EUROPE AGREEMENT establishing an association between the European Communities and their Member States, of the one part, and the Republic of Lithuania, of the other part

THE KINGDOM OF BELGIUM,

THE KINGDOM OF DENMARK,

THE FEDERAL REPUBLIC OF GERMANY,

THE HELLENIC REPUBLIC,

THE KINGDOM OF SPAIN,

THE FRENCH REPUBLIC,

IRELAND,

THE ITALIAN REPUBLIC,

THE GRAND DUCHY OF LUXEMBOURG,

THE KINGDOM OF THE NETHERLANDS,

THE REPUBLIC OF AUSTRIA,

THE PORTUGUESE REPUBLIC,

THE REPUBLIC OF FINLAND,

THE KINGDOM OF SWEDEN,

THE UNITED KINGDOM OF GREAT BRITAIN AND NORTHERN IRELAND,

Contracting Parties to the Treaty on EUROPEAN UNION, the Treaty establishing the EUROPEAN COMMUNITY, the Treaty establishing the EUROPEAN COAL AND STEEL COMMUNITY and the Treaty establishing the EUROPEAN ATOMIC ENERGY COMMUNITY,

hereinafter referred to as 'the Member States`, and

the EUROPEAN COMMUNITY, the EUROPEAN ATOMIC ENERGY COMMUNITY and the EUROPEAN COAL AND STEEL COMMUNITY,

hereinafter referred to as 'the Community`,

acting within the framework of the European Union,

of the one part, and

the REPUBLIC OF LITHUANIA,

hereinafter referred to as 'Lithuania`,

of the other part,

RECALLING the historical links between the Parties and the common values they share;

RECOGNISING that the Community and Lithuania wish to reinforce these links, to establish close and lasting relations on a basis of reciprocity allowing Lithuania to participate in the process of European integration, in reinforcing and further developing the relations previously established, in particular via the Agreement on Trade and Commercial and Economic Cooperation and the Agreement on Free Trade and Trade-Related Matters;

CONSIDERING the commitment to the intensification of political and economic liberties which constitute the basis of this Agreement and to further development of Lithuania's new economic and political system which respects, in accordance, inter alia, with the undertakings made within the context of the Conference on Security and Cooperation in Europe (CSCE) and the Organisation for Security and Cooperation in Europe (OSCE), the rule of law and human rights, including the rights of persons belonging to minorities, a multiparty system with free and democratic elections and liberalisation aimed at setting up a market economy;

SHARING the understanding that Lithuania has made considerable progress in political and economic reforms and that these reforms will be pursued;

CONSIDERING the commitment to the implementation of commitments made in the framework of the CSCE, in particular those set out in the Helsinki Final Act, the concluding documents of the Madrid, Vienna and Copenhagen meetings, those of the Charter of Paris for a New Europe, the conclusions of the CSCE's Bonn Conference, the CSCE Helsinki document 1992, the European Convention on Human Rights, the European Energy Charter Treaty as well as the Ministerial Declaration of the Lucerne Conference of 30 April 1993;

WILLING to promote improved contacts among their citizens as well as the free flow of information and ideas, as agreed by the Parties in the framework of the CSCE and the OSCE;

CONSCIOUS of the importance of this Agreement in establishing and enhancing in Europe a system of stability based on cooperation, with the European Union as one of the cornerstones;

RECOGNISING that there is a need to continue, with the Community's help, Lithuania's political and economic reform;

TAKING ACCOUNT of the Community's wishes to contribute to the implementation of the reforms and to assist Lithuania in facing the economic and social consequences of structural adjustment;

RECOGNISING that full implementation of the Agreement is linked to the implementation of a coherent programme of economic and political reform by Lithuania;

RECOGNISING the need for continuing regional cooperation among the Baltic States, taking into account that closer integration between the European Union and the Baltic States, and the Baltic States among themselves, should proceed in parallel;

CONSIDERING the commitment to liberalise trade based on the General Agreement on Tariffs and Trade (GATT) and World Trade Organisation (WTO) principles;

EXPECTING that this Agreement will create a new climate for economic relations between them and above all for the development of trade matters and investment, which are essential to economic restructuring and the renewal of technology;

BEARING in mind that political dialogue on matters of mutual interest has been established by the Joint Declaration of May 1992;

DESIROUS of developing and intensifying regular political dialogue within the multilateral framework established by the Copenhagen European Council of June 1993 and enhanced by the Decision of the Council of the European Union of 7 March 1994 and the conclusions of the Essen European Council of December 1994;

RECALLING that Lithuania has been an associated partner of the Western European Union (WEU) since May 1994 and that it participates in the North Atlantic Treaty Organisation (NATO) Partnership for Peace Programme;

RECOGNISING the contribution which the Pact on Stability in Europe can make to promoting stability and good-neighbourly relations in the Baltic region, and confirming their determination to work together for the success of this initiative;

TAKING ACCOUNT of the Community's willingness to employ instruments of cooperation and economic, technical and financial assistance on a global and multiannual basis;

BEARING in mind the economic and social disparities between the Community and Lithuania and thus recognising that the objectives of this association should be reached through appropriate provisions of the Agreement;

DESIROUS of establishing cultural cooperation and developing exchanges of information;

WILLING to set up a framework for cooperation aimed at preventing illegal activities;

RECOGNISING the fact that Lithuania's ultimate objective is to become a member of the European Union and that association through this Agreement will, in the view of the Parties, help Lithuania to achieve this objective;

TAKING INTO ACCOUNT the accession preparation strategy adopted by the Essen European Council of December 1994, which is being politically implemented by the creation, between the associated States and the Institutions of the European Union, of structured relations which encourage mutual trust and will provide a framework for addressing topics of common interest,

HAVE AGREED AS FOLLOWS:

Article 1

1. An association is hereby established between the Community and its Member States, of the one part, and Lithuania, of the other part.

2. The objectives of this association are:

- to provide an appropriate framework for the political dialogue between the Parties allowing the development of close political relations,

- to establish gradually a free trade area between the Community and Lithuania covering substantially all trade between them,

- to promote the expansion of trade and the harmonious economic relations between the Parties and so to foster dynamic economic development and prosperity in Lithuania,

- to provide a basis for economic, financial, cultural and social cooperation and cooperation in the prevention of illegal activities, as well as for the Community's assistance to Lithuania,

- to support Lithuania's efforts to develop its economy and to complete the transition into a market economy,

- to provide an appropriate framework for the gradual integration of Lithuania into the European Union. Lithuania shall work towards fulfilling the necessary requirements in this respect,

- to set up institutions suitable to make the association effective.

TITLE I GENERAL PRINCIPLES

Article 2

1. Respect for democratic principles and human rights, established by the Helsinki Final Act and in the Charter of Paris for a New Europe, as well as the principles of market economy, inspire the domestic and external policies of the Parties and constitute essential elements of this Agreement.

2. The Parties consider that it is essential for the future prosperity and stability of the region that the Baltic States should maintain and develop cooperation among themselves and will make every effort to enhance this process.

Article 3

1. The association includes a transitional period which is referred to in specific Articles hereinafter and which ends at the latest on 31 December 1999.

2. The Association Council established pursuant to Article 111, bearing in mind that the principles of the market economy are essential to the present association, shall proceed regularly to examine the application of the Agreement and the implementation by Lithuania of economic reforms on the basis of the principles referred to in the preamble.

3. The transitional period envisaged under paragraph 1 shall apply neither to Title II nor to Title III.

TITLE II POLITICAL DIALOGUE

Article 4

The political dialogue between the European Union and Lithuania shall be developed and intensified. It shall accompany and consolidate the rapprochement between the European Union and Lithuania, support the political and economic changes under way in that country or already realised, and contribute to the establishment of close links of solidarity and new forms of cooperation between the Parties. The political dialogue is intended to promote in particular:

- Lithuania's full integration into the community of democratic nations and its progressive rapprochement with the European Union,

- an increasing convergence of positions of the Parties on international issues and, in particular, on those issues likely to have substantial effects on the Parties,

- better cooperation in areas covered by the common foreign and security policy of the European Union,

- security and stability in Europe.

Article 5

Political dialogue shall take place within the multilateral framework and in accordance with the forms and practices established with the associated countries of Central Europe.

Article 6

1. At Ministerial level, bilateral political dialogue shall take place within the Association Council, which shall have the general responsibility for any matter which the Parties might wish to put to it.

2. With the agreement of the Parties, other procedures for political dialogue shall be established, in particular:

- meetings, where necessary, of senior officials (at the level of political directors) representing Lithuania, on the one hand, and the Presidency of the Council of the European Union and the Commission, on the other,

- taking full advantage of all diplomatic channels between the Parties, including appropriate contacts in third countries and within the United Nations, the OSCE and other international forums,

- including Lithuania in the group of countries receiving regular information on the activities managed within the framework of the common foreign and security policy as well as exchanging information with a view to achieving the objectives defined in Article 4,

- any other means which would make a useful contribution to consolidating, developing and stepping up this dialogue.

Article 7

At parliamentary level, political dialogue shall take place within the framework of the Parliamentary Committee of the association between the European Communities and their Member States and the Republic of Lithuania (hereinafter referred to as the 'Parliamentary Committee`).

TITLE III FREE MOVEMENT OF GOODS

Article 8

1. The Community and Lithuania shall gradually establish a free trade area in a transitional period lasting a maximum of six years starting from the entry into force of the Agreement on Free Trade and Trade-Related Matters on 1 January 1995, in accordance with the provisions of this Agreement and in conformity with those of the GATT and the WTO.

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

3. For each product the basic duty to which the successive reductions set out in this Agreement are to be applied shall be that actually applied, erga omnes, on 1 March 1994. For products referred to in Chapters II and III, the basic duties shall be those set out in Annexes II to V and XII, or those actually applied, erga omnes, on 1 January 1995, whichever are the lower.

4. If, after the entry into force of the Agreement on Free Trade and Trade-Related Matters, i.e. 1 January 1995, any tariff reduction is applied on an erga omnes basis, in particular, reductions resulting from the tariff agreement concluded as a result of the GATT Uruguay Round, such reduced duties shall replace the basic duties referred to in paragraph 3 as from the date when such reductions are applied.

5. The Community and Lithuania shall communicate to each other their respective basic duties.

CHAPTER I INDUSTRIAL PRODUCTS

Article 9

1. The provisions of this Chapter shall apply to products originating in the Community and in Lithuania listed in Chapters 25 to 97 of the Combined Nomenclature with the exception of the products listed in Annex I.

2. The provisions of Articles 10 to 14 inclusive do not apply to products mentioned in Article 16.

3. Trade between the Parties in items covered by the Treaty establishing the European Atomic Energy Community will be conducted in accordance with the provisions of that Treaty.

Article 10

1. Customs duties on imports applicable in the Community to products originating in Lithuania are abolished on 1 January 1995.

2. Quantitative restrictions on imports into the Community and measures having an equivalent effect are abolished on 1 January 1995 with regard to products originating in Lithuania.

Article 11

1. Customs duties on imports applicable in Lithuania to products originating in the Community other than those listed in Annexes II, III and IV are abolished on 1 January 1995.

2. Customs duties on imports applicable in Lithuania to products originating in the Community which are listed in Annex II shall be progressively reduced in accordance with the following timetable:

- on 1 January 1996, each duty shall be reduced to 50 % of the basic duty,

- on 1 January 1997, the remaining duties shall be eliminated.

3. Customs duties on imports applicable in Lithuania to products originating in the Community which are listed in Annex III shall be progressively reduced in accordance with the following timetable:

- on 1 January 1998, each duty shall be reduced to 50 % of the basic duty,

- on 1 January 2001, the remaining duties shall be eliminated.

4. Customs duties on imports applicable in Lithuania to products originating in the Community which are listed in Annex IV shall be abolished on 1 January 2001.

5. Quantitative restrictions on imports into Lithuania of products originating in the Community and measures having an equivalent effect are abolished on 1 January 1995.

Article 12

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

Article 13

Any charges having an effect equivalent to customs duties on imports are abolished on 1 January 1995 in trade between the Community and Lithuania.

Article 14

1. The Community and Lithuania shall progressively abolish between them by 1 January 1995 any customs duties on exports and charges having equivalent effect except those applied by Lithuania to products listed in Annex V which shall be eliminated by 1 January 2001 at the latest.

2. Quantitative restrictions on exports to Lithuania and any measures having equivalent effect are abolished by the Community on 1 January 1995.

3. Quantitative restrictions on exports to the Community and any measures having equivalent effect are abolished by Lithuania on 1 January 1995.

Article 15

Each Party declares its readiness to reduce its customs duties in trade with the other Party more rapidly than is provided for in Articles 10 and 11 if its general economic situation and the situation of the economic sector concerned so permit.

The Association Council may make recommendations to this effect.

Article 16

1. The textile products of Lithuanian origin listed in Annex VI to this Agreement shall benefit from a suspension of customs duties on imports into the Community, under the conditions set out in that Annex. The Annex may be revised by decision of the Association Council, in accordance with the procedures set out in Article 113.

2. Protocol 1 lays down the other arrangements applicable to the textile products referred to therein.

Article 17

1. The provisions of this Chapter do not preclude the retention by the Community of an agricultural component in the duties applicable to products listed in Annex VII in respect of products originating in Lithuania.

2. The provisions of this Chapter do not preclude the introduction of an agricultural component by Lithuania in the duties applicable to the products listed in Annex VIII in respect of products originating in the Community.

CHAPTER II AGRICULTURE

Article 18

1. The provisions of this Chapter shall apply to agricultural products originating in the Community and in Lithuania.

2. The term 'agricultural products` means the products listed in Chapters 1 to 24 of the Combined Nomenclature and the products listed in Annex I, but excluding fishery products as defined by Regulation (EEC) No 3759/92.

Article 19

Protocol 2 lays down the trade arrangements for processed agricultural products which are listed therein.

Article 20

1. As from 1 January 1995 no quantitative restrictions apply to imports into the Community of agricultural products originating in Lithuania nor to imports into Lithuania of agricultural products originating in the Community.

2. The Community and Lithuania shall grant each other the concessions referred to in Annexes IX to XIII on a harmonious and reciprocal basis in accordance with the conditions laid down therein.

3. The concessions referred to in paragraph 2 may be subject to revision by agreement between the Parties within a period lasting until 31 December 1997 and on the basis of the principles and procedures set out in paragraph 4.

4. Taking account of the volume of trade in agricultural products between them, of their particular sensitivity, of the rules of the common agricultural policy of the Community, of the rules of the agricultural policy in Lithuania, of the role of agriculture in Lithuania's economy, the Community and Lithuania shall examine in the Association Council, product by product and on an orderly and reciprocal basis, the possibilities of granting each other further concessions.

Article 21

Notwithstanding other provisions of this Agreement, and in particular Article 30, if, given the particular sensitivity of the agricultural markets, imports of products originating in one Party, which are the subject of concessions granted pursuant to Article 20, cause serious disturbance to the markets in the other Party, both Parties shall enter into consultations immediately to find an appropriate solution. Pending such a solution, the Party concerned may take the measures it deems necessary.

CHAPTER III FISHERIES

Article 22

1. The provisions of this Chapter shall apply to fishery products originating in the Community and in Lithuania, which are covered by Regulation (EEC) No 3759/92.

Article 23

1. The Community and Lithuania shall grant each other the concessions referred to in Annexes XIV and XV, on a harmonious and reciprocal basis, in accordance with the conditions laid down therein.

2. The provisions of Articles 20(4) and 21 shall apply mutatis mutandis to fishery products.

CHAPTER IV COMMON PROVISIONS

Article 24

The provisions of this Title shall apply to trade between the Parties in all products except where otherwise provided herein or in Protocols 1 and 2.

Article 25

1. In trade between the Community and Lithuania from 1 January 1995:

- no new customs duties on imports or exports or charges having equivalent effect shall be introduced, nor shall those already applied be increased,

- no new quantitative restrictions on imports or exports or measures having equivalent effect shall be introduced nor shall those existing be made more restrictive.

2. Without prejudice to the concessions granted pursuant to Article 20, the provisions of paragraph 1 of this Article shall not restrict in any way the pursuance of the respective agricultural policies of Lithuania and the Community or the taking of any measures under such policies.

Article 26

1. The two Parties shall refrain from 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 two Parties may not benefit from repayment of internal indirect taxation in excess of the amount of direct or indirect taxation imposed on them.

Article 27

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. Consultations between the Parties shall take place within the Association Council concerning agreements establishing such customs unions or free trade areas and, where requested, on other major issues related to their respective trade policies with third countries. In particular in the event of a third country acceding to the Community, such consultations shall take place so as to ensure that account can be taken of the mutual interests of the Community and Lithuania stated in this Agreement.

Article 28

Exceptional measures of limited duration which derogate from the provisions of Article 11 and Article 25(1), first indent, may be taken by Lithuania in the form of increased customs duties.

These measures may only concern infant industries, or certain sectors undergoing restructuring or facing serious difficulties, particularly where these difficulties produce important social problems.

Customs duties on imports applicable in Lithuania to products originating in the Community introduced by these measures may not exceed 25 % ad valorem and shall maintain an element of preference for products originating in the Community.

The total value of imports of the products which are subject to these measures may not exceed 15 % of total imports of industrial products from the Community as defined in Chapter I during the last year for which statistics are available.

These measures shall be applied for a period not exceeding three years unless a longer duration is authorised by the Association Council. They shall cease to apply at the latest by 31 December 2000.

No such measures can be introduced in respect of a product if more than three years have elapsed since the elimination of all duties and quantitative restrictions or charges or measures having an equivalent effect concerning that product.

Lithuania shall inform the Association Council of any exceptional measures it intends to take and, at the request of the Community, consultations shall be held in the Association Council on such measures and the sectors to which they apply before they are applied. When taking such measures Lithuania shall provide the Association Council with a schedule for the elimination of the customs duties introduced under this Article. This schedule shall provide for a phasing out of these duties starting at the latest two years after their introduction at equal annual rates. The Association Council may decide on a different schedule.

Article 29

If one of the Parties finds that dumping is taking place in trade with the other Party within the meaning of Article VI of the GATT, it may take appropriate measures against this practice in accordance with the Agreement relating to the application of Article VI of the GATT, with related internal legislation and with the conditions and procedures laid down in Article 33.

Article 30

Where any product is being imported in such increased quantities and under such conditions as to cause or threaten to cause:

- serious injury to domestic producers of like or directly competitive products in the territory of one of the Parties, or

- serious disturbances in any sector of the economy or difficulties which could bring about serious deterioration in the economic situation of a region,

the Community or Lithuania, whichever is concerned, may take appropriate measures under the conditions and in accordance with the procedures laid down in Article 33.

Article 31

Where compliance with the provisions of Articles 14 and 25 leads to:

(i) re-export towards a third country against which the exporting Party maintains, for the product concerned, quantitative export restrictions, export duties or measures having equivalent effect, or

(ii) a serious shortage, or threat thereof, of a product essential to the exporting Party,

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 Article 33. The measures shall be non-discriminatory and be eliminated when conditions no longer justify their maintenance.

Article 32

The Member States of the European Union (hereinafter referred to as 'the Member States`) and Lithuania shall progressively adjust any State monopolies of a commercial character so as to ensure that, by the end of 1999, no discrimination regarding the conditions under which goods are procured and marketed exists between nationals of the Member States and of Lithuania. The Association Council will be informed about the measures adopted to implement this objective.

Article 33

1. In the event of the Community or Lithuania subjecting imports of products liable to give rise to the difficulties referred to in Article 30 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.

2. In the cases specified in Articles 29, 30 and 31, before taking the measures provided for therein or, in cases in which paragraph 3(d) applies, as soon as possible, the Community or Lithuania, as the case may be, shall supply the Association Council with all relevant information with a view to seeking a solution acceptable to the two Parties.

In the selection of measures, priority must be given to those which least disturb the functioning of this Agreement.

The safeguard measures shall be notified immediately to the 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.

3. For the implementation of paragraph 2, the following provisions shall apply:

(a) as regards Article 30, the difficulties arising from the situation referred to in that Article shall be referred for examination to the Association Council, which may take any decision needed to put an end to such difficulties.

If the Association Council or the exporting Party has not taken a decision putting an end to the difficulties or no other satisfactory solution has been reached within 30 days of the matter being referred, the importing Party may adopt the appropriate measures to remedy the problem. These measures must not exceed the scope of what is necessary to remedy the difficulties which have arisen;

(b) as regards Article 29, the Association Council shall be informed of the dumping case as soon as the authorities of the importing Party have initiated an investigation. If no end has been put to the dumping or if no other satisfactory solution has been reached within 30 days of the matter being referred to the Association Council, the importing Party may adopt the appropriate measures;

(c) as regards Article 31, the difficulties arising from the situations referred to in that Article shall be referred for examination to the Association Council.

The Association Council may take any decision needed to put an end to the difficulties. If it has not taken such a decision within 30 days of the matter being referred to it, the exporting Party may apply appropriate measures on the exportation of the product concerned;

(d) where exceptional circumstances requiring immediate action make prior information or examination, as the case may be, impossible, the Community or Lithuania whichever is concerned may, in the situations specified in Articles 29, 30 and 31, apply forthwith the precautionary measures strictly necessary to deal with the situation.

Article 34

Protocol 3 lays down rules of origin for the application of the tariff preferences provided for in this Agreement as well as the methods of administrative cooperation therewith.

Article 35

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 36

Protocol 4 lays down the specific provisions to apply to trade between Lithuania of the one part and Spain and Portugal of the other part, and it will be valid until 31 December 1995.

TITLE IV MOVEMENT OF WORKERS, ESTABLISHMENT, SUPPLY OF SERVICES

CHAPTER I MOVEMENT OF WORKERS

Article 37

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

- the treatment accorded to workers of Lithuanian nationality legally employed in the territory of a Member State shall be free from any discrimination based on nationality, as regards working conditions, remuneration or dismissal, as compared with its own nationals,

- 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 coming under bilateral agreements in the sense of Article 41, 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. Lithuania shall, subject to the conditions and modalities applicable in that country, 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 their spouse and children who are legally resident in the said territory.

Article 38

1. With a view to coordinating social security systems for workers of Lithuanian nationality, legally employed in the territory of a Member State and for the members of their family legally resident there, and subject to the conditions and modalities applicable in each Member State,

- 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,

- 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,

- the workers in question shall receive family allowances for the members of their family as defined above.

2. Lithuania 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 the second and third indents of paragraph 1.

Article 39

1. The Association Council shall by decision adopt the appropriate provisions to implement the objective set out in Article 38.

2. The Association Council shall by decision adopt detailed rules for administrative cooperation providing the necessary management and control guarantees for the application of the provisions referred to in paragraph 1.

Article 40

The provisions adopted by the Association Council in accordance with Article 39 shall not affect any rights or obligations arising from bilateral agreements linking Lithuania and the Member States where those agreements provide for more favourable treatment of nationals of Lithuania or of the Member States.

Article 41

1. Taking into account the labour market situation in the Member State, subject to its legislation and to the respect of rules in force in that Member State in the area of mobility of workers,

- the existing facilities for access to employment for Lithuanian workers accorded by Member States under bilateral agreements ought to be preserved and if possible improved,

- the other Member States shall consider favourably the possibility of concluding similar agreements.

2. The Association Council shall examine granting other improvements including facilities of access for professional training, in conformity with rules and procedures in force in the Member States, and taking account of the labour market situation in the Member States and in the Community.

Article 42

From the end of the transitional period or sooner if socioeconomic conditions in Lithuania have been largely aligned on those of the Member States and if the employment situation in the Community permits, the Association Council will consider ways of further improving the movement of workers. The Association Council shall make recommendations to such end.

Article 43

In the interest of facilitating the restructuring of labour resources resulting from the economic restructuring in Lithuania, the Community shall provide technical assistance for the establishment of a suitable social security system in Lithuania as set out in Article 93 of this Agreement.

CHAPTER II ESTABLISHMENT

Article 44

1. The Community and its Member States shall grant, except for the sectors included in Annex XVI, from entry into force of this Agreement:

(i) treatment no less favourable than that accorded by Member States to their own companies or to any third country company, whichever is the better, with regard to the establishment of Lithuanian companies;

(ii) to subsidiaries and branches of Lithuanian companies, established in their territory, treatment no less favourable than that accorded by Member States to their own companies and branches or to subsidiaries and branches of any third country company established in their territory, whichever is the better, in respect of their operation.

2. Lithuania shall facilitate the setting up of operations on its territory by Community companies and nationals. To that end, it shall, except for the sectors included in Annex XVIIa:

(i) grant, from entry into force of the Agreement, for the establishment of Community companies, treatment no less favourable than that accorded to its own companies or to companies of any third country, whichever is the better, save for the sectors referred to in Annex XVIIb, where national treatment shall be granted at the latest by the end of the transitional period referred to in Article 3;

(ii) grant, from entry into force of this Agreement, for the operation of branches and subsidiaries of Community companies, established in Lithuania, treatment no less favourable than that accorded to its own companies or to subsidiaries and branches of any third country company established in its territory, whichever is the better.

3. Lithuania shall, during the transitional period referred to in paragraph 2 (i) not adopt any measures or actions which introduce discrimination as regards the establishment and operations of Community companies and nationals in its territory in comparison with its own companies and nationals.

4. The Association Council shall examine regularly the possibility of accelerating the granting of national treatment in the sectors referred to in Annex XVIIb and the inclusion of areas or matters listed in Annex XVIIa within the scope of application of paragraph 2 of this Article. Amendments may be made to these Annexes by decision of the Association Council.

Following the expiration of the transitional period referred to in Article 3, the Association Council may exceptionally, on request of Lithuania, and if the necessity arises, decide to prolong the duration of exclusion of certain areas or matters listed in Annex XVIIb for a limited period of time.

5. The treatment described in paragraphs 1 and 2 shall be applicable for the establishment and operation of nationals as from the end of the transitional period referred to in Article 3.

6. Nothwithstanding the provisions of Article 44(2), Lithuanian subsidiaries and branches of Community companies shall have, from entry into force of this Agreement, the right to acquire, use, rent and sell real property, and as regards natural resources, agricultural land and forestry, the right to lease, where these are directly necessary for the conduct of economic activities for which they are established.

By the end of the transitional period referred to in Article 3 Lithuania shall grant these rights to Community nationals established in Lithuania.

Article 45

1. The provisions of Article 44 shall not apply to air transport, inland waterways and maritime cabotage transport services.

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

Article 46

For the purposes of this Agreement:

(a) a 'Community company` or a 'Lithuanian company` respectively shall mean a company set up in accordance with the laws of a Member State or of Lithuania respectively and having its registered office or central administration or principal place of business within the Community or in the territory of Lithuania respectively.

However, should the company, set up in accordance with the laws of a Member State or Lithuania respectively, have only its registered office within the Community or in the territory of Lithuania respectively, the company shall be considered a Community or Lithuanian company respectively if its operations possess a real and continuous link with the economy of one of the Member States or Lithuania respectively;

(b) 'subsidiary` of a company shall mean a company which is effectively controlled by the first 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 those who are not exclusively self-employed;

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

(e) 'operation` 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 'Lithuanian national` shall mean respectively a natural person who is a national of one of the Member States or of Lithuania;

(h) with regard to international maritime transport, including intermodal operations involving a sea leg, nationals of the Member States or of Lithuania established outside the Community or Lithuania respectively, and shipping companies established outside the Community or Lithuania and controlled by nationals of a Member State or Lithuanian nationals respectively, shall also be beneficiaries of the provisions of Chapter II and Chapter III, if their vessels are registered in that Member State or in Lithuania respectively in accordance with their respective legislation.

Article 47

1. Subject to the provisions of Article 44, with the exception of financial services described in Annex XVIII, each Party may regulate the establishment and operation of companies and nationals on its territory, in so far as these regulations do not discriminate against companies and nationals of the other Party 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, policyholders 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 the Agreement.

3. Nothing in the 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 48

1. The provisions of Articles 44 and 47 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 with 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 49

1. A 'Community company` or a 'Lithuanian company` established in the territory of Lithuania or the Community respectively 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 country of establishment, in the territory of Lithuania and the Community respectively, employees who are nationals of Community Member States and Lithuania respectively, provided that such employees are key personnel as defined in paragraph 2 of this Article, and that they are employed exclusively by companies, subsidiaries or branches.

The residence and work permits of such employees shall only cover the period of such employment.

2. Key personnel of the abovementioned companies herein referred to as 'organisations` are 'intracorporate transferees` as defined in (c) of this paragraph in the following categories, provided that the organisation is a juridical 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 the 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:

- directing the establishment or a department or sub-division of the establishment,

- supervising and controlling the work of other supervisory, professional or managerial employees,

- 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 'intracorporate 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 Lithuania of Lithuanian 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), within a company, and are responsible for the setting up of a Community subsidiary or branch of a Lithuanian company or of a Lithuanian subsidiary or branch of a Community company in a Community Member State or Lithuania respectively, when:

- those representatives are not engaged in making direct sales or supplying services, and

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

Article 50

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

Article 51

During the transitional period referred to in Article 3, Lithuania may introduce measures which derogate from the provisions of this Chapter as regards the establishment of Community companies and nationals if certain industries:

- are undergoing restructuring, or

- are facing serious difficulties, particularly where these entail serious social problems in Lithuania, or

- face the elimination or a drastic reduction of the total market share held by Lithuanian companies or nationals in a given sector or industry in Lithuania, or

- are newly emerging industries in Lithuania.

Such measures:

- shall cease to apply at the latest on the expiration of the transitional period referred to in Article 3,

- shall be reasonable and necessary in order to remedy the situation, and

- shall only relate to establishments in Lithuania to be created after the entry into force of such measures and shall not introduce discrimination concerning the operations of Community companies or nationals already established in Lithuania at the time of introduction of a given measure compared with Lithuanian companies or nationals.

While devising and applying such measures, Lithuania shall grant whenever possible to Community companies and nationals a preferential treatment, and in no case a treatment less favourable than that accorded to companies or nationals from any third country.

Prior to the introduction of these measures, Lithuania shall consult the Association Council and shall not put them into effect before a one-month period following the notification of the Association Council of the concrete measures to be introduced by Lithuania, except where the threat of irreparable damage requires the taking of urgent measures in which case Lithuania shall consult the Association Council immediately after their introduction.

On expiration of the transitional period referred to in Article 3, Lithuania may introduce such measures only with the authorisation of the Association Council and under conditions determined by the latter.

CHAPTER III SUPPLY OF SERVICES

Article 52

1. The Parties undertake in accordance with the following provisions to take the necessary steps to allow progressively the supply of services by Community or Lithuanian companies or nationals which are established in 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, and subject to the provisions of Article 56, 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 49(2), including natural persons who are representatives of a Community or Lithuanian 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. At the latest eight years after the entry into force of this Agreement, the Association Council shall take the measures necessary to implement progressively the provisions of paragraph 1. Account shall be taken of the progress achieved by the Parties in the approximation of their laws.

Article 53

1. The Parties shall not take any measures or actions which render the conditions for the supply of services by Community and Lithuanian 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 with the situation existing on the day preceding the day of entry into force of the Agreement.

2. If one Party is of the view that measures introduced by the other Party since the signature of the 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 signature of the Agreement, such first Party may request the other Party to enter into consultations.

Article 54

1. With regard to international maritime transport, the Parties undertake to apply effectively the principle of unrestricted access to the market and traffic on a commercial basis.

(a) The above provision does not prejudice the rights and obligations arising from the United Nations Code of Conduct for Liner Conferences, as applicable to one or other Party to the present Agreement. Non-conference lines will be free to operate in competition with a conference as long as they adhere to the principle of fair competition on a commercial basis.

(b) The Parties affirm their commitment to a freely competitive environment as being an essential feature of the dry and liquid bulk trade.

2. In applying the principles of paragraph 1, the Parties shall:

(a) not apply, as from entry into force of this Agreement, any cargo-sharing provisions of bilateral agreements between any Member State of the Community and the former Soviet Union;

(b) not introduce cargo-sharing clauses into future bilateral agreements with third countries, other than in those exceptional circumstances where liner shipping companies from one or other Party to the present Agreement would not otherwise have an effective opportunity to ply for trade to and from the third country concerned;

(c) prohibit cargo-sharing arrangements in future bilateral agreements concerning dry and liquid bulk trade;

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

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.

3. Nationals and companies of the Community providing international maritime transport services shall be free to provide international sea-river services in the inland waterways of Lithuania and vice versa.

4. With a view to ensuring the transit of goods through the territory of each Party, the Parties undertake to conclude an agreement as soon as possible and before the end of 1999 on the transit of intermodal traffic through each other's territory.

5. With a view to assuring a coordinated development and progressive liberalisation of transport between the Parties, adapted to their reciprocal commercial needs, the conditions of mutual market access and provision of services in transport by road, rail and inland waterways and, if applicable, in air transport shall be dealt with by specific transport agreements where appropriate, negotiated between the Parties after entry into force of this Agreement.

6. Prior to the conclusion of the agreements referred to in paragraph 5, the Parties shall not take any measures or actions which are more restrictive or discriminatory as compared with the situation existing on the day preceding the day of entry into force of the Agreement.

7. During the transitional period, Lithuania shall progressively adapt its legislation including administrative, technical and other rules to that of the Community legislation existing at any time in the field of road, rail, inland waterway and air transport in so far as it serves liberalisation purposes and mutual access to markets of the Parties and facilitates the movement of passengers and of goods.

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

CHAPTER IV GENERAL PROVISIONS

Article 55

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 which in the territory of either Party are connected, even occasionally, with the exercise of official authority.

Article 56

For the purpose of this Title nothing in the Agreement shall prevent the Parties from applying their laws and regulations regarding entry and stay, work, labour conditions and establishment of natural persons and supply of services, provided that, in so doing, they do not apply them in a manner as to nullify or impair the benefits accruing to any Party under the terms of a specific provision of the Agreement.

Article 57

Companies which are controlled and exclusively owned by Lithuanian companies or nationals and Community companies or nationals jointly shall also be beneficiaries of the provisions of Chapters II, III and IV of this Title.

Article 58

1. The most-favoured-nation treatment granted in accordance with the provisions of this Title shall not apply to the tax advantages which the Parties are providing or will provide in the future on the basis of agreements to avoid double taxation, or other tax arrangements.

2. Nothing in 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. Nothing in this Title shall be construed to prevent Member States or Lithuania from distinguishing, in the application of the relevant provisions of their fiscal legislation, between taxpayers who are not in identical situations, in particular as regards their place of residence.

Article 59

The provisions of this Title shall be progressively adjusted by the Parties. In formulating recommendations to this effect, the Association Council shall take into account the respective obligations of the Parties under the General Agreement on Trade in Services (GATS), and in particular of its Article V.

Article 60

The provisions of this Agreement shall not prejudice the application by each 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 V PAYMENTS, CAPITAL, COMPETITION AND OTHER ECONOMIC PROVISIONS, APPROXIMATION OF LAWS

CHAPTER I CURRENT PAYMENTS AND MOVEMENT OF CAPITAL

Article 61

The Parties undertake to authorise, in freely convertible currency, any payments on the current account of balance of payments to the extent that the transaction underlying the payments concerns movements of goods, services, or persons between the Parties which have been liberalised pursuant to the present Agreement.

Article 62

1. With regard to transactions on the capital account of balance of payments, from entry into force of the Agreement, the Member States and Lithuania respectively shall ensure the free movement of capital relating to direct investments made in companies formed in accordance with the provisions of Chapter II of Title IV, and the liquidation or repatriation of these investments and of any profit stemming therefrom.

The liquidation or repatriation of investments linked to establishment of Community nationals establishing in Lithuania as self-employed persons pursuant to Chapter II of Title IV shall be liberalised from entry into force of this Agreement. Notwithstanding the above provision, complete free movement of capital for all of these investments shall be ensured by the end of the transitional period referred to in Article 3.

2. With regard to transactions on the capital account of balance of payments, from entry into force of this Agreement the Member States and Lithuania respectively shall ensure the free movement of capital relating to portfolio investment. This shall also apply to the free movement of capital relating to credits related to commercial transactions or the provision of services in which a resident of one of the Parties is participating and to financial loans.

3. Without prejudice to paragraph 1, the Member States, as from the entry into force of the Agreement, and Lithuania as from the end of the transitional period referred to in Article 3, shall be introduce any new restrictions on the movement of capital and current payments connected therewith between residents of the Community and Lithuania and shall not make the existing arrangements more restrictive.

4. The provisions of paragraphs 1 and 2 shall not prevent Lithuania from applying restrictions on outward investments by Lithuanian nationals and companies. However, the liquidation or repatriation of investments made in Lithuania and of any profit stemming therefrom shall not be affected. Five years after the entry into force of this Agreement the Parties agree to consult over the maintenance of any such restrictions, taking into account all the relevant monetary, fiscal and financial considerations.

5. The Parties shall consult each other with a view to facilitating the movement of capital between the Community and Lithuania in order to promote the objective of the present Agreement.

Article 63

1. During the transitional period referred to in Article 3, the Parties 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 transitional period referred to in Article 3, the Association Council shall examine ways of enabling Community rules on the movement of capital to be applied in full.

CHAPTER II COMPETITION AND OTHER ECONOMIC PROVISIONS

Article 64

1. The following are incompatible with the proper functioning of this Agreement, in so far as they may affect trade between the Community and Lithuania:

(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 of Lithuania as a whole or in a substantial part thereof;

(iii) any public aid, which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods.

2. Any practices contrary to this Article shall be assessed on the basis of criteria arising from the application of the rules of Articles 85, 86 and 92 of the Treaty establishing the European Community or, for products covered by the ECSC Treaty, on the basis of corresponding rules of the ECSC Treaty including secondary legislation.

3. The Association Council shall, by 31 December 1997, adopt by decision the necessary rules for the implementation of paragraphs 1 and 2.

Until these rules are adopted, the provisions of the Agreement on interpretation and application of Articles VI, XVI and XXIII of the GATT shall be applied as the rules for the implementation of paragraph 1 point (iii) and related parts of paragraph 2.

4. (a) For the purposes of applying the provisions of paragraph 1(iii), the Parties recognise that until 31 December 1999, any public aid granted by Lithuania shall be assessed taking into account the fact that Lithuania shall be regarded as an area identical to those areas of the Community described in Article 92(3)(a) of the Treaty establishing the European Community. The Association Council shall, taking into account the economic situation of Lithuania, decide whether that period should be extended by further periods of five years.

(b) Each Party shall ensure transparency in the area of public aid, inter alia, by reporting annually to the other Party on the total amount and the distribution of the aid given and by providing, on request, information on aid schemes. On request by one Party, the other Party shall provide information on particular individual cases of public aid.

5. With regard to products referred to in Chapters II and III of Title III:

- the provision of paragraph 1(iii) does not apply,

- any practices contrary to paragraph 1(i) should be assessed according to the criteria established by the Community on the basis of Articles 42 and 43 of the Treaty establishing the European Community and in particular of those established in Council Regulation No 26/1962.

6. If the Community or Lithuania considers that a particular practice is incompatible with the terms of the first paragraph of this Article, and

- is not adequately dealt with under the implementing rules referred to in paragraph 3, or

- in the absence of such rules, and if such practice causes or threatens to cause serious prejudice to the interests of the other Party or material injury to its domestic industry, including its services industry,

it may take appropriate measures after consultation within the Association Council or after 30 working days following referral for such consultation.

In the case of practices incompatible with paragraph 1(iii) of this Article, such appropriate measures may, where the GATT applies thereto, only be adopted in conformity with the procedures and under the conditions laid down by the GATT and any other relevant instrument negotiated under its auspices which are applicable between the Parties.

7. Notwithstanding any provisions to the contrary adopted in conformity with paragraph 3, the Parties shall exchange information taking into account the limitations imposed by the requirements of professional and business secrecy.

Article 65

1. The Parties shall endeavour to avoid the imposition of restrictive measures including measures relating to imports for balance of payments purposes. In the event of their introduction, the Party having introduced the same shall present to the other Party, as soon as possible, a time schedule for their removal.

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

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

Article 66

With regard to public undertakings, and undertakings to which special or exclusive rights have been granted, the Association Council shall ensure that as from 1 January 1998, the principles of the Treaty establishing the European Community, notably Article 90, and the principles of the concluding document of the April 1990 Bonn meeting of the CSCE, notably entrepreneurs' freedom of decision, are upheld.

Article 67

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

2. Lithuania shall continue to improve the protection of intellectual, industrial and commercial property rights in order to provide, by the end of the transitional period referred to in Article 3, for a level of protection similar to that existing in the Community, including effective means of enforcing such rights.

3. By the end of the transitional period referred to in Article 3, Lithuania shall accede to the multilateral conventions on intellectual, industrial and commercial property rights referred to in paragraph 1 of Annex XVII to which Member States of the Community are parties or which are, de facto, applied by Member States according to the relevant provisions contained in these conventions.

4. If problems in the area of intellectual, industrial and commercial property affecting trading conditions were to occur, urgent consultations will be undertaken, at the request of either Party, with a view to reaching mutually satisfactory solutions.

Article 68

1. The Parties consider the opening up of the award of public contracts on the basis of non-discrimination and reciprocity, in particular in the GATT and WTO context, to be a desirable objective.

2. The Lithuanian companies as defined in Article 46 of this Agreement, shall be granted access to contract award procedures in the Community pursuant to Community procurement rules under a treatment no less favourable than that accorded to Community companies as of the entry into force of this Agreement.

Community companies in the sense of Article 46 of this Agreement shall be granted access to contract award procedures in Lithuania under a treatment no less favourable than that accorded to Lithuanian companies at the latest by the end of the transitional period referred to in Article 3.

Community companies established in Lithuania under the provisions of Chapter II of Title IV in the form of subsidiaries as described in Article 46 and in the forms described in Article 57 shall have on entry into force of this Agreement access to contract award procedures under a treatment no less favourable than that accorded to Lithuanian companies. Community companies established in Lithuania in the form of branches and agencies as described in Article 46 shall be granted such treatment at the latest by the end of the transitional period referred to in Article 3.

The provisions in this paragraph shall also apply to public contracts covered by Directive 93/38/EEC of 14 June 1993 once Lithuania has introduced the appropriate legislation.

The Association Council shall periodically examine the possibility for Lithuania to introduce access to contract award procedures in Lithuania for all Community companies prior to the end of the transitional period.

3. As regards establishment, operations, supply of services between the Community and Lithuania, as well as employment and movement of labour linked to the fulfilment of public contracts, the provisions of Articles 37 to 60 of this Agreement are applicable.

CHAPTER III APPROXIMATION OF LAWS

Article 69

The Parties recognise that an important condition for Lithuania's economic integration into the Community is the approximation of Lithuania's existing and future legislation to that of the Community. Lithuania shall endeavour to ensure that its legislation will be gradually made compatible with that of the Community.

Article 70

The approximation of laws shall extend to the following areas in particular: customs law, company law, banking law, company accounts and taxation, intellectual property, financial services, rules on competition, protection of health and life of humans, animals and plants, protection of workers including health and safety at work, consumer protection, indirect taxation, technical rules and standards, nuclear law and regulation, transport, telecommunications, environment, public procurement, statistics, product liability.

Within these areas rapid progress in the approximation of laws should in particular be made in the fields of the internal market, competition, protection of workers, environmental protection and consumer protection.

Article 71

The Community shall provide Lithuania with technical assistance for the implementation of these measures, which may include inter alia:

- the exchange of experts,

- the provision of early information especially on relevant legislation,

- organisation of seminars,

- training activities,

- aid for the translation of Community legislation in the relevant sectors.

TITLE VI ECONOMIC COOPERATION

Article 72

1. The Community and Lithuania shall further develop economic cooperation aimed at contributing to Lithuania's development and growth potential. Such cooperation shall strengthen existing economic links on the widest possible foundation, to the benefit of both Parties.

2. Policies and other measures shall be designed to bring about the economic and social development of Lithuania and will be guided by the principle of sustainable development. These policies should ensure that environmental considerations are also fully incorporated from the outset and that they are linked to the requirements of harmonious social development.

3. To this end the cooperation should focus in particular on policies and measures related to industry, investment, agriculture and the agroindustrial sector, energy, transport, regional development and tourism.

4. Special attention shall be devoted to measures capable of fostering cooperation between the three Baltic countries, and with the other countries of Central and Eastern Europe as well as the other countries bordering the Baltic Sea with a view to an integrated development of the region.

Article 73 Industrial cooperation

1. Cooperation shall seek to promote the following in particular:

- industrial cooperation between the economic operators of the two Parties, with the particular aim of strengthening the private sector in Lithuania,

- Community participation in Lithuania's efforts in both public and private sectors to modernise and restructure its industry, which will effect the transition from a centrally planned system to a market economy under conditions which ensure that the environment is protected,

- the restructuring of individual sectors,

- the establishment of new undertakings in areas offering potential for growth, particularly in branches of light industry, consumer goods and market services.

2. Industrial cooperation initiatives shall take into account priorities determined by Lithuania. The initiatives should seek in particular to establish a suitable framework for undertakings, to improve management know-how and to promote transparency as regards markets and conditions for undertakings. Technical assistance will be included where appropriate.

Article 74 Investment promotion and protection

1. Cooperation shall aim at maintaining and, if necessary, improving a legal framework and a favourable climate for private investment and its protection, both domestic and foreign, which is essential to economic and industrial reconstruction and development in Lithuania. The cooperation shall also aim to encourage and promote foreign investment and privatisation in Lithuania.

2. The particular aims of cooperation shall be:

- for Lithuania to establish a legal framework which favours and protects investment,

- the conclusion, where appropriate, with Member States of bilateral agreements for the promotion and protection of investment,

- to proceed with deregulation and to improve economic infrastructure,

- to exchange information on investment opportunities in the context of trade fairs, exhibitions, trade weeks and other events.

Assistance from the Community could be granted in the initial stage to agencies which promote inward investment.

3. Lithuania shall honour the rules on Trade-Related Aspects of Investment Measures (TRIMs).

Article 75 Small and medium-sized enterprises

1. The Parties shall aim to develop and strengthen small and medium-sized enterprises (SMEs) and cooperation between SMEs in the Community and Lithuania.

2. They shall encourage the exchange of information and know-how in the following areas:

- improving, where appropriate, the legal, administrative, technical, tax and financial conditions necessary for the setting-up and expansion of SMEs and for cross-border cooperation,

- the provision of the specialised services required by SMEs (management training, accounting, marketing, quality control, etc.) and the strengthening of agencies providing such services,

- the establishment of appropriate links with Community operators via European business cooperation networks, in order to improve the flow of information to SMEs and to promote cross-border cooperation.

3. The cooperation shall include the supply of technical assistance, in particular for the establishment of appropriate institutional back-up for SMEs at both national and regional level, regarding financial, training, advisory, technological and marketing services.

Article 76 Agricultural and industrial standards and conformity assessment

1. The cooperation between the Parties shall aim in particular to reduce differences in standards, technical regulations and conformity assessment procedures, with Community technical assistance where necessary.

2. To this end, the cooperation shall seek:

- to promote the use of Community technical regulations and European standards and conformity assessment procedures, recognising that, to reach Lithuania's objectives of environmental quality, the country is free to develop and implement special (higher) standards if necessary,

- where appropriate, to conclude agreements on mutual recognition in these fields,

- to encourage Lithuania's active and regular participation in the work of specialised organisations (CEN, Cenelec, ETSI, EOTC, Euromet),

- to support Lithuania in the European measurement and testing programmes,

- to promote the exchange of technical and methodological information in the field of quality control of production and production processes between interested parties.

3. The Community shall provide Lithuania with technical assistance where appropriate.

Article 77 Cooperation in science and technology

1. The Parties shall promote cooperation in research and technological development activities. They shall devote special attention to the following:

- the exchange of information on each other's science and technology policies,

- the organisation of joint scientific meetings (seminars and workshops),

- joint R& D activities aimed at encouraging scientific progress and the transfer of technology and know-how,

- training activities and mobility programmes for researchers and specialists from both sides,

- the development of an environment conducive to research and the application of new technologies and adequate protection of the intellectual property of results of research,

- Lithuania's participation in Community research programmes in accordance with paragraph 3.

Technical assistance shall be provided where appropriate.

2. The Association Council shall determine the appropriate procedures for developing cooperation.

3. Cooperation under the Community's framework programme in the field of research and technological development shall be implemented according to specific arrangements to be negotiated and concluded in accordance with the legal procedures of each Party.

Article 78 Education and training

1. Cooperation shall aim at a harmonious development of human resources and at raising the level of general education and professional qualifications in Lithuania, both in the public and private sectors, taking into consideration the priorities of Lithuania. Institutional frameworks and plans of cooperation will be established under the auspices of the European Training Foundation, the Tempus programme and the Eurofaculty. Participation of Lithuania in other Community programmes shall also be considered in this context.

2. The cooperation shall focus in particular on the following areas:

- reform of the education and training system in Lithuania,

- initial training, in-service training and retraining, including the training of public and private sector executives and senior civil servants, particularly in priority areas to be determined,

- in-service training for teachers,

- cooperation between universities, cooperation between universities and firms, mobility for teachers, students, administrators and young people,

- promoting teaching in the field of European studies within the appropriate institutions,

- mutual recognition of periods of studies and diplomas,

- promoting language training in Lithuania, in particular for resident persons belonging to minorities,

- teaching of Community languages, training of translators and interpreters and promotion of the use of Community standards and terminology,

- development of distance education and new training technologies,

- provision of training materials and equipment.

Article 79 Agriculture and the agroindustrial sector

1. Cooperation in this field shall aim at modernising, restructuring and privatising agriculture, fresh water (inland) fisheries and the agroindustrial sector as well as forestry. Such cooperation will promote the protection and sustainable use of natural landscapes and non-polluted soils.

To this end cooperation shall endeavour notably to:

- develop private farms and distribution channels, methods of storage, marketing etc.,

- modernise the rural infrastructure (transport, water supply, telecommunications),

- improve land-use planning, including construction and town planning,

- develop criteria for areas for extensive and intensive agriculture, forestry and fresh water (inland) fisheries in accordance with national and regional development plans and programmes,

- establish and promote effective cooperation on agricultural information systems,

- improve productivity and quality by using appropriate methods and products; provide training and monitoring in the use of anti-pollution methods connected with inputs,

- promote development of organic agriculture, processing, marketing of production,

- promote implementation of Community food standards,

- restructure, develop, modernise and decentralise food-processing firms and their marketing techniques,

- promote complementarity in agriculture,

- promote industrial cooperation in agriculture and the exchange of know-how, particularly between the private sectors in the Community and Lithuania,

- develop cooperation on sanitary and phytosanitary legislation, with the aim of bringing about gradual harmonisation with Community standards through assistance for training and the organisation of checks,

- promote exchange of information in respect of agricultural policy and legislation,

- promote joint ventures, particularly for cooperation on the markets of third countries.

2. To these ends, technical assistance shall be provided by the Community as appropriate.

Article 80 Fisheries

1. The Parties shall develop their cooperation on fisheries in accordance with the Agreement on Fisheries Relations between the European Economic Community and the Republic of Lithuania.

2. The cooperation shall in particular take into account:

- the establishment of sustainable fishing in the world's oceans and the Baltic Sea,

- traditional cooperation on fisheries,

- the necessity of developing fishing control systems, catch-statistics and information systems,

- the development of scientific potential for the study of fishery resources in the Baltic Sea and mutual action for the conservation and renewal of fish stocks (especially salmon and cod) and the introduction of modern technologies in this field,

- the gradual modernisation of Lithuania's fishing fleet and fish-processing industry, through the establishment of joint ventures,

- the development of private enterprises in this field and the necessity of obtaining EC experience in marketing techniques,

- the development of industrial cooperation in fisheries and exchange of know-how,

- the introduction in Lithuania of EC production quality and health standards for fish farming (including feed),

- the exchange of information on fisheries policy and legislation and on the establishment of a market for fishery products,

- cooperation in international fishery organisations.

Article 81 Energy

1. Within the principles of the market economy and of the Treaty on the European energy charter, the Parties shall cooperate to develop the progressive integration of the energy markets in Europe.

2. The cooperation shall focus on the following in particular:

- formulation and planning of energy policy, including its long-term aspects,

- management and training in the energy sector,

- promotion of energy saving and energy efficiency,

- development of energy resources,

- improvement of distribution as well as improvement and diversification of supply,

- environmental impact of energy production and consumption,

- the nuclear energy sector, in particular nuclear safety,

- opening up the energy market to a greater degree, including facilitating transit of gas and electricity,

- the electricity and gas sectors, including consideration of the possibility of the inter-connection of European supply networks,

- modernisation of energy infrastructures,

- formulation of framework conditions for cooperation between undertakings in this sector,

- transfer of technology and know-how,

- cooperation on pricing and taxation policies in the energy sector,

- regional cooperation in the energy sector among the Baltic States, particularly as an important contribution to security of energy supply in the region.

3. Technical assistance shall be provided where appropriate.

Article 82 Nuclear safety

1. The aim of cooperation is to provide for a safer use of nuclear energy.

2. Cooperation in the nuclear field shall mainly cover the following topics:

- industrial measures to upgrade the safety of Lithuanian nuclear power plants,

- evaluation of the feasibility of improving the safety of the existing power plant in Ignalina,

- upgrading of staff training,

- upgrading of Lithuania's laws and regulations on nuclear safety and strengthening of the supervisory authorities and their resources,

- nuclear safety, preparation for nuclear emergencies and accident management,

- radiation protection, including environmental radiation monitoring,

- fuel cycle problems, safeguarding and physical protection of nuclear materials,

- radioactive waste management,

- decommissioning and dismantling of nuclear installations,

- decontamination,

- establishment of uniform safety standards to protect the health of workers, the general public and the environment and ensuring that they are applied.

3. Cooperation will include the exchange of information and experience and R& D activities in accordance with the provisions on science and technology.

4. The Parties agree on the necessity of making efforts to cooperate, within the framework of their respective powers and competences, in order to combat nuclear smuggling. Cooperation in this area should include exchange of information, technical support for analysing and identifying the material, and administrative and technical assistance for the installation of efficient customs controls. Further cooperation in this field could be identified as need arises.

Article 83 Environment

1. The Parties shall develop and strengthen their cooperation on environment and human health.

2. Cooperation shall concern in particular:

- effective monitoring of pollution levels,

- combating local, regional and cross-border air and water pollution,

- efficient, sustainable and clean energy production and consumption; safety of industrial plants (including nuclear power stations),

- classification and safe handling of chemicals,

- water quality, particularly in cross-border waterways (protection of the Baltic Sea against pollution from ships, artificial islands, platforms and other sources),

- reduction, recycling and safe disposal of waste and implementation of the Basle Convention,

- sustainable use of non-renewable natural resources,

- the environmental impact of agriculture, soil erosion and pollution by agricultural chemicals, water eutrophication,

- protection of forests and flora and fauna,

- conservation of biodiversity,

- protected areas,

- land-use planning, including construction and town planning,

- improvement of public transport, especially in cities,

- use of economic and fiscal instruments,

- management of the coastline and prevention of marine pollution,

- global climate change,

- rehabilitation of contaminated areas,

- protecting human health against environmental hazards.

3. Cooperation shall take place notably through:

- exchange of information and experts, especially in the field of the transfer of clean technologies and the safe use of environmentally-friendly biotechnologies,

- institution-building and training programmes,

- transfer of technology and know-how,

- approximation of laws (Community standards),

- cooperation at regional level (including cooperation between the three Baltic States and in the framework of the European Environment Agency) and at international level,

- development of strategies, particularly with regard to global and climatic issues,

- education and information on environmental issues,

- environmental impact studies.

4. The Parties shall develop cooperation in various fields of water management with special regard to:

- environment-friendly utilisation of the water of trans-boundary water shed and cross-boundary rivers and lakes,

- harmonisation of regulations concerning water management and means of technical water regulation (directives, limits, standards, normatives, logistics),

- modernisation of research and development (R& D) and the scientific basis of water management.

Article 84 Transport

1. The Parties shall develop and step up their cooperation in the field of transport in order to enable Lithuania to:

- restructure and modernise transport,

- improve the movement of passengers and goods and the access to transport markets by removing administrative, technical and other obstacles,

- facilitate Community transit through Lithuania by road, rail, inland waterway and combined transport,

- achieve operating standards comparable to those in the Community.

2. The cooperation shall cover the following in particular:

- economic, legal and technical training programmes and the preparation of the legislative and institutional framework for policy development and implementation, including privatisation of the transport sector,

- the provision of technical assistance and advice, and the exchange of information (conferences and seminars),

- support for the development of infrastructure in Lithuania.

3. Priority areas of cooperation will be:

- the construction and modernisation, on recognised trans-European corridors and major routes of common interest, of road, rail, inland waterway, port and airport infrastructures,

- the improvement of conditions, the reduction of waiting times and the easing of transit at the border crossings on the Lithuanian stretch of the multimodal Crete corridors No 1 and No 9, on the basis of norms set by international agreements of the European Union to secure interoperability,

- the management of railways, ports and airports, including cooperation between the appropriate national authorities,

- land-use planning, including construction and urban planning,

- the upgrading of technical equipment to meet Community standards; particularly in the fields of road-rail transport, containerisation and trans-shipment,

- contributing to the development of transport policies compatible with those in the Community,

- the promotion of short-sea shipping as an alternative to overland transport and as a transport mode particularly suited to the Baltic Sea region,

- the promotion of joint research and development programmes,

- concrete projects in a tri- or multilateral (CBSS - Council of the Baltic Sea States) context of regional cooperation, such as Via Baltica.

Article 85 Telecommunications, postal services and broadcasting

1. The Parties shall endeavour to expand and strengthen telecommunications cooperation. This shall involve:

- exchange of information on telecommunications policies, postal services and broadcasting policies,

- establishment of a stable and consistent regulatory framework for telecommunications, postal services and broadcasting,

- exchange of technical and other information and the organisation of seminars, workshops and conferences for experts of both sides,

- training and advisory operations,

- transfer of technology,

- joint execution of projects by competent bodies from both sides,

- promotion of European standards and certification systems,

- promotion of new communication facilities, services and installations, particularly those with commercial applications,

- collaboration in development of integrated services digital network (ISDN) implementation strategic plan.

2. These activities shall focus on the following priority areas:

- development and application of a sectoral market policy in telecommunications, postal services and broadcasting in Lithuania, of legal acts and procedures,

- modernisation of Lithuania's telecommunications network and its integration into European and world networks,

- cooperation within European standardisation structures,

- integration of trans-European systems,

- legal aspects of telecommunications,

- management of telecommunications in the new European business environment: organisational structures, strategy and planning, purchasing principles, tariffs structure in voice telephony,

- land-use planning, construction and town planning,

- upgrading of the data network and development of data-based information services.

Article 86 Information infrastructure

The Parties shall endeavour to expand and strengthen cooperation, with a view to setting up a global information infrastructure. This shall involve:

- exchange of information on policies and programmes aimed at setting up the information infrastructure and the corresponding services,

- close cooperation between institutions managing current information networks (academic and/or government agencies),

- exchange of information on technologies, market needs and other information, organisation of seminars, workshops and conferences for experts and industrialists from both sides,

- training and advisory operations,

- joint execution of projects,

- promotion and agreement of information technology standards, hardware and software certification and testing,

- promotion of an appropriate regulatory framework, assessment of existing information technology legislation in relation to European Union laws,

- action to promote the growth of information services and infrastructure,

- cooperation in the areas of electronic data interchange (EDI) technology and information security systems and policies.

Article 87 Banking, insurance and other financial services

1. The Parties shall cooperate with the aim of establishing and developing a suitable framework for the encouragement of a banking, insurance and financial services sector in Lithuania.

2. The cooperation shall focus on:

- the improvement of efficient accounting and audit systems in Lithuania based on international rules and European Community standards,

- the strengthening and restructuring of the banking and financial systems,

- the improvement and harmonisation of supervision and regulation systems of banking and financial services,

- the preparation of glossaries of terminology,

- the exchange of information in particular in respect of laws in force or being drafted,

- the preparation and translation of Community and Lithuanian legislation.

3. To this end, the cooperation shall include the provision of technical assistance and training.

Article 88 Audit and financial control cooperation

1. The Parties shall cooperate with the aim of developing efficient financial control and audit systems in the Lithuanian administration following standard Community methods and proceedings.

2. Cooperation shall focus on:

- the exchange of relevant information on audit systems,

- the uniformisation of audit documentation,

- training and advisory operations.

3. To this end, technical assistance shall be provided by the Community as appropriate.

Article 89 Monetary policy

At the request of the Lithuanian authorities, the Community shall provide technical assistance designed to support Lithuania's efforts towards the gradual alignment of its policies on those of the European monetary system. At the request of Lithuania, it will organise informal exchange of information concerning the principles and the functioning of the European monetary system.

Article 90 Money laundering

1. The Parties agree on the necessity of making strenuous efforts and cooperating in order to prevent the use of their financial systems for the laundering of proceeds from criminal activities in general and drug offences in particular.

2. Cooperation in this area shall include administrative and technical assistance with the purpose of establishing suitable standards to combat money laundering, equivalent to those adopted by the Community and other international bodies in this field, in particular the Financial Action Task Force (FATF).

Article 91 Regional development

1. The Parties shall strengthen cooperation between them on regional development and land-use planning.

2. To this end, any of the following measures may be taken:

- exchange of information by national, regional or local authorities on regional and land-use planning policy, and, where appropriate, the provision of assistance to Lithuania for the formulation of such policy,

- joint action by regional and local authorities in the field of economic development,

- study of a joint approach towards the development of interregional cooperation with Baltic Sea regions in the Community,

- exchange of visits to explore cooperation and assistance opportunities,

- exchange of civil servants or experts,

- provision of technical assistance with special emphasis on the development of disadvantaged regions, including border areas,

- establishment of programmes for the exchange of information and experience, by methods including seminars.

Article 92 Housing and construction

The Parties will cooperate in the housing and construction sector. This cooperation has the objective, among others, of modernising and restructuring the housing and construction sector, taking into account the related aspects of health, safety, environment and energy efficiency.

Article 93 Social cooperation

1. With regard to health and safety at work and public health, the Parties shall develop cooperation between them with the aim of improving the level of protection of the health and safety of workers, taking as a reference the level of protection existing in the Community. Cooperation shall comprise the following in particular:

- the provision of technical assistance,

- the exchange of experts,

- cooperation between companies,

- information and training operations,

- cooperation on public health.

2. With regard to employment, cooperation between the Parties shall focus in particular on:

- organisation of the labour market,

- modernisation of job-finding, careers advice and workers' retraining services,

- planning and implementation of regional restructuring programmes,

- encouragement of local employment development.

Cooperation in these fields shall be realised through actions such as the performance of studies, provision of the services of experts and information and training.

3. With regard to social security, cooperation between the Parties shall seek to adapt the Lithuanian social security system to the new economic and social situation, primarily by providing the services of experts and information and training.

Article 94 Tourism

The Parties shall increase and develop cooperation between them in the field of tourism, which will be aimed in particular at:

- facilitating the tourist trade,

- strengthening the flow of information through international networks, databases, etc.,

- transferring know-how through training, exchanges, seminars,

- enhancing regional cooperation projects,

- studying the opportunities for joint operations (cross-border projects, town twinning, etc.),

- developing of agro-tourism,

- introducing computerised booking and information systems (preferably common to all three Baltic States) and consumer protection standards for tourists.

Article 95 Information and communication

1. With regard to information and communication, the Community and Lithuania shall take appropriate steps to stimulate effective mutual exchange of information. Priority shall be given to programmes aimed at providing the general public with basic information about the European Union and specific circles in Lithuania with more specialised information, including, where possible, access to Community databases.

2. The Parties shall coordinate and, where appropriate, harmonise their policies regarding the regulation of cross-border broadcasts, technical standards and the promotion of European audiovisual technology.

3. Cooperation may include providing for exchange programmes, scholarships, training facilities for journalists and experts in the sectors of the media as appropriate.

Article 96 Consumer protection

1. The Parties shall cooperate with the aim of achieving full compatibility between the systems of consumer protection in