final report 15 february 2008thaifta.com/trade/study/aseu_report3-1.pdf ·...

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 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



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

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



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


15/02/2008 Hunton & Williams

(vi.) Food processing ......................................................................................................... 277

(vii.) Fishery........................................................................................................................ 280

(viii.) Poultry Farming and Processing ........................................................................ 284


15/02/2008 Hunton & Williams Page 1 of 287

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.



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.



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,


5 Certificate EUR.1, EUR.2, or Form A, invoice declaration.

6 Article 23 section 1 of Council Regulation No. 2913/92 (CC)



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)



• 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



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).



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



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.



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



• 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).



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.



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



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



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.



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.



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.



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



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.



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



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.



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



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.



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



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.



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.



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.



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



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.



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



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.



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.



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



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



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)



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.



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



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



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.



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



� 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



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



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



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



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



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/



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



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.



* 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’.



* 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.



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).



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.



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



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.



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.



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



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



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



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



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.



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



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:


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.



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.



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



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



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



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



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



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



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



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.



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



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



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



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



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



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



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.



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



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



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



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



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



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



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



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.



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.



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




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



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



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.



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.



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).



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)



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



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.



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



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.



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



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;



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



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



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



• 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:



♦ 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)



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).



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.



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).



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.



• 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.


• 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.


• Other documents required by law.

Documents required in order to enter a commercial association into the Commercial

Register:



• 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.


• Telecommunications numbers (telephone, facsimile, e-mail, etc.) of the association on

a separate sheet.


• 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



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).



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



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



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



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,



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.



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



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



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



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.


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



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



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



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



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.



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.


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



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.


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.



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



treated as de facto general partnerships.


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.


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



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)



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)



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.



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-



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.



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



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



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:



• 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



• 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.



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



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



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



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



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



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



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



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.



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



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



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.



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



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.).



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.




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.


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



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.


An individual can set up a business as a sole proprietor. Such a business must be registered

with the local Chamber of Commerce.


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



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;



- 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



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



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



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)



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 .



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



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



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”).



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.


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



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



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



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.


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.


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



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



(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.


(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.)



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



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.



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



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,



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.


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



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.



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



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.



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



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.



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.



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/



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.



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



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.



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



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



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



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



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



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



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.



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



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



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



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.



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



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.



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



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



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.



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



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



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.



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



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



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.



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



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



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



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.



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



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



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



(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



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.



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.



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.



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



#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.



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



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



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.



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.



(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



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



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.



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



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



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



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



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



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



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



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.



(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



(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



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



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.



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



(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



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



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



(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.



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.



(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


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



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.




(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



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



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.



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



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



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.



(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



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


194 Convention on International Trade in Endangered Species of World Fauna and Flora available at http://www.cites.org/eng/disc/text.shtml



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.



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.



(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



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



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



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



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,



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



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.



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.



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



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



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



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.



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.



(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.


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



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.



(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.



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.


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



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



/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.


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



view to provide hairdressing services, manicure, other beauty treatment services, and

relaxation services such as spa.



(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.



(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



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



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).



(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



(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



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.



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.



(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



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



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/



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