Explanatory Memorandum to COM(2024)191 - - Main contents
Please note
This page contains a limited version of this dossier in the EU Monitor.
| dossier | COM(2024)191 - . |
|---|---|
| source | COM(2024)191 |
| date | 26-04-2024 |
1. CONTEXT OF THE PROPOSAL
• Reasons for and objectives of the proposal
On the basis of the negotiating directives adopted by the Council in December 2014, the Commission has negotiated a far-reaching association agreement with Andorra and San Marino providing for the participation of these countries in the European Unions’s internal market and for the cooperation outside the four freedoms. In its conclusions adopted in June 2022, the Council called on the Commission to finalise the negotiations by the end of 2023. On 7 December 2023, the negotiations were completed and an Association Agreement was agreed at the level of the Chief Negotiators. The negotiations were conducted in consultation with the Council’s EFTA Working Party. The European Parliament has been informed about the outcome of the negotiations.
The attached proposal constitutes the legal instrument for authorising the signing and provisional application of the Agreement establishing an association between the European Union (‘EU’) and the Principality of Andorra (‘Andorra’) and the Republic of San Marino (‘San Marino’), respectively (hereinafter referred to as ‘the Agreement’).
The Agreement provides for the participation of Andorra and San Marino, respectively, to a homogenous extended internal market under equal conditions of competition and respect of the same rules, and related horizontal and flanking policies, while also replacing the current customs unions between the EU and each of these countries.
In addition, the Agreement includes a framework for possible cooperation in policy areas outside the four freedoms such as research and development, education, social policy, the environment, consumer protection, culture and regional cooperation.
To ensure the effective functioning of the internal market, the Agreement foresees dynamic regulatory alignment. It also provides for the Commission as the responsible authority in charge of applying EU law on State aid in Andorra and San Marino. The Agreement further includes provisions establishing a dispute settlement mechanism with the Court of Justice of the European Union as arbiter for disputes on the interpretation and application of the Agreement.
Finally, the situation of Andorra and San Marino as small-sized States is taken into account, in accordance with Declaration 3 on Article 8 of the Treaty on European Union (TEU) 1. This is reflected in a number of adaptations to the provisions of EU legal acts included in the annexes to the Agreement, as well as in several transitional periods for the implementation and application of parts of the EU acquis. Sectoral adaptations concern in particular the area of free movement of persons where quantitative limits regarding certain types of residence inspired by those agreed with Liechtenstein in the Agreement on the European Economic Area2 are foreseen. Transitional periods are also provided for in areas such as telecommunications, transport or energy. Specific adaptations are also included concerning the absence of a certain industrial sector such as parts of the transport sector.
The Agreement also allows for a staggered access to the EU’s internal market for financial services, whereby Andorra and San Marino may decide not to seek access to the entire EU internal market for financial services. This possibility should not last longer than 15 years after the entry into force of the Agreement. In light of the specificities of Andorra and San Marino and the related specific rules and provisions introduced to cater for orderly and sound market integration, it was necessary to subject market access in the area of financial services to specific additional safeguards to those that govern relations between Member States in the internal market, in particular regarding the requirements on local provision of services and emergency powers of the European Supervisory Authorities.
• Consistency with existing policy provisions in the policy area
The Agreement is a significant milestone which responds directly, on the one hand, to the EU's objective to develop a special relationship with neighbouring countries as set out in Article 8 TEU and, on the other hand, to these two countries' stated interest in building closer relations with the EU.
The EU’s main interests, as stated in the 2012 Commission Communication3 and 2013 report4, reflected in subsequent Council conclusions, and eventually in the Council’s negotiating directives, include the contribution that closer economic ties could make to greater employment, trade and investment activity in EU regions neighbouring these countries. Given the obstacles to the small countries’ access to the EU’s internal market and cooperation in other areas, there would be significant potential to develop relations further for mutual benefit by breaking down barriers to cross-border economic activity.
In addition, the Agreement establishes a coherent and efficient institutional framework for relations, including institutional provisions to ensure the preservation of the homogeneity and the good functioning of the internal market, the indivisibility of the four freedoms and legal certainty, while taking into account the particular situation of each these countries.
a) The EU and Andorra
The EU and Andorra have progressively established close links, inter alia, following the conclusion of several bilateral agreements.
The bilateral agreements listed below shall cease to have effect and shall be replaced and superseded by the Agreement. The termination of those agreements shall take effect from the date of entry into force of the Agreement:
- Agreement in the form of an Exchange of Letters between the European Economic Community and Andorra of 28 June 19905; and
- Cooperation Agreement between the European Community and Andorra of 15 November 20046.
The bilateral agreements listed below will remain in place after the entry into force of the Agreement:
- Monetary Agreement between the EU and Andorra of 30 June 20117; and
- Agreement between the European Community and Andorra providing for measures equivalent to those laid down in Council Directive 2003/48/EC on taxation of savings income of 15 November 20048.
b) The EU and San Marino
The EU and San Marino have progressively established close links, inter alia, following the conclusion of several bilateral agreements.
The bilateral agreement listed below shall cease to have effect and shall be replaced and superseded by the Agreement. The termination of this agreement shall take effect from the date of entry into force of the Agreement:
- Agreement on Cooperation and Customs Union between the European Economic Community and the Republic of San Marino of 16 December 19919.
The bilateral agreements listed below will remain in place after the entry into force of the Agreement:
- Monetary Agreement between the EU and San Marino of 27 March 201210; and
- Agreement between the European Community and the Republic of San Marino providing for measures equivalent to those laid down in Council Directive 2003/48/EC on taxation of savings income in the form of interest payments and the accompanying Memorandum of Understanding of 7 December 200411.
• Consistency with other Union policies
The Agreement is fully consistent with EU policies and fully respects the Treaties, preserving the integrity and the autonomy of the EU legal order. The Agreement will not require the EU to amend its rules, regulations or standards in any regulated area. They promote the values, objectives, and interests of the EU, and ensure the consistency, effectiveness and continuity of its policies and actions.
2. LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY
• Legal basis
The substantive legal basis for the proposed Council Decision on signature is Article 217 of the Treaty on the Functioning of the European Union (TFEU). This legal basis is the most appropriate given the broad scope of the envisaged Agreement.
The procedural legal basis is Article 218(5) TFEU, read in conjunction with the second subparagraph of Article 218(8) TFEU which provides for unanimity voting in the Council.
Thus, the legal basis for the proposed Council Decision is Article 217 TFEU, read in conjunction with Articles 218(5) TFEU and the second subparagraph of Article 218(8) TFEU.
3. OTHER ELEMENTS
• Implementation by bodies established under the Agreement
The Agreement sets up an institutional framework composed of an Association Committee consisting of representatives of the EU, Andorra and San Marino, as well as a Joint Committee and several Subcommittees between the EU and each of the two countries. The Agreement provides for a mechanism to address failure by one of the Parties to fulfil obligations assumed under the Agreement.
• Implementation and application of the Agreement
In accordance with Article 216(2) TFEU, agreements concluded by the Union are binding upon the institutions of the EU and its Member States.
The interim solutions set out below are required for the time of provisional application in order to allow the very voluminous and imminent update of the EU acquis included in the Associated State Protocols and their Annexes, with a view to ensuring dynamic alignment during provisional application:
(a) It is appropriate to authorise the Commission, pursuant to Article 218(7) TFEU, to approve on behalf of the Union certain modifications to the Agreement that are to be adopted by a simplified procedure or by a body set up by the Agreement. Such modifications relate to Article 108 of the Framework Agreement as regards amendments to the Associated State Protocols, excluding their Annexes. The Commission should inform the Council of the above-mentioned proposed modifications in advance. The Council may object to those proposed modifications by a blocking minority of the Council in accordance with Article 16 i TEU. In that case, the Commission has to reject the proposed modifications on behalf of the Union, without prejudice to the possibility of subsequently making a proposal to the Council in accordance with Article 218(9) TFEU.
(a) It is also appropriate to authorise the Commission, pursuant to Article 218(7) TFEU, to approve on behalf of the Union the position regarding decisions by the Joint Committees that simply extend EU acts included in the Annexes to the Associated State Protocols to Andorra and San Marino respectively, subject to technical adaptations.
To guarantee compliance with the obligations under the Agreement, there are robust enforcement mechanisms. The Agreement also provides for the possibility for the Parties to take measures to protect their interests, such as compensatory measures for the incorrect application of the Agreement, safeguard measures in the event of serious economic, societal and environmental difficulties of a regional nature that are caused by the application of the Agreement or safeguard measures in the event of a terrorist attack or a natural or man-made disaster that affects one of the Parties. It is important for the EU to be fully able to deploy these measures rapidly and effectively. For this purpose, until a specific legislative act regulating the adoption of the above-mentioned measures enters into force in the EU, any decision of the EU to take such measures should be taken by the Commission in accordance with the conditions set out in the corresponding provisions of the Agreement.
• Detailed explanation of the specific provisions of the proposal
The Agreement is formed of the following elements: a Framework Agreement; seven Framework Protocols; two Associated State Protocols; and 25 technical Annexes to each Associated State Protocol, containing all EU legal acts falling within the scope of the Agreement.
a) The Framework Agreement
The Framework Agreement outlines the essential elements for the future association between the EU and Andorra and San Marino respectively, which ensures the participation of Andorra and San Marino to a homogenous extended internal market under equal conditions of competition and respect of the same rules, while at the same time establishing a framework to develop and promote dialogue and cooperation in other areas of common interest. The Framework Agreement foresees that the EU law principle of non-discrimination on grounds of nationality is respected by Andorra and San Marino.
The Framework Agreement also establishes a coherent, effective and efficient institutional framework with a view to ensuring the homogeneity of the internal market and legal certainty for (inter alia) economic operators and citizens.
The Agreement provides for the possibility of an application of the Agreement between the EU and one of the Associated States, pending the finalisation of the ratification procedure for the entry into force of the Agreement between the three contracting parties.
b) Seven Framework Protocols
The Agreement contains seven Framework Protocols aimed at clarifying and detailing the provisions included in the Framework Agreement.
Among these Framework Protocols, Framework Protocol 1 (on horizontal adaptations) contains a number of general rules, including with regard to the functioning of specific adaptations, including transitional periods and certain derogations.
Framework Protocol 3 (on financial services) is organised on the basis of the following elements:
- access to the EU single market on financial services depends on a comprehensive evaluation on the full and effective implementation of the EU acquis for the financial sector and the robustness of the Associated States’ regulatory and supervisory frameworks.
- The Framework Protocol provides for a staggered approach, whereby the Associated States may decide not to seek access to the entire EU internal market for financial services. This possibility will not last longer than 15 years after the entry into force of the Agreement.
- market access requires the adoption by the Commission of a positive recommendation that all necessary conditions set out in the protocol have been fulfilled.
- in case the regulatory or supervisory frameworks of an Associated State show deficiencies, the EU has the possibility to suspend market access.
- local presence and provision of services in the Associated States are required;
- compliance with the anti-money laundering acquis is a pre-condition to access the EU market for financial services.
- the European Supervisory Authorities will be instrumental in the auditing process, in which competent authorities of EU Member States may also participate. Furthermore, they will be able to exercise their authority vis-à-vis the Associated States and their financial services sector.
The other Framework Protocols cover aspects such as: (a) implementation of competition rules applicable to undertakings; (b) organisation of cooperation in the field of statistics; (c) status of the parliamentary association committee; (d) arbitration procedures; and (e) existing agreements.
c) Two Associated State Protocols
The Associated State Protocols contain matters which are strictly bilateral (between the EU and one of the Associated States) such as provisions concerning customs cooperation.
d) 25 Annexes to each Associated State Protocol
Each Associated State Protocol is accompanied by 25 Annexes, containing the EU legal acts falling within the scope of the Agreement. The Annexes include several sectoral or specific adaptations to take account of the specificities of Andorra and San Marino arising from their specific relations of proximity with their neighbours, their size and their relatively small populations. The Annexes also include transitional periods for the take-over, implementation, and application of certain EU legal acts by the two countries.
| Annex I (Veterinary and Phytosanitary Matters) | Annex VI (Social Security) | Annex XI (Electronic Communication, Audiovisual Services and Information Society Telecommunication) | Annex XVI (Procurement) | Annex XXI (Statistics) |
| Annex II (Technical Regulations, Standards, Testing and Certification) | Annex VII (Recognition of Professional Qualifications) | Annex XII (Free Movement of Capital) | Annex XVII (Intellectual Property) | Annex XXII (Company Law) |
| Annex III (Product Liability) | Annex VIII (Right of Establishment) | Annex XIII (Transport) | Annex XVIII (Health and Safety at Work, Labour Law and Equal Treatment for Men and Women Health and safety at work) | Annex XXIII (Customs) |
| Annex IV (Energy) | Annex IX (Financial Services) | Annex XIV (Competition) | Annex XIX (Consumer Protection) | Annex XXIV (Agriculture) |
| Annex V (Free Movement of Workers) | Annex X (Services in general) | Annex XV (State Aid) | Annex XX (Environment-Climate) | Annex XXV (Trade) |
ATTACHEMENTS:
Contents
- Annex, Part 1: Framework Agreement, Framework Protocols
- The bilateral agreements listed below will remain in place after the entry into force of the Agreement:
- The main elements of the Agreement are the following:
- Framework Protocol 3 (on financial services) is organised on the basis of the following elements:
- Annex, Part 2: Andorra Protocol
- Annex, Part 3: Annex I to the Andorra Protocol
- Annex, Part 4: Annex II to the Andorra Protocol
- Annex, Part 5: Annexes III, IV, V, VI, VII, VIII, IX, X to the Andorra Protocol
- Annex, Part 6: Annexes XI, XII, XIII, XIV, XV, XVI, XVII, XVIII, XIX to the Andorra Protocol
- Annex, Part 7: Annexes XX, XXI, XXII, XXIII, XXIV, XXV to the Andorra Protocol
- Annex, Part 8: San Marino Protocol
- Annex, Part 9: Annex I to the San Marino Protocol
- Annex, Part 10: Annex II to the San Marino Protocol
- Annex, Part 11: Annexes III, IV, V, VI, VII, VIII, IX, X to the San Marino Protocol
- Annex, Part 12: Annexes XI, XII, XIII, XIV, XV, XVI, XVII, XVIII, XIX to the San Marino Protocol
- Annex, Part 13: Annexes XX, XXI, XXII, XXIII, XXIV, XXV to the San Marino Protocol
Annex, Part 12: Annexes XI, XII, XIII, XIV, XV, XVI, XVII, XVIII, XIX to the San Marino Protocol
Annex, Part 14: Declarations