Stabilisation and Association Agreement

between the European Communities and their Member States of the one part, and the Republic of Serbia, of the other part

THE KINGDOM OF BELGIUM,

THE REPUBLIC OF BULGARIA,

THE CZECH REPUBLIC,

THE KINGDOM OF DENMARK,

THE FEDERAL REPUBLIC OF GERMANY,

THE REPUBLIC OF ESTONIA,

IRELAND,

THE HELLENIC REPUBLIC,

THE KINGDOM OF SPAIN,

THE FRENCH REPUBLIC,

THE ITALIAN REPUBLIC,

THE REPUBLIC OF CYPRUS,

THE REPUBLIC OF LATVIA,

THE REPUBLIC OF LITHUANIA,

THE GRAND DUCHY OF LUXEMBOURG,

THE REPUBLIC OF HUNGARY,

MALTA,

THE KINGDOM OF THE NETHERLANDS,

THE REPUBLIC OF AUSTRIA,

THE REPUBLIC OF POLAND,

THE PORTUGUESE REPUBLIC,

ROMANIA,

THE REPUBLIC OF SLOVENIA,

THE SLOVAK REPUBLIC,

THE REPUBLIC OF FINLAND,

THE KINGDOM OF SWEDEN,

THE UNITED KINGDOM OF GREAT BRITAIN AND NORTHERN IRELAND,

Contracting Parties to the Treaty establishing the European Community and the Treaty establishing the European Atomic Energy Community, and the Treaty on European Union, hereinafter referred to as "Member States", and

THE EUROPEAN COMMUNITY and THE EUROPEAN ATOMIC ENERGY COMMUNITY,

hereinafter referred to as the "Community",

of the one part, and

THE REPUBLIC OF SERBIA, hereinafter referred to as "Serbia",

of the other part,

together referred to as "the Parties",

CONSIDERING the strong links between the Parties and the values that they share, their desire to strengthen those links and establish a close and lasting relationship based on reciprocity and mutual interest, which should allow Serbia to further strengthen and extend its relations with the Community and its Member States;

CONSIDERING the importance of this Agreement, in the framework of the Stabilisation and Association process (SAp) with the countries of south-eastern Europe, in the establishment and consolidation of a stable European order based on cooperation, of which the European Union is a mainstay, as well as in the framework of the Stability Pact;

CONSIDERING the European Union’s readiness to integrate Serbia to the fullest possible extent into the political and economic mainstream of Europe and its status as a potential candidate for EU membership on the basis of the Treaty on European Union (hereinafter referred to as "the EU Treaty") and fulfilment of the criteria defined by the European Council in June 1993 as well as the SAp conditions, subject to the successful implementation of this Agreement, notably regarding regional cooperation;

CONSIDERING the European Partnership, which identifies priorities for action in order to support the country’s efforts to move closer to the European Union;

CONSIDERING the commitment of the Parties to contribute by all means to the political, economic and institutional stabilisation in Serbia as well as in the region, through the development of civil society and democratisation, institution building and public administration reform, regional trade integration and enhanced economic cooperation, as well as through cooperation in a wide range of areas, particularly in justice, freedom and security, and the strengthening of national and regional security;

CONSIDERING the commitment of the Parties to increasing political and economic freedoms as the very basis of this Agreement, as well as their commitment to respect human rights and the rule of law, including the rights of persons belonging to national minorities, and democratic principles through a multi-party system with free and fair elections;

CONSIDERING the commitment of the Parties to the full implementation of all principles and provisions of the UN Charter, of the OSCE, notably those of the Final Act of the Conference on Security and Cooperation in Europe (hereinafter referred to as "the Helsinki Final Act"), the concluding documents of the Madrid and Vienna Conferences, the Charter of Paris for a New Europe, and of the Stability Pact for south-eastern Europe, so as to contribute to regional stability and cooperation among the countries of the region;

REAFFIRMING the right of return for all refugees and internally displaced persons and to the protection of their property and other related human rights;

CONSIDERING the commitment of the Parties to the principles of free market economy and to sustainable development as well as the readiness of the Community to contribute to the economic reforms in Serbia;

CONSIDERING the commitment of the Parties to free trade, in compliance with the rights and obligations arising out of membership of the WTO;

CONSIDERING the wish of the Parties to further develop regular political dialogue on bilateral and international issues of mutual interest, including regional aspects, taking into account the Common Foreign and Security Policy (CFSP) of the European Union;

CONSIDERING the commitment of the Parties to combat organised crime and to strengthen cooperation in the fight against terrorism on the basis of the declaration issued by the European Conference on 20 October 2001;

CONVINCED that the Stabilisation and Association Agreement (hereinafter referred as "this Agreement") will create a new climate for economic relations between them and, above all, for the development of trade and investment, factors crucial to economic restructuring and modernisation;

BEARING in mind the commitment by Serbia to approximate its legislation in the relevant sectors to that of the Community, and to effectively implement it;

TAKING ACCOUNT of the Community’s willingness to provide decisive support for the implementation of reform and to use all available instruments of cooperation and technical, financial and economic assistance on a comprehensive indicative multiannual basis to this endeavour;

CONFIRMING that the provisions of this Agreement that fall within the scope of Part III, Title IV of the Treaty establishing the European Community (hereinafter referred to as "the EC Treaty") bind the United Kingdom and Ireland as separate Contracting Parties, and not as Member States of the Community, until the United Kingdom or Ireland (as the case may be) notifies Serbia that it has become bound as part of the Community in accordance with the Protocol on the position of the United Kingdom and Ireland annexed to the EU Treaty and the EC Treaty. The same applies to Denmark, in accordance with the Protocol annexed to those Treaties on the position of Denmark;

RECALLING the Zagreb Summit, which called for further consolidation of relations between the countries of the Stabilisation and Association process and the European Union as well as enhanced regional cooperation;

RECALLING that the Thessaloniki Summit reinforced the Stabilisation and Association process as the policy framework for the European Union’s relations with the Western Balkan countries and underlined the prospect of their integration with the European Union on the basis of their individual reform progress and merit, as reiterated in subsequent European Council Conclusions in December 2005 and December 2006;

RECALLING the signature of the Central European Free Trade Agreement in Bucharest on 19 December 2006 as a means of enhancing the region’s ability to attract investments and the prospects of its integration into the global economy;

RECALLING the entry into force on 1 January 2008 of the Agreement between the European Community and the Republic of Serbia on the facilitation of the issuance of Visas [1] and the Agreement between the European Community and the Republic of Serbia on the readmission of persons residing without authorisation [2] (hereinafter referred to as "Agreement on readmission between the Community and Serbia");

DESIROUS of establishing closer cultural cooperation and developing exchanges of information,

HAVE AGREED AS FOLLOWS:

Article 1

1. An Association is hereby established between the Community and its Member States, of the one part, and the Republic of Serbia of the other part.

2. The aims of this Association are:

(a) to support the efforts of Serbia to strengthen democracy and the rule of law;

(b) to contribute to political, economic and institutional stability in Serbia, as well as to the stabilisation of the region;

(c) to provide an appropriate framework for political dialogue, allowing the development of close political relations between the Parties;

(d) to support the efforts of Serbia to develop its economic and international cooperation, including through the approximation of its legislation to that of the Community;

(e) to support the efforts of Serbia to complete the transition into a functioning market economy;

(f) to promote harmonious economic relations and gradually develop a free trade area between the Community and Serbia;

(g) to foster regional cooperation in all the fields covered by this Agreement.

TITLE I

GENERAL PRINCIPLES

Article 2

Respect for democratic principles and human rights as proclaimed in the Universal Declaration of Human Rights and as defined in the Convention for the Protection of Human Rights and Fundamental Freedoms, in the Helsinki Final Act and the Charter of Paris for a New Europe, respect for principles of international law, including full cooperation with the International Criminal Tribunal for the former Yugoslavia (ICTY), and the rule of law as well as the principles of market economy as reflected in the Document of the CSCE Bonn Conference on Economic Cooperation, shall form the basis of the domestic and external policies of the Parties and constitute essential elements of this Agreement.

Article 3

The Parties consider that the proliferation of weapons of mass destruction (hereinafter also referred to as "WMD") and their means of delivery, both to state and non-state actors, represents one of the most serious threats to international stability and security. The Parties therefore agree to cooperate and to contribute to countering the proliferation of weapons of mass destruction and their means of delivery through full compliance with and national implementation of their existing obligations under international disarmament and non-proliferation Treaties and Agreements and other relevant international obligations. The parties agree that this provision constitutes an essential element of this Agreement and will be part of the political dialogue that will accompany and consolidate these elements.

The Parties furthermore agree to cooperate and to contribute to countering the proliferation of weapons of mass destruction and their means of delivery by:

- taking steps to sign, ratify, or accede to, as appropriate, and fully implement all other relevant international instruments;

- the establishment of an effective system of national export controls, controlling the export as well as the transit of WMD-related goods, including a WMD end-use control on dual use technologies and containing effective sanctions for breaches of export controls.

Political dialogue on this matter may take place on a regional basis.

Article 4

The contracting parties reaffirm the importance they attach to the implementation of international obligations, notably the full cooperation with ICTY.

Article 5

International and regional peace and stability, the development of good neighbourly relations, human rights and the respect and protection of minorities are central to the Stabilisation and Association process referred to in the conclusions of the Council of the European Union on 21 June 1999. The conclusion and the implementation of this Agreement come within the framework of the conclusions of the Council of the European Union of 29 April 1997 and are based on the individual merits of Serbia.

Article 6

Serbia commits itself to continue to foster cooperation and good neighbourly relations with the other countries of the region including an appropriate level of mutual concessions concerning the movement of persons, goods, capital and services as well as the development of projects of common interest, notably those related to border management and combating organised crime, corruption, money laundering, illegal migration and trafficking, including in particular in human beings, small arms and light weapons, as well as illicit drugs. This commitment constitutes a key factor in the development of the relations and cooperation between the Parties and thus contributes to regional stability.

Article 7

The Parties reaffirm the importance that they attach to the fight against terrorism and the implementation of international obligations in this area.

Article 8

The association shall be progressively and fully realised over a transitional period of a maximum of six years.

The Stabilisation and Association Council (hereinafter also referred to as "SAC") established under Article 119 shall regularly review, as a rule on an annual basis, the implementation of this Agreement and the adoption and implementation by Serbia of legal, administrative, institutional and economic reforms. This review shall be carried out in the light of the preamble and in accordance with the general principles of this Agreement. It shall take duly into account priorities set in the European Partnership relevant to this Agreement and be in coherence with the mechanisms established under the Stabilisation and Association process, notably the progress report on the Stabilisation and Association process.

On the basis of this review, the SAC will issue recommendations and may take decisions. Where the review identifies particular difficulties, they may be referred to the mechanisms of dispute settlement established under this Agreement.

The full association shall be progressively realised. No later than the third year after the entry into force of this Agreement, the SAC shall make a thorough review of the application of this Agreement. On the basis of this review the SAC shall evaluate progress made by Serbia and may take decisions governing the following stages of association.

The aforementioned review will not apply to the free movement of goods, for which a specific schedule is foreseen in Title IV.

Article 9

This Agreement shall be fully compatible with and implemented in a manner consistent with the relevant WTO provisions, in particular Article XXIV of the General Agreement on Tariffs and Trade 1994 (GATT 1994) and Article V of the General Agreement on Trade in Services (GATS).

TITLE II

POLITICAL DIALOGUE

Article 10

1. Political dialogue between the Parties shall be further developed within the context of this Agreement. It shall accompany and consolidate the rapprochement between the European Union and Serbia and contribute to the establishment of close links of solidarity and new forms of cooperation between the Parties.

2. The political dialogue is intended to promote in particular:

(a) full integration of Serbia into the community of democratic nations and gradual rapprochement with the European Union;

(b) an increasing convergence of positions of the Parties on international issues, including CFSP issues, also through the exchange of information as appropriate, and, in particular, on those issues likely to have substantial effects on the Parties;

(c) regional cooperation and the development of good neighbourly relations;

(d) common views on security and stability in Europe, including cooperation in the areas covered by the CFSP of the European Union.

Article 11

1. Political dialogue shall take place within the Stabilisation and Association Council, which shall have the general responsibility for any matter which the Parties might wish to put to it.

2. At the request of the Parties, political dialogue may also take place in the following forms:

(a) meetings, where necessary, of senior officials representing Serbia, on the one hand, and the Presidency of the Council of the European Union, the Secretary-General/High Representative for the Common Foreign and Security Policy and the Commission of the European Communities (hereinafter referred to as "European Commission"), on the other;

(b) taking full advantage of all diplomatic channels between the Parties, including appropriate contacts in third countries and within the United Nations, the OSCE, the Council of Europe and other international fora;

(c) any other means which would make a useful contribution to consolidating, developing and stepping up this dialogue, including those identified in the Thessaloniki agenda, adopted in the Conclusions of the European Council in Thessaloniki on 19 and 20 June 2003.

Article 12

A political dialogue at parliamentary level shall take place within the framework of the Stabilisation and Association Parliamentary Committee established under Article 125.

Article 13

Political dialogue may take place within a multilateral framework, and as a regional dialogue including other countries of the region, including in the framework of the EU-Western Balkan forum.

TITLE III

REGIONAL COOPERATION

Article 14

In conformity with its commitment to international and regional peace and stability, and to the development of good neighbourly relations, Serbia shall actively promote regional cooperation. The Community assistance programmes may support projects having a regional or cross-border dimension through its technical assistance programmes.

Whenever Serbia intends to enhance its cooperation with one of the countries mentioned in Articles 15, 16 and 17, it shall inform and consult the Community and its Member States according to the provisions laid down in Title X.

Serbia shall implement fully the Central European Free Trade Agreement signed in Bucharest on 19 December 2006.

Article 15

Cooperation with other countries having signed a Stabilisation and Association Agreement

After the signature of this Agreement, Serbia shall start negotiations with the countries which have already signed a Stabilisation and Association Agreement with a view to concluding bilateral conventions on regional cooperation, the aim of which shall be to enhance the scope of cooperation between the countries concerned.

The main elements of these conventions shall be:

(a) political dialogue;

(b) the establishment of free trade areas, consistent with relevant WTO provisions;

(c) mutual concessions concerning the movement of workers, establishment, supply of services, current payments and movement of capital as well as other policies related to movement of persons at an equivalent level to that of this Agreement;

(d) provisions on cooperation in other fields whether or not covered by this Agreement, and notably the field of Justice, Freedom and Security.

These conventions shall contain provisions for the creation of the necessary institutional mechanisms, as appropriate.

These conventions shall be concluded within two years after the entry into force of this Agreement. Readiness by Serbia to conclude such conventions will be a condition for the further development of the relations between Serbia and the European Union.

Serbia shall initiate similar negotiations with the remaining countries of the region once these countries will have signed a Stabilisation and Association Agreement.

Article 16

Cooperation with other countries concerned by the Stabilisation and Association process

Serbia shall pursue regional cooperation with the other States concerned by the Stabilisation and Association process in some or all the fields of cooperation covered by this Agreement, and notably those of common interest. Such cooperation should always be compatible with the principles and objectives of this Agreement.

Article 17

Cooperation with other countries candidate for EU accession not concerned by the Sap

1. Serbia should foster its cooperation and conclude a convention on regional cooperation with any country candidate for EU accession in any of the fields of cooperation covered by this Agreement. Such conventions should aim to gradually align bilateral relations between Serbia and that country with the relevant part of the relations between the Community and its Member States and that country.

2. Serbia shall start negotiations with Turkey which has established a customs union with the Community, with a view to concluding, on a mutually advantageous basis, an Agreement establishing a free trade area in accordance with Article XXIV of the GATT 1994 as well as liberalising the establishment and supply of services between them at an equivalent level of this Agreement in accordance with Article V of the GATS.

These negotiations should be opened as soon as possible, with a view to concluding the abovementioned Agreement before the end of the transitional period referred to in Article 18(1).

TITLE IV

FREE MOVEMENT OF GOODS

Article 18

1. The Community and Serbia shall gradually establish a bilateral free trade area over a period lasting a maximum of six years starting from the entry into force of this Agreement in accordance with the provisions of this Agreement and in conformity with those of the GATT 1994 and the WTO. In so doing they shall take into account the specific requirements laid down hereinafter.

2. The Combined Nomenclature shall be applied to the classification of goods in trade between the Parties.

3. For the purpose of this Agreement customs duties and charges having equivalent effect to customs duties include any duty or charge of any kind imposed in connection with the importation or exportation of a good, including any form of surtax or surcharge in connection with such importation or exportation, but do not include any:

(a) charges equivalent to an internal tax imposed consistently with the provisions of paragraph 2 of Article III of the GATT 1994;

(b) antidumping or countervailing measures;

(c) fees or charges commensurate with the costs of services rendered.

4. For each product, the basic duty to which the successive tariff reductions set out in this Agreement are to be applied shall be:

(a) the Community Common Customs Tariff, established pursuant to Council Regulation (EEC) No 2658/87 [3] actually applied erga omnes on the day of the signature of this Agreement;

(b) the Serbian applied tariff [4].

5. If, after the signature of this Agreement, any tariff reduction is applied on an erga omnes basis, in particular reductions resulting:

(a) from the tariff negotiations in the WTO or,

(b) in the event of the accession of Serbia to the WTO or,

(c) from subsequent reductions after the accession of Serbia to the WTO, such reduced duties shall replace the basic duty referred to in paragraph 4 as from the date when such reductions are applied.

6. The Community and Serbia shall communicate to each other their respective basic duties and any changes thereof.

CHAPTER I

Industrial products

Article 19

Definition

1. The provisions of this Chapter shall apply to products originating in the Community or in Serbia listed in Chapters 25 to 97 of the Combined Nomenclature, with the exception of the products listed in Annex I, paragraph I, (ii) of the WTO Agreement on Agriculture.

2. Trade between the Parties in products covered by the Treaty establishing the European Atomic Energy Community shall be conducted in accordance with the provisions of that Treaty.

Article 20

Community concessions on industrial products

1. Customs duties on imports into the Community and charges having equivalent effect shall be abolished upon the entry into force of this Agreement on industrial products originating in Serbia.

2. Quantitative restrictions on imports into the Community and measures having equivalent effect shall be abolished upon the entry into force of this Agreement on industrial products originating in Serbia.

Article 21

Serbian concessions on industrial products

1. Customs duties on imports into Serbia of industrial products originating in the Community other than those listed in Annex I shall be abolished upon the entry into force of this Agreement.

2. Charges having equivalent effect to customs duties on imports into Serbia shall be abolished upon the entry into force of this Agreement on industrial products originating in the Community.

3. Customs duties on imports into Serbia of industrial products originating in the Community which are listed in Annex I shall be progressively reduced and abolished in accordance with the timetable indicated in that Annex.

4. Quantitative restrictions on imports into Serbia of industrial products originating in the Community and measures having equivalent effect shall be abolished upon the date of entry into force of this Agreement.

Article 22

Duties and restrictions on exports

1. The Community and Serbia shall abolish any customs duties on exports and charges having equivalent effect in trade between them upon the entry into force of this Agreement.

2. The Community and Serbia shall abolish between themselves any quantitative restrictions on exports and measures having equivalent effect upon the entry into force of this Agreement.

Article 23

Faster reductions in customs duties

Serbia declares its readiness to reduce its customs duties in trade with the Community more rapidly than is provided for in Article 21 if its general economic situation and the situation of the economic sector concerned so permit.

The Stabilisation and Association Council shall analyse the situation in this respect and make the relevant recommendations.

CHAPTER II

Agriculture and fisheries

Article 24

Definitions

1. The provisions of this Chapter shall apply to trade in agricultural and fishery products originating in the Community or in Serbia.

2. The term "agricultural and fishery products" refers to the products listed in Chapters 1 to 24 of the Combined Nomenclature and the products listed in Annex I, paragraph I, (ii) of the WTO Agreement on Agriculture.

3. This definition includes fish and fishery products covered by Chapter 3, headings 1604 and 1605, and sub-headings 051191, 230120 and ex190220 ("stuffed pasta containing more than 20 % by weight of fish, crustaceans, molluscs or other aquatic invertebrates").

Article 25

Processed agricultural products

Protocol 1 lays down the trade arrangements for processed agricultural products which are listed therein.

Article 26

Community concessions on imports of agricultural products originating in Serbia

1. From the date of entry into force of this Agreement, the Community shall abolish all quantitative restrictions and measures having equivalent effect, on imports of agricultural products originating in Serbia.

2. From the date of entry into force of this Agreement, the Community shall abolish the customs duties and charges having equivalent effect, on imports of agricultural products originating in Serbia other than those of headings 0102, 0201, 0202, 1701, 1702 and 2204 of the Combined Nomenclature.

For the products covered by Chapters 7 and 8 of the Combined Nomenclature, for which the Common Customs Tariff provides for the application of ad valorem customs duties and a specific customs duty, the elimination applies only to the ad valorem part of the duty.

3. From the date of entry into force of this Agreement, the Community shall fix the customs duties applicable to imports into the Community of "baby beef" products defined in Annex II and originating in Serbia at 20 % of the ad valorem duty and 20 % of the specific duty as laid down in the Common Customs Tariff, within the limit of an annual tariff quota of 8700 tonnes expressed in carcass weight.

4. From the date of entry into force of this Agreement, the Community shall apply duty-free access on imports into the Community for products originating in Serbia of headings 1701 and 1702 of the Combined Nomenclature, within the limit of an annual tariff quota of 180000 tonnes (net weight).

Article 27

Serbian concessions on agricultural products

1. From the date of entry into force of this Agreement, Serbia shall abolish all quantitative restrictions and measures having equivalent effect, on imports of agricultural products originating in the Community.

2. From the date of entry into force of this Agreement, Serbia shall:

(a) abolish the customs duties applicable on imports of certain agricultural products originating in the Community, listed in Annex III(a);

(b) abolish progressively the customs duties applicable on imports of certain agricultural products originating in the Community, listed in Annex III(b) in accordance with the timetable indicated for each product in that Annex;

(c) reduce progressively the customs duties applicable on imports of certain agricultural products originating in the Community, listed in Annex III (c) and (d) in accordance with the timetable indicated for each product in those Annexes;

Article 28

Wine and Spirit drinks Protocol

The arrangements applicable to the wine and spirit drinks products referred to in Protocol 2 are laid down in that Protocol.

Article 29

Community concessions on fish and fishery products

1. From the date of entry into force of this Agreement, the Community shall abolish all quantitative restrictions and measures having equivalent effect on imports of fish and fishery products originating in Serbia.

2. From the entry into force of this Agreement the Community shall eliminate all customs duties and measures having equivalent effect on fish and fishery products originating in Serbia other than those listed in Annex IV. Products listed in Annex IV shall be subject to the provisions laid down therein.

Article 30

Serbian concessions on fish and fishery products

1. From the date of entry into force of this Agreement, Serbia shall abolish all quantitative restrictions and measures having equivalent effect on imports of fish and fishery products originating in the Community.

2. From the entry into force of this Agreement, Serbia shall eliminate all customs duties and measures having equivalent effect on fish and fishery products originating in the Community other than those listed in Annex V. Products listed in Annex V shall be subject to the provisions laid down therein.

Article 31

Review clause

Taking account of the volume of trade in agricultural and fishery products between the Parties, of their particular sensitivities, of the rules of the Community common policies and of the policies for agriculture and fisheries in Serbia of the role of agriculture and fisheries in the economy of Serbia, of the consequences of the multilateral trade negotiations in the framework of the WTO as well as of the eventual accession of Serbia to the WTO, the Community and Serbia shall examine in the Stabilisation and Association Council, no later than three years after the entry into force of this Agreement, product by product and on an orderly and appropriate reciprocal basis, the opportunities for granting each other further concessions with a view to implementing greater liberalisation of the trade in agricultural and fishery products.

Article 32

Safeguard clause concerning agriculture and fisheries

1. Notwithstanding other provisions of this Agreement, and in particular Article 41, given the particular sensitivity of the agricultural and fisheries markets, if imports of products originating in one Party, which are the subject of concessions granted pursuant to Articles 25, 26, 27, 28, 29 and 30, cause serious disturbance to the markets or to their domestic regulatory mechanisms, in the other Party, both Parties shall enter into consultations immediately to find an appropriate solution. Pending such solution, the Party concerned may take the appropriate measures it deems necessary.

2. In the event that imports originating in Serbia of products listed in Annex V of Protocol 3 cumulatively reach in volume 115 % of the average of the three previous calendar years, Serbia and the Community shall within five working days enter into consultations to analyse and evaluate the trade pattern of these products into the Community, and when necessary, find appropriate solutions to avoid trade distortion of the imports of these products into the Community.

Without prejudice to paragraph 1, in the event that imports originating in Serbia of products listed in Annex V of Protocol 3 cumulatively increase by more than 30 percent in volume during a calendar year, compared to the average of the three previous calendar years, the Community may suspend the preferential treatment applicable to the products causing the increase.

If a suspension of the preferential treatment is decided, the Community shall notify within five working days the measure to the Stabilisation and Association Committee and shall enter in consultations with Serbia to agree on measures designed to avoid trade distortion in trade of products listed in Annex V of Protocol 3.

The Community shall restore the preferential treatment as soon as the trade distortion has been resolved by the effective implementation of the agreed measures or by the effect of any other appropriate measures adopted by the Parties

The provisions of Article 41, paragraphs 3 to 6 shall apply mutatis mutandis to action under this paragraph.

3. The Parties shall review the functioning of the mechanism provided for in paragraph 2 no later than three years after the entry into force of this Agreement. The Stabilisation and Association Council may decide on appropriate adaptations to the mechanism provided for in paragraph 2.

Article 33

Protection of geographical indications for agricultural and fishery products and foodstuffs other than wine and spirit drinks

1. Serbia shall provide protection for the geographical indications of the Community registered in the Community under Council Regulation (EC) No 510/2006 of 20 March 2006 on the protection of geographical indications and designations of origin for agricultural products and foodstuffs [5], in accordance with the terms of this Article. Geographical indications of Serbia shall be eligible for registration in the Community under the conditions set out in that Regulation.

2. Serbia shall prohibit any use in its territory of the names protected in the Community for comparable products not complying with the geographical indication’s specification. This shall apply even where the true geographical origin of the good is indicated, the geographical indication in question is used in translation, the name is accompanied by terms such as "kind", "type", "style", "imitation", "method" or other expressions of the sort.

3. Serbia shall refuse the registration of a trademark the use of which corresponds to the situations referred to in paragraph 2.

4. Trademarks the use of which corresponds to the situations referred to in paragraph 2, which have been registered in Serbia or established by use, shall no longer be used five years after the entry into force of this Agreement. However, this shall not apply to trademarks registered in Serbia and trademarks established by use which are owned by nationals of third countries, provided they are not of such a nature as to deceive in any way the public as to the quality, the specification and the geographical origin of the goods.

5. Any use of the geographical indications protected in accordance with paragraph 1 as terms customary in common language as the common name for such goods in Serbia shall cease at the latest five years after the entry into force of this Agreement.

6. Serbia shall ensure that goods exported from its territory five years after the entry into force of this Agreement do not infringe the provisions of this Article.

7. Serbia shall ensure the protection referred to in paragraph 1 to 6 on its own initiative as well as at the request of an interested party.

CHAPTER III

Common provisions

Article 34

Scope

The provisions of this Chapter shall apply to trade in all products between the Parties except where otherwise provided herein or in Protocol 1.

Article 35

Improved concessions

The provisions of this Title shall in no way affect the application, on a unilateral basis, of more favourable measures by any of the Parties.

Article 36

Standstill

1. From the date of entry into force of this Agreement, no new customs duties on imports or exports or charges having equivalent effect shall be introduced, nor shall those already applied be increased, in trade between the Community and Serbia.

2. From the date of entry into force of this Agreement, no new quantitative restriction on imports or exports or measure having equivalent effect shall be introduced, nor shall those existing be made more restrictive, in trade between the Community and Serbia.

3. Without prejudice to the concessions granted under Articles 26, 27, 28, 29 and 30, the provisions of paragraphs 1 and 2 of this Article shall not restrict in any way the pursuit of the respective agricultural and fishery policies of Serbia and of the Community and the taking of any measures under those policies in so far as the import regime in Annexes II-V and Protocol 1 is not affected.

Article 37

Prohibition of fiscal discrimination

1. The Community and Serbia shall refrain from, and abolish where existing, any measure or practice of an internal fiscal nature establishing, whether directly or indirectly, discrimination between the products of one Party and like products originating in the territory of the other Party.

2. Products exported to the territory of one of the Parties may not benefit from repayment of internal indirect taxation in excess of the amount of indirect taxation imposed on them.

Article 38

Duties of a fiscal nature

The provisions concerning the abolition of customs duties on imports shall also apply to customs duties of a fiscal nature.

Article 39

Customs unions, free trade areas, cross-border arrangements

1. This Agreement shall not preclude the maintenance or establishment of customs unions, free trade areas or arrangements for frontier trade except in so far as they alter the trade arrangements provided for in this Agreement.

2. During the transitional period specified in Article 18, this Agreement shall not affect the implementation of the specific preferential arrangements governing the movement of goods either laid down in frontier Agreements previously concluded between one or more Member States and Serbia or resulting from the bilateral Agreements specified in Title III concluded by Serbia in order to promote regional trade.

3. Consultations between the Parties shall take place within the Stabilisation and Association Council concerning the Agreements described in paragraphs 1 and 2 of this Article and, where requested, on other major issues related to their respective trade policies towards third countries. In particular in the event of a third country acceding to the Union, such consultations shall take place so as to ensure that account is taken of the mutual interests of the Community and Serbia stated in this Agreement.

Article 40

Dumping and subsidy

1. None of the provisions in this Agreement shall prevent any of the Parties from taking trade defence action in accordance with paragraph 2 of this Article and Article 41.

2. If one of the Parties finds that dumping and/or countervailable subsidisation is taking place in trade with the other Party, that Party may take appropriate measures against this practice in accordance with the WTO Agreement on Implementation of Article VI of the GATT 1994 or the WTO Agreement on Subsidies and Countervailing Measures and the respective related internal legislation.

Article 41

Safeguards clause

1. The provisions of Article XIX GATT 1994 and the WTO Agreement on Safeguards are applicable between the parties.

2. Notwithstanding paragraph 1 of this Article, where any product of one Party is being imported into the territory of the other Party in such increased quantities and under such conditions as to cause or threaten to cause:

(a) serious injury to the domestic industry of like or directly competitive products in the territory of the importing Party or

(b) serious disturbances in any sector of the economy or difficulties which could bring about serious deterioration in the economic situation of a region of the importing Party,

the importing Party may take appropriate bilateral safeguard measures under the conditions and in accordance with the procedures laid down in this Article.

3. Bilateral safeguard measures directed at imports from the other Party shall not exceed what is necessary to remedy the problems, as defined in paragraph 2, which have arisen as a result of application of this Agreement. The safeguard measure adopted should consist of a suspension in the increase or in the reduction of the margins of preferences provided for under this Agreement for the product concerned up to a maximum limit corresponding to the basic duty referred to in Article 18 paragraph 4(a) and (b) and paragraph 5 for the same product. Such measures shall contain clear elements progressively leading to their elimination at the end of the set period, at the latest, and shall not be taken for a period exceeding two years.

In very exceptional circumstances, measures may be extended for a further period of maximum two years. No bilateral safeguard measure shall be applied to the import of a product that has previously been subject to such a measure for a period of time equal to that during which such measure had been previously applied, provided that the period of non-application is at least two years since the expiry of the measure.

4. In the cases specified in this Article, before taking the measures provided for therein or, in the cases to which paragraph 5(b) of this Article applies, as soon as possible, the Community on the one part or Serbia on the other part, shall supply the Stabilisation and Association Council with all relevant information required for a thorough examination of the situation, with a view to seeking a solution acceptable to the Parties concerned.

5. For the implementation of the paragraphs 1, 2, 3 and 4 the following provisions shall apply:

(a) the problems arising from the situation referred to in this Article shall be immediately referred for examination to the Stabilisation and Association Council, which may take any decisions needed to put an end to such problems.

If the Stabilisation and Association Council or the exporting Party has not taken a decision putting an end to the problems, or no other satisfactory solution has been reached within 30 days of the matter being referred to the Stabilisation and Association Council, the importing Party may adopt the appropriate measures to remedy the problem in accordance with this Article. In the selection of safeguard measures, priority must be given to those which least disturb the functioning of the arrangements established in this Agreement. Safeguard measures applied in accordance with Article XIX GATT 1994 and the WTO Agreement on Safeguards shall preserve the level/margin of preference granted under this Agreement.

(b) Where exceptional and critical circumstances requiring immediate action make prior information or examination, as the case may be, impossible, the Party concerned may, in the situations specified in this Article, apply forthwith provisional measures necessary to deal with the situation and shall inform the other Party immediately thereof.

The safeguard measures shall be notified immediately to the Stabilisation and Association Council and shall be the subject of periodic consultations within that body, particularly with a view to establishing a timetable for their abolition as soon as circumstances permit.

6. In the event of the Community of the one part or Serbia of the other part subjecting imports of products liable to give rise to the problems referred to in this Article to an administrative procedure having as its purpose the rapid provision of information on the trend of trade flows, it shall inform the other Party.

Article 42

Shortage clause

1. Where compliance with the provisions of this Title leads to:

(a) a critical shortage, or threat thereof, of foodstuffs or other products essential to the exporting Party; or

(b) re-export to a third country of a product against which the exporting Party maintains quantitative export restrictions, export duties or measures or charges having equivalent effect, and where the situations referred to above give rise, or are likely to give rise to major difficulties for the exporting Party

that Party may take appropriate measures under the conditions and in accordance with the procedures laid down in this Article.

2. In the selection of measures, priority must be given to those which least disturb the functioning of the arrangements in this Agreement. Such measures shall not be applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination where the same conditions prevail, or a disguised restriction on trade and shall be eliminated when the conditions no longer justify their maintenance.

3. Before taking the measures provided for in paragraph 1 or, as soon as possible in cases to which paragraph 4 applies, the Community or Serbia, shall supply the Stabilisation and Association Council with all relevant information, with a view to seeking a solution acceptable to the Parties. The Parties within the Stabilisation and Association Council may agree on any means needed to put an end to the difficulties. If no agreement is reached within 30 days of the matter being referred to the Stabilisation and Association Council, the exporting Party may apply measures under this Article on the exportation of the product concerned.

4. Where exceptional and critical circumstances requiring immediate action make prior information or examination, as the case may be, impossible, the Community or Serbia may apply forthwith the precautionary measures necessary to deal with the situation and shall inform the other Party immediately thereof.

5. Any measures applied pursuant to this Article shall be immediately notified to the Stabilisation and Association Council and shall be the subject of periodic consultations within that body, particularly with a view to establishing a timetable for their elimination as soon as circumstances permit.

Article 43

State monopolies

Serbia shall progressively adjust any state monopolies of a commercial character so as to ensure that, three years after the entry into force of this Agreement, no discrimination regarding the conditions under which goods are procured and marketed exists between nationals of the Member States of the European Union and Serbia.

Article 44

Rules of origin

Except if otherwise stipulated in this Agreement, Protocol 3 lays down the rules of origin for the application of the provisions of this Agreement.

Article 45

Restrictions authorised

This Agreement shall not preclude prohibitions or restrictions on imports, exports or goods in transit justified on grounds of public morality, public policy or public security; the protection of health and life of humans, animals or plants; the protection of national treasures of artistic, historic or archaeological value or the protection of intellectual, industrial and commercial property, or rules relating to gold and silver. Such prohibitions or restrictions shall not, however, constitute a means of arbitrary discrimination or a disguised restriction on trade between the Parties.

Article 46

Failure to provide administrative cooperation

1. The Parties agree that administrative cooperation is essential for the implementation and the control of the preferential treatment granted under this Title and underline their commitment to combat irregularities and fraud in customs and related matters.

2. Where a Party has made a finding, on the basis of objective information, of a failure to provide administrative cooperation and/or of irregularities or fraud under this Title, the Party concerned may temporarily suspend the relevant preferential treatment of the product(s) concerned in accordance with this Article.

3. For the purpose of this Article a failure to provide administrative cooperation shall mean, inter alia:

(a) a repeated failure to respect the obligations to verify the originating status of the product(s) concerned;

(b) a repeated refusal or undue delay in carrying out and/or communicating the results of subsequent verification of the proof of origin;

(c) a repeated refusal or undue delay in obtaining authorisation to conduct administrative cooperation missions to verify the authenticity of documents or accuracy of information relevant to the granting of the preferential treatment in question.

For the purpose of this Article a finding of irregularities or fraud may be made, inter alia, where there is a rapid increase, without satisfactory explanation, in imports of goods exceeding the usual level of production and export capacity of the other Party, which is linked to objective information concerning irregularities or fraud.

4. The application of a temporary suspension shall be subject to the following conditions:

(a) the Party which has made a finding, on the basis of objective information, of a failure to provide administrative cooperation and/or of irregularities or fraud shall without undue delay notify the Stabilisation and Association Committee of its finding together with the objective information and enter into consultations within the Stabilisation and Association Committee, on the basis of all relevant information and objective findings, with a view to reaching a solution acceptable to both Parties.

(b) Where the Parties have entered into consultations within the Stabilisation and Association Committee as above and have failed to agree on an acceptable solution within three months following the notification, the Party concerned may temporarily suspend the relevant preferential treatment of the product(s) concerned. A temporary suspension shall be notified to the Stabilisation and Association Committee without undue delay.

(c) Temporary suspensions under this Article shall be limited to the minimum necessary to protect the financial interests of the Party concerned. They shall not exceed a period of six months, which may be renewed. Temporary suspensions shall be notified immediately after their adoption to the Stabilisation and Association Committee. They shall be subject to periodic consultations within the Stabilisation and Association Committee in particular with a view to their termination as soon as the conditions for their application no longer prevail.

5. At the same time as the notification to the Stabilisation and Association Committee under paragraph 4(a) of this Article, the Party concerned should publish a notice to importers in its Official Journal. The notice to importers should indicate for the product concerned that there is a finding, on the basis of objective information, of a failure to provide administrative cooperation and/or of irregularities or fraud.

Article 47

In case of error by the competent authorities in the proper management of the preferential system at export, and in particular in the application of the provisions of Protocol 3 to the present Agreement where this error leads to consequences in terms of import duties, the Contracting Party facing such consequences may request the Stabilisation and Association Council to examine the possibilities of adopting all appropriate measures with a view to resolving the situation.

Article 48

The application of this Agreement shall be without prejudice to the application of the provisions of Community law to the Canary Islands.

TITLE V

MOVEMENT OF WORKERS, ESTABLISHMENT, SUPPLY OF SERVICES, MOVEMENT OF CAPITAL

CHAPTER I

Movement of workers

Article 49

1. Subject to the conditions and modalities applicable in each Member State:

(a) treatment accorded to workers who are nationals of Serbia and who are legally employed in the territory of a Member State shall be free of any discrimination based on nationality, as regards working conditions, remuneration or dismissal, compared to nationals of that Member State;

(b) the legally resident spouse and children of a worker legally employed in the territory of a Member State, with the exception of seasonal workers and of workers concerned by bilateral Agreements within the meaning of Article 50, unless otherwise provided by such Agreements, shall have access to the labour market of that Member State, during the period of that worker’s authorised stay of employment.

2. Serbia shall, subject to the conditions and modalities applicable in that Republic, accord the treatment referred to in paragraph 1 to workers who are nationals of a Member State and are legally employed in its territory as well as to their spouse and children who are legally resident in Serbia.

Article 50

1. Taking into account the situation in the labour market in the Member States, and subject to their legislation and to compliance with the rules in force in the Member States in the area of mobility of workers:

(a) the existing facilities of access to employment for Serbian workers accorded by Member States under bilateral Agreements should be preserved and if possible improved;

(b) the other Member States shall examine the possibility of concluding similar Agreements.

2. After three years, the Stabilisation and Association Council shall examine the granting of other improvements, including facilities for access to professional training, in accordance with the rules and procedures in force in the Member States, and taking into account the situation in the labour market in the Member States and in the Community.

Article 51

1. Rules shall be laid down for the coordination of social security systems for workers with Serbian nationality, legally employed in the territory of a Member State, and for the members of their families legally resident there. To that effect, a decision of the Stabilisation and Association Council, which should not affect any rights or obligations arising from bilateral Agreements where the latter provide for more favourable treatment, shall put the following provisions in place:

(a) all periods of insurance, employment or residence completed by such workers in the various Member States shall be added together for the purpose of pensions and annuities in respect of old age, invalidity and death and for the purpose of medical care for such workers and such family members;

(b) any pensions or annuities in respect of old age, death, industrial accident or occupational disease, or of invalidity resulting therefrom, with the exception of non-contributory benefits, shall be freely transferable at the rate applied by virtue of the law of the debtor Member State or States;

(c) the workers in question shall receive family allowances for the members of their families as defined above.

2. Serbia shall accord to workers who are nationals of a Member State and legally employed in its territory, and to members of their families legally resident there, treatment similar to that specified in points (b) and (c) of paragraph 1.

CHAPTER II

Establishment

Article 52

Definition

For the purposes of this Agreement:

(a) "Community company" or "Serbian company" shall mean, respectively, a company set up in accordance with the laws of a Member State, or of Serbia and having its registered office or central administration or principal place of business in the territory of the Community or of Serbia. However, should the company, set up in accordance with the laws of a Member State or of Serbia, have only its registered office in the territory of the Community or of Serbia respectively, the company shall be considered a Community or a Serbian company if its operations possess a real and continuous link with the economy of one of the Member States or of Serbia;

(b) "Subsidiary" of a company shall mean a company which is effectively controlled by another company;

(c) "Branch" of a company shall mean a place of business not having legal personality which has the appearance of permanency, such as the extension of a parent body, has a management and is materially equipped to negotiate business with third parties so that the latter, although knowing that there will if necessary be a legal link with the parent body, the head office of which is abroad, do not have to deal directly with such parent body but may transact business at the place of business constituting the extension;

(d) "Establishment" shall mean:

(i) as regards nationals, the right to take up economic activities as self-employed persons, and to set up undertakings, in particular companies, which they effectively control. Self-employment and business undertakings by nationals shall not extend to seeking or taking employment in the labour market or confer a right of access to the labour market of another Party. The provisions of this Chapter do not apply to persons who are not exclusively self-employed;

(ii) as regards Community or Serbian companies, the right to take up economic activities by means of the setting up of subsidiaries and branches in Serbia, or in the Community respectively;

(e) "Operations" shall mean the pursuit of economic activities;

(f) "Economic activities" shall in principle include activities of an industrial, commercial and professional character and activities of craftsmen;

(g) "Community national" and "national of Serbia" shall mean respectively a natural person who is a national of a Member State or Serbia;

With regard to international maritime transport, including inter-modal operations involving a sea leg, Community nationals or nationals of Serbia established outside the Community and Serbia, and shipping companies established outside the Community or Serbia and controlled by Community nationals or nationals of Serbia, shall also be beneficiaries of the provisions of this Chapter and Chapter III, if their vessels are registered in that Member State or in Serbia, in accordance with their respective legislation;

(h) "Financial services" shall mean those activities described in Annex VI. The Stabilisation and Association Council may extend or modify the scope of that Annex.

Article 53

1. Serbia shall facilitate the setting-up of operations on its territory by Community companies and nationals. To that end, Serbia shall grant, upon entry into force of this Agreement:

(a) as regards the establishment of Community companies on the territory of Serbia, treatment no less favourable than that accorded to its own companies or to any third country company, whichever is the better;

(b) as regards the operation of subsidiaries and branches of Community companies on the territory of Serbia once established, treatment no less favourable than that accorded to its own companies and branches or to any subsidiary and branch of any third country company, whichever is the better.

2. The Community and its Member States shall grant, from the entry into force of this Agreement:

(a) as regards the establishment of Serbian companies treatment no less favourable than that accorded by Member States to their own companies or to any company of any third country, whichever is the better;

(b) as regards the operation of subsidiaries and branches of Serbian companies, established in its territory, treatment no less favourable than that accorded by Member States to their own companies and branches, or to any subsidiary and branch of any third country company, established in their territory, whichever is the better.

3. The Parties shall not adopt any new regulations or measures which introduce discrimination as regards the establishment of any other Party’s companies on their territory or in respect of their operation, once established, by comparison with their own companies.

4. Four years after the entry into force of this Agreement, the Stabilisation and Association Council shall establish the detailed arrangements to extend the above provisions to the establishment of Community nationals and nationals of Serbia to take up economic activities as self-employed persons.

5. Notwithstanding the provisions of this Article:

(a) Subsidiaries and branches of Community companies shall have, from the entry into force of this Agreement, the right to use and rent real property in Serbia;

(b) Subsidiaries of Community companies shall, from the entry into force of this Agreement, have the right to acquire and enjoy ownership rights over real property as Serbian companies and as regards public goods/goods of common interest, the same rights as enjoyed by Serbian companies respectively where these rights are necessary for the conduct of the economic activities for which they are established.

(c) Four years after the entry into force of this Agreement, the Stabilisation and Association Council shall examine the possibility of extending the rights mentioned under point (b) to branches of the Community companies.

Article 54

1. Subject to the provisions of Article 56, with the exception of financial services described in Annex VI, the Parties may regulate the establishment and operation of companies and nationals on their territory, insofar as these regulations do not discriminate against companies and nationals of the other Parties in comparison with its own companies and nationals.

2. In respect of financial services, notwithstanding any other provisions of this Agreement, a Party shall not be prevented from taking measures for prudential reasons, including for the protection of investors, depositors, policy holders or persons to whom a fiduciary duty is owed by a financial service supplier, or to ensure the integrity and stability of the financial system. Such measures shall not be used as a means of avoiding the Party’s obligations under this Agreement.

3. Nothing in this Agreement shall be construed to require a Party to disclose information relating to the affairs and accounts of individual customers or any confidential or proprietary information in the possession of public entities.

Article 55

1. Without prejudice to any provision to the contrary contained in the Multilateral Agreement on the Establishment of a European Common Aviation Area [6] (hereinafter referred to as "ECAA"), the provisions of this Chapter shall not apply to air transport services, inland waterways transport services and maritime cabotage services.

2. The Stabilisation and Association Council may make recommendations for improving establishment and operations in the areas covered by paragraph 1.

Article 56

1. The provisions of Articles 53 and 54 do not preclude the application by a Party of particular rules concerning the establishment and operation in its territory of branches of companies of another Party not incorporated in the territory of the first Party, which are justified by legal or technical differences between such branches as compared to branches of companies incorporated in its territory or, as regards financial services, for prudential reasons.

2. The difference in treatment shall not go beyond what is strictly necessary as a result of such legal or technical differences or, as regards financial services, for prudential reasons.

Article 57

In order to make it easier for Community nationals and nationals from Serbia to take up and pursue regulated professional activities in Serbia and in the Community respectively, the Stabilisation and Association Council shall examine which steps are necessary for the mutual recognition of qualifications. It may take all necessary measures to that end.

Article 58

1. A Community company established in the territory of Serbia or a Serbian company established in the Community shall be entitled to employ, or have employed by one of its subsidiaries or branches, in accordance with the legislation in force in the host territory of establishment, in the territory of the Republic of Serbia and the Community respectively, employees who are nationals of the Member States or nationals from Serbia respectively, provided that such employees are key personnel as defined in paragraph 2 and that they are employed exclusively by companies, subsidiaries or branches. The residence and work permits of such employees shall cover only the period of such employment.

2. Key personnel of the abovementioned companies herein referred to as "organisations" are "intra-corporate transferees" as defined in point (c) of this paragraph in the following categories, provided that the organisation is a legal person and that the persons concerned have been employed by it or have been partners in it (other than as majority shareholders), for at least one year immediately preceding such movement:

(a) Persons working in a senior position with an organisation, who primarily direct the management of the establishment, receiving general supervision or direction principally from the board of directors or stockholders of the business or their equivalent including:

(i) directing the establishment of a department or sub-division of the establishment;

(ii) supervising and controlling the work of other supervisory, professional or managerial employees;

(iii) having the authority personally to recruit and dismiss or recommend recruiting, dismissing or other personnel actions;

(b) Persons working within an organisation who possess uncommon knowledge essential to the establishment’s service, research equipment, techniques or management. The assessment of such knowledge may reflect, apart from knowledge specific to the establishment, a high level of qualification referring to a type of work or trade requiring specific technical knowledge, including membership of an accredited profession;

(c) An "intra-corporate transferee" is defined as a natural person working within an organisation in the territory of a Party, and being temporarily transferred in the context of pursuit of economic activities in the territory of the other Party; the organisation concerned must have its principal place of business in the territory of a Party and the transfer be to an establishment (branch, subsidiary) of that organisation, effectively pursuing like economic activities in the territory of the other Party.

3. The entry into and the temporary presence within the territory of the Community or in Serbia of Serbian nationals and Community nationals respectively shall be permitted, when these representatives of companies are persons working in a senior position, as defined in paragraph 2(a) above, within a company, and are responsible for the setting up of a Community subsidiary or branch of a Serbian company or of a Serbian subsidiary or branch of a Community company in a Member State or in the Republic of Serbia respectively, when:

(a) those representatives are not engaged in making direct sales or supplying services, and do not receive remuneration from a source located within the host territory of establishment, and;

(b) the company has its principal place of business outside the Community or Serbia, respectively, and has no other representative, office, branch or subsidiary in that Member State or in Serbia respectively.

CHAPTER III

Supply of services

Article 59

1. The Community and Serbia undertake, in accordance with the following provisions, to take the necessary steps to allow progressively the supply of services by Community companies, Serbian companies or by Community nationals or nationals of Serbia which are established in the territory of a Party other than that of the person for whom the services are intended.

2. In step with the liberalisation process mentioned in paragraph 1, the Parties shall permit the temporary movement of natural persons providing the service or who are employed by the service provider as key personnel as defined in Article 58, including natural persons who are representatives of a Community or Serbian company or national and are seeking temporary entry for the purpose of negotiating for the sale of services or entering into agreements to sell services for that service provider, where those representatives will not be engaged in making direct sales to the general public or in supplying services themselves.

3. After four years, the Stabilisation and Association Council shall take the measures necessary to progressively implement the provisions of paragraph 1. Account shall be taken of the progress achieved by the Parties in the approximation of their laws.

Article 60

1. The Parties shall not take any measures or actions which render the conditions for the supply of services by Community and Serbia nationals or companies which are established in a Party other than that of the person for whom the services are intended significantly more restrictive as compared to the situation existing on the day preceding the day of entry into force of this Agreement.

2. If one Party is of the view that measures introduced by the other Party since the entry into force of this Agreement result in a situation which is significantly more restrictive in respect of supply of services as compared with the situation existing at the date of entry into force of this Agreement, such first Party may request the other Party to enter into consultations.

Article 61

With regard to supply of transport services between the Community and Serbia, the following provisions shall apply:

1. With regard to land transport, Protocol 4 lays down the rules applicable to the relationship between the Parties in order to ensure, particularly, unrestricted road transit traffic across Serbia and the Community as a whole, the effective application of the principle of non discrimination and progressive harmonisation of the transport legislation of Serbia with that of the Community.

2. With regard to international maritime transport, the Parties undertake to apply effectively the principle of unrestricted access to the international maritime markets and trades on a commercial basis, and to respect international and European obligations in the field of safety, security and environmental standards.

The Parties affirm their commitment to a freely competitive environment as an essential feature of international maritime transport.

3. In applying the principles of paragraph 2, the Parties shall:

(a) not introduce cargo-sharing clauses in future bilateral Agreements with third countries;

(b) abolish, upon the entry into force of this Agreement, all unilateral measures and administrative, technical and other obstacles that could have restrictive or discriminatory effects on the free supply of services in international maritime transport;

(c) Each Party shall grant, inter alia, no less favourable treatment for the ships operated by nationals or companies of the other Party than that accorded to a Party’s own ships with regard to access to ports open to international trade, the use of infrastructure and auxiliary maritime services of the ports, as well as related fees and charges, customs facilities and the assignment of berths and facilities for loading and unloading.

4. With a view to ensuring a coordinated development and progressive liberalisation of transport between the Parties adapted to their reciprocal commercial needs, the conditions of mutual market access in air transport shall be dealt with by the ECAA.

5. Prior to the conclusion of the ECAA, the Parties shall not take any measures or actions which are more restrictive or discriminatory as compared with the situation existing prior to the entry into force of this Agreement.

6. Serbia shall adapt its legislation, including administrative, technical and other rules, to that of the Community existing at any time in the field of air, maritime, inland waterway and land transport insofar as it serves liberalisation purposes and mutual access to markets of the Parties and facilitates the movement of passengers and of goods.

7. In step with the common progress in the achievement of the objectives of this Chapter, the Stabilisation and Association Council shall examine ways of creating the conditions necessary for improving freedom to provide air, land and inland waterway transport services.

CHAPTER IV

Current payments and movement of capital

Article 62

The Parties undertake to authorise, in freely convertible currency, in accordance with the provisions of Article VIII of the Articles of the Agreement of the International Monetary Fund, any payments and transfers on the current account of balance of payments between the Community and Serbia.

Article 63

1. With regard to transactions on the capital and financial account of balance of payments, from the entry into force of this Agreement, the Parties shall ensure the free movement of capital relating to direct investments made in companies formed in accordance with the laws of the host country and investments made in accordance with the provisions of Chapter II of Title V, and the liquidation or repatriation of these investments and of any profit stemming there from.

2. With regard to transactions on the capital and financial account of balance of payments, from the entry into force of this Agreement, the Parties shall ensure the free movement of capital relating to credits related to commercial transactions or to the provision of services in which a resident of one of the Parties is participating, and to financial loans and credits, with maturity longer than a year.

3. As from the entry into force of this Agreement, Serbia shall authorise, by making full and expedient use of its existing procedures, the acquisition of real estate in Serbia by nationals of Member States of the European Union. Within four years from the entry into force of this Agreement, Serbia shall progressively adjust its legislation concerning the acquisition of real estate in its territory by nationals of the Member States of the European Union to ensure the same treatment as compared to its own nationals.

4. The Community and Serbia shall also ensure, as from four years after the entry into force of this Agreement, free movement of capital relating to portfolio investment and financial loans and credits with maturity shorter than a year.

5. Without prejudice to paragraph 1, the Parties shall not introduce any new restrictions on the movement of capital and current payments between residents of the Community and Serbia and shall not make the existing arrangements more restrictive.

6. Without prejudice to the provisions of Article 62 and of this Article, where, in exceptional circumstances, movements of capital between the Community and Serbia cause, or threaten to cause, serious difficulties for the operation of exchange rate policy or monetary policy in the Community or Serbia, the Community and Serbia, respectively, may take safeguard measures with regard to movements of capital between the Community and Serbia for a period not exceeding six months if such measures are strictly necessary.

7. Nothing in the above provisions shall be taken to limit the rights of economic operators of the Parties from benefiting from any more favourable treatment that may be provided for in any existing bilateral or multilateral Agreement involving Parties to this Agreement.

8. The Parties shall consult each other with a view to facilitating the movement of capital between the Community and Serbia in order to promote the objectives of this Agreement.

Article 64

1. During the first four years following the date of entry into force of this Agreement, the Community and Serbia shall take measures permitting the creation of the necessary conditions for the further gradual application of Community rules on the free movement of capital.

2. By the end of the fourth year following the date of entry into force of this Agreement, the Stabilisation and Association Council shall determine the detailed arrangements for full application of Community rules on the movement of capital in Serbia.

CHAPTER V

General provisions

Article 65

1. The provisions of this Title shall be applied subject to limitations justified on grounds of public policy, public security or public health.

2. They shall not apply to activities that in the territory of any of the Parties are connected, even occasionally, with the exercise of official authority.

Article 66

For the purpose of this Title, nothing in this Agreement shall prevent the Parties from applying their laws and regulations regarding entry and stay, employment, working conditions, establishment of natural persons and supply of services, notably insofar as the granting, renewal or refusal of a residence permit is concerned, provided that, in so doing, they do not apply them in such a manner as to nullify or impair the benefits accruing to any Party under the terms of a specific provision of this Agreement. This provision shall be without prejudice to the application of Article 65.

Article 67

Companies which are controlled and exclusively owned jointly by Serbian companies, or nationals of Serbia and Community companies or nationals shall also be covered by the provisions of this Title.

Article 68

1. The Most-Favoured-Nation treatment granted in accordance with the provisions of this Title shall not apply to the tax advantages that the Parties are providing or will provide in the future on the basis of Agreements designed to avoid double taxation or other tax arrangements.

2. None of the provisions of this Title shall be construed to prevent the adoption or enforcement by the Parties of any measure aimed at preventing the avoidance or evasion of taxes pursuant to the tax provisions of Agreements to avoid double taxation and other tax arrangements or domestic fiscal legislation.

3. None of the provisions of this Title shall be construed to prevent Member States or Serbia from applying the relevant provisions of their fiscal legislation, from distinguishing between taxpayers who are not in identical situations, in particular as regards their place of residence.

Article 69

1. The Parties shall endeavour wherever possible to avoid the imposition of restrictive measures, including measures relating to imports, for balance of payments purposes. A Party adopting such measures shall present as soon as possible to the other Party a timetable for their removal.

2. Where one or more Member States or Serbia is in serious balance of payments difficulties, or under imminent threat thereof, the Community and Serbia may, in accordance with the conditions established under the WTO Agreement, adopt restrictive measures, including measures relating to imports, which shall be of limited duration and may not go beyond what is strictly necessary to remedy the balance of payments situation. The Community and Serbia shall inform the other Party forthwith.

3. Any restrictive measures shall not apply to transfers related to investment and in particular to the repatriation of amounts invested or reinvested or any kind of revenues stemming therefrom.

Article 70

The provisions of this Title shall be progressively adjusted, notably in the light of requirements arising from Article V of the GATS.

Article 71

The provisions of this Agreement shall not prejudice the application by any Party of any measure necessary to prevent the circumvention of its measures concerning third-country access to its market through the provisions of this Agreement.

TITLE VI

APPROXIMATION OF LAWS, LAW ENFORCEMENT AND COMPETITION RULES

Article 72

1. The Parties recognise the importance of the approximation of the existing legislation in Serbia to that of the Community and of its effective implementation. Serbia shall endeavour to ensure that its existing laws and future legislation will be gradually made compatible with the Community acquis. Serbia shall ensure that existing and future legislation will be properly implemented and enforced.

2. This approximation shall start on the date of signing of this Agreement, and shall gradually extend to all the elements of the Community acquis referred to in this Agreement by the end of the transitional period defined in Article 8 of this Agreement.

3. Approximation will, at an early stage, focus on fundamental elements of the Internal Market acquis, Justice, Freedom and Security as well as on other trade-related areas. At a further stage, Serbia shall focus on the remaining parts of the acquis.

Approximation shall be carried out on the basis of a programme to be agreed between the European Commission and Serbia.

4. Serbia shall also define, in agreement with the European Commission, the detailed arrangements for the monitoring of the implementation of approximation of legislation and law enforcement actions to be taken.

Article 73

Competition and other economic provisions

1. The following are incompatible with the proper functioning of this Agreement, insofar as they may affect trade between the Community and Serbia:

(i) all Agreements between undertakings, decisions by associations of undertakings and concerted practices between undertakings which have as their object or effect the prevention, restriction or distortion of competition;

(ii) abuse by one or more undertakings of a dominant position in the territories of the Community or Serbia as a whole or in a substantial part thereof;

(iii) any State aid which distorts or threatens to distort competition by favouring certain undertakings or certain products.

2. Any practices contrary to this Article shall be assessed on the basis of criteria arising from the application of the competition rules applicable in the Community, in particular from Articles 81, 82, 86 and 87 of the EC Treaty and interpretative instruments adopted by the Community institutions.

3. The Parties shall ensure that an operationally independent authority is entrusted with the powers necessary for the full application of paragraph 1(i) and (ii) of this Article, regarding private and public undertakings and undertakings to which special rights have been granted.

4. Serbia shall establish an operationally independent authority which is entrusted with the powers necessary for the full application of paragraph 1(iii) within one year from the date of entry into force of this Agreement. This authority shall have, inter alia, the powers to authorise State aid schemes and individual aid grants in conformity with paragraph 2, as well as the powers to order the recovery of State aid that has been unlawfully granted.

5. The Community on one side and Serbia on the other side shall ensure transparency in the area of State aid, inter alia, by providing to the other Parties a regular annual report, or equivalent, following the methodology and the presentation of the Community survey on State aid. Upon request by one Party, the other Party shall provide information on particular individual cases of public aid.

6. Serbia shall establish a comprehensive inventory of aid schemes instituted before the establishment of the authority referred to in paragraph 4 and shall align such aid schemes with the criteria referred to in paragraph 2 within a period of no more than 4 years from the entry into force of this Agreement.

7. (a) For the purposes of applying the provisions of paragraph 1(iii), the Parties recognise that during the first five years after the entry into force of this Agreement, any public aid granted by Serbia shall be assessed taking into account the fact that Serbia shall be regarded as an area identical to those areas of the Community described in Article 87(3)(a) of the EC Treaty.

(b) Within four years from the entry into force of this Agreement, Serbia shall submit to the European Commission its GDP per capita figures harmonised at NUTS II level. The authority referred to in paragraph 4 and the European Commission shall then jointly evaluate the eligibility of the regions of Serbia as well as the maximum aid intensities in relation thereto in order to draw up the regional aid map on the basis of the relevant Community guidelines.

8. As appropriate, Protocol 5 establishes the rules on state aid in the steel industry. This Protocol establishes the rules applicable in the event restructuring aid is granted to the steel industry. It would stress the exceptional character of such aid and the fact that the aid would be limited in time and would be linked to capacity reductions within the framework of feasibility programmes.

9. With regard to products referred to in Chapter II of Title IV:

(a) paragraph 1(iii) shall not apply;

(b) any practices contrary to paragraph 1(i) shall be assessed according to the criteria established by the Community on the basis of Articles 36 and 37 of the EC Treaty and specific Community instruments adopted on this basis.

10. If one of the Parties considers that a particular practice is incompatible with the terms of paragraph 1, it may take appropriate measures after consultation within the Stabilisation and Association Council or after 30 working days following referral for such consultation. Nothing in this Article shall prejudice or affect in any way the taking, by the Community or Serbia, of countervailing measures in accordance with the GATT 1994 and the WTO Agreement on Subsidies and Countervailing Measures and the respective related internal legislation.

Article 74

Public undertakings

By the end of the third year following the entry into force of this Agreement, Serbia shall apply to public undertakings and undertakings to which special and exclusive rights have been granted the principles set out in the EC Treaty, with particular reference to Article 86.

Special rights of public undertakings during the transitional period shall not include the possibility to impose quantitative restrictions or measures having an equivalent effect on imports from the Community into Serbia.

Article 75

Intellectual, industrial and commercial property

1. Pursuant to the provisions of this Article and Annex VII, the Parties confirm the importance that they attach to ensuring adequate and effective protection and enforcement of intellectual, industrial and commercial property rights.

2. From the entry into force of this Agreement, the Parties shall grant to each others companies and nationals, in respect of the recognition and protection of intellectual, industrial and commercial property, treatment no less favourable than that granted by them to any third country under bilateral Agreements.

3. Serbia shall take the necessary measures in order to guarantee no later than five years after entry into force of this Agreement a level of protection of intellectual, industrial and commercial property rights similar to that existing in the Community, including effective means of enforcing such rights.

4. Serbia undertakes to accede, within the period referred to above, to the multilateral conventions on intellectual, industrial and commercial property rights referred to in Annex VII. The Stabilisation and Association Council may decide to oblige Serbia to accede to specific multilateral Conventions in this area.

5. If problems in the area of intellectual, industrial and commercial property affecting trading conditions occur, they shall be referred urgently to the Stabilisation and Association Council, at the request of either Party, with a view to reaching mutually satisfactory solutions.

Article 76

Public procurement

1. The Community and Serbia consider the opening-up of the award of public contracts on the basis of non-discrimination and reciprocity, following in particular the WTO rules, to be a desirable objective.

2. Serbian companies, whether established in the Community or not, shall be granted access to contract award procedures in the Community pursuant to Community procurement rules under treatment no less favourable than that accorded to Community companies as from the entry into force of this Agreement.

The above provisions shall also apply to contracts in the utilities sector once the government of Serbia has adopted the legislation introducing the Community rules in this area. The Community shall examine periodically whether Serbia has indeed introduced such legislation.

3. Community companies established in Serbia under the provisions of Chapter II of Title V shall, from the entry into force of this Agreement, be granted access to contract award procedures in Serbia under treatment no less favourable than that accorded to Serbian companies.

4. Community companies not established in Serbia shall be granted access to contract award procedures in Serbia pursuant to the Serbian Law on Public Procurement under treatment no less favourable than that accorded to Serbian companies at the latest five years after the entry into force of this Agreement.

Upon the entry into force of this Agreement, Serbia shall convert any existing preference for domestic economic entities to a price preference and, within a period of five years, shall gradually reduce the latter in accordance with the following timetable:

- the preferences shall not exceed 15 % by the end of the second year following the entry into force of this Agreement;

- the preferences shall not exceed 10 % by the end of the third year following the entry into force of this Agreement;

- the preferences shall not exceed 5 % by the end of the fourth year following the entry into force of this Agreement; and

- the preferences will be completely abolished no later than the end of the fifth year following the entry into force of this Agreement.

5. The Stabilisation and Association Council shall periodically examine the possibility for Serbia to introduce access to contract award procedures in Serbia for all Community companies. Serbia shall report annually to the Stabilisation and Association Council on the measures they have taken to enhance transparency and to provide for effective judicial review of decisions taken in the area of public procurement.

6. As regards establishment, operations, supply of services between the Community and Serbia, and also employment and movement of labour linked to the fulfilment of public contracts, the provisions of Articles 49 to 64 are applicable.

Article 77

Standardisation, metrology, accreditation and conformity assessment

1. Serbia shall take the necessary measures in order to gradually achieve conformity with Community technical regulations and European standardisation, metrology, accreditation and conformity assessment procedures.

2. To this end, the Parties shall seek to:

(a) promote the use of Community technical regulations, European standards and conformity assessment procedures;

(b) provide assistance to fostering the development of quality infrastructure: standardisation, metrology, accreditation and conformity assessment;

(c) promote the participation of Serbia in the work of organisations related to standards, conformity assessment, metrology and similar functions (e.g. CEN, Cenelec, ETSI, EA, WELMEC, EUROMET) [7].

(d) where appropriate, conclude an Agreement on Conformity Assessment and Acceptance of Industrial Products once the legislative framework and the procedures of Serbia is sufficiently aligned on that of the Community and appropriate expertise is available.

Article 78

Consumer protection

The Parties shall cooperate in order to align the standards of consumer protection in Serbia to those of the Community. Effective consumer protection is necessary in order to ensure the proper functioning of the market economy, and this protection will depend on the development of an administrative infrastructure in order to ensure market surveillance and law enforcement in this field.

To that end, and in view of their common interests, the Parties shall ensure:

(a) a policy of active consumer protection, in accordance with Community law, including the increase of information and development of independent organisations;

(b) the harmonisation of legislation of consumer protection in Serbia on that in force in the Community;

(c) effective legal protection for consumers in order to improve the quality of consumer goods and maintain appropriate safety standards;

(d) monitoring of rules by competent authorities and providing access to justice in case of disputes;

(e) exchange information on dangerous products.

Article 79

Working conditions and equal opportunities

Serbia shall progressively harmonise its legislation to that of the Community in the fields of working conditions, notably on health and safety at work, and equal opportunities.

TITLE VII

JUSTICE, FREEDOM AND SECURITY

Article 80

Reinforcement of institutions and rule of law

In their cooperation on justice, freedom and security, the Parties shall attach particular importance to the consolidation of the rule of law, and the reinforcement of institutions at all levels in the areas of administration in general and law enforcement and the administration of justice in particular. Cooperation shall notably aim at strengthening the independence of the judiciary and improving its efficiency, improving the functioning of the police and other law enforcement bodies, providing adequate training and fighting corruption and organised crime.

Article 81

Protection of personal data

Serbia shall harmonise its legislation concerning personal data protection with Community law and other European and international legislation on privacy upon the entry into force of this Agreement. Serbia shall establish one or more independent supervisory bodies with sufficient financial and human resources in order to efficiently monitor and guarantee the enforcement of national personal data protection legislation. The Parties shall cooperate to achieve this goal.

Article 82

Visa, border management, asylum and migration

The Parties shall cooperate in the areas of visa, border control, asylum and migration and shall set up a framework for the cooperation, including at a regional level, in these fields, taking into account and making full use of other existing initiatives in this area as appropriate.

Cooperation in the matters above shall be based on mutual consultations and close coordination between the Parties and should include technical and administrative assistance for:

(a) the exchange of statistics and information on legislation and practices;

(b) the drafting of legislation;

(c) enhancing the capacity and efficiency of the institutions;

(d) the training of staff;

(e) the security of travel documents and detection of false documents;

(f) border management.

Cooperation shall focus in particular:

(a) on the area of asylum on the implementation of national legislation to meet the standards of the Convention relating to the Status of Refugees done at Geneva on 28 July 1951 and the Protocol relating to the Status of Refugees done at New York on 31 January 1967 thereby to ensure that the principle of "non-refoulement" is respected as well as other rights of asylum seekers and refugees;

(b) on the field of legal migration, on admission rules and rights and status of the person admitted. In relation to migration, the Parties agree to the fair treatment of nationals of other countries who reside legally on their territories and to promote an integration policy aiming at making their rights and obligations comparable to those of their citizens.

Article 83

Prevention and control of illegal immigration; readmission

1. The Parties shall cooperate in order to prevent and control illegal immigration. To this end, Serbia and the Member States shall readmit any of their nationals illegally present on their territories and agree to fully implement the Agreement on readmission between the Community and Serbia and bilateral Agreements between Member States and Serbia in so far as the provisions of these bilateral Agreements are compatible with those of the Agreement on readmission between the Community and Serbia, including an obligation for the readmission of nationals of other countries and stateless persons.

The Member States and Serbia shall provide their nationals with appropriate identity documents and shall extend to them the administrative facilities necessary for such purposes.

Specific procedures for the purpose of readmission of nationals, third country nationals and stateless persons are laid down in the Agreement on readmission between the Community and Serbia and bilateral Agreements between Member States and Serbia in so far as the provisions of these bilateral Agreements are compatible with those of the Agreement on readmission between the Community and Serbia.

2. Serbia agrees to conclude readmission Agreements with the Stabilisation and Association process countries and undertakes to take any necessary measures to ensure the flexible and rapid implementation of all readmission Agreements referred to in this Article.

3. The Stabilisation and Association Council shall establish other joint efforts that can be made to prevent and control illegal immigration, including trafficking and illegal migration networks.

Article 84

Money laundering and financing of terrorism

1. The Parties shall cooperate in order to prevent the use of their financial systems and relevant non-financial sectors for laundering of proceeds from criminal activities in general and drug offences in particular, as well as for the purpose of financing terrorism.

2. Cooperation in this area may include administrative and technical assistance with the purpose of developing the implementation of regulations and efficient functioning of the suitable standards and mechanisms to combat money laundering and financing of terrorism equivalent to those adopted by the Community and international fora in this field, in particular the Financial Action Task Force (FATF).

Article 85

Cooperation on illicit drugs

1. Within their respective powers and competencies, the Parties shall cooperate to ensure a balanced and integrated approach towards drug issues. Drug policies and actions shall be aimed at reinforcing structures for combating illicit drugs, reducing the supply of, trafficking in and the demand for illicit drugs, coping with the health and social consequences of drug abuse as well as at a more effective control of precursors.

2. The Parties shall agree on the necessary methods of cooperation to attain these objectives. Actions shall be based on commonly agreed principles along the lines of the EU Drug Strategy.

Article 86

Preventing and combating organised crime and other illegal activities

The Parties shall cooperate on combating and preventing criminal and illegal activities, organised or otherwise, such as:

(a) smuggling and trafficking in human beings;

(b) illegal economic activities, and in particular counterfeiting of cash and non-cash means of payments, illegal transactions on products such as industrial waste, radioactive material and transactions involving illegal, counterfeit or pirated products;

(c) corruption, both in the private and public sector, in particular linked to non-transparent administrative practices;

(d) fiscal fraud;

(e) identity theft;

(f) illicit trafficking in drugs and psychotropic substances;

(g) illicit arms trafficking;

(h) forging documents;

(i) smuggling and illicit trafficking of goods, including cars;

(j) cyber crime.

Regional cooperation and compliance with recognised international standards in combating organised crime shall be promoted.

Article 87

Combating terrorism

In compliance with the international conventions to which they are Party and their respective laws and regulations, the Parties agree to cooperate in order to prevent and suppress acts of terrorism and their financing:

(a) in the framework of full implementation of United Nations Security Council Resolution 1373 (2001) and other relevant UN resolutions, international conventions and instruments;

(b) by exchanging information on terrorist groups and their support networks in accordance w