help to maintain high standards of safety and
quality.
The traceability of food, feed food-producing animals and all substances incorporated into
foodstuffs must be established at all stages of production, processing and distribution. Food
and feed business operators must be able to identify suppliers of food, feed, food producing
animal or any substance for food. Procedures have been instituted for making this
information available to authorities at their request. Food and feed must be adequately
identified to facilitate its traceability.
In the field of genetically modified organisms (GMOs), directives on the contained use of
GMOs in research and industry, and on their release and placing on the market, have been
adopted. The European Union has established a legal framework comprising various acts.
The contained use of genetically modified micro-organisms, e.g. laboratory research (in a
confined environment), is regulated by Directive 90/219/EC146 on the contained use of
genetically modified micro-organisms. The experimental release of GMOs into the
environment, in other words the introduction of GMOs into the environment for experimental
purposes (e.g. for field testing), is governed by Directive 2001/18/EC147 on the deliberate
release into the environment of genetically modified organisms. The placing on the market of
GMOs (products containing or consisting of GMOs), e.g. for cultivation, import or
processing into industrial products, is subject to Directive 2001/18/EC on the deliberate
release into the environment of genetically modified organisms. The placing on the market
of GMOs intended for food or feed and of food or feed products containing, consisting of or
produced from GMOs is governed by Regulation (EC) 1829/2003148 on genetically modified
146 Council Directive 90/219/EEC of 23 April 1990 on the contained use of genetically modified micro-organisms, O.J. (L 117) 1 available at http://eur-lex.europa.eu/smartapi/cgi/sga_doc?smartapi!celexplus!prod!CELEXnumdoc&lg=en&numdoc=31990L0219
147 Directive 2001/18/EC of the European Parliament and of the Council of 12 March 2001 on the deliberate release into the environment of genetically modified organisms and repealing Council Directive 90/220/EEC - Commission Declaration, O.J. (L 106) 1 available at http://eur-lex.europa.eu/pri/en/oj/dat/2001/l_106/l_10620010417en00010038.pdf
148 Regulation (EC) No 1829/2003 of the European Parliament and of the Council of 22 September 2003 on genetically modified food and feed (Text with EEA relevance), O.J. (L 268) 1 available at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32003R1829:EN:HTML
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food and feed. Where a food product contains or consists of GMOs, the applicant has a
choice: either the application as a whole is subject solely to Regulation (EC) 1829/2003, in
application of the principle of "one door, one key", in order to obtain authorisation for the
deliberate release of a GMO into the environment - in accordance with the criteria laid down
by Directive 2001/18/EC - and for the use of this GMO in food products - in accordance with
the criteria laid down by Regulation (EC) 1829/2003; or the application - or part of it - is
subject both to Directive 2001/18/EC and to Regulation (EC) 1829/2003. Unintentional
movements of GMOs between Member States and exports of GMOs to third countries are
governed by Regulation (EC) No 1946/2003 on transboundary movements of genetically
modified organisms.
Under current regulations, a food business operator, if he has reason to believe that imported,
produced or processed food is unsafe, must immediately withdraw the food from the market
and inform competent authorities. If products have reached consumers, effective and accurate
information must be disseminated to the public and, if necessary, the products must be
recalled. Food distributors and retailers must cooperated and pass on relevant information.
New legislation also provides for a rapid alert system if a crisis exists. Member states must
inform the Commission, and provide a detailed explanation, of:
• Any measure aimed at restricting marketing of foodstuff to protect human health
requiring rapid action, or
• Any recommendation or agreement restricting marketing or use of foodstuff requiring
rapid action, or
• Any rejection, related to direct or indirect health risk, of batch, container, or cargo of
food or feed at border post. In this case, the Commission informs all EU border posts
and third country concerned. If food has been dispatched to a third country, the
Commission informs that country.
Third countries may enter into an agreement with the EU to participate in the rapid alert
system.
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The 1989 “PARNUTS” Directive149 covers food, composition and preparation of which must
be specifically designed to meet nutritional needs of persons for whom they are mainly
intended. PARNUTS are defined as ”foodstuffs which “owing to their special composition or
manufacturing process, are clearly distinguishable from foodstuff for normal consumption,
which are suitable for their claimed nutritional purposes and which are marketed in such a
way as to indicate such suitability.” Directive 2001/15 lists the chemical substances in each
category of nutritional substances that may be added for specific nutritional purposes in
foodstuffs for particular nutritional uses.150
Further, nutritional claims implying properties for prevention, treatment or cure of human
diseases are prohibited, except if approval has been obtained from the Commission. The
PARNUTS Directive also sets forth labelling requirements. Labels must indicate (i)
particular nutritional use; (ii) qualitative and quantitative characteristics giving food its
particular nutritional characteristics; (iii) available energy values in kilojoules and
kilocalories; and (iv) carbohydrate, protein and fat content per 100 grams or millilitres. Prior
to the first marketing, manufacturers or importers must submit a model of the label to the
authorities. Although trade in food may not be restricted if manufacturers and importers
comply with the PARNUTS requirements, Member States have authority to temporarily
suspend trade in case that a product may pose a threat, in which case they must inform the
Commission and other Member States.
Directive 91/321 on Infant and Follow-On Formulae imposes compositional and labelling
requirements.151 Specifically, infant and baby foods (i) must be manufactured from protein
sources listed in Annex and other food ingredients whose suitability for use by infants has
been established scientifically; (ii) substances that may be added are listed in annex
(vitamins, mineral substances, amino acids, other nitrogen compounds); and (iii) consumer
may only be required to add water.
149 Council Directive 89/398 of 3 May 1989 on Foodstuffs Intended for Particular Nutritional Uses (O.J. L 186, 30 June 1989).
150 Commission Directive 2001/15/EC of 15 February 2001 on substances that may be added for specific nutritional purposes in foods for particular nutritional uses O.J. (L 52) 19 available at
http://eur-lex.europa.eu/LexUriServ/site/en/oj/2001/l_052/l_05220010222en00190025.pdf
151 Commission Directive 91/321/EEC of 14 May 1991 on infant formulae and follow-on formulae, O.J. (L 175) 35 available at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31991L0321:EN:HTML
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Other compositional and labelling requirements are imposed by the 1996 Processed Cereal-
Based Foods for Children Directive,152 and the 1996 Foods for Weight Reduction
Directive.153 The last Directive covers “total diet replacement for weight control” and “meal
replacement for weight control” and lays down compositional criteria relate to energy,
protein, fat, dietary fibre, vitamins and minerals. Also, labels must state that the product may
not be used for more than three weeks without medical advice.
Food Additives. Directive 89/107 on Food Additives154 establishes an authorization
procedure for additives in food for human consumption. The Directive sets forth a positive
list of categories of additives that may be used to the exclusion of all other substances. New
additives may be authorized if (i) a reasonable technological need for their use can be
demonstrated, which cannot be achieved by any other means; (ii) they present no hazard to
human health at the level of use proposed, based on existing scientific evidence; and (iii) they
do not mislead the consumers. Food additives must serve strictly predefined purposes, for
instance, the preservation of the nutritional quality of food, and are subject to specific
labelling requirements. Directive 89/107 is supplemented by the Sweeteners Directive,155 the
Colorants Directive,156 and the “Other Additives” Directive.157
Contaminants. The 1993 Food Contaminants Regulation158 covers any substance not
intentionally added to food which are present in food as a result of the production,
manufacture, processing, preparation, treatment, packing, packaging, transport or handling of
152 Directive 96/5 of 16 February 1996 on Processed Cereal-Based Foods and Baby Foods for Infants and Young Children (O.J. L 49, 28 February 1996).
153 Commission Directive 96/8 of 26 February 1996 on Foods Intended for Use in Energy-Restricted Diets for Weight Reduction, O.J. (L 55) .
154 Directive 89/107 of 21 December 1988 concerning Food Additives authorized for Use in Foodstuffs Intended for Human Consumption (O.J. L 40 11 February 1989)
155 Commission Directive 95/31 of 5 July 1995 Laying Down Specific Criteria of Purity concerning Sweeteners for Use in Foodstuffs, O.J. (L 178) 1 available at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31995L0031:EN:HTML
156 Commission Directive 95/45 of 26 July 1995 Laying Down Specific Criteria concerning Colours for Use in Foodstuffs, O.J. (L 226) 1 available at http://eur-lex.europa.eu/LexUriServ/site/en/consleg/1995/L/01995L0045-20060410-en.pdf
157 Directive 95/2 of 20 February 1995 on Food Additives other than Colours and Sweeteners, O.J. (L 61)1 available at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31995L0002:EN:HTML
158 Regulation 315/93 of 8 February 1993 laying down Community Procedures for Contaminants in food, O.J. (L 37) 1 available at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31993R0315:EN:HTML
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such food, or as a result of environmental contamination. Food containing contaminants in
an amount which is unacceptable from public health viewpoint and in particular at
toxicological harmful level may not be put on the market. Furthermore, contaminants should
be kept as low as possible through use of good practices at all levels of food production
chain. Maximum tolerance levels are set through a regulatory procedure.
Food Packaging. Materials that are intended to come into contact with food, such as food
packaging, are subject to specific regulatory requirements. EU food contact legislation
includes a Framework Directive159 and a set of specific directives regarding specific
materials, such as plastics, vinyl chloride monomers, ceramic, regenerated cellulose film,
paper and board, elastomers and rubber, glass, metals, alloys, textile, paraffin, and micro
crystal-line waxes. The regulations set forth a positive list of substances that may be used for
food packaging, together with global and specific migration limits and extraction limits.
Plastics legislation in the EU includes Commission Directive 2007/19/EC, as corrected160, of
30 March 2007 amending Directive 2002/72/EC relating to plastic materials and articles
intended to come into contact with food and Council Directive 85/572/EEC laying down the
list of stimulants to be used for testing migration of constituents of plastic materials and
articles intended to come into contact with foodstuffs. The Directive lists permitted
monomers and approved additives, and sets overall and specific migration limits. In addition,
Directive 82/711/EEC, as amended by 93/8/EEC161, and 85/572/EEC set out the rules for
testing compliance with those migration limits. Council Directive 78/142/EEC, as amended
by Directives 80/766/EEC162 and 81/432/EEC163, deals specifically with food contact
materials and articles containing vinyl chloride monomer.
159 Commission Directive 89/109 of 21 December 1988 relating to Materials and Articles intended to Come into Contact with Foodstuffs, O.J. (L 40) 38 available at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31989L0109:EN:HTML
160Corrigendum to Commission Directive 2007/19/EC of 30 March 2007 amending Directive 2002/72/EC relating to plastic materials and articles intended to come into contact with food and Council Directive 85/572/EEC laying down the list of stimulants to be used for testing migration of constituents of plastic materials and articles intended to come into contact with foodstuffs, O.J. (L 91) 50 available at http://eur-lex.europa.eu/LexUriServ/site/en/oj/2007/l_097/l_09720070412en00500069.pdf
161 Commission Directive 93/8/EEC of 15 March 1993 amending Council Directive 82/711/EEC laying down the basic rules necessary for testing migration of constituents of plastic materials and articles intended to come into contact with foodstuffs, O.J. (L 90) 22 available at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31993L0008:EN:HTML
162 Commission Directive 80/766/EEC of 8 July 1980 laying down the Community method of analysis for the official control of the vinyl chloride monomer level in materials and articles which are intended to come
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Food Labelling. Food labelling is subject to a set of Directives. Generally, labelling may not
be misleading, and medical claims are not permitted.164 The Nutritional Labelling
Directive165 which applies to food sold to consumers and caterers, requires that certain
nutritional data be disclosed on the label and sets forth conditions in respect of nutritional
claims. It establishes a format for providing information on energy value, amounts of protein,
carbohydrates, fat, and other materials, and imposes language requirements. Directive
2000/13/EC has been amended by Commission Directive 2001/101/EC166 of 26 November
2001 regulating the definition of meat for labelling purpose, where meat is used as an
ingredient in foodstuffs, and by Directive 2003/89/EC167 of 10 November 2003, as regard
indication of the ingredients present in foodstuffs.
Registration of premises used for a food business (including market stalls, delivery vehicles
and other moveable structures) is required by law in many Member States.
Hazard Analysis and Critical Control Point (HACCP), is used to describe an internationally
recognized way of managing food safety and protecting consumers. It is a requirement of EU
food hygiene legislation that applies to all food business operators except farmers and
growers.
into contact with foodstuffs, O.J. (L 213) 42 available at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31980L0766:EN:HTML
163 Commission Directive 81/432/EEC of 29 April 1981 laying down the Community method of analysis for the official control of vinyl chloride released by materials and articles into foodstuffs, O.J. (L 167) 6 available at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31981L0432:EN:HTML
164 Commission Directive 2000/13 of 20 March 2000 relating to the Labelling, Presentation and Advertising of Foodstuffs, O.J. (L 109) 29 available at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32000L0013:EN:HTML
165 Council Directive 90/496 of 24 September 1990 on Nutrition Labelling for Foodstuffs, O.J. (L 276) 40 available at http://eur lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31990L0496:EN:HTML 166 Commission Directive 2001/101/EC of 26 November 2001 amending Directive 2000/13/EC of the European Parliament and of the Council on the approximation of the laws of the Member States relating to the labelling, presentation and advertising of foodstuffs, O.J. (L 310) 19 available at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32001L0101:EN:HTML
167 Directive 2003/89/EC of the European Parliament and of the Council of 10 November 2003 amending Directive 2000/13/EC as regards indication of the ingredients present in foodstuffs (Text with EEA relevance), O.J. (L 308) 15 available at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32003L0089:EN:HTML
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EU Regulation 852/2004168 (Article 5) requires food business operators, including meat plant
operators to implement and maintain hygiene procedures based on HACCP principles.
As regards to animal health rules, Council Directive 2002/99/EC laying down the animal
health rules governing the production, processing, distribution and introduction of products of
animal origin for human consumption has been applicable since 1 January 2005, while
Council Directive 2004/68/EC laying down animal health rules for the importation into and
transit through the Community of certain live ungulate animals has been applied since 20
November 2005.
The EU animal welfare requirements are also applicable in relation to the import of live
animals and products of animal origin. They have paramount importance in particular in two
major areas that are the handling of animals during slaughter for human consumption and the
welfare requirements concerning the transport of most of live animals.
In relation to the import of certain products the animal welfare requirements are incorporated
into the import certificates in the form of an attestation and the veterinary authority of the
country of origin has to certify them together with the animal and public health requirements.
In relation to the transport of live animals from third countries the animal welfare
requirements are both incorporated into the import certificates and also directly apply and are
enforceable by the veterinary authorities of the Member States once the consignment reaches
the Border Inspection Post (BIP) of entry. As these criteria are thoroughly checked at the
BIPs, veterinary authorities at the country of origin should very much be aware of them.
Consignments that do not meet them (e.g. unfit animals, overstocked trucks, insufficient head
space, transporter not authorized by a MS, lack of route plan for leg of journey within EU
etc.) will, at the very least, be delayed.
Imports of animals and animal products into the EU must, as a general rule, be accompanied
by the health certification laid down in EU legislation. This sets out the conditions that must
be satisfied, and the checks that must have been undertaken, if imports are to be allowed. The
168 Regulation (EC) No 852/2004 of the European Parliament and of the Council of 29 April 2004 on the hygiene of foodstuffs, O.J. (L 139) 1 available at http://eur-lex.europa.eu/LexUriServ/site/en/oj/2004/l_139/l_13920040430en00010054.pdf
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details of the certification required are set out in specific EU legislation, which includes
models of the certificates to be used. The certification must be signed by an official
veterinarian or official inspector (as indicated in the relevant certificate), and must respect the
provisions of Council Directive 96/93/EC on the certification of animals and animal products.
Strict rules apply to the production, signing and issuing of certificates, as they confirm
compliance with EU rules. The original version of the certificate must accompany
consignments on entry into the Community. Each category of animal and product has its own
set of animal and/or public health requirements, which may include welfare requirements
(e.g. at stunning and slaughter). Particular attention must be paid to ensure that the correct
certification is used, and that all of its provisions have been met.
Residue monitoring requirements for third countries wishing to export food of animal origin
to the EU are outlined in Articles 29 and 30 of Council Directive 96/23/EC. Article 29 (1) of
the Directive states that a third country must submit a plan setting out the guarantees which it
offers as regards the monitoring of the groups of residues and substances referred to in Annex
I to Council Directive 96/23/EC. The guarantees must have an effect at least equivalent to
those provided for in the Directive for Member States. The guarantees provided by third
countries must, (a) meet the requirements of Article 4 and specify the particulars laid down in
Article 7 of this Directive, and (b) meet the requirements of Article 11 (2) of Council
Directive 96/22/EC as amended by Directive 2003/74/EC.
Imports of fishery products into the European Union are subject to official certification,
which is based on the recognition of the competent authority of the non-EU country by the
European Commission. This formal recognition of the reliability of the competent authority is
a pre-requisite for the country to be eligible and authorized to export to the European Union.
Public authorities with the necessary legal powers and resources must ensure credible
inspection and controls throughout the production chain, which cover all relevant aspects of
hygiene, public health and, in the case of aquaculture products, also animal health. All
bilateral negotiations and other relevant dialogue concerning imports of fishery products must
be undertaken by the national competent authority.
Imports of fishery products from non-EU countries must enter the EU via an approved Border
Inspection Post (BIP) under the authority of an official veterinarian. Each consignment is
subject to a systematic documentary check, identity check and, as appropriate, a physical
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check. The frequency of physical checks depends on the risk profile of the product and also
on the results of previous checks. Consignments which are found not to be compliant with
Community (EU) legislation shall either be destroyed or, under certain conditions, re-
dispatched within 60 days.
For imports it is essential that the third country has public health legislation and controls for
the fishery sector which are equivalent to the EU legislation. These requirements are checked
by the European Commission. Establishments from third countries fulfilling the EU
requirements have to obtain the agreement from their competent authorities if they want to
export fisheries products to the EU.
For all fishery products, countries of origin must be on a positive list of eligible countries for
the relevant product. The eligibility criteria are:
- Exporting countries must have a competent authority which is responsible for
official controls throughout the production chain. The Authorities must be empowered,
structured and resourced to implement effective inspection and guarantee credible
certification of the relevant hygiene conditions.
- Live fish, their eggs and gametes intended for breeding and live bivalve molluscs
must fulfil the relevant animal health standards. This requires that the veterinary services
must ensure effective enforcement of all necessary health controls and monitoring
programmes.
- The national authorities must also guarantee that the relevant hygiene and public
health requirements are met. The hygiene legislation contains specific requirements on the
structure of vessels, landing sites, processing establishments and on operational
processes, freezing and storage. These provisions are aimed at ensuring high standards
and at preventing any contamination of the product during processing.
- Specific conditions apply for imports of live or processed bivalve molluscs (e.g.
mussels and clams), echinoderms (e.g. sea urchins) or marine gastropods (e.g. sea-
snails and conchs). These imports are only permitted if they come from approved and listed
production areas. The national authorities of exporting countries are required to give
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guarantees on the classification of these products and the close monitoring of the
production zones to exclude contamination with certain marine biotoxins causing
shellfish poisoning.
- In the case of aquaculture products, a control plan on heavy metals, contaminants,
residues of pesticides and veterinary drugs must be in place to verify compliance with EU
requirements.
- A suitable control plan must be designed by the competent authority and submitted
to the European Commission for initial approval and yearly renewal.
- Imports are only authorised from approved vessels and establishments (e.g.
processing plants, freezer or factory vessels, cold stores), which have been inspected by the
competent authority of the exporting country and found to meet EU requirements. The
authority provides the necessary guarantees and is obliged to carry out regular inspections
and take corrective action, if necessary. A list of such approved establishments is maintained
by the European Commission and is published on its website.
- Inspections by the Commission’s Food and Veterinary Office are necessary to
confirm compliance with the above requirements. Such an inspection mission is the basis of
establishing confidence between the EU Commission and the competent authority of the
exporting country.
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(ii) Rubber and Products
The marketing and sale of rubber products is subject to the REACH legislation as well as to
the Directive on the marketing and use of dangerous substances (refer to the discussion below
in respect of Textile and Footwear).
The sale and use of chemicals such as bromine compounds and halogenated organic
compounds is restricted within the EU. For instance, subject to limited exceptions, the use of
methyl bromine or bromochloromethane in products and equipment is prohibited.
Baby teats and soothers must meet the limits set for nitrosamines and nitrosatables as
described in EU Directive 93/11/EEC169. Natural rubber latex (NRL) has been increasingly
used in a variety of medical devices and as with all products which meet the definition of a
medical device (as detailed in Article 1 of the Medical Devices Directive 93/42/EEC) NRL-
containing medical devices (i.e. examination and surgeons’ gloves, condoms, catheters, etc.)
must meet certain conditions as specified by the relevant Essential Requirements under
Annex 1 of the Directive. This represents the minimum standard a manufacturer is expected
to demonstrate when claiming conformity of a product with the Directive.
The EC is a member of the International Rubber Study Group (IRSG)170. The Commission
works together with the IRSG in order to support the European Union policies developed to
improve the competitive situation of rubber consuming industries in the EU through
provision of expert advice, collection of statistical data, exchange of best practice.
169 Commission Directive 93/11/EEC of 15 March 1993 concerning the release of the N-nitrosamines and N- nitrosatable substances from elastomer or rubber teats and soothers, O.J. (L 93) 37 available at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31993L0011:EN:HTML
170 See Council Decision of 22 July 2002 concerning the participation of the Community in the International Rubber Study Group, O.J. (L 215) 13 available at http://eur lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32002D0651:EN:NOT
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(iii) Textile and Clothing; Footwear
Textile and footwear are subject to several general and specific regulations, including
chemical laws and textile- or footwear-specific laws and policies.
Chemical Substances
Pursuant to a Directive on the marketing and use of dangerous substances, certain chemicals
may be not be marketed and/or used in certain applications and products. These chemical
restrictions apply to a broad range of products, including textiles and footwear. Certain types
of dyes (e.g. azo-dyes), for instance, may be prohibited based on health and safety and/or
environmental concerns. The list of restricted substances is long and imposes across-the-
board prohibitions and/or specific prohibitions or conditions of use.
The EU chemical legislation greatly expands the scope of the EU’s chemical law regime.
The REACH Regulation171 extends the EU chemical law’s scope in respect of products
containing chemicals, including textile and footwear. The REACH regulation imposes
requirements regarding data gathering and analysis and testing, chemical safety assessment,
and reporting and communication. Notably, it introduces registrant- and use-specific
registration and authorization requirements, and establish a fast regime for imposing
regulatory restrictions on chemical of concern. To ensure compliance with the new regime,
the regulation also prescribes sanctions for non-compliance. Penalties would have to be
“effective, proportionate, and dissuasive.”
Under the REACH-system, subject to volume thresholds, no chemical, either as a substance
or in a product, may be imported or marketed in the EU unless it has first been registered
with a new European chemical agency. Registration involves prior data gathering and gap
analysis, and possibly testing (“no data, no market”). Thus, the REACH system reverses the
burden of production from public authorities to chemical producers, importer, and
downstream users, who would effectively have to submit a complete analysis of the
information on the safety of the chemicals they put on the market. The specific requirements
171 For details on REACH, please refer to Labor and Environment part of this report
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applying to a substance depend on proven or suspected hazardous properties, uses, exposure,
and volumes of chemicals produced or imported. Data gathering and analysis and testing
requirements depend largely on volume, the Commission confirms, but “may be tailored
based on intrinsic properties and conditions of use.” REACH also places a duty on
companies that produce, import and use chemicals (on their own or in products) above
certain thresholds to assess the risks arising from the uses to which they put the chemicals,
which may require additional and specific testing, risk assessment, and analysis. They are
also required to take the necessary measures to manage any risks they identify. Under the
REACH regime, there is a regulatory procedure for restricting the manufacture, marketing
and use of chemicals of concern. Producers and importers of articles have to ensure that any
applicable chemical restrictions are respected.
Azo-Dyes
The use of azo-dyes is restricted by Directive 2002/61. Pursuant to the Directive, azodyes
which, by reductive cleavage of one or more azo groups, may release one or more of the
aromatic amines listed in the Directive’s appendix in detectable concentrations, i.e. above 30
ppm in finished articles or in the dyed parts thereof, according to the testing method
established in accordance with Article 2a of this Directive, may not be used in textile and
leather articles which may come into direct and prolonged contact with the human skin or
oral cavity, such as:
– clothing, bedding, towels, hairpieces, wigs, hats, nappies and other sanitary items,
sleeping bags,
– footwear, gloves, wristwatch straps, handbags, purses/wallets, briefcases, chair covers,
purses worn around the neck,
– textile or leather toys and toys which include textile or leather garments,
– yarn and fabrics intended for use by the final consumer.
The following azocolourants are affected by the Directive: benzidine (CAS nr. 92-87-5); 4-
Aminodiphenyl (CAS nr. 92-67-1); 4-Chloro-o-toluidine (CAS nr. 95-69-2); 2-
Naphthylamine (CAS nr. 91-59-8); o-Aminoazotoluene (CAS nr. 97-56-3); 2-Amino-4-
nitrotoluene (CAS nr. 99-55-8); p-Chloroaniline (CAS nr. 106-47-8); 2,4-Diaminoanisole
(CAS nr. 615-05-4), 4,4’-Diaminodiphenylmethane (CAS nr.101-77-9); 3,3’-
Dichlorobenzidine (CAS nr. 91-94-1); 3,3’-Dimethoxybenzidine (CAS nr. 119-90-4); 3,3’-
Dimethylbenzidine (CAS nr. 119-93-7); 3,3’-Dimethyl-4,4’diaminodiphenylmethane (CAS
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nr. 838-88-0); p-Cresidine (CAS nr. 120-71-8)4,4’-Methylene-bis-(2-chloraniline) (CAS nr.
101-14-4); 4,4’-Oxydianiline (CAS nr. 101-80-4); 4,4’-Thiodianiline (CAS nr. 139-65-1); o-
Toluidine (CAS nr. 95-53-4); o-anisidine (CAS 90-04-0) 2,4-Toluenediamine (CAS nr. 95-
80-7); 2,4,5-Trimethylaniline (CAS nr. 137-17-7 4-amino azobenzene.
Footwear Legislation
The footwear sector is a diverse industry which covers a wide variety of materials (textile,
plastics, rubber or leather) and products from different types of footwear to more specialised
products, like protective footwear. This diversity of end products corresponds to a multitude
of industrial processes, enterprises or market structures. Certain “horizontal” legislation,
such as the chemical legislation discussed above, applies also to footwear, even though it is
not specifically applicable to such products.
Directive 94/11 on the Labelling of the Materials Used in the Main Components of Footwear
for Sale to the Consumer172 imposes obligations relating to labelling of the materials used in
the main components of footwear for sale to the consumer. Footwear is defined as “all
articles with applied soles designed to protect or cover the foot, including parts marketed
separately as referred to in Annex I.” Annex I sets forth the definitions of the parts of the
footwear to be identified (upper, lining and sock, outer sole) together with the corresponding
pictograms or written indications. It also contains definitions of the materials (leather, coated
leather, natural textile materials and synthetic or non-woven textile materials, other materials)
and corresponding symbols. The Directive further contains provisions describing the
conditions, rules, and procedures for the placing of the labelling or marking system. For
instance: (i) the labelling should convey information relating to three parts of the footwear;
(ii) either pictograms or written indications may be chosen; (iii) labels must be visible
enough; and (iv) manufacturers are responsible for supplying the label and for its accuracy.
If the manufacturer is not established in the EU, the person who first places the footwear on
the market is responsible.
172 O.J. L 100, 19 April 1994.
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Textiles and Clothing Legislation
Textile and clothing legislation is based on two major policy grounds: (i) ensuring a common
requirements as regards textile labelling; and (ii) consumer protection.
Directive 96/74173 on Textile Names requires the labelling of the fibre composition of textile
products. It stipulates for checks on whether the composition of textile products is in
conformity with the information supplied. It applies to all products containing at least 80%
by weight of textile fibres, including raw, semi-worked, worked, semi-manufactured, semi-
made, made-up products. The labelling indicating the fibre composition is mandatory in all
stages of the industrial processing and commercial distribution of a product. Checks on
whether the composition of textile products is in conformity with the information supplied on
the label are carried out by the methods of analysis that are specified in specific regulations
(including preparation for test samples, methods for the quantitative analysis of ternary fibre
mixtures, proceedings for the adaptation to technical process).174
Clothing safety standards fall under the current Directive on General Product Safety
Directive 2001/95/EEC175. The Directive includes an obligation of the producer and
distributor to notify the Commission in case of a problem with the product, provisions for
recall, the creation of a European Product Safety Network, and a ban on exports to third
countries of products which are deemed unsafe in the EU.
173 Directive 96/74/EC of the European Parliament and of the Council of 16 December 1996 on textile names, O.J. (L 32) 38 available at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31996L0074:EN:HTML
174 Directive 96/73 on Certain Methods for the Quantitative Analysis of Binary Textile Fibre Mixtures (O.J., L 032, 3 February 1997); and Directive 73/44 relating to the Quantitative Analysis of Ternary Fibre Mixtures (O.J. L 083 30 March 1973).
175 Directive 2001/95/EC of the European Parliament and of the Council of 3 December 2001 on general product safety (Text with EEA relevance), O.J. (L 11) 4 available at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32001L0095:EN:HTML
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(iv) Glass
The European Union (EU) is the world's largest glass market, both in terms of production and
consumption. The European glass industry, with its 1300 companies, accounts for more than
one quarter of the non-metallic mineral sector. The glass industry is highly concentrated and
more than 80% of glass is produced by fewer than ten multinationals (each with more than
1000 employees). The other companies are small or medium-sized, but mainly specialists.
The commission has mandated CEN, Comité Européen de Normalisation, specifically TC
129, to produce harmonised European Norms (hENs) in the field of “Glass in Building”. This
mandate covers “Flat glass, profiled glass and glass block products”. These are the product
functions that are claimed when the product is placed on the market. ‘Harmonised standards’
(hENs) are European standards adopted by Comité Européen de Normalisation (CEN)
following a mandate issued by the European Commission. They are developed through an
open and transparent process, built on consensus between all interested parties.
Harmonized standards have been developed for the following glass products:
• Basic soda lime silicate glass products (EN572-9)
• Thermally toughened soda lime silicate safety glass (EN 12150-2)
• Coated glass (EN1096-4)
• Heat strengthened soda lime silicate glass (EN1863-2)
• Laminated glass and laminated safety glass (EN14449)
• Insulating glass units (EN1279-5)
• Heat soaked thermally toughened soda lime silicate safety glass (EN 14179-2)
For conformity purposes the processed glass product manufacturer is responsible for the
preparation and maintenance of the product description. This description shall describe the
product and/or product families. Disclosure of the product description shall be at the
discretion of the processed glass product manufacturer or his agent except in the case of
regulatory requirements. The description shall contain at least a normative part. The
description may also contain an informative part, when the manufacturer foresees further
development of the product. Materials used in products must not release any dangerous
substances in excess of the maximum permitted levels specified in a relevant European
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Standard for the material or permitted in the national regulations of the Member State of
destination.
Construction Products Directive (CPD)
With regard to construction products the following applies: Council Directive of 21/12/1988
on the approximation of laws, regulations and administrative provisions of the Member States
relating to construction products (89/106/EEC)176. The Construction Products Directive
(CPD) aims to achieve:
♦ elimination of technical barriers to trade,
♦ to afford access to the market for as many manufacturers as possible,
♦ to ensure the greatest possible degree of market transparency,
♦ to create the conditions for a harmonised system of general rules in the construction
industry.
A construction product is a product manufactured to be permanently incorporated into the
construction works, i.e. buildings, civil engineering works. The following are applicable to
the CPD:
1. Mechanical resistance and stability
2. Safety in case of fire
3. Hygiene, health and the environment
4. Safety in use
5. Protection against noise
6. Energy economy and heat retention
The “Systems of Attestation of Conformity” contained within the CPD details the level of
involvement of ‘Notified Bodies’ in the process of showing conformity. Dependant on the
final intended use of the glass product a different “System of Attestation” may be applicable.
The glass industry is also affected by many environmental directives in the EU. The REACH
regulations (see section on Environment and Labor) took affect on June 1, replacing more
176 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, O.J. (L 40) 12 available at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31989L0106:EN:HTML
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than 40 separate Directives and sets of regulations. Glassmaking is classed as a downstream
user of chemicals and so must implement relevant risk management measures. It has yet to be
determined whether glass itself counts as a substance or a preparation within REACH, and so
the extra actions that need to be undertaken have still to be determined. The glass industry is
also affected by the EU Emissions Trading Scheme (ETS) established under Directive
2003/87/EC177. The glass industry falls within the scope of the Directive for installations with
a melting capacity greater than 20 tonnes per day. Participation in mandatory for those
facilities.
177 Directive 2003/87/EC of the European Parliament and of the Council of 13 October 2003 establishing a scheme for greenhouse gas emission allowance trading within the Community and amending Council Directive 96/61/EC (Text with EEA relevance), O.J. (L 275) 32 available at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32003L0087:EN:HTML
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(v) Jewellery
The European ‘Nickel’ Directive, 94/27/EC, adopted in 1994, seeks to prevent nickel
sensitisation by restricting the use of nickel and its compounds in products that come into
close and prolonged contact with the skin. It addresses three main groups of products that
might lead to sensitisation by stating that nickel and its compounds may not be used:
1. in post assemblies which are inserted into pierced ears and other pierced parts of the
human body during epithelization of the wound caused by piercing, whether
subsequently removed or not, unless such post assemblies are homogeneous and the
concentration of nickel – expressed as mass of nickel to total mass – is less than
0.05%;
2. in products intended to come into direct and prolonged contact with the skin such as:
a. earrings,
b. necklaces, bracelets and chains, anklets, finger rings,
c. wrist-watch cases, watch straps and tighteners,
d. rivet buttons, tighteners, zippers and metal marks, when these are used in
garments
if the rate of nickel release from the parts of these products coming into direct and
prolonged contact with the skin is greater than 0.5 µg/cm²/week;
3. in products listed in point 2 above, where these have a non-nickel coating unless such
a coating is sufficient to ensure that the rate of nickel release from those parts of such
products coming into direct and prolonged contact with the skin will not exceed 0.5
µg/cm²/week for a period of at least two years of normal use of the product.178
These products may not be placed on the market unless they conform to the
requirements set out above. In order to confirm that products comply with the Directive, the
178 These requirements appear to recognise that it is the rate of nickel ion release from products in direct and prolonged contact with skin that can give rise to sensitisation, rather than the nickel content. In the case of body piercing, extra consumer safety is provided during the period of epithelisation by specifying the use of post assemblies with an essentially zero nickel content and, hence, a zero nickel release.
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European Standardisation body, CEN, has produced test methods for determining nickel
content and nickel release into artificial sweat.
• EN 1810:1998, ‘Body-Piercing Post Assemblies - Reference Test Method for
Determination of Nickel Content by Flame Atomic Absorption Spectrometry’. This
European Standard specifies a method for the determination of nickel in aluminium,
titanium, copper, silver, gold and their alloys and in steels by flame atomic absorption
spectrophotometry. The method is primarily suitable when the nickel content of a
sample lies between 0.03% and 0.07% (m/m).
• EN 1811:1999, ‘Reference Test Method for Release of Nickel from Products Intended
to come into Direct and Prolonged Contact with the Skin’. This European Standard
specifies a method for simulating the release of nickel from consumer items in direct
and prolonged contact with the skin in order to determine whether such items release
nickel at a rate greater than 0.5 µg/cm²/week. The item to be tested for nickel release
is placed in an artificial sweat test solution for 1 week. The concentration of dissolved
nickel in the solution is determined by atomic absorption spectrometry or other
appropriate analytical methodology. The nickel release is expressed in micrograms
per square centimetre per week (µg/cm²/week).
The Directive has implications for the body-piercing industry because of the use of some
grades of austenitic stainless steel (e.g. AISI 316 and 316L) in body piercing. However, the
high nickel content of these grades prohibits their use in post assemblies in body piercing
during the period of epithelisation. Even high-grade austenitic stainless steel specified for
surgical implants and intended to remain in the human body for long periods is prohibited for
use in body piercing during the healing period of the wound.179
179 It is claimed by the body-piercing industry that the nickel release rate for certain grades of austenitic stainless steel is much less than 0.5 µg/cm²/week and that they should be permitted for use in body piercing. The martensitic and ferritic grades of stainless steel possess no significant nickel content (less than 0.5%) but are not very suitable for use in post assemblies because most grades are insufficiently resistant to corrosion under physiological conditions. This has effectively limited material selection for body piercing to the more expensive metals such as gold, silver, platinum, titanium etc.
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(vi) Electronics and Electrical Products
For legislation applicable to Electronics and Electrical products, please refer to the
Environment sections of this report, and in particular to the discussions on WEEE, RoHS,
Battery, and EuP Directives.
In addition, there are two main European Directives that apply with respect to health, safety
and performance:
- The Low Voltage Directive (LVD)180 lays down the requirements covering all health
and safety risks of electrical equipment operating within certain voltage ranges.
Consumer goods that are not covered by the LVD are dealt by the General Product
Safety Directive (GPSD)181.
- The Electromagnetic Compatibility (EMC) Directive182 89/336/EEC lays down
requirements in order to preventing electrical and electronic equipment from
generating or being affected by electromagnetic disturbances.
Both Directives are based on the principles of the so-called "New Approach" (prescribing
essential requirements, the voluntary use of standards, and conformity assessment procedures
to be applied) and have been proved to offer a high level of protection to the user. The almost
total absence of third-party intervention in the conformity assessment greatly reduces the
burden on the manufacturer as is considered a model for other trade blocs. By means of the
above and the application of the CE marking, these Directives have directly and substantially
contributed to the Single Market for electrical and electronic products.
180 Directive 2006/95/EC of the European Parliament and of the Council of 12 December 2006 on the harmonisation of the laws of Member States relating to electrical equipment designed for use within certain voltage limits (codified version) (Text with EEA relevance), O.J. (L 374) 10 available at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2006:374:0010:01:EN:HTML
181 Directive 2001/95/EC of the European Parliament and of the Council of 3 December 2001 on general product safety (Text with EEA relevance), O.J. (L 11) 4 available at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32001L0095:EN:HTML
182 Council Directive 89/336/EEC of 3 May 1989 on the approximation of the laws of the Member States relating to electromagnetic compatibility, O.J. (L 139) 19 available at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31989L0336:EN:HTML
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Electronics and Electrical products are also covered by the General Product Safety Directive
(2001/95/EC)183 which requires producers and distributors to place only safe consumer
products on the market and to take all the necessary measures to prevent risks for consumers.
Among such measures, the Directive introduces the obligation for producers and distributors
to notify the competent authorities appointed by the Member States when a product available
on the market proves to be dangerous.
If a product is found to be dangerous, the producer or distributor must inform the authorities
through the notification procedure. Depending on the nature of the risk, the authorities might
require further action from the producer or distributor. This could be a warning to the public
of the risk connected with the product, banning the marketing of the product and withdrawing
the product from the market.
183 Directive 2001/95/EC of the European Parliament and of the Council of 3 December 2001 on general product safety (Text with EEA relevance), O.J. (L 11) 4 available at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32001L0095:EN:HTML
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(vii) Motor Vehicles and Parts
Harmonisation of technical requirements on motor vehicles has thus far been achieved for
three categories of vehicles, namely passenger cars, motorcycles and tractors. The EC Whole
Vehicle Type-Approval (WVTA) system applies to passenger cars and to motorcycles on a
mandatory basis since January 1998 and June 2003, respectively. As a result, these
categories of vehicles must comply with all the relevant EC type-approval directives in order
to be placed on the market. The system of type-approval implies that each authority granting
an approval for a vehicle, a system, a component or a technical unit is solely responsible for
ensuring the conformity of production (COP) during the whole period of validity of the
approval.
Optional harmonisation has been achieved for tractors. For this category, manufacturers may
choose between applying the EC directives and obtaining an EC WVTA, or requesting a
national type-approval based on the technical requirements of a Member State. Mandatory
EC Whole Vehicle Type-Approval for new types of tractors applied from the 1st of July
2005. Partial harmonisation has been achieved for the remaining vehicle categories, like
heavy-duty commercial vehicles. Directive 70/156/EEC184, deals with type-approval of
motor vehicles, and provides that the Member States take appropriate measures at two stages:
− Before granting approval the authority must verify that adequate arrangements for
ensuring conformity of production have been taken by the applicant. This is deemed to
be achieved if the manufacturer demonstrates compliance with EN standard 29002 or
equivalent standards.
− After having given approval, the authority must verify that the production arrangements
of the manufacturer continue to be adequate. This verification must be carried out in
accordance with certain procedures set out in the directive, and, where appropriate, with
the specific provisions of the separate directives. This procedure may be carried out
184 Council Directive 70/156/EEC of 6 February 1970 on the approximation of the laws of the Member States relating to the type-approval of motor vehicles and their trailers, O.J. (L 42)1 available at http://eur-lex.europa.eu/LexUriServ/site/en/consleg/1970/L/01970L0156-20070101-en.pdf
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with manufacturers' technical equipment and control programs, but may also be
extended to the actual testing of selected production samples.
The approval authority of each Member State must also send to the approval authority of the
other Member States a copy of the vehicle type-approval certificate for each vehicle type
which it has approved, refused to approve or withdrawn. The same procedure applies to
type-approvals of systems, components and separate technical units.
For vehicles for which EC WVTA applies, each Member State shall register or permit the
sale and entry into service of new vehicles on grounds relating to their construction and
functioning only if they are accompanied by a valid certificate of conformity (COC). A COC
is, in effect, a statement by the manufacturer that the vehicle conforms to the relevant EC
type-approval. Member States cannot refuse to register vehicles for use on their roads if they
comply with a properly issued type-approval.
In addition to the separate EC type-approval directives, regulations are developed under the
auspices of the UN/ECE Revised 1958 Agreement185. There is a very strong correlation
between EU legislation and UN/ECE regulations, and regulations adhered to by the
Community are considered to be equivalent to their corresponding, separate directives for the
purpose of EC type-approval.
End of Life Vehicles Regulation
Directive 2000/53/EC186 on end-of-life vehicles (the “ELV Directive”) has been implemented
in the EU. The objective of this directive is to prevent waste from end-of-life vehicles and
promote the collection, re-use and recycling of their components to protect the environment.
185 United Nations Economic Commission for Europe UN/ECE Revised 1958 Agreement available at http://www.unece.org/trans/main/welcwp29.htm
186 Directive 2000/53/EC of the European Parliament and of the Council of 18 September 2000 on end-of life vehicles - Commission Statements, O.J. (L 269) 34 available at http://eur-lex.europa.eu/smartapi/cgi/sga_doc?smartapi!celexplus!prod!DocNumber&lg=en&type_doc=Directive&an_doc=2000&nu_doc=53
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The directive includes a number of product standards, as well as invitations to member states
to adopt their own product-related measures.
Heavy Metals Restrictions: The directive provides that lead, mercury, cadmium and
hexavalent chromium contained in vehicles put on the market after 1 January 2003 may not
be shredded in vehicle shredders and not disposed in landfill or in any installation
incinerating and co-incinerating waste, with or without energy recovery.
Design and Material Choice: The directive instructs member states to encourage or require
producers to do the following:
− to control the use of hazardous substances in vehicles and to reduce them as far as
possible from the conception of the vehicle onwards, so as to prevent their release into
the environment, make recycling easier, and avoid the disposal of hazardous waste;
− to design and produce new vehicles so as to take into full account and facilitate
dismantling, re-use and recovery, in particular recycling, of end of life vehicles, their
components and materials; and
− to integrate an increasing quantity of recycled material in vehicles and other products, in
order to develop the market for recycled materials.
Type-Approval Standards: In order to achieve the directive’s reuse and recovery targets, the
Commission is to propose legislation amending EC vehicle type-approval regulations so that
vehicles placed on market after January 2005 are re-usable and/or recoverable to a minimum
of 95 % by weight per vehicle.
Material Coding: The directive requires that producers, in concert with material and
equipment manufactures, use common component and material coding by 31 December
1999, in particular to facilitate the identification of those components and materials which are
suitable for re-use and recovery.
Collection: Producers, defined to include the “vehicle manufacturer” and “professional
importer,” are obliged to take-back all of their vehicles, without charge, as of January 2003.
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Treatment, Reuse, Recovery: The directive requires that facilities carrying out treatment
operations shall obtain a waste permit under EC waste legislation. The directive imposes a
rigid waste management hierarchy. It would require that components suitable for re-use are
reused, that components which cannot be re-used are recovered and that preference is given
to material recycling when environmentally viable, without prejudice to safety requirements.
Targets: The directive sets out a set of reuse and recovery targets to be met by 2005 and
2015. The targets are as follows:
− re-use and recovery (which includes material recycling and energy recovery) of 85
percent by weight per vehicle; and
− re-use and material recycling of 80 percent per vehicle (i.e., only 5 percent energy
recovery.
The targets for 2015 are even higher, as follows:
− re-use and recovery to 95 percent by weight per vehicle; and
− re-use and material recycling of 85 percent by weight per vehicle.
Reporting and Disclosure: The directive requires that member states develop databases on
end of life vehicles and their treatment. Such data collection is a necessary consequence of
setting industry-wide collection and reuse/recycling targets, for the Commission and other
member states will want to verify whether a member state is meeting its targets.
Several revisions to the Annexes of the Directive have been made and there are several
related acts. Directive 2005/64/EC187 on the type-approval of motor vehicles with regard to
their reusability, recyclability and recoverability and amending Council Directive
70/156/EEC lays down minimum thresholds for the re-use, recycling and recovery of the
component parts and materials of new vehicles with the aim of facilitating the re-use,
recycling and recovery of parts with a view to fulfilling the planned 2015 objectives for
recycling and recovering end-of-life vehicles. It provides for a preliminary assessment of
manufacturers before Member States grant EC type-approval or national type-approval. From
15 December 2008, vehicles which do not comply with the requirements of this Directive
187 Directive 2005/64/EC of the European Parliament and of the Council of 26 October 2005 on the type-approval of motor vehicles with regard to their reusability, recyclability and recoverability and amending Council Directive 70/156/EEC, O.J. (L 310) 10 available at http://eur-lex.europa.eu/LexUriServ/site/en/oj/2005/l_310/l_31020051125en00100027.pdf
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may not be granted EC type-approval or national type-approval. From 15 July 2010,
moreover, the marketing of new vehicles which do not comply with the requirements of this
Directive will be prohibited. Decision 2005/293/EC188 of the Commission lays down detailed
rules on the monitoring of the re-use/recovery and re-use/recycling targets set out in Directive
2000/53/EC of the European Parliament and of the Council on end-of-life vehicles.
Automobile Distribution Rules under EU Competition Law
The Block Exemption Regulation 1400/2002189 provides a sector-specific regulatory
framework for vehicle distribution and repair. The objective of the Regulation is to exempt,
under certain conditions, specific categories of vertical agreements and concerted practices in
the motor vehicle sector.
In the Member States of the European Union (EU) motor vehicle manufacturers and spare
parts manufacturers distribute their products via networks of distributors ("dealers") and set
up networks of authorised repairers. For the purposes of competition law, the relevant
agreements rank as vertical agreements since the manufacturer and distributor or the repairer
each operate at a different level of the production or distribution chain. Vertical agreements,
which are normally prohibited, may qualify for exemption under Regulation No 2790/1999 or
for a sectoral block exemption, as in the case of the motor vehicle sector.
On the basis of its experience with distribution agreements for new motor vehicles, spare
parts and after-sales service in the motor vehicle sector, the Commission concluded that
consideration could be given to introducing sectoral exemptions. These exemptions had to be
sufficiently targeted as to allow compliance with the competition rules. Although more
188 Commission Decision of 1 April 2005 laying down detailed rules on the monitoring of the reuse/recovery and reuse/recycling targets set out in Directive 2000/53/EC of the European Parliament and of the Council on end-of-life vehicles (notified under document number C(2004) 2849) (Text with EEA relevance), O.J. (L 94) 30 available at http://eur-lex.europa.eu/LexUriServ/site/en/oj/2005/l_094/l_09420050413en00300033.pdf
189 Commission Regulation (EC) No 1400/2002 of 31 July 2002 on the application of Article 81(3) of the Treaty to categories of vertical agreements and concerted practices in the motor vehicle sector, O.J. (L 203) 30 available at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32002R1400:EN:HTML
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flexible overall, the present Regulation is stricter than Regulation No 1475/95, which has
governed the sector until now, and Regulation No 2790/1999 on supply and distribution
agreements. The current Regulation is designed to enhance competition between distributors
by facilitating cross-border purchases of new vehicles and to provide practical benefits for
European consumers as regards both motor vehicle sales and after-sales services.
The Regulation applies to vertical agreements concluded in the motor vehicle sector at all
stages of the trade in and supply of new vehicles or spare parts, including repair and
maintenance services. The products covered by the Regulation range from passenger cars to
light commercial vehicles and from lorries to buses and coaches. The Regulation applies to
vertical agreements entered into between:
• a motor vehicle manufacturer or its subsidiary and independent importers or
wholesalers that are not subsidiaries of that manufacturer and can be entrusted with
the task of supplying and managing the latter's distribution and repair network in one
or more Member States;
• a motor vehicle manufacturer and members of its network of distributors and
authorised repairers taken individually, including with regard to intellectual property
rights;
• a motor vehicle manufacturer, a main distributor and a sub-distributor;
• a motor vehicle manufacturer and an association of dealers or authorised or
independent repairers that sell vehicles or spare parts where no individual member of
the association has a total annual turnover exceeding 50 million;
• a supplier of spare parts and the members of a repair network that repairs or
maintains vehicles.
In principle, the Regulation does not apply to vertical agreements entered into between
competing undertakings. Only agreements that a motor vehicle manufacturer selling direct to
end-users can conclude with the individual members of its distribution network are exempt.
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(viii) Furniture
In the European Union there are no specific Directives for furniture but several Directives
have implications for the furniture sector. The main environmental Directives which directly
affect the furniture industry are industrial emissions, Integrated Product Policy (IPPC),
Volatile Organic Compounds (VOC), and waste (Packaging and Packaging Waste). Waste
products from furniture production have been eliminated from the hazardous waste list, but
some products used by furniture manufacturers remain, such as varnishes. The EMAS
schemes190 are already used in the sector and furniture industry is also concerned by the
Community eco-label award scheme. The eco-label scheme is designed to promote products
which have a reduced environmental impact compared with other products in the same
product group and to provide consumers with accurate and scientifically based information
and guidance on products.
Directive 94/62191 (as amended) on packaging and packaging waste is aimed at harmonizing
national measures concerning packaging and packaging waste. Member states may not
restrict the marketing of packaging that complies with the directive. However, the directive
leaves many issues unregulated and, thus, member states have wide discretion in adopting
their packaging laws.
The directive imposes (1) “essential requirements” for packaging, which are to be elaborated
by European standardization bodies (i.e. CEN); (2) maximum heavy metal concentration
levels; and (3) a packaging marking system. It also requires members states to (1) adopt
packaging waste prevention measures; (2) meet specific recovery and recycling targets; (3)
set up collection and recovery systems; (4) set up information systems on packaging and
packaging waste; and (5) ensure that consumers are informed on packaging take back.
190 The Eco-Management and Audit Scheme (EMAS) is the EU voluntary instrument which acknowledges organizations that improve their environmental performance on a continuous basis. For further information see http://ec.europa.eu/environment/emas/about/summary_en.htm
191 European Parliament and Council Directive 94/62/EC of 20 December 1994 on packaging and packaging waste, O.J. (L 365) 10 available at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31994L0062:EN:HTML
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Organic solvents are used in a large number of industrial processes and, due to their
volatility, are emitted either directly or indirectly into the air in many of these processes. A
number of organic compounds are directly harmful to health. The legislation concerned is
Council Directive 1999/13/EC192 on the limitation of emissions of Volatile Organic
Compounds (VOC) due to the use of organic solvents in certain activities and installations.
The emission limit values set in the Directive were determined for each industry sector on the
basis of 'best available technologies'. Therefore, the values differ from one production
process to another or depend on the installation capacity.
Fire safety is a crucial issue for upholstered furniture manufacturers and their suppliers. As
the furniture sector is not covered by any specific legislation, upholstered furniture fire safety
issues falls under the General Product Safety Directive 2001/95/CE193 and is under the
responsibility of the Health and Consumer Protection DG.
In addition, attention has to be given to the material used in the furniture such as wood,
plastics, metal, textiles, leather, etc. Based on the material used, some furniture articles may
be subject to the relevant EU and Member State product legislation, and in particular the
legislation concerning hazardous substances. generally, harmful substances used in the
production of furniture should be reduced as much as possible.
Directive 2001/95/EC on general product safety provides that all consumer goods must bear
safety guarantee. For children’s products, standard CEN/TC 252 defines the requirements
and testing methods, which must be applied in order to ensure the safety of children’s
furniture.
Also relevant to the furniture industry is the Convention on International Trade in
Endangered Species of World Fauna and Flora (CITES)194. CITES is an international
192 Council Directive 1999/13/EC of 11 March 1999 on the limitation of emissions of volatile organic compounds due to the use of organic solvents in certain activities and installations, O.J. (L 85) 1 available at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31999L0013:EN:HTML
193 Directive 2001/95/EC of the European Parliament and of the Council of 3 December 2001 on general product safety (Text with EEA relevance), O.J. (L 11) 4 available at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32001L0095:EN:HTML
194 Convention on International Trade in Endangered Species of World Fauna and Flora available at http://www.cites.org/eng/disc/text.shtml
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agreement between governments which aims is to ensure that international trade in specimens
of wild animals and plants does not threaten their survival. Imports of certain kinds of
endangered species such as mahogany and Brazilian rosewood are restricted.
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VI) Sector Specific EU Policies (TOR 14)
This chapter reviews EU policies, measures, laws, rules and regulations relevant to sectors
identified in TOR 14 of the study, and in particular professional services, including nurse;
hotel and restaurant services, including cook; distribution services; massage and spa business;
entertainment business; food processing; fishery; and poultry farming and processing.
Services sector has been traditionally regulated by Member States, and thus barriers to
movement of service providers within the EU existed. As the Treaty establishing the
European Community provides for freedom of establishment and freedom to provide services
and in the response to the above situation, the European Union has taken certain steps to
facilitate movement of labour and services providers within the Community.
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(i.) Professional Services, including nurse
The Directive on the recognition of professional qualifications195 applies to all individuals
who are Member State nationals wishing to practice a regulated profession in a Member State
other than that in which they originally obtained their professional qualifications. Seven
professions are covered by a series of directives: doctor, general nurse, midwife, veterinary
surgeon, dental surgeon, pharmacist and architect. These directives provide for the
harmonization of minimum training requirements and the automatic recognition of
professional qualifications.
The EU Services Directive196 was adopted in 2006 and must be implemented by the Member
States by 28 December 2009. The Services Directive applies to a wide range of services and
aims to enhance the potential of the European services sector while eliminating the
unnecessary legal and administrative obstacles. Service includes self employed economic
activity referred to in Article 50 of the EC Treaty, and thus to fall within the scope of the
Services Directive, it must be a self-employed activity falling outside the ties of a contract for
employment. The Services Directive applies to services which are provided by a natural
person who is a national of a Member State or by a legal person within the meaning of Article
48 of the EC Treaty and established in a Member State. Services provided by natural persons
who are not nationals of a Member State or by entities which are established outside the
Community or are not incorporated in accordance with the laws of a Member State are not
covered by the Directive. Non-EU nationals wishing to work in the EU must first comply
with specific Member State entry requirements.
Examples of services included within the scope of the Services Directive include: lawyers,
accountants, engineers, management consultants, architects, accommodation and food
services (such as hotels, restaurants, catering services), masseuse, distributive trades
(including retail and wholesale of goods and services), and household support services (such
as cleaning services, gardening services, or private nannies).
195 Directive 2005/36/EC of the European Parliament and of the Council of 7 September 2005 on the recognition of professional qualifications available at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:02005L0036-20070101:EN:NOT 196 Directive 2006/123/EC of the European Parliament and of the Council of 12 December 2006 on services in the internal market, O.J.(L 376) 36 available at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32006L0123:EN:NOT
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Excluded from the scope of the Services Directive are:
• non-economic services of general interest,
• financial services,
• electronic communication services and networks,
• services in the field of transport, services of temporary work agencies,
healthcare and pharmaceutical services provided by health professionals to
patients,
• audiovisual and radio broadcasting services,
• gambling activities,
• activities which are connected with exercise of official authority,
• certain social services,
• private security services,
• notary and bailiff services (where they are appointed by an official act of
government)
The Directive requires Member States to set up a point of single contact through which
service providers can have access to almost all administrative formalities and procedures
electronically. This aims to improve transparency and save businesses time and money when
researching their opportunities to trade elsewhere in the EU. It is meant to create a source of
information and a mechanism through which authorization to provide services in a member
state can be obtained electronically in the future. Mutual assistance as part of the Services
Directive will enable regulators to cooperate more efficiently with their counterparts in other
Member States. The Services Directive also includes provisions on rights for service
recipients, such as making information on redress schemes more readily available.
Currently available from the EU is a website197 of the lists of regulated professions in the EU
Member States as well as in Iceland, Norway, Liechtenstein and Switzerland. The 'General
System' is the system for the mutual recognition of professional qualifications established by
197 Regulated Professionals available at http://ec.europa.eu/internal_market/qualifications/regprof/index.cfm
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Directive 89/48/EEC198 and supplemented by Directive 92/51/EEC199. The general system
applies when a Member State requires a qualification in order to practice a profession on its
territory, with the exception of the professions already covered by a Sectoral Directive (see
below).
Generally regulations that exist at a Member State level with respect to service providers are
either issued by the national legislative body of the Member State or by professional bodies
established by the industries themselves (e.g. Bar associations that regulate the legal
professions). Compliance with the rules of professional bodies can be either compulsory
(licensing model) or voluntary (certification model).
If the profession a person wishes to pursue is not regulated, they are subject to the rules of the
labor market and the behavior of that market and not to any legal constraints with regard to
their diploma or education.
Sectoral Directives
The Sectoral Directives comprise seven professions that have harmonized training
requirements across the EU. Professions falling under these directives are doctors, dentists,
nurses, midwifes, pharmacists, vets and architects. Directive 89/48/EEC200 covers regulated
professions requiring at least three years study (or an equivalent duration part-time) at a
university or higher education establishment plus any professional training required to
practice the profession. Directive 92/51/EEC, as amended,201 covers those professions
regulated below degree level. Directive 99/42/EC202 (Certificates of Experience) recognizes
198 Council Directive 89/48/EEC of 21 December 1988 on a general system for the recognition of higher-education diplomas awarded on completion of professional education and training of at least three years' duration, O.J. (L 19) 16 available at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31989L0048:EN:NOT 199 Council Directive 92/51/EEC of 18 June 1992 on a second general system for the recognition of professional education and training to supplement Directive 89/48/EEC, O.J. (L 209) 25, amended by O.J. (L 236) 33, available at http://eur lex.europa.eu/LexUriServ/site/en/consleg/1992/L/01992L0051-20040501-en.pdf 200 Council Directive 89/48/EEC of 21 December 1988 on a general system for the recognition of higher-education diplomas awarded on completion of professional education and training of at least three years' duration, O.J. (L 19) 16 available at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31989L0048:EN:HTML 201 Council Directive 92/51/EEC of 18 June 1992 on a second general system for the recognition of professional education and training to supplement Directive 89/48/EEC, O.J. (L 209) 25, amended by O.J. (L 236) 33, available at http://eur lex.europa.eu/LexUriServ/site/en/consleg/1992/L/01992L0051-20040501-en.pdf 202 Directive 1999/42/EC of the European Parliament and of the Council of 7 June 1999 establishing a mechanism for the recognition of qualifications in respect of the professional activities covered by the
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professional experience for crafts or trades people wishing to work in an non- independent or
self-employed capacity.
The EU provides statistics on its website relating to the recognition within a Member State
(either nationally or by professional bodies) of qualifications that a service provider obtained
in another Member State and whether such service provider was (1) immediately allowed to
provide service in the state as the qualification was completely recognized, (2) allowed to
provide service after passing an aptitude test, (3) allowed to provide service after a period of
training and/or observation to establish if competency in service area exists, (4) not
immediately allowed to provide service because the qualification was therefore not
recognized, (5) not allowed to provide service, due to a failed aptitude test or (6) not allowed
to provide service after undergoing training and/or observation. These statistics could be
indicative of the level of regulation within specific industries that could serve to limit the
freedom of establishment.
Specific Professional Services
There are significant variations among EU Member State requirements for foreign lawyers
and accountants intending to practice in the EU. Accountants face nationality requirements in
certain Member States. For architects, some open competitions are only open to architects
who meet the requirements of EU directive 85/384/EEC203 (the Architects' Directive). This
means that one must have completed a program of architectural education recognized by the
European Union, i.e. one must have graduated from one of the institutions of education listed
in the directive.
Lawyers, Barristers, Solicitors (together, “Lawyers”)
Directives on liberalisation and transitional measures and supplementing the general systems for the recognition of qualifications, O.J. (L 201) 77, corrected by O.J. (L 23) 48, available at http://eur-lex.europa.eu/LexUriServ/site/en/consleg/1999/L/01999L0042-19990731-en.pdf 203 Council Directive 85/384/EEC of 10 June 1985 on the mutual recognition of diplomas, certificates and other evidence of formal qualifications in architecture, including measures to facilitate the effective exercise of the right of establishment and freedom to provide services, O.J. (L 223) 15, as amended in O.J. (L 363) 131 available at http://eur lex.europa.eu/LexUriServ/site/en/consleg/1985/L/01985L0384-20070101-en.pdf
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The EU statistics show that out of 2866 cases of Lawyers wishing to use a qualification in a
state in which it was not obtained and 707 were immediately allowed to provide service
(25%), 1846 were allowed to practice after passing an aptitude test (64%), 108 were not
allowed to provide service (4%) and 198 were not allowed to practice after a failed aptitude
test (7%). In 7 cases, Lawyers were allowed to practice after a training/observation period.
Relatively high levels of conduct regulation exist in respect to Lawyers operating in Member
States. For instance, in Austria, Germany, Italy and Greece, some degree of minimum price
setting exists (with Italy also imposing maximum pricing). All Member States inflict some
restrictions on advertising, with Greece, Portugal and Ireland (for Barristers) disallowing
advertising altogether.
In the European Commission’s revised services offer to the WTO in the Doha Development
Round (DDA) negotiations, the EU has offered to improve the legal services sector in the EU
by extending market opportunities not only to foreign lawyers practicing in law firms but also
to self-employed lawyers. Foreign lawyers and law firms will be able to establish a
commercial presence in any Member State and provide legal services through that
commercial presence or through temporary entry into the EU, in respect of the law of any
country in which lawyers are qualified to practice.
Accountants, Auditors and Tax Advisers (together, “Accountants”)
The EU statistics show that out of 102 cases of Accountants wishing to use a qualification in
a state in which it was not obtained and 21 were immediately allowed to provide service
(21%), 45 were allowed to practice after passing an aptitude test (44%), 6 were not allowed to
provide service (6%) and 28 were not allowed to practice after a failed aptitude test (27%). In
2 cases, Accountants were allowed to practice after a training/observation period.
Mandatory membership in a professional body which regulates accountancy in Member
States is one barrier to entry for Accountants wishing to practice in states other than which
they obtained their qualifications.
The right to practice accountancy services requires an approved level of university (or higher)
education in Austria, Belgium, Denmark, Finland, France, Greece, Italy, Netherlands,
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Portugal, Spain, Sweden and Luxembourg. In Germany, Ireland and United Kingdom,
provisions for service providers with extensive experience but no formal university training
to practice accountancy are in place.
Pharmaceutical services
The EU statistics show that out of 139 cases of pharmaceutical technicians wishing to use a
qualification in a state in which it was not obtained and 102 were immediately allowed to
provide service (73%), 6 were allowed to practice after passing an aptitude test (4%), 11 were
not allowed to provide service (8%) and 20 were allowed to practice after a
training/observation period (14%).
Dentists and Doctors
Doctors and Dentists are also covered by specific sectoral directives. These directives provide
for the harmonization of minimum training requirements and the automatic recognition of
professional qualifications. The consolidated version of Council Directive 93/16/EEC204 was
enacted to facilitate the free movement of doctors and the mutual recognition of their
diplomas, certificates and other evidence of formal qualifications. Council Decision
78/686/EEC205 concerns the mutual recognition of diplomas, certificates and other evidence
of the formal qualifications of practitioners of dentistry, including measures to facilitate the
effective exercise of the right of establishment and freedom to provide services.
Nurses and Midwives
204 Consolidated version of Council Directive 93/16/EEC of 5 April 1993 to facilitate the free movement of doctors and the mutual recognition of their diplomas, certificates and other evidence of formal qualifications, O.J. (L 165) 1 available at http://eur-lex.europa.eu/LexUriServ/site/en/consleg/1993/L/01993L0016-20040501-en.pdf 205 Consolidated version of Council Decision 78/686/EEC of 25 July 1978 concerning the mutual recognition of diplomas, certificates and other evidence of the formal qualifications of practitioners of dentistry, including measures to facilitate the effective exercise of the right of establishment and freedom to provide services, O.J. (L 233) 1 available at http://eur-lex.europa.eu/LexUriServ/site/en/consleg/1978/L/01978L0686-20040501-en.pdf
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All countries in the EU have a national or regional regulatory system for nurses. In the
majority of countries a nurse is required to register his or her qualification with the regulatory
authority before being allowed to practice in that country.
European legislation to promote labour market mobility means that most basic nursing
qualifications gained in one EU country are automatically recognized by these regulatory
authorities in another EU country. They are the qualifications adhering to the Nurses in
general care directive which lays down minimum EU requirements for content and length of
nurse education. Existing legislation includes the Consolidated version of Council Directive
77/452/EEC of 27 June 1977 concerning the mutual recognition of diplomas, certificates and
other evidence of the formal qualifications of nurses responsible for general care, including
measures to facilitate the effective exercise of this right of establishment and freedom to
provide services.
Other basic nursing qualifications gained in the EU fall within the general systems directives.
This means that the regulatory authority in another EU member state has the right to assess
these nurses’ qualifications individually to determine whether they meet the requirements of
that country. If they do not they can be asked to undertake a period of adaptation or
supervised practice. This may also apply to nurses wishing to gain recognition for
qualifications from outside the EU.
Midwives are governed by different qualifications in the Member States. The Consolidated
version of Council Directive 80/154/EEC concerning the mutual recognition of diplomas,
certificates and other evidence of formal qualifications in midwifery and including measures
to facilitate the effective exercise of the right of establishment and freedom to provide
services tries to end all discriminatory treatment based on nationality with regard to
establishment and provision of services.
Restrictive Regulations in the Professional Services of Member States
Regulations adopted by professional bodies are decisions of associations of undertakings
capable of infringing the prohibition contained in Article 81 EC. Regulations which are
objectively necessary to guarantee the proper practice of the profession, as organised in the
Member State concerned, fall however outside the scope of the prohibition.
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State regulation which imposes or favours anti-competitive conduct or reinforces its effects,
infringes Articles 3(1)(g), 10(2) and 81 EC. Where a State delegates its policy-making power
to a professional association without sufficient safeguards, that is without clearly indicating
the public interest objectives to respect, without retaining the last word and without control of
the implementation, the Member State can also be held liable for any resulting infringement.
Restrictive regulations in the liberal professions, among EC member states and with third
countries, include licensing restrictions such as entry requirements and reserved tasks, as well
as rules governing conduct such as price regulation, advertising restrictions, and regulation of
business structure. Such restrictions may eliminate or limit competition between service
providers and thus reduce the incentives for professionals to work cost-efficiently, to lower
prices, to increase quality or to offer innovative services. Price regulation, advertising
restrictions and entry barriers may for example allow prices to remain above competitive
levels. Business structure regulations may inhibit the development of innovative services and
cost-effective business models.
We considers that the major categories of potentially restrictive regulation for both EC and
non-EC professions are: (i) entry requirements and reserved rights, and (ii) regulations
governing business structure. The report of the Commission, provided progress of each
member state in eliminating restrictions in areas of professional services206, would give us
comparative views of restrictive regulations in each member state.
(i). Entry restrictions
Entry restrictions fall broadly into two categories – qualitative and quantitative. The former
are designed to ensure that only those with appropriate qualifications andexpertise can
practise, and hence act to safeguard quality of service. They are alsooften closely tied to
reserved rights to provide certain services. Quantitativerestrictions are largely designed to
safeguard access to important services.
Quantitative restrictions
206 The Commission Staff Working Documents: Progress by Member States in reviewing and eliminating restrictions to Competition in the area of Professional Services, SEC(2005) 1064.
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Notary and pharmacy professions - Strict entry controls in the form of quantitative limits
(based both on demographic and geographical criteria) continue to exist in most Member
States. Only Slovenia and the UK report any substantive reforms to quantitative entry
controls. Slovenia reports that the competence to make nominations, and make the final
decision on notary appointments, has passed to the national regulatory authority (Ministry of
Justice) from the professional body thereby introducing more State control into the process.
The UK slightly eased restrictions on the establishment of pharmacies. However, the
relaxation falls short of the recommendations of the national competition authority.
It seems that the existing rules contained in the professional ethical code regulating the right
to establish a pharmacy for France and Latvia aim at increasing the responsibility on local
administrators to ensure the availability of adequate health care in their area, including access
to pharmacies.
Reasons given for retaining quantitative restrictions in both the pharmacy and notarial
professions focus on the need to ensure the adequate provision of these services to all
citizens, especially in remote areas, and to safeguard quality by ensuring practitioners are
rewarded appropriately for their services.
Qualitative restrictions
Qualitative entry requirements are widespread across most professions. These are often set by
the State or by self-regulatory bodies and vary between countries.207 There has been progress
on developing the current framework for mutual recognition of qualifications with respect to
the professions with the adoption of a new Directive on recognition of professional
qualifications in 2005 (Directive 2005/36/EC).208 The Directive, proposed by the
Commission in the framework of the Lisbon agenda, consolidates and improves the current
207 As far as professional qualifications are concerned, qualitative requirements imposed by Member States are in principle acceptable under Community law. In order to facilitate the recognition of professional qualifications between Member States, Community law harmonised minimum training requirements for certain professions such as architects and pharmacists (see Directives 85/384/EEC and 85/432/EEC). When qualifications have not been harmonised, mechanisms have been put in place in order to facilitate the free movement of professionals while ensuring that these measures would not undermine quality: Community law allows host Member Statesto ensure a priori that the qualifications of migrants willing to work on their territory match national requirements for the same activity (see Directives 89/48/EEC, 92/51/EEC and 1999/42/EC). 208 Details on the new Directive on recognition of professional qualifications can be found at: http://www.europa.eu.int/comm/internal_market/qualifications/future_en.htm
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regime of mutual recognition of professional qualifications. It simplifies cross-border
provision of services. The Directive grants effective free movement of fully qualified
professionals throughout the EU while guaranteeing the protection of consumers.
Four countries report substantive change (Italy, Latvia, Lithuania and Slovakia) to qualitative
restrictions to facilitate entry to the legal, notarial and technical professions, but these seem to
be of relatively low impact.
Italy has relaxed qualitative entry requirements to allow architectural and engineering
graduates, who have completed a three year university course, to perform some reserved
tasks previously only open to those having completed the five year course. Slovakia likewise
reports having eased entry requirements for architects by reducing the level of professional
experience required.
Latvia has relaxed entry controls to the notary and legal professions by reducing the level of
professional experience required, and those with doctorates are no longer required to take the
professional entry examination to enter the legal profession. Lithuania likewise has eased
entry criteria for lawyers so that those with significant relevant professional experience do
not have to take the professional entry examination.
A government commission in the Netherlands has been set up to consider the Law on
Notaries, which will review the way notaries are appointed. Work is also underway to allow
candidate notaries to work as employees for existing notaries thereby increasing accessibility
to the profession in the Netherlands.
As noted above, Italy’s profession’s reform project covers access requirements to all the
professions. The UK reports that a general review of regulation in the construction sector is
underway. Portugal is reviewing the law which regulates qualitative entry requirements for
technicians (including architectural and engineering technicians) involved in construction
projects, and is also reviewing some of the other legislation in the construction field. Slovakia
is planning to review the law in the field of civil engineering to simplify procedures and
reduce professional discrimination. France has started a project to modernise the architectural
profession. Ireland reports that it is considering reserving the title of ‘architects’ in such a
way as to include practically trained as well as academically trained architects. Luxembourg
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has passed legislation to free up entry requirements with respect to the professions of
landscape and interior designers.
Auditing - Finland, Estonia, Lithuania and Slovenia are preparing new auditing legislation to
comply with the new EU Auditing Directive20209, which could change some of the current
restrictions. It is reasonable to assume that other Member States too may review existing
legislation in the auditing field as a result of the adoption of this new Auditing Directive. In
Italy work is underway to merge into one the two existing professional bodies in the
accountancy sector. Spain plans to reform entry requirements for auditors. The UK reports
having drawn up new draft ethical guidelines for auditors taking into account competition
concerns to ensure that they do not affect the ability of smaller companies to compete for the
business of larger clients.
Conversely, Luxembourg reports tightening of the entry requirements for accountants so that
in future entrants will have to pass a professional test. Lithuania reports that educational entry
requirements have increased for auditors. In Cyprus consideration is being given to
increasing the level of professional experience required to qualify as a lawyer. Spain is
planning to reform entry controls for lawyers by introducing a professional entry
examination. Estonia reports a new law, which introduced a registration system for those
wishing to practise as pharmacists, with the aim of ensuring that entrants have the necessary
competence. Germany has also increased entry requirements for pharmacists and those
wishing to practise in public or hospital pharmacies must now prove that they have a
sufficient knowledge of the German language and law. Hungary has increased entry
requirements for architects and engineers, and entrants must now pass a registration
examination to become licensed and gain entry to the professional bodies.
Reasons given for the need to retain qualitative entry controls centre on the need to safeguard
quality of services for the end user who is often not in a position to assess such quality, and
protect the reputation and integrity of the profession.
(ii). Business structure regulation 209 See Commission proposal for a Directive on statutory audit of annual accounts and consolidated accounts and amending Council Directives 78/660/EEC and 83/349/EEC. This can be found at: http://www.europa.eu.int/comm/internal_market/auditing/officialdocs_en.htm
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A number of professions are subject to sector-specific regulations on business structure.
These regulations can restrict the ownership structure of professional services companies, the
scope for collaboration with other professions and, in some cases, the opening of branches,
franchises or chains.
Significant restrictions on the way professionals can practise continue to exist across most
Member States. Professionals are often required to practise as individuals or in partnership
with others in the same profession, and incorporation is widely forbidden. Even where
incorporation is permitted, the 50% rule is common whereby persons in the same profession,
or those professionals actually practising in a firm, must have the majority of share capital or
voting rights. Restrictions are most widespread in the legal, notarial and pharmacy sectors.
The usual reason given for these is to protect the independence of the profession and quality
of service.
Pharmacy Business - France and Slovakia has positive substantive reform. France reports
some relaxation of the ownership rules in the legal and notarial professions. Slovakia reports
that rules on the establishment of pharmacies were relaxed opening the way for pharmacies to
be established by non-pharmacists (although health care professionals entitled to issue
prescriptions are still barred from opening or owning shares). There are also plans by
Slovakia to allow the entry of chain pharmacies. Conversely, Estonia reports that a new law
introduced prohibits the ownership of pharmacists by drug manufacturers and health care
professionals entitled to issue prescriptions. The Netherlands also reports that the gradual
development of a more competitive market is being encouraged in the pharmacy sector,
including the entry of pharmacy chains.
Architectural and engineering business - Work is however reported as being underway by a
number of countries. Austria is proposing to open the way to allow architectural and
engineering firms to have a financial holding/shares in other firms in their respective sectors,
and Belgium reports that work is underway to allow architects to form incorporated firms.
Accounting business - Belgium also reports that a study is underway to examine the options
for closer/joint working between the accountancy profession and other professions e.g.
lawyers. Lithuania too reports plans to ease restrictions in the accountancy/audit sector.
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Germany has started reviews to consider easing restrictions in the accountancy, engineering
and legal sectors. Italy reports that its reform project includes proposals to revise business
structure regulation in all professions210. Business structure restrictions in the
accountancy/audit field in Member States may also change as a result of the new Auditing
Directive when adopted, and the ongoing work in the construction field by some Member
States could result in change in this sector.
Legal business - The committee in Denmark on lawyers will also consider regulation on the
ownership of law firms. The UK has considered the structure of the legal profession with a
view to opening the way for new and more innovative business structures in the profession. A
similar review is now also underway of Scottish legal services, and the Irish competition
authority’s report on legal services has called on the government to radically change the
structure of the profession. The Netherlands’ planned government commission on lawyers
will consider business structure restrictions.
This is an area where many Member States shy away from reform given concerns about
safeguarding the independence of the professions. But this should not mean that reform
cannot and should not be made, rather that it may need to be addressed in a more holistic
way. As noted above, there are already examples of such a holistic approach from Ireland and
the UK, and experience shows that significant consumer benefits can flow from relaxing
business structure restrictions. In the US, for example, relaxing controls has seen the
emergence of legal ‘clinics’ making access to legal advice available to consumers who would
otherwise have considered lawyers too expensive. The Commission Services call on Member
States to pursue reform in this area imaginatively and proactively.
210 See footnote 1.
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(ii.) Hotel and Restaurant Services, including cook
The Services Directive generally covers accommodation and food service (such as hotels,
restaurants, catering services) in the European Union. In Austria, one is given the title
Gastgewerbe and it is regulated by the Federal Ministry of Economics and Labour
(Bundesministerium für Wirtschaft und Arbeit). Under Directive 1999/42, Art. 4, the
Austrian authorities have given automatic recognition to diplomas and qualifications from
four other Member States upon request. In Slovakia, the Regional Authority receives
applications for the profession (Poskytovatel' ubytovacích služieb v ubytovacích zariadeniach
s prevádzkovaním pohostinských činnosti y týchto zariadeniach a v chatovej osade triedy 3 v
kempingoch triedy 3 a 4) and the Local Authority takes decisions including licensing. In
Slovenia, hotel services (Hotelska gospodinja) are regulated by certification and the Ministry
of Economy (Ministrstvo za gospodarstvo) is the competent authority.
Hotel Director (Director de hotel) is a specifically regulated profession by diploma in
Portugal. In one case, the competent authority (Instituto de Formação Turística) in Portugal
did not automatically recognize an applicants qualifications from the United Kingdom for this
profession under Council Directive 89/48/EEC on a general system for the recognition of
higher-education diplomas awarded on completion of professional education and training of
at least three years' duration.
Hotel receptionist is a regulated profession in Portugal and Slovenia. In Portugal a hotel
receptionist (Recepcionista) is granted a certification and the competent authority is again
the (Instituto de Formação Turística). A hotel receptionist (Receptor) is also certified in
Slovenia and the governmental authority is the Ministry of Economy (Ministrstvo za
gospodarstvo). No information has been provided by the EU or Member States on the
recognition or hotel receptionist qualifications.
In the European Commission’s revised services offer to the WTO in the Doha Development
Round (DDA) negotiations, the EU was proposing to grant non-EU services suppliers
wishing to establish travel agencies in the territory of the European Union the same treatment
as EU services suppliers. In the proposals, the nationality of the companies or their managers
would not be considered for the authorization of new travel agencies. Some Member States
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offered to lift specific restrictions affecting hotels, restaurants, travel agencies, and tour
operators, tour guides’ services and catering services.
Cooks
A Cook (Cozinheiro) in Portugal is a certified occupation under the authority of the Instituto
de Formação Turística. The Portuguese authorities have automatically accepted qualifications
from four Member States and in three other cases, the qualifications were accepted after the
individual was examined. In Slovenia, a Cook (Kuhar) is a regulated profession by
certification. The competent authority is the Ministry of Economy (Ministrstvo za
gospodarstvo).
Many Member States have universities or school programs that offer training and/or
certification in the areas of Catering, or Hospitality or Professional Cookery. For instance, in
the United Kingdom, Business & Technology Education Council (BTEC) provide various
certificates such as a National Certificate in Food Science and Manufacturing Technology
which can be taken before entering the bakery industry, and include food safety, flour
confectionary, and bread technology. They can take the form of (or be part of) a technical
certificate, one of the key components of an Apprenticeship.
Please also see the section on visa requirements and business establishment for more
information.
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(iii.) Distribution Sector
The distribution sector within the EC is largely open to foreigners, and commitments have
been given by the EC in all sub-sectors. There are no important restrictions in the EC,
except some limited goods carve-out and an economics needs test for department stores in
some cases (in respect of which the main criteria are clearly specified). The openness of the
distribution sector in the EC allows EC citizens to have a wider choice of better quality
products at much more affordable prices.
Within the distribution services sector, there are usually product exclusions, including
pharmaceutical, medical and orthopaedic goods; agricultural raw materials and live animals;
food, beverages and tobacco; precious metals. There are also other sectoral restrictions such
as citizenship and residency requirements; registration and licensing for non-residents;
unspecified economic needs test, etc. Finally, some horizontal restrictions have a particular
impact on distribution, for example unspecified approval requirements; limitations on the
purchase or rental of real estate; restrictions on equity holdings; certain tax and subsidy
measures; etc.
Foreign companies that establish themselves as legal entities in the EC wishing to use
distribution, franchising and agency arrangements, subjected to the same regulatory as EC
companies, need to ensure that the agreements they put into place are in accordance with EU
and Member State national laws. Certain regulations are carved out as the following:
Council Directive 86/653/EEC establishes certain minimum standards of protection for self-
employed commercial agents who sell or purchase goods on behalf of their principals. In
essence, the Directive establishes the rights and obligations of the principal and its agents; the
agent’s remuneration; and the conclusion and termination of an agency contract, including
the notice to be given and indemnity or compensation to be paid to the agent. The Directive
states that parties may not derogate certain requirements. Essentially, in order to receive the
protection enumerated in the Directive, commercial agents are obligated to negotiate and
conclude business for the principal, communicate with the principal about all necessary
information, and follow any reasonable instructions. Commercial agents can also make
commitments binding to their partners, but they do not generally buy and sell inventories,
hold supplies or offer after sales service.
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Directive 2000/35/EC covers all commercial transactions within the EU, whether in the
public or private sector, primarily dealing with the consequences of late payment. Payment
transactions with consumers, however, do not fall within the scope of this Directive. The
Directive entitles a seller who does not receive payment for goods/services within 30-60 days
of the payment deadline to collect interest (at a rate of 7 percent above the European Central
Bank rate) as compensation. The seller may also retain the title to goods until payment is
completed and may claim full compensation for all recovery costs.
In the European Commission’s revised services offer to the WTO in the Doha Development
Round (DDA) negotiations, the EU proposed very comprehensive market access
opportunities for foreign services suppliers, in particular as regards setting up commercial
presences within the EU to provide commission agent’s services, wholesale and retailing
activities and franchising. Commitments proposed by the EU confer on non-EU services
suppliers the same treatment granted to EU services suppliers when applying for the opening
of new department stores.
Other EU legislation will apply to wholesale suppliers, distributors and agents, depending on
the industries involved. Please see the reports on Competition law, Environmental laws,
Business Establishment and the Free movement of Persons for more information on
establishment of distribution services entities and movement of services suppliers in the EC.
(iv.) Massage and spa business, including masseuse
The Services Directive will encompass most services regarded as Masseur/Massage
therapist/Spa therapist/Masseur-Aesthetician. Activities which are designed to enhance
wellness or to provide relaxation are covered by the Directive, but certain healthcare services
are excluded as mentioned above. The EU provided statistics show that out of 282 cases of
masseuses wishing to use a qualification in a state in which it was not obtained and 208 were
immediately allowed to provide service (74%), 66 were not allowed to provide service
(23%). In 3 and 5 cases, masseuses were allowed to practice after a test and
training/observation respectively.
Some Member States have specific education and training courses which show that the holder
has the professional qualifications required for the taking up or pursuit of the regulated
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profession in that Member State. In some Member States to work as a professional massage
therapist one needs to complete a course that includes approximately 100 to 150 hours'
theoretical study, as well as treatments observed by an assessor or tutor, case studies and a
practical exam. Shorter courses tend to be introductory or for general interest only and are not
usually suitable as a preparation for professional practice. Several awarding bodies have
developed courses in massage, including the Vocational Training Charitable Trust (VTCT)
and International Therapy Examination Council (ITEC). Austria, the Czech Republic,
Finland, Germany, Italy, Lithuania, Luxembourg, Poland, Portugal, Slovakia, and Slovenia
all regulate the Masseur/Massage therapist/Spa therapist/Masseur-Aesthetician profession in
their countries211.
In Austria, a Masseur is a regulated profession with the competent authority being the Federal
Ministry of Economics and Labour (Bundesministerium für Wirtschaft und Arbeit). The
Austrian officials automatically recognized the qualifications of three different individuals
from other Member States, and approved the qualifications of another three individuals after
testing. In Bulgaria, the Qualified Masseur/Masseuse (Масажист) is professionally regulated
by the Ministry of Health (Министерство на Здравеопазването). The Ministry of Industry
and Trade in the Czech Republic regulates the massage profession by certification (Masérské
rekondiční a regenerační služby) under Sections 6, 7, 8, 21, and 22 of Act No 455/1991 Coll.,
the Trade Licensing Act, as amended. The Czech authorities have automatically recognized
the professional and educational qualifications of all the fourteen individuals seeking to work
in the Czech Republic. A Blind And Asthenopic Masseur (Masér/nevidomý a slabozraký
masér ) is also regulated in the Czech Republic by the Ministry of Health under Act 96/2004
Coll., Art. 37. In two instances, they automatically recognized the training and educational
qualifications of individuals seeking to work in the Czech Republic. In Finland a Masseur or
Massage therapist (Koulutettu hieroja / utbildad massör) is regulated by certificate. In one
instance the government automatically recognized the education and qualifications of an
individual, and in another instance the government allowed the individual to work in Finland
after examination. In Germany, a Spa therapist (medizinischer Bademeister) is certified by
the government. In most instances, the authorities did not automatically recognize the
diploma or training of an individual from outside Germany. However, some individuals were
recognized after testing and some only after training. A Masseur/Massage therapist/Spa therapist
211 See more details about the regulated professions at http://ec.europa.eu/internal_market/qualifications/regprof/regprofs/dsp_regprofs.cfm?profId=1260
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/Masseur-Aesthetician (Massaggiatore e bagnino terapeutico/balneoterapista /idroterapista) is
regulated by diploma in Italy. The government positively automatically recognized 133
individuals seeking to work in Italy. Another forty-two were recognized after examination.
The Ministry of Health (Sveikatos apsaugos ministerija) regulates the Masseur
(Masažuotojas) in Lithuania. In Luxembourg, the Masseur/masseuse is regulated by diploma
(masseur/euse diplômé(e)) as recognized in Council Directive 92/51/EEC. In one instance an
individual seeking employment in Luxembourg had to undergo training, but in the other eight
instances the individuals were able to automatically work in Luxembourg. In Poland, a
massage therapist (Masażysta) is a regulated profession by the Ministry of Health (Minister
Zdrowia). One individual seeking to have their qualifications recognized in Poland to work as
a massage therapist was automatically recognized. In Portugal, a massage therapist
(Massagista de Estética) is regulated by the Employment and Vocational Training Institute
(IEFP). It was established in 1979 (Decree-Law no. 519-A2/79, of 29 December), as a public
body, under the auspices of the Ministry of Labour and Social Solidarity, which is
responsible for executing the employment and vocational training policies defined and
approved by the Government. In sixteen cases, individuals were automatically granted
positive recognition of their education and qualifications to work in Portugal. In Slovakia, a
Masseur - Medical Worker In The Category Assistant (Masér - zdravotnícky pracovník v
kategórii asistent) is regulated by the Ministry of Health (Ministerstvo zdravotníctva SR) and
the Ministry of Education (Ministerstvo Školstva SR). In Slovenia, a Masseur in the Health
sector (Maser v zdravstveni dejavnosti ) is regulated by the Ministry of Health (Ministrstvo
za zdravje).
There are several professional bodies that represent reflexologists and offer industry
recognition to suitably qualified practitioners. Each professional body sets its own entry
requirements. One can study reflexology as a level 3 diploma, or at degree or postgraduate
level. Some courses satisfy the criteria for membership of one of the professional bodies and
many organizations list approved courses on their website.
In the European Commission’s revised services offer to the WTO in the Doha Development
Round (DDA) negotiations, the EU was proposing to make commitments in the beauty and
well-being services sector at the request of several developing countries. The proposals
allowed foreign suppliers to have broad market access to set up commercial presences with a
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view to provide hairdressing services, manicure, other beauty treatment services, and
relaxation services such as spa.
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(v.) Entertainment business
Various schemes exist for entertainers in the European Union. Trade unions for artists exist
to help access to training, medical and insurance information, advice on contracts and other
legal matters. Many operate at an international level through the Federation of International
Artists.
The EuroFIA Dance Passport is a reciprocal solidarity service that performers’ unions in
Europe have agreed to grant to their respective members, assisting them as they temporarily
work or seek employment opportunities in another EU member State, in Iceland, Norway and
Switzerland. It allows the Passport holder to benefit temporarily from various services
offered, at no cost, by the union in the country of destination. All participating unions have
undertaken to offer as many services to visiting performers as they can afford – meaning that
some may be able to grant more than others. Once a dancer or choreographer joins a union in
one of the participating Member States, they can obtain the EuroFIA Dance Passport.
Member States also have local laws and regulations affecting the entertainment industry.
Many require licenses for authorization of events, such as a premises license authorizing the
use of a particular premises for the relevant licensable activities. This does not, for example,
affect other planning or health and safety etc. requirements, and applicants should speak to
the relevant authorities about how to comply with other legislation.
Third country nationals can get visas and work permits in certain EU countries under certain
sportspeople and entertainers arrangements which allow employers to employ established
sportspeople, entertainers, cultural artists and some technical/support people from outside the
EU. People who have performed at the highest level and have established a reputation in their
profession and people/groups who are engaged to perform or do work which only they can do
provide relevant past publicity material or press reviews with the source clearly identified.
Please see the report section on free movement of persons and business establishment for
more information.
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(vi.) Food processing
Registration of premises used for a food business (including market stalls, delivery vehicles
and other moveable structures) is required by law in many Member States.
Hazard Analysis and Critical Control Point (HACCP), is used to describe an internationally
recognized way of managing food safety and protecting consumers. It is a requirement of EU
food hygiene legislation that applies to all food business operators except farmers and
growers.
EU Regulation 852/2004212 (Article 5) requires food business operators, including meat plant
operators to implement and maintain hygiene procedures based on HACCP principles.
As regards to animal health rules, Council Directive 2002/99/EC213 laying down the animal
health rules governing the production, processing, distribution and introduction of products of
animal origin for human consumption has been applicable since 1 January 2005, while
Council Directive 2004/68/EC214 laying down animal health rules for the importation into and
transit through the Community of certain live ungulate animals has
been applied since 20 November 2005.
The EU animal welfare requirements are also applicable in relation to the import of live
animals and products of animal origin. They have paramount importance in particular in
two major areas that are the handling of animals during slaughter for human consumption and
the welfare requirements concerning the transport of most of live animals.
In relation to the import of certain products the animal welfare requirements are incorporated
into the import certificates in the form of an attestation and the veterinary authority of the
212 Regulation (EC) No 852/2004 of the European Parliament and of the Council of 29 April 2004 on the hygiene of foodstuffs, O.J. (L 139) 1 available at http://eur-lex.europa.eu/LexUriServ/site/en/oj/2004/l_139/l_13920040430en00010054.pdf 213 Council Directive 2002/99/EC of 16 December 2002 laying down the animal health rules governing the production, processing, distribution and introduction of products of animal origin for human consumption, O.J. (L 18) 11 available at http://eur-lex.europa.eu/LexUriServ/site/en/oj/2003/l_018/l_01820030123en00110020.pdf 214 Council Directive of 26 June 1990 on animal health conditions governing the movement and import from third countries of equidae (90/426/EEC), O.J. (L 224) 42 available at http://eur-lex.europa.eu/LexUriServ/site/en/consleg/1990/L/01990L0426-20070101-en.pdf
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country of origin has to certify them together with the animal and public health requirements.
In relation to the transport of live animals from third countries the animal welfare
requirements are both incorporated into the import certificates and also directly apply and are
enforceable by the veterinary authorities of the Member States once the consignment reaches
the Border Inspection Post (BIP) of entry. As these criteria are thoroughly checked at the
BIPs, veterinary authorities at the country of origin should very much be aware of them.
Consignments that do not meet them (e.g. unfit animals, overstocked trucks, insufficient
head space, transporter not authorized by a MS, lack of route plan for leg of journey within
EU etc.) will, at the very least, be delayed.
Imports of animals and animal products into the EU must, as a general rule, be accompanied
by the health certification laid down in EU legislation. This sets out the conditions that must
be satisfied, and the checks that must have been undertaken, if imports are to be allowed. The
details of the certification required are set out in specific EU legislation, which includes
models of the certificates to be used. The certification must be signed by an official
veterinarian or official inspector (as indicated in the relevant certificate), and must respect the
provisions of Council Directive 96/93/EC on the certification of animals and animal products.
Strict rules apply to the production, signing and issuing of certificates, as they confirm
compliance with EU rules. The original version of the certificate must accompany
consignments on entry into the Community. Certificates must normally be drawn up in the
language of the country of dispatch and both of the Member State of destination and the of
Member State in which the border inspection takes place although these Member States can
agree if they so wish to accept any official EU language other than their own on the
certificates. Each category of animal and product has its own set of animal and/or public
health requirements, which may include welfare requirements (e.g. at stunning and
slaughter). Particular attention must be paid to ensure that the correct certification is used,
and that all of its provisions have been met.
In the United Kingdom for instance, if you run a food business, whether for profit or not (e.g.
a charity), you must tell the local authority about any premises you use for storing, selling
distributing or preparing food. Any one starting a new food business must register with the
local authority 28 days before they start trading. If a vehicle is used for the food business in
connection with a permanent premises such as a shop, a perons only needs to tell the local
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authority how many vehicles they have. Each vehicle need not be registered separately. If
there are one or more vehicles but no permanent premises the authority must be notified of
where they are normally kept. Market stalls and mobile vendors like ice cream or burger vans
must be registered with the local authority in whose area the stocks of food or the vehicle are
ordinarily kept. The Meat Hygiene Service (MHS), and Executive Agency of the Food
Standards Agency regulate the slaughter and processing sections of the industry. They
provide Official Veterinarians and Poultry Meat Inspectors to all licensed slaughterhouses,
and they work closely with the operators to ensure all the legal welfare and hygiene
requirements are met.
Most food businesses will have to register but some are exempt. These include primary
production for domestic use, domestic preparation and storage of food for domestic
consumption, direct supply by the producer of small quantities of primary products to the
final consumer or to local retail establishments directly supplying to the final consumer. A
person will not have to register if they occasionally handle, prepare or serve food on a small
scale (e.g. a church, school or village fair or are a charity volunteer who only prepares food
occasionally).
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(vii.) Fishery
The Common Fisheries Policy (CFP) in the European Union governs the fisheries business,
including the exploitation, processing and marketing of living aquatic resources (fish,
shellfish and mollusks) and aquaculture products. The CFP covers both activities within the
waters of EU member states and the actions of member state citizens in non-EU waters. It
provides for the establishment of conservation/sustainable practices, common organization of
the market, including common marketing standards, establishment of producer organizations,
price stabilization arrangements and rules governing trade with non-EU countries, structural
policy (addressing any EU aid provided for the repair, replacement or addition of fishing
ships to the EC fleet), international fisheries relations framework, including fisheries
agreements with non-EU countries and participation by the EU in global organizations with a
fishery focus, regulation on inspection, including marketing, transport and sale of fish
products and environmental protection measures established in each member states. These
requirements also apply to imports from third countries.
The basic regulation governing the CFP is Council Regulation (EC) No 2371/2002215 of 20
December 2002 on the conservation and sustainable exploitation of fisheries resources under
the Common Fisheries Policy. The policy sets quotas for which Member States are allowed to
catch what amounts of each type of fish, as well as encouraging the fishing industry by
various market interventions. Under the Regulation, each Member State is to maintain a
national register of fishing vessels which should be made available to the Commission for the
purposes of monitoring the size of the Member States' fleets. Activities within the scope of
the Common Fisheries Policy shall be prohibited, unless the following requirements are met:
(a) a fishing vessel shall carry on board its license and, where provided for, its
authorizations for fishing;
(b) a fishing vessel shall have installed on board a functioning system which
allows detection and identification of that vessel by remote monitoring systems.
This requirement applies to vessels exceeding 18 meters length overall as from 1 January
2004 and to vessels exceeding 15 meters length overall as from 1 January 2005;
215 Council Regulation (EC) No 2371/2002 of 20 December 2002 on the conservation and sustainable exploitation of fisheries resources under the Common Fisheries Policy, O.J. (L 358) 59 available at http://eur-lex.europa.eu/LexUriServ/site/en/oj/2002/l_358/l_35820021231en00590080.pdf
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(c) the master shall without undue delay record and report information on fishing
activities, including landings and transshipments. Copies of the records shall be made
available to the authorities.
(d) the master shall accept inspectors on board and cooperate with them; and
where an observer scheme applies, the master shall also accept observers on
board and cooperate with them;
(e) the master shall respect conditions and restrictions relating to landings,
transshipments, joint fishing operations, fishing gear, nets and the marking and
identification of vessels.
The marketing of fisheries products under the CFP are subject to the following requirements:
(a) fisheries products shall only be sold from a fishing vessel to registered buyers or
at registered auctions;
(b) the buyer of fisheries products from a fishing vessel at first sale shall be
registered with the authorities;
(c) the buyer of fisheries products at first sale shall submit invoices or sales
notes to the authorities, unless the sale takes place at a registered auction which is
itself obliged to submit invoices or sales notes to the authorities;
(d) all fisheries products landed in or imported into the Community for which
neither invoices nor sales notes have been submitted to the authorities and which are
transported to a place other than that of landing or import shall be accompanied by a
document drawn up by the transporter until the first sale has taken place;
(e) the persons responsible for premises or transport vehicles shall accept inspectors
and cooperate with them;
(f) where a minimum size has been fixed for a given species, operators responsible
for selling, stocking or transporting must be able to prove the geographical origin of the
products.
In December each year the EU Council of Fisheries Ministers sets “Total Allowable Catches”
(TACs) for over 130 fish stocks. In setting these TACs account is taken of various factors,
including the latest scientific advice on the condition of the stocks. In 2000, the social
partners with the European Commission developed the European Network for Fisheries
Training and Employment (REFOPE), which connects training institutes in the sector in
order to promote employment and access to the profession to young people, in particular
through an information service and training activities. REFOPE brings together a list of
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fisheries’ training courses in the various Member States, provides a directory of training
institutes, facilitates the exchange of teaching materials and supports the training of teachers.
In 2001, the social partners issued an opinion inviting EU authorities to insert a social clause
in the fishing agreements with third countries. This clause states the right of freedom of
association and the right to collective bargaining, the principle of non-discrimination, and the
right to certain social security benefits and appropriate remuneration levels.
The placement of fishery products on the EC market, whether of domestic or foreign origin,
is subject to sanitary regulations to protect the health of consumers. A Commission Decision
sets the conditions for imports into the EC from each third country based on a report of a
mission of experts.216
A new "hygiene package" on food safety, including for fishery products, has been applied
since 1 January 2006, consisting of five EC Regulations (the same text applies in all Member
States), four of which concern fishery products: No. 852/2004 sets out general hygiene
principles; No. 853/2004 sets out specific hygiene rules for food of animal origin (specific
requirements for fishery products in Annex III Section VIII and for live bivalves in Section
VII); and Nos. 854/2004 and 882/2004 specify rules for official controls. This hygiene
legislation, taken together with the General Food Law, aims to ensure an effective food safety
system.217
In addition to the CFP which applied within EC member states and imports from foreign
countries, some Member States have regulated their owned regulations on the profession of
fisherman, such as Denmark, Poland, Portugal, Slovenia, and Spain. In Denmark, a
Fisherman (Fisker) is regulated under national legislation (Lov nr. 15 af 13. januar 1997 om
skibes besætning med senere ændringer) and the competent authority is the Danish Maritime
Authority (Søfartsstyrelsen). The Danish authorities have positively and automatically
recognized qualifications in thirty-three cases, but required training for individuals prior to
employment in another fifty-six cases. In Poland, a Fisherman (Rybak rybołóstwa morskiego)
is a regulated profession, and the competent authorities are the Dyrektor Urzedu Morskiego w
Gdyni, Dyrektor Urzedu Morskiego w Slupsku, and Dyrektor Urzedu Morskiego w.
216 The test applied to imports is whether the hygiene conditions under which production is carried out in the country of origin can be considered to be equivalent to that required from EC producers; there must also be a competent authority responsible for the public health aspects of fishery products (WTO, 2004). 217 EC Regulation No.1642/2003.
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Szczecinie. A Fisherman (Pescador) in Portugal is regulated by the Portugese Institute of
Maritime Transport (Instituto Portuãrio e dos Transportes Marítimos). Thirteen individuals
seeking recognition for employment received a positive automatic recognition, and twenty-
seven individuals had to first undergo an examination. In Slovenia, a Fisherman (Ribič) is
regulated by the Ministry of Agriculture, Forestry, and Food (Ministrstvo za kmetijstvo,
gozsdarstvo in Prehrano). The Spanish Ministry of Agriculture, Fisheries and Food
(Ministerio de Agricultura, Pesca y Alimentación) regulates the profession of Fisherman
(Marinero de pesca).
In the Czech Republic, a fisheries expert (Rybářský hospodář a jeho zástupce) is a regulated
profession under Decree No. 296/2001 Coll. § 6 and § 11 with the Ministry of Agriculture
(Ministerstvo zemědělství) being the competent authority. In Greece, a fisheries expert
(Ichthiológos (TEI)) is regulated by the government.
Please also see the section on visa requirements and business establishment for more
information.
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(viii.) Poultry Farming and Processing
The industries devoted to raising and processing poultry for the purposes of human
consumption are governed within the EU by the General Principles of Food Law enacted by
Regulation EC/178/2002.218 The Food Law aims at ensuring a high level of protection of
human life and health, taking into account the protection of animal health and welfare, plant
health and the environment. This integrated "Farm to Fork" approach is now considered a
general principle for EU food safety policy.
Food Law, both at national and EU level, establishes the rights of consumers to safe food and
to accurate and honest information. The EU Food Law aims to harmonize existing national
requirements in order to ensure the free movement of food and feed in the EU. The Food Law
recognizes the EU's commitment to its international obligations and will be developed and
adapted taking international standards into consideration, except where this might undermine
the high level of consumer protection pursued by the EU.
Regulation (EEC) 2777/75 (as amended)219, establishes the Common Agriculture Policy
(CAP) regime for the following:
� live poultry (see also hatching eggs and chicks regulations)
� poultry meat and edible offal, fresh, frozen or chilled (Customs Nomenclature 0207)
and prepared or preserved poultry meat (Customs Nomenclature 1602 31, 1602 32 &
1602 39)
� poultry livers under Customs Nomenclature 0207, 0210 and 1602 (but not 0207 31,
0207 3990 & 0207 50)
� poultry fat, rendered and unrendered (Customs Nomenclature 0209 0090 and 1501)
Council Regulation (EEC) No. 1906/90220 and Commission Regulation (EC) No. 1538/91221
(both as amended) prescribe minimum harmonized standards to facilitate trade and to ensure
218 Regulation EC/178/2002 of 28 January 2002 laying down the general principles and requirements of food law, establishing the European Food Safety Authority and laying down procedures in matters of food safety, O.J. (L 31) 1 available at http://eur-lex.europa.eu/pri/en/oj/dat/2002/l_031/l_03120020201en00010024.pdf 219 Regulation (EEC) No 2777/75 of the Council of 29 October 1975 on the common organization of the market in poultrymeat, O.J. (L 282) 77 available at http://eur-lex.europa.eu/LexUriServ/site/en/consleg/1975/R/01975R2777-20060511-en.pdf
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EU consumers are provided with good quality fresh and frozen poultry meat produced to a
common standard.
220 Council Regulation (EEC) No 1906/90 of 26 June 1990 on certain marketing standards for poultry, O.J. (L 173) 1 available at http://eur-lex.europa.eu/LexUriServ/site/en/consleg/1990/R/01990R1906-20060714-en.pdf 221 Commission Regulation (EEC) No 1538/91 of 5 June 1991 introducing detailed rules for implementing Regulation (EEC) No 1906/90 on certain marketing standards for poultry, O.J. (L 143) 11 available at http://eur-lex.europa.eu/LexUriServ/site/en/consleg/1991/R/01991R1538-20070101-en.pdf
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List of sources
European Union http://europa.eu/index_en.htm
World Trade Organization http://www.wto.org/
European Centre for the development of
Vocational Training (CEDEFOP) http://www.cedefop.europa.eu/
International Centre for Vocational
Education and Training (UNEVOC) http://www.unevoc.unesco.org/
The World Bank Doing Business Guides http://www.doingbusiness.org/
Austrian Federal Chancellery http://www.austria.gv.at/
Belgian Government Federal Portal http://www.belgium.be/eportal/index.jsp
Bulgarian Government http://www.government.bg/
Republic of Cyprus Ministry of Interior http://moi.gov.cy/
Czech Republic Government Portal http://portal.gov.cz
Denmark National Administration Portal http://borger.dk
Estonia National Public Administration http://www.riik.ee/en/
Finnish Government http://www.vn.fi/etusivu/en.jsp
French Government Portal http://www.premier-ministre.gouv.fr/en/
German Government http://www.bundesregierung.de
Greece Ministry of Foreign Affairs http://www.ypex.gov.gr/www.mfa.gr/en-
US
Hungarian Government http://www.magyarorszag.hu/english
Ireland Government Site http://www.irlgov.ie/
Italian Government http://www.italia.gov.it/
Latvia Ministry of Foreign Affairs http://www.am.gov.lv/en/
Lithuanian Government http://www.lrv.lt/main_en.php
Luxembourg Government http://www.gouvernement.lu/
Maltese Government http://www.gov.mt/
Dutch Government http://overheid.nl/english/
Poland Government Portal http://www.poland.gov.pl/
Portuguese Government http://www.portugal.gov.pt/Portal/EN/
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Romanian Government http://www.gov.ro/engleza/index.php
Slovak Government Office http://www.government.gov.sk/english/
Slovenia Information Gateway http://www.slovenia.si/
Spanish Government http://www.la-moncloa.es/
Swedish Official Gateway http://www.sweden.se/
United Kingdom Information Site http://www.direct.gov.uk/en/index.htm
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