WORLD TRADE  
ORGANIZATION   
WT/REG226/4 
15 September 2011  
 
(11-4450) 
Committee on Regional Trade Agreements Original:   English 
  
  
ECONOMIC INTEGRATION AGREEMENT BETWEEN 
THE EUROPEAN UNION  AND ALBANIA 
(SERVICES) 
 
Questions and Replies 
 
  The following communication, dated 14 September 2011, is being circulated at the request of the delegations of the European Union and Albania. 
 
_______________ 
 
  This document reproduces the questions addressed to the Parties and the responses submitted.  Questions from the Delegation of Japan 
 
National and MFN treatment (Paragraph 21, page 10) 
 
1. Japan understands that the provisions on MFN and national treatment (NT) are only 
included in Chapter II (Establishment), but not in Chapter III (Supply of Services).  Japan 
would like to know the reason for exclusion of th ese provisions from Chapter III and your idea 
on its consistency with Article V of GATS. 
 The Stabilisation and Association agreements ar e part of the EU Stabilisation and Association 
Process (SAP) and that is why they are designed to prepare the country concerned to accede to the EU 
and its internal market and are therefore based on the harmonization and approximation towards the 
EU's acquis communautaire. 
  The SAA does not include specific schedules of  commitments, but the national treatment is 
committed in a different way.  Firstly, chapter I of Title V eliminates discrimination for workers.  Secondly, Chapter II of Title V provides for an  unqualified national treatment obligation for 
establishment (covering mode 3).  Article 55 also provides for access and national treatment for 
mode 4 (covering the categories listed in that artic le).  Finally, as indicated above, the Agreement 
provides for a progressive opening of cross border services in line with the progress made towards the approximation of laws to those of the EU, hence providing for the elimination of any discrimination 
(Title V, Chapter III). 
 
 With regard to the requirements of GATS Article  V (1), the SAA agreement meets them as, in 
particular it:   - has substantial sectoral coverage, since a ll sectors are included, with the exception of 
 air transport services, inland waterways transport services and maritime cabotage WT/REG226/4 
Page 2  
 
   services.  However these sectors can be added upon a recommendation of the 
 Stabilisation and Association Council; 
 -  covers all modes of supply (the re is no a priori exclusion) and; 
  -  provides for the absence or elimination of substantially all discrimination.   
 
Establishment (Paragraph 25, page 10) 
 
2. From Japan's understanding, the Secretariat's Report indicates that this Agreement's 
provisions on establishment go beyond the GATS definition of mode 3.    Japan would like to 
request further explanation on why this Agree ment adopted the scope of "establishment" 
instead of including an Investment Chapter which also regulates post-establishment stage. 
 The Stabilization and Association agreements follow a different structure than normal FTAs 
or BITs, as they are aiming at the approximation and harmonization process referred to in the response to question 1 above, which is relevant given Albania's aspirations for EU Membership. 
 
 Regarding the structure of the Stabilization and Association Agreement between the EU and 
Albania, there is indeed a chapter on establishment covering services (mode 3) and non-services sectors – in line with the approach of the EU Treaty - regulating market access and non-discriminatory conditions, parts of it also covering the post-establishment stage.   
 Regarding the question on the post-establishmen t stage, it is understood that this question 
refers to the inclusion of conditions on investment protection in an 'investment chapter'.  With respect 
to the EU such conditions on investment protection are typically laid down in bilateral investment 
agreements concluded between the individual EU Member States and third countries.  There are, at 
this moment, no equivalent EU-level agreements with third countries.  
 
 This is related to an internal division of competences within the EU regarding investment, 
where until recently the Union concluded agreements on liberalization of investments, while Member 
States concluded agreements on investment protection.   In that sense agreements of the EU may have 
a different structure regarding investment than other countries use.  
 New developments in the EU have brought a cha nge to this division of competences.  The EU 
Lisbon Treaty has included foreign direct invest ments (FDI) as part of the Union's Common Trade 
Policy, making it part of the exclusive competence of the EU.  As a result, EU trade policy will now 
seek to integrate investment liberalization and investment protection, and will move towards 
investment negotiations with third countries at the le vel of the EU.  Future trade agreements of the EU 
with third countries will thus where appropriate in clude investment protection, while stand-alone 
investment agreements may also be considered.     
Movement Of Natural Persons (Paragraph 30, page 11) 
 
3. No time limits on residence and work permits are laid down in the Agreement.  In this 
connection, can we understand that Intra Co mpany Transferee Directive which regulates the 
maximum duration of three years of stay for non-EU member nationals is not applied to Albanian nationals? 
 Currently, the legislation of the EU member St ates applies.  Once the ICT directive will be in 
force and implemented into the legal order of the EU  member states, the time periods indicated in the 
directive will apply for ICTs coming into the EU .  It is nonetheless worth noting that the draft 
directive mandates compliance with any intern ational commitments that may be relevant. 
  WT/REG226/4 
 Page 3 
 
 
  Questions from the Delegation of the Separate Customs Territory of Taiwan, Penghu, Kinmen, 
and Matsu 
 
4. As indicated in the factual presentation, th e objective of the Agreement is for the 
stabilization and association process (SAP) countri es to align their legislative framework with 
the regulatory framework of the EU as a precursor to eventual EU membership. 
(a) How has Albania, as a Party to the Agreement, dealt with the market opening of 
its sensitive or protected sectors in services? 
 Albania has a very liberal and open trade regime in services.  As indicated in the First Trade 
Policy Review in April 2010 Albania has liberalized  considerably its trade in services regime as 
compared to the WTO GATS Schedule.  Furthermor e, Albania has already liberalized the banking 
and non-banking system, landline and mobile telephon y, electrical power generation, fuel industry, 
etc. 
 However, compliant with public policy, public  security, public moral and health there are 
some sectors in which a specific protection is granted.   
 
 The protection is given through these measures: (i ) restriction of market entry for the private 
sector (government monopoly); (ii) regulated prices, (iii) conferring exclusive rights for a specific service.  The protected sectors are:  
 The Electricity Sector (electricity transmission and distribution); 
 The Pharmaceutical Sector (prices of medications); 
 The Transport Sector (city public road tran sport and railway passenger transportation); 
 The Public Works Sector (water supply); 
 The Telecommunications Sector (landline and mobile telephony); 
 Postal Services (Reserved Area). 
 
 In the Electricity Sector,  the transmission system is a public  monopoly.  While in the sectors 
of:  
a. transport (city public road transport and passenger ra ilway transportation:  regulated prices); 
b. public works (water supply: regulated prices); 
c. electricity (distribution system: exclusive rights and regulated prices);  
d. postal services, (Reserved area, exclusive rights and regulated price);  
e. telecommunication (landline and mobile telephony: regulated price).  
 
respective services are provided under exclusive rights or prices that are regulated by regulators or 
government bodies.  Exclusive rights are generally  given under concessionary agreements that are 
awarded to the winners of international open tenders .  Exclusive rights are granted based on economic 
analysis and other parameters related to market size, initial investment, change of management from 
public to private, etc. 
 
 The aforementioned sectors, which receive some form of protection (i.e. monopoly or exclusive rights or regulated prices), are considered  protected sectors because they are covered by 
specific policies related to the protection of publ ic interest, maintenance of a balance between 
liberalization and deregulation, and protection of certain population groups.  Any protection granted 
to a sector, however, as explained above is based  on a complete economic, financial and social 
analysis carried out by the regulators taking into account the cost-benefit ratio. 
 WT/REG226/4 
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  (b) Has Albania contributed any assistance or provided any grant to the 
above-mentioned sectors? 
 Water supply and railway passenger transport ar e subsidized by the government due to the 
high social sensitivity and the GoA policy to suppor t/protection certain popul ation groups, vulnerable 
group of people.  
 
(c) Why is it necessary for Albania to sign the Stabilization and Association 
Agreement in order for it to be a po tential candidate for EU membership?  
What other processes does Albania need to follow? 
 There is no formal need for a country to sign a Stabilisation and Association Agreement 
(SAA) to join the EU.  The SAAs  are the centrepieces of the Stab ilisation and Association Process, 
which is the framework for EU negotiations with th e Western Balkan countries, all the way to their 
eventual accession.   The EU membership is of utmost importance for Albania and it is the strategic goal of the 
Albanian Government.  Signing of the Stabilization and Association Agreement has many objectives, 
and becoming a potential candidate is one of the mo st evident.  However, Albania considers the 
signing of this Agreement as beneficial to its econom ic and social development.  The EU has been 
historically the main and strategic economic and trade partner for Albania, representing the main 
exporting market and the biggest foreign investors in  Albania.  Therefore signing of this Agreement 
has political, economic and social objectives. 
 
 Aligning the legislation with the EU acquis and other respective policies is the process needed 
for Albania to follow in order to achie ve its strategic goal, EU membership. 
 
5. According to Article 49(a) of the Agreement, a Party may deny the benefits of Title V 
(Movement of Workers, Establishment, Supply of  Services, Current Payments and Movement 
of Capital) to a company having only its reg istered office in the EU or Albania unless its 
operations possess "a real and continuous link" with the economy of one of the EU Member 
States or of Albania. 
(a) How do the Parties define "a real and continuous link" as it applies in the 
Agreement? Could the Parties please elab orate further on the criteria used to 
determine whether "a real and continuous link" exists or not? 
(b) What is the difference between the term "a real and continuous link" and the 
term "substantial business operations" as in GATS Article 5.6? 
(c) Please elaborate further on the meaning of "a registered office" in this context? 
Can any examples be provided by way of illustration? 
(d) Before a Party applies the denial of benefits provision, what are the procedures 
that it is required to follow? 
 In line with its notification of the Treat y establishing the European Community to the 
WTO (WT/REG39/1), the EU understands the concep t of "effective and continuous link" with the 
economy of a Member State of the European Uni on enshrined in Article 54 of the Treaty on the 
Functioning of the European Union as equivalent to the concept of "substantive business operations" 
provided for in paragraph 6 of Article V of the GATS.  
   WT/REG226/4 
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   Accordingly, for a juridical person set up in  accordance with the laws of Albania and having 
only its registered office or central administration in the territory of Albania, the EU shall only extend 
the benefits of this Agreement if that juridical person possesses an effective and continuous link with 
the economy of one of the EU Member States or Albania.  6. According to Article 55 of the Agreement, Chapter II of Title V on "Establishment" 
contains provisions on the right of EU and Albanian companies to employ employees who are EU and Albanian nationals.  To be eligible , employees must be "key personnel" exclusively 
employed by companies, subsidiaries or branches. 
(a) Why do the Parties want to limit compan ies to employing only "key personnel"? 
(b) Why do the Parties require that "key personnel" employees must effectively 
pursue "like economic activities" in the terri tory of the other Party as stipulated 
in Article 55.2(c) of the Agreement?  Are there any criteria for evaluating 
whether the activities pursued are "like" or not? 
(c) What is the scope of the term "key personnel"?  Are there any requirements as 
to their status or expertise? 
(d) Regarding the requirement for employees to be "EU and Albanian nationals," 
could a foreigner with official permanent residence status in the EU and Albania qualify in lieu of the "nationality" requirement? 
 The aim of allowing the entry and stay of Key Personnel is to fac ilitate the setting up and 
functioning of establishments of the other Party in  the Parties' respective territories.  The natural 
persons being defined in Artic le 55 (2) were identified as being essential to this regard. 
  The organization receiving the Key Personnel h as to pursue "like economic activities" in the 
territory of the home country in order to avoid the exploitation of the provisions by setting up 
subsidiaries in the other Party with the sole purpose of transferring personnel.   
 
 The Key Personnel has to fulfil the require ments laid down in the Agreement and the 
immigration requirements of the respective EU Member State.    Permanent residents are not covered by the Agreement.   7. According to Article 63 of the Agreement, th e provisions of Title V do not apply to 
limitations justified on grounds of public policy,  public security or public health;  exercise of 
official authority.  In addition, according to Article 69 of the Agreement, the Parties may take 
any measure necessary to prevent the circumventi on of its measures concerning third-country 
access to its market. 
(a) What is the scope of the term "public secu rity"?  What is the difference between 
the term "public security" and the terms "to protect public morals or to maintain public order" and "to protect human, animal or plant life or health" as in GATS Article 14(a) and (b)? 
 WT/REG226/4 
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   The concept of the " limitation justified on the grounds of public policy, public security and 
public health " is taken directly from Article 45
1 of the Treaty on the Functioning of the 
European Union, Directive 2004/38/EC the European  Parliament and of the Council of 29 April 2004 
on the right of citizens of the Union and their fa mily members to move and reside freely within the 
territory of the Member States2) and wide case law in this respect.  
 
 As it could be found in the Judgment of the Court 4 December 197 in the case 41-74 
Yvonne van Duyn vs. Home Office the concept of public policy in the context of the Community and 
where, in particular, it is used as a justifica tion for derogating from a fundamental principle of 
community law, must be interpreted strictly, so th at its scope cannot be determined unilaterally by 
each Member State without being subject to control by the institutions of the Community. 
Nevertheless, the particular circumstances justif ying recourse to the concept of public policy may 
vary from one country to another and from one period to  another, and it is therefore necessary in this 
matter to allow the competent national authorities an  area of discretion within the limits imposed by 
the Treaty. 
 
 Moreover, according to the Communication3 on the special measures concerning the 
movement and residence of citizens of the Union which are justified on grounds of public policy, 
public security or public health Member States are free to determine the scope of these concepts on 
the basis of their national legislation and case law,  but within the framework of Community law. 
However, any measures taken on grounds of public po licy, public security or public health must be 
justified by a real and sufficiently serious threat to  a fundamental interest of society and must be in 
conformity with the European Convention for the Protection of Human Rights and Fundamental 
Freedoms and with the proportionality principle.  
(b) How do the Parties define the "circumv ention" of their measures used by a 
third party?  Could the Parties please provide further detail and, if possible, 
some practical examples from the services trade? 
 The "circumvention of the measures" refers to attempts to avoid certain provisions or 
obligations in order to benefit from the provisions  of the Agreement, without being entitled.  A 
possible example would be the attempt to have a ccess to the market wit hout complying with the 
conditions set out in  Article 49 (a). 
 
 Determination of whether there is the circumve ntion of the measures would require a case by 
case analysis.   
(c) What is the difference between the "circumvention" exception and the 
"to secure compliance with laws or regulations" exception as in GATS 
Article 14(c)? 
 The scope of these provisions is different.  Wh ile the GATS exception relates to any type of 
measures which may conflict with the GATS but wh ich are adopted in order to secure compliance 
with GATS consistent measures, the exception in the Agreement relates to measures regarding third 
country access.  
 
 
                                                      
1 Article 39 of Treaty establishing the European Community or Article 48 of EC Treaty as in the 
Maastricht consolidated version or Article 48 - EEC Treaty. 
2 Amending Regulation (EEC) No 1612/68 and repealing Directives 64/221/EEC, 68/360/EEC, 
72/194/EEC, 73/148/EEC, 75/34/EEC, 75/35/EEC, 90/364/EEC, 90/365/EEC and 93/96/EEC. 
3 COM/99/0372.  WT/REG226/4 
 Page 7 
 
 
  Questions from the Delegation of the United States 
8. Paragraph 12 of the Factual Presentation notes that the Agreement is to be 
progressively and fully implemented over a transition al period of a maximum of ten years.  It 
then notes, separately, that certain Title V provi sions applicable to Albania are subject to a 
"transition period."  Other parts of the Factua l Presentation (paragraphs 22 and 32) note that 
measures necessary to implement certain provisions of  Title V, such as those on liberalization of 
trade in services (Article 57.1) and temporary movement of natural persons (Article 57.2) are to be taken "within five years from the entry into force of the Agreement." 
(a) Could the Parties clarify the timeline for implementation of the services aspects 
of the Agreement?  Are the provisions of Title V to be fully implemented within 
five years, or within ten years of the Agreement's entry into force? 
 According to the provisions of Article 6 of  the SAA the transitional period for the full 
implementation of the Agreement is ten years divide d into two successive stages, whereas as regards 
the provisions of Title V this period varies de pending on the nature of the provisions.  
 
 Thus, the timeline for the implementation of the abovementioned Title is as follows: 
(i) provisions to be implemented upon the date of entr y into force of the Agreement; (ii) provisions to 
be implemented five years following the date of en try into force upon decision of the Stabilisation and 
Association Council;  (iii) the other provisions with  no specified transitional period, the ten years 
transitional period applies.   
(b) With respect to Articles 57.1 and 57.2, what does it mean that measures 
necessary to implement these provisions "are to be taken" within five years from 
entry into force?  Does that mean the Parties need to fully implement these 
provisions within five years, or that they are under no obligation to even start implementing these provisions for five years? 
 With respect to Articles 57.1 and 57.2 of the Agre ement, five years after the date of entry into 
force of this Agreement the Stabilisation and Associ ation Council shall take the measures necessary to 
implement progressively (c.f. Article 57.3) the abov ementioned provisions meaning that there is no 
obligation for the Parties to start implementing th ese provisions earlier.  However, the Agreement 
does not prohibit the Parties to start implementing these provisions earlier.   
(c) Could the Parties explain precisely ho w the timelines and procedures for 
implementation of Title V provisions are different for Albania?  What is the nature of the additional or separate "transition period" referenced in paragraph 12 of the Factual Presentation? 
 The Agreement does not provide different time lines and procedures for the implementation of 
Title V provisions for the Parties.  The Agreem ent provides different timelines on specific issues 
though.  In certain cases, the Stabilisation and A ssociation Council shall examine or determine the 
modalities for progressive implementation of provisions.   
9. Paragraph 29 of the Factual Presentation notes that the Agreement requires EU 
Member States that do not have bilateral agreeme nts with Albania on labour access to examine 
the possibility of concluding such agreements. 
 
 WT/REG226/4 
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   How have EU Member States implemented this obligation of the Agreement?  What has 
been the result of their analyses on the possibility of concluding such agreements? 
 
 This is covered by the internal policy of each Member State itself and the process is still 
ongoing.  10. Paragraph 30 of the Factual Presentation describes the provisions of Title V relating to 
key personnel and intra-corporate transferees.  It outlines definitions contained in the Agreement (for intra-corporate transferees), but does not describe any affirmative obligation requiring Parties to permit transferees;  rath er, paragraph 30 suggests that right to transfer 
employees is based on "legislation in fo rce in the host country of establishment." 
(a) Could the Parties describe the nature of the Agreement's obligations on 
intra-corporate transferees?  In particular, could the Parties clarify whether the Agreement contains any affirmative obligation to allow intra-corporate transferees? 
(b) If not, what is the purpose of including a definition of "intra-corporate 
transferee" in the Agreement? 
 The aim of allowing the entry and stay of Key Personnel is to fac ilitate the setting up and 
functioning of establishments of the other Party in  the Parties' respective territories.  The natural 
persons being defined in Artic le 55 (2) were identified as being essential to this regard. 
 
 The Key Personnel has to fulfil the require ments laid down in the Agreement and the 
immigration requirements of the respective EU Member State.    
11. In comparing the EU's commitments under the GATS to those undertaking under the 
Agreement, Paragraph 37 of the Factual Presentation notes that, in the GATS, the EU 
maintains a horizontal "public utilities carve-ou t," whereas under the Agreement, activities that 
are "connected, even occasiona lly, with the exercise of official authority" are excluded. 
 Could the EU describe how the scope of th e exclusion from the Agreement ("activities 
connected, even occasionally, with the exercise of  official authority") compares to the scope of 
its horizontal carve-out in the GATS for "public utilities")?  
 The concept of the "activities that are conn ected, even occasionally, with the exercise of 
official authority" is taken directly from Article 51
4 of the Treaty on the Functioning of the European 
Union as the exception to the right of the establi shment.  The exclusion of activities that are 
connected, even occasionally, with the exercise of governmental authority corresponds effectively to 
the GATS exclusion of "services supplied in the exercise of governmental authority". 
 Activities connected, even occasiona lly, with the exercise of official authority, and activities 
falling within the "public utilities carve-out" are different , in that the latter fall within the scope of the 
Agreement and would be covered by its disciplines if it was not for the public utilities carve out, while 
the former are excluded altogether fro m the scope of the Agreement.   
  
                                                      
4 Or Article 45 of Treaty establishing the European Community.  WT/REG226/4 
 Page 9 
 
 
  12. Paragraph 83 of the Factual Presentation not es that the provisions of Title V do not 
apply to limitations justified on grounds of pub lic policy, public security or health, or the 
"exercise of official authority". 
(a) Could the Parties clarify whether these exceptions to the provisions of Title V 
are self-judging, or whether the Agreem ent’s dispute settlement provisions can 
be used by a party to seek a determination about whether a  limitation imposed 
by a party is in fact "justified on grounds of public policy"? 
(b) Does the Agreement place any limitations on the scope of the "justified on 
grounds of public policy" exception? 
(c) Does the Agreement define "public policy, " generally or for the purposes of this 
exception? 
 The concept of the " limitation justified on the grounds of public policy, public security and 
public health " is taken directly from Article 455 of the Treaty on the Functioning of the European 
Union, Directive 2004/38/EC the European Par liament and of the Council of 29 April 2004 on the 
right of citizens of the Union and their family me mbers to move and reside freel y within the territory 
of the Member States6) and wide case law in this respect.  
  As it could be found in the Judgment of the Court 4 December 197 in the case 41-74 Yvonne 
van Duyn vs.  Home Office the concept of public policy in the co ntext of the Community and where, 
in particular, it is used as a justification for de rogating from a fundamental principle of community 
law, must be interpreted strictly, so that its scope  cannot be determined unilaterally by each Member 
State without being subject to control by the in stitutions of the Community.  Nevertheless, the 
particular circumstances justifying recourse to the concept of public policy may vary from one 
country to another and from one peri od to another, and it is therefore necessary in this matter to allow 
the competent national authorities an area of discr etion within the limits imposed by the Treaty. 
 
 Moreover, according to the Communication7 on the special measures concerning the 
movement and residence of citizens of the Union which are justified on grounds of public policy, 
public security or public health Member States are free to determine the scope of these concepts on 
the basis of their national legislation and case law,  but within the framework of Community law. 
However, any measures taken on grounds of public po licy, public security or public health must be 
justified by a real and sufficiently serious threat to  a fundamental interest of society and must be in 
conformity with the European Convention for the Protection of Human Rights and Fundamental 
Freedoms and with the proportionality principle.   
__________  
                                                      
5 Article 39 of Treaty establishing the European Community or Article 48 of EC Treaty as in the 
Maastricht consolidated version or Article 48 - EEC Treaty. 
6 Amending Regulation (EEC) No 1612/68 and repealing Directives 64/221/EEC, 68/360/EEC, 
72/194/EEC, 73/148/EEC, 75/34/EEC, 75/35/EEC, 90/364/EEC, 90/365/EEC and 93/96/EEC. 
7 COM/99/0372.