REPORT on the proposal for a Council and Commission Decision on the position to be taken by the Community within the Association Council established by the Europe Agreement between the European Communities and their Member States of the one part, and Bulgaria, of the other part, signed on 8 March 1993, with regard to the adoption of the necessary rules for the implementation of Article 64 para. 1 (i) and (ii) and para. 2 of the Europe Agreement (COM(95)0528 - 4390/96 - C4-0089/97 - 95/0295(CNS))

28 May 1997

Committee on External Economic Relations
Rapporteur : Mrs Erika Mann

By letter of 17 February 1997 the Council consulted the European Parliament, pursuant to Articles 87, in conjunction with Article 228(2), second sentence and paragraph 3, first subparagraph of the EC Treaty, on the proposal for a Council and Commission decision concerning the position to be taken by the Community within the Association Council established by the Europe Agreement between the European Communities and their Member States of the one part, and Bulgaria, of the other part, signed on 8 March 1993, with regard to the adpotion of the necessary rules for the implementation of Article 64 (1)(i),(ii) and (2) of the Europe Agreement

At the sitting of 10 March 1997 the President of Parliament announced that he had referred this proposal to the Committee on External Economic Relations as the committee responsible and to the Committee on Foreign Affairs, Security and Defence Policy and the Committee on Economic and Monetary Affairs and Industrial Policy for their opinions.

At its meeting of 23 January 1996 the Committee on External Economic Relations had appointed Mrs Erika Mann rapporteur.

It considered the Commission proposal and the draft report at its meetings of 16 April 1997 and 27 May 1997.

At the last meeting it adopted the draft legislative resolution unanimously.

The following took part in the vote : Castellina, chairman ; Moniz, vicechairmen; Erika Mann, rapporteur; Elchlepp, Ferrer, Hindley, Ilaskivi (for Moorhouse), Janssen van Raay (Art. 138.2 for Parodi), Kreissl-Dörfler, Schwaiger, Smith, Sonneveld (for Casini Pier F), Tindemans (for Porto), Valdivielso de Cue, Van der Waal (for Souchet).

The Committee on Foreign Affairs, Security and Defence Policy decided on 22 May 1997 not to deliver an opinion.

The Committee on Economic and Monetary Affairs and Industrial Policy decided on 20 March 1997 not to deliver an opinion.

The report was tabled on 28 May 1997.

A DRAFT LEGISLATIVE RESOLUTION

Legislative resolution embodying the opinion of the European Parliament on the draft Council and Commission decision on the position to be taken by the Community within the Association Council established by the Europe Agreement between the European Communities and their Member States, of the one part, and Bulgaria of the other part, signed on 8 March 1993, with regard to the adoption of the necessary rules for the implementation of Article 64 para. 1 (i) and (ii) and para. 2 of the Europe Agreement (COM(95)0528 - 4390/96 - C4-0089/97 - 95/0295 (CNS))

(Consultation procedure)

The European Parliament,

- having regard to the Commission proposal to the Council (COM(95)0528

- 4390/96 - 95/0295(CNS))[1]

- having been consulted by the Council pursuant to Articles 87 in conjunction with Article 228(2), second sentence, and 228(3), first subparagraph, of the EC Treaty (C4-0089/97),

- having regard to Rule 90,7 of its Rules of Procedure,

- having regard to the report of the Committee on External Economic Relations (A4-0199/97),

1. Approves the Commission proposal;

2. Instructs its President to forward this opinion to the Council and Commission.

• [1]  OJ C ..., ....., p.

B EXPLANATORY STATEMENT

1. The European Union and the Republic of Bulgaria have concluded a European Association Agreement, which came into force on 1 February 1995. The purpose of the agreement is to establish an association between the two partners to prepare Bulgaria for membership of the European Union. With a view to this the agreement provides for, inter alia, the establishment of a free-trade area on an "asymmetrical" basis, which means that the European Union will open up its markets to Bulgarian products more quickly than Bulgaria does to Community products. The free-trade area is to be fully established within ten years. European Agreements have also been concluded with Poland, Hungary, the Czech Republic, the Slovak Republic, Romania and the three Baltic Republics. A similar agreement is currently being ratified with Slovenia.

2. Given that the EC-Bulgaria Europe Agreement also provides for cooperation in areas of competence shared between the Union and its Member States, it must be ratified not only by the Union but also by the national parliaments. This procedure has taken almost one year. With regard to commercial cooperation, which is the exclusive competence of the Union, the two sides concluded an interim agreement which covers the commercial provisions of the Europe Agreement. This agreement entered into force on 31 December 1993. The time-limit for the implementation of Article 64 para. 1(i) and (ii) and para. 2 of the Europe Agreement (competition rules) runs from 1 January 1993, in accordance with article 125 (article 52 of the Interim Agreement).

3. The establishment of an effective competition policy is one of the keys to the success of the transition by the countries of Central and Eastern Europe (CCEEs) to a market economy. Indeed, the free-trade area between the European Union and Bulgaria cannot operate satisfactorily unless it is accompanied by a legal framework ensuring that the same conditions apply to both Community and Bulgarian companies. Furthermore, the reduction in the use of trade policy instruments is also conditional on this policy, as revealed in the conclusions of the Essen European Council in December 1994, in that the implementation of an effective competition policy and of monitoring in respect of state aid will reduce the need for such instruments from the economic point of view. The establishment by the CCEEs of competition rules preventing companies from behaving in an anticompetitive fashion which may cancel out the effects of the internal market is also an essential feature of the White Paper adopted at the Cannes - European Council in June 1995.

It is in order to ensure that the free-trade area operates satisfactorily that the European (and interim) Agreements concluded with the CCEEs contain detailed basic rules on competition which are virtually identical to those contained in the EC Treaty and which provide for the adoption of implementing rules as regards both rules applicable to businesses and those relating to state aid. Furthermore, the Association Agreements provide for the CCEEs' national laws on competition to be brought into line with Community law.

In 1995, the EU and Poland, Hungary and the Czech and Slovak Republics adopted the rules necessary for the implementation of the competition fundamental policy included in their respective Association Agreements.

4. As regards Bulgaria, Article 64 of the Association Agreement states that the two parties shall conduct a competition policy and apply public aid in accordance with identical basic principles. As regards the rules applicable to undertakings, these principles are defined, in Article 64 (paragraphs 1 and 2), on the basis of Articles 85, 86 and 92 of the EC Treaty. Paragraph 3 grants the Association Council the power to adopt the necessary rules to ensure that the policy is implemented within three years of the entry into force of the Agreement.

The Joint Committee set up by the interim agreement was given a similar responsibility. Only in the case of Poland were rules adopted by the EC - Poland Joint Committee.

5. To enable the Association Council to take a decision, a common position must first be drawn up by the Union. The Council has submitted the draft decision of the Council and Commission on the common position to be adopted by the Community within the Association Council to the European Parliament for consultation. The legal bases for this decision are Articles 87 in conjunction with Article 228(2) and (3). Consultation of the EP is therefore compulsory.

6. The draft Association Council decision, annexed to the common position, relates in particular to the basic principles of the competition policy to be followed in the EC - Bulgaria Association, the competent authorities as regards competition, consultation and information procedures in cases of mutual interest which fall within the exclusive competence of one of the parties or which are cross-border in nature, and administrative cooperation. The rules apply to all agreements between undertakings decisions by associations of undertakings and concerted practices between undertakings, the aim or effect of which is to prevent, restrict or distort competition, and also to the exploitation of a dominant position throughout the territory of the Community or Bulgaria. Cases are examined by the Commission's DG IV on behalf of the EU and by the Committee on the Protection of Competition (CPC) on the Bulgarian side. The two authorities settle the various cases in accordance with their own basic rules and with due regard to the agreed implementing provisions. In other words the relevant basic rules for the Commission are the rules on competition in the Treaties and the laws derived therefrom and, as regards Bulgaria, the Bulgarian Act on the Protection of Economic Competition. To settle cases covered by competition law the Community authorities and the national authorities will apply their respective laws in close cooperation. Similarly, the implementing rules in question provide for the establishment of cooperation procedures between the competent authorities in the following three cases :

* where both authorities (i.e. DGIV and the authority of the associate country concerned) are competent to judge in one and the same case (Article 2);

* in cases where a single authority has exclusive competence, when the measures it adopts may affect the basic interests of the other party (Article 3);

* where a case does not fall within the competence of either authority (for example, where only trade between one Member State and the associate country is concerned, the authority of that Member State alone is competent).

7. Contrary to the similar rules adopted for Poland, Hungary, the Czech and Slovak Republics, this regulation does not provide for control over mergers which could have a significant impact on the Bulgarian economy. This justifies the non-inclusion of Article 235 in the legal basis in view of the fact that the Community regulation on the monitoring of mergers is also based on that article. It should be noted that the major area of public aid, a prime source of possible distortion of competition, is not covered by this decision.

8. The stipulation of fundamental principles and the establishment of procedures for implementing competition policy beyond what is already set out in the Association Agreement itself is an important factor in ensuring the smooth operation of the EC - Bulgaria association. The European Parliament may therefore give a favourable opinion to the draft common position. Once the common position is adopted, the rules are to be adopted by the Association Council according to a written procedure.

9. In spite of the fact that the deadline fixed by article 125 of the EU

- Bulgaria Association Agreement is just passed, from the draftman's point of view it is essential that, in this significant preaccession period, the Union create the same base for all the associated countries. Consequently, the timetable for application of competition rules should be aligned with that of other Central and Eastern Europe Associated countries. For political reasons, these rules should enter into force before the Commission will publish its "opinions" on the applications from Central and Eastern European Associated countries scheduled by next July. To avoid prolonging this gap the EP should give its opinion as soon as possible.

10. Application of these rules will help to improve the conditions under which trade is carried out between the European Union and Bulgaria. Nonetheless, this will not prevent the Union from using, where necessary, its trade protection measures and, in particular, the anti-dumping and safeguard measures allowed under the Association Agreement. For the Union to abandon these measures once and for all, Bulgaria would have to conduct a public aid policy based on the same disciplines as those in force within the EU. To this end, particular attention will have to be devoted in the near future to the establishment of implementing rules applicable to state aid and to the establishment of transparent monitoring of such aid, taking into account the particular situation of the associate countries, whose economies are currently in a process of transition.