www.whitecase.com mark powell 17 december 2004 business in the new eu member states kita seminar

www.whitecase.com

Mark Powell17 December

2004

Business in the New EU Member StatesKITA Seminar

The Enlarged EU

Introduction

On 1 May 2004, 10 new Member States (EU10) acceded to the EU:

(i) Cyprus; (ii) Czech Republic; (iii) Estonia; (iv) Hungary; (v) Latvia; (vi) Lithuania; (vii) Malta; (viii) Poland; (ix) Slovak Republic and (x) Slovenia

They are now full Members of the EU: participate in all EU institutions and all EU programmes and operate under EU law

No €uro yet and no Schengen yet (like the UK)

Remember that the EU’s role in JHA and security and defence issues is still weak, but growing

Conditions for EU Accession

To accede, applicant countries must comply with a number of criteria:

A well-functioning democracy;

A functioning market economy; and

Adoption of the Community Acquis, ie all EU legislation.

Transitional periods and derogations from the acquis are granted only in exceptional circumstances and are limited in scope.

Consequences of Accession

Therefore, the EU-10 should by now have now transposed all Community legislation into national legislation (derogations/TPs excepted).

Business can be set up as in any of the old Member States.

Business can refer to both national and EU judicial systems/courts.

More to follow on customs, tax, trade & investment…

Customs: Regulatory Framework

EU-10 applied EC Customs Code and Implementing Provisions (Regulations 2913/92 and 2545/93).

=Basic rules

National customs procedures and legislation must be compatible with basic EC rules – subject to scrutiny by European Court of Justice.

EU 10 experts sit in Customs Code Committee (developslegislation with European Commission, discussesdifferences among Member States).

Customs: Examples of What Changed for EU-10

Duty Rates:

EU-10 must now apply Common Customs Tariff (CCT), including preferences, duty suspensions, and trade policy measures.

EU-10 can no longer establish duty rates autonomously.

Customs classification:

EU rules apply; EU-10 must accept Binding Tariff Information (BTI) issues by other Member States.

Customs: Member State Discretion

Member States apply basic rules, but have been given some discretion, e.g. on:

appeals procedures,

sanctions,

decisions on remissions/repayment.

Data elements required in customs declarations not identical in allMember States.

Despite common basic rules, still no level playing field in practice (e.g. classification).

According to the EC Treaty, EU competence in the field of taxation is small

harmonisation of Member States’ rules in the area of indirect taxation

approximation of legislative or administrative provisions of the Member States as directly affect the establishment or functioning of the common market

mutual assistance and administrative cooperation in tax matters

Tax: EU Competence

Tax: National Competence

EU tax law can only be adopted unanimously by Member States:

To a great extent, tax legislation remains to be a matter of national competence.

At the EU level, there is little and often only framework legislation in the field of taxation.

Not much for the new Member States to implement or change.

Tax: Cooperation

However, there are some fundamental EU tax provisions that need to be respected

e.g. VAT rules and the soft law emerging from the Code of Conduct for business taxation.

Also, EU tax law is often about coordination, cooperation, mutual assistance and exchange of information between Member States’ tax authorities.

EU tax law to contribute to a more business-friendly environment in the EU-10.

Tax: Examples of EU Tax Law

Direct Taxation

Tax on savings

Mergers

Parent & Subsidiaries

Code of Conduct for Business Taxation

Indirect taxation

6th VAT Directive (TPs to EU10)

VAT on Gas & Electricity

VAT Invoicing rules

Excise duties (on alcohol, tobacco and energy products)

Tax: EU Constitution

EU Constitutional Treaty:

Signed in Rome on 29 October 2004

To be ratified by the EU Member States

If ratified by all, to take effect end of 2006

All tax policy decisions will have to be approved unanimously, as at present

Trade & Investment: Changes for EU-10

EU-10 had to accept the “four freedoms”:

Freedom of goods;

Freedom of services;

Freedom of persons; and

Freedom of capital.

Among other measures, all remaining tariff and non-tariff barriers (e.g. extra licensing requirements) were removed and the EU-10 adopted the EU Common External Tariff and harmonized EU standards.

Trade & Investment: Benefits for EU-10

Elimination tariff and non-tariff barriers increased trade between new and original Member States and among new Member States, reduced distortions in economy, and decreased red tape.

Lower unit labour costs and further privatisation increased foreign investments.

Shift employment to more skill-intensive sectors,implementation EC legislation, higher investments and research and development (R&D) expenditure increased productivity.

Common regulatory framework EU market increased overall efficiency.

New Business Environment in EU-10

Enlarged single market, uniform regulatory framework, increased market access and intellectual property rights protection, and extension WTO Government Procurement Agreement to EU10 benefits businesses.

Business environment in EU10 is now characterised by improved allocation of resources and increased degree of specialisation and competition.

Labour and capital-intensive sectors in manufacturing industries (e.g. textiles, wood products, furniture, and basic metals) in EU10 have become more competitive.

Status Enlargement - I

On 1 May 2004, 10 new Member States (EU10) acceded to the EU:

(i) Cyprus; (ii) Czech Republic; (iii) Estonia; (iv) Hungary; (v) Latvia; (vi) Lithuania; (vii) Malta; (viii) Poland; (ix) Slovak Republic and (x) Slovenia

Bulgaria and Romania are expected to accede on 1 January 2007.

Western Balkans to follow: Accession negotiations with Croatia are expected to start early in 2005.

Status Enlargement - II

EU Member States and the European Parliament to decide in December (this week!!!) whether to launch accession negotiations with Turkey.

The EU is in the process of strengthening its relations with its neighbours (Russia, WIS, South & Eastern Mediterranean) in the framework of the European Neighbourhood Policy.

EU-Korea Relations – I

Korea is the EU’s fourth largest trade partner.

Main EU exports power generating machinerychemicalstransport materials and ITA equipment

Main EU imports ITA equipmenttransport materialstextiles and clothing and power generating machinery

EU Korea Relations – II

The EU seeks facilitation of trade and investment with Korea in two ways:

Multilateral: by ensuring progress in Doha Round by Hong Kong Ministerial in December 2005.

Bilateral: by (i) cooperating to remove trade barriers in Korea (e.g.Korean requirements for products and services, improve IPR protection) and (ii) supporting ongoing Korean reforms to improve investment climate.

At the EU-Korea Summit in October, the EU and Korea agreed to intensify dialogue under the EU-Korea Framework Agreement on Trade and Cooperation, in force since 2001.

Environment

3 important environmental issues:

Electrical & electronic equipment: WEEE / RoHS

Energy-using products (EuPs)

Chemicals: REACH

Environment – WEEE & ROHS

A selected number of implementation issues:

13 RoHS Exemption Requests

Grey Area Products

Marking of Products

Information for Treatment

Change Separate Treatment?

Enforcement

Expand RoHS??

Environment – Energy Using Products

Certain EuP’s to be designed according to certain requirements

These requirements to be set out in future implementing measures (IM)

IM to be decided by regulatory committee of Member State officials

IM to cover only products sold in more than 200,000 units/year in the EU

Motor vehicles to be excluded

Products that conform to European or international standards to be considered compliant

Manufacturers of sub-components to provide information on the environmental impact of parts

Commission to set working plan to develop IM

Voluntary initiatives by the industry to be taken into account when preparing IM

Environment – REACH - I

A single system to replace over 40 existing legal measures for gathering information, assessing risks to human health and the environment and authorizing or restricting the marketing and use of individual chemicals produced or supplied in the EU

To apply to the manufacture, import, placing on the market or use of substances, on their own, in preparations or in articles

If a substance does not fulfil the registration requirements set forth in the REACH proposal, its marketing in the EU will be prohibited: no data = no marketing

Environment – REACH - II

Main elements of the REACH system:

Registration

Evaluation

Authorisation

Reduced requirement for articles

Creation of a European Chemicals Agency

www.whitecase.com mark powell 17 december 2004 business in the new eu member states kita seminar

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