WORLD TRADE  
ORGANIZATION   
WT/REG142/6 
21 June 2011  
 
(11-3063) 
Committee on Regional Trade Agreements Original:   English 
  
 
ECONOMIC INTEGRATION AGREEMENT BETWEEN  
THE EUROPEAN UNION AND CROATIA (SERVICES) 
 
Questions and Replies 
 
 
 The following communication, dated 20 June 2011,  is being circulated at the request of the 
delegations of the European Union and Croatia.  
_______________ 
 
  This document reproduces the questions addressed to the Parties and the responses submitted.  
Question from the Delegation of Japan 
1. Regarding paragraph 82, page 22, what are the steps expected for mutual recognition of 
qualifications?  Please indicate what kinds  of qualifications are under consideration. 
 The system of the mutual recognition of qualification in the EU is based on the 
Directive 2005/36/EC on the recognition of pr ofessional qualifications  that came into force in 2007. 
  This Directive establishes rules according to which a Member State which makes access to or 
pursuit of a regulated profession in its territory  contingent upon possession of specific professional 
qualifications shall recognise professional qualifications  obtained in one or more other Member States 
and which allow the holder of the said qualifications to pursue the same profession there, for access to and pursuit of that profession.   According to the Directive, 'regulated pr ofession' is a professional activity or group of 
professional activities, access to which, the pursuit of which, or one of the modes of pursuit of which 
is subject, directly or indirectly, by virtue of legi slative, regulatory or administrative provisions to the 
possession of specific professional qualifications; in pa rticular, the use of a professional title limited 
by legislative, regulatory or administrative provi sions to holders of a gi ven professional qualification 
shall constitute a mode of pursuit.  
 
 At the same time 'professional qualifications' are understood as qualifications attested by:   - evidence of formal qualifications (diplo mas, certificates and other evidence issued by 
 an authority in a Member State designat ed pursuant to legislative, regulatory or 
 administrative provisions of that Member State and certifying successful completion 
 of professional training obtained mainly in the Community);  
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   - an attestation of competence issued by a competent authority in the home Member 
 State designated pursuant to legislative, regulatory or administrative provisions of 
 that Member State, on the basis either a training course not forming part of a  certificate or diploma of or a specific examination without prior training, or full-time  pursuit of the profession in a Member Stat e for three consecutive years or for an 
 equivalent duration on a part-time basis during the previous ten years,
 and/or;  
  -  professional experience.   The EU approach of mutual recognition of prof essional qualifications is demand-driven.  This 
means that it is based on the interest expressed by the professions.  Schematically, the EU approach is 
based on a two-step process.  In a first step, th e competent authorities check if there is a clear 
economic interest from suppliers a nd users of professional services.  This may entail contacts between 
the professional bodies of the two parties.  As a second step, if the professions express an interest on an agreement on mutual recognition, the Pa rties review the situation and the possible 
recommendations from the professions and can take  a decision on the launching of negotiations. 
 
 Important steps have been taken in this rega rd.  For instance, Croatia issued the Act on the 
Regulated Professions and the Recognition of Foreign Professional Qualifications 
(OG 124/09, 45/11), which was passed by the Croatian Parliament on 2 October 2009.  
 
 The EU has its database of the regulated prof essions that can be checked under the following 
link:
  http://ec.europa.eu/internal_market/qualifications/index_en.htm . 
 
 The full text of the directive can be found under the following link:  
http://eur-lex.europa.eu/Lex UriServ/LexUriServ.do?uri=CONSLEG:2005L0036:20090427:EN:PDF 
 
Questions from the Delegation of the United States 
2. The Factual Presentation for the Stabilizatio n and Association Agreement (SAA) notes 
that the Agreement does not foll ow the typical structure of WTO-Member RTAs;  rather, the 
structure is in large part directed at achieving "approximation" of legislation in SAA countries 
to that of the European Union.  As a result, several provisions typically found in 
WTO-Member RTAs and in the GATS are not found in the SAA agreements (or exist in 
different form), which rather focus on mi rroring elements of EU primary law 
(Treaty establishing the European Community). 
(a) In light of the non-typical structure, objectives, and provisions of the 
SAA agreements, how should Members assess these agreements with respect to 
the requirements of GATS Article V.1? 
 The Stabilisation and Association agreements ar e part of the EU Stabilisation and Association 
Process (SAP).  These agreements are designed to pr epare the country concerned to accede to the EU 
and its internal market and are therefore based on the EU's acquis communautaire.  
 The progress of the SAA country in adapting its national legislation to the EU's 
acquis communautaire is monitored and checked by the EU in cooperation with Croatia on a regular 
basis.  It is discussed in the various fora creat ed by the SAA (Subcommittees, Association Committee 
and Association Council).  The EU assesses the pr ogress made in annual progress reports, which are 
detailed by EU accession negotiating chapter. 
 
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   With regard to the requirements of GA TS Article V (1), the SAA agreement has: 
  - substantial sectoral coverage, since all sectors are included, with the exception of air 
 transport services, inland waterways transport services and maritime cabotage  services.  However these sectors can be added upon a recommendation of the 
 Stabilisation and Association Council; 
  - covers all modes of supply (there  is no a priori exclusion) and; 
  - provides for the absence or elimination of substantially all discrimination.  
 
(b) To what extent should the timeframe of implementation of Parties' commitments 
under the SAA agreements affect assessment of the agreements relative to the GATS Article V.1 criteria? 
 According to GATS Article V. 1, the above-mentioned requirements should be fulfilled at the 
entry into force of the agreement or on the basis of a reasonable timeframe.  Article 5 of the 
agreement foresees the realisation of the Associ ation agreement within a transitional period of 
maximum six years from the entry into force of the agreement.  Article 56 links the progressive liberalisation of cross-border trade in services to th e progress made in the alignment to the EU acquis 
and provides for a transitional period of four years from entry into force of the agreement after which 
the Stabilisation and Association Council is to ta ke the measures necessary to progressively allow 
cross border trade in services, taking into account the progress made in the legislative approximation.  
 
3. As described in the Factual Presentation, the Agreement does not provide for immediate 
liberalization of cross-border services trade amon g Parties (services supplied through Modes 1, 
2 and 4).  Rather, the Agreement provides fo r a standstill obligation, combined with a 
requirement that the Parties "take the necessa ry steps to allow progressively the supply of 
services."  The Agreement does not specify the pr ocess or timeline by which such steps should 
take place, although the "General Principles" section of the Agreement contains a deadline for 
"full realization" of the Agreement. 
(a) With respect to the "standstill" provision in the "Supply of Services" chapter of 
the SAA agreements (requiring that Parties not take any measures or actions 
that render conditions for cross-border s upply "significantly more restrictive as 
compared to the situation existing [befo re entry into force]"), how do the Parties 
define "significantly more restrictive"?  What types of measures would be simply "more restrictive," rather than "s ignificantly more restrictive"?  What 
factors are relevant in such an analysis? 
 There is no specific definition or common prior understanding of these terms.  The 
Agreement provides for consultations should the Par ties disagree on the facts and on the definition.  
 
(b) With respect to implementation of the SAA agreements' obligation to 
"allow progressively the supply of services, " how do Parties to the agreements 
measure implementation of this obligation?   What conditions need to be satisfied 
in order for this commitment to be considered "fully realized"? 
 As mentioned in the reply to Question 1, prog ress of the SAA country in adapting its national 
legislation to the EU acquis communautaire is check ed by the EU in cooperation with the respective 
Party on a regular basis and it is assessed in annual progress reports.  The reports are public and can be consulted on the following website:  http://ec.europa.eu/enlargement/press_ corner/key-documents/reports_nov_2010_en.htm  WT/REG142/6 
Page 4  
 
  4. As noted in the Factual Presentation, th e SAA Agreement does not contain specific 
provisions on national treatment or most-favored -nation treatment in the area of cross-border 
supply of services.  Rather, it requires that Pa rties take steps to "allow progressively" the 
supply of services, and to refrain from taking measures that "render conditions for the supply 
of services … significantly more restrictive." 
 Do the Parties consider that the Agreeme nt's requirements to "allow progressively" the 
cross-border supply of services and to refrain fr om "significantly more restrictive measures" 
encapsulate a requirement to eliminate and prohibit discrimination in the sense of GATS Article XVII?  
 According to GATS Article XVII, in the sectors inscribed in its Schedule, and subject to any 
conditions and qualifications set out therein,  each Member shall accord to services and service 
suppliers of any other Member, in respect of all measures affecting the suppl y of services, treatment 
no less favourable than that it accords to its own like services and service suppliers.  A Member may 
meet this requirement by according to services a nd service suppliers of any other Member, either 
formally identical treatment or formally different  treatment to that it accords to its own like services 
and service suppliers.   The SAA does not include specific schedules of  commitments.  However, national treatment 
is committed in a different way.  Firstly, chapter I eliminates discrimination for workers.  Secondly, 
chapter II provides for an unqualified national treat ment obligation for establishment ('mode 3). 
Article 56 also provides for access and national treatment for mode 4 (ICT).  Finally, as indicated 
above, the Agreement provides for a progressive openi ng of cross border services trade in line with 
the progress made towards the approximation of laws to those of the EU, hence providing for the elimination of any discrimination. 
 
Denial of Benefits 
 
5. The Factual Presentation notes that Parties to  the Agreement may deny the benefits of 
services-related provisions of the Agreement to co mpanies having only their registered office in 
the territory of a Party, unless they possess a "r eal and continuous link" with the economy of 
one of the Parties. 
 To what extent does the concept of possessing  a "real and continuous link" as contained 
in the SAA agreements equate to the concept of engaging in "substantive business operations" 
as contained in GATS Article V.6.  
 In line with its notification of the Treaty establishing the European Community to the WTO 
(WT/REG39/1), the EU understands the concept of "effective and continuous link" with the economy 
of a Member State of the European Union enshrine d 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.  Accordingl y, for a juridical person set up in accordance with 
the laws of Croatia and having only its registered office or central administration in the territory of Croatia, the EU shall only extend th e benefits of this Agreement if  that juridical person possesses an 
effective and continuous link with the economy of Croatia. 
 
General provisions of the Agreement 
 6. As noted in paragraph 96 of the Factual Presentation, the Agreement includes a general 
exception to services-related provisions of the Agreement for "limitations justified on the 
grounds of public policy" (among others).  WT/REG142/6 
 Page 5 
 
 
   What do Parties to the SAA Agreement understand the term "public policy" to mean in 
the context of this exception?  What types of  measures taken by a government are not a matter 
of public policy? 
 
 The concept of the " limitation justified on the grounds of public policy, public security and 
public health " is taken directly from Article 451 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 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.   According to the EU law, measures taken on grounds of public policy or public security must 
be based exclusively on the personal conduct of th e individual concerned.  For example, previous 
criminal convictions do not in themselves constitu te grounds for the taking of such measures and 
expiry of the identity card used by the person c oncerned does not justify expulsion from the territory; 
only the diseases or disabilities listed in the Annex of the directive may justify refusal of entry into a 
territory or refusal to issue a first residence permit. 
 
 Moreover, according to the Communication
3 on the special measures concerning the 
movement and residence of citizens of the Union wh ich 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.  
7. The Factual Presentation further notes that  the services-related provisions of the 
Agreement does not apply to activities that "are connected, even occasionally, with the exercise 
of official authority." 
(a) What do the Parties understand to be the scope of this exception?   
(b) What types of "activity" does this exception cover (e.g., the sale of services, the 
purchase of services, etc.)? 
 
                                                      
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/REG142/6 
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  (c) What is meant by the "exercise of offi cial authority" (e.g., does it include 
authority delegated to non-governmental entities)? 
(d) What factors determine the "connection" (occasional or otherwise) between 
such activity and the exercise of an official authority?  
 The concept of the " activities that are connected, 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 establishment. 
  According to the European Court the 'exercise of official authority' needs to be judged on a case by case basis and activities which, in one Member St ate, do not fall within the sphere of official 
authority cannot be relied upon for the purpose of ex ception, even if the same activities fall within the 
sphere of official authority in other Member States.  
__________ 
 
 
                                                      
4 Or Article 45 of Treaty establishing the European Community.