COMPREHENSIVE MONITORING REPORT ON POLAND'S PREPARATIONS FOR MEMBERSHIP {COM(2003) 675 final}

A. Introduction

B. Economic issues

1. Economic developments

2. Implementation of recommendations for improvements

C. Commitments and requirements arising from the accession negotiations

1. Administrative and judicial capacity

Public administration

Judicial capacity

Anti-corruption measures

Translation of the acquis into Polish

2. The chapters of the acquis

Chapter 1: Free movement of goods

Chapter 2: Free movement of persons

Chapter 3: Freedom to provide services

Chapter 4: Free movement of capital

Chapter 5: Company law

Chapter 6: Competition Policy

Chapter 7: Agriculture

Chapter 8: Fisheries

Chapter 9: Transport policy

Chapter 10: Taxation

Chapter 11: Economic and monetary union

Chapter 12: Statistics

Chapter 13: Social policy and employment

Chapter 14: Energy

Chapter 15: Industrial policy

Chapter 16: Small and medium-sized enterprises

Chapter 17: Science and research

Chapter 18: Education and training

Chapter 19: Telecommunications and information technologies

Chapter 20: Culture and audio-visual policy

Chapter 21: Regional policy and co-ordination of structural instruments

Chapter 22: Environment

Chapter 23: Consumer and health protection

Chapter 24: Justice and home affairs

Chapter 25: Customs union

Chapter 26: External relations

Chapter 27: Common foreign and security policy

Chapter 28: Financial control

Chapter 29: Financial and budgetary provisions

D. Conclusion

Statistical annex

A. Introduction

The accession negotiations with Poland were successfully concluded on 13 December 2002 and the Treaty of Accession was signed on 16 April 2003. In a referendum held on 7-8 June 2003, a majority of Poles expressed their support for membership of the European Union. Following ratification of the Treaty of Accession, Poland will join the EU on 1 May 2004.

In its Strategy Paper "Towards the enlarged Union", which accompanied the 2002 Regular Reports, the Commission stated that:

"Acceding countries need to implement the acquis by the date of accession, except in cases where transitional arrangements have been agreed. Commitments undertaken in the negotiations must be fully met before accession. The Regular Reports point to a number of areas where further improvements need to be made in the context of the political and economic criteria and in relationship to the adoption, implementation and enforcement of the acquis. These should be vigorously pursued. In order to analyse progress and to facilitate successful membership of the European Union, the Commission will regularly monitor this and report to Council. The Commission will produce six months before the envisaged date of accession a comprehensive monitoring report for the Council and the European Parliament."

The Copenhagen European Council in December 2002 concluded that:

"Monitoring up to accession of the commitments undertaken will give further guidance to the acceding states in their efforts to assume responsibilities of membership and will give the necessary assurance to current Member States."

and the Thessaloniki European Council in June 2003 stated that:

"...the ten acceding States are encouraged to keep up their efforts so that they are fully prepared to assume the obligations of membership by accession. This also includes the necessary translation of the Community acquis. With a view to making a success of enlargement, the monitoring of these preparations has been intensified on the basis of reports submitted regularly by the Commission."

As the accession date of 1 May 2004 draws closer, this report presents a comprehensive state of play of the findings of the regular monitoring carried out by the Commission, building upon the findings of the 2002 Regular Report for Poland. The report contains two main parts.

The first part deals with economic issues. It describes briefly economic developments in Poland, and then goes on to assess the implementation of the necessary economic reforms in the areas highlighted in the conclusions of the 2002 Regular Report for Poland as being in need of further improvements.

The second part gives an overview of where Poland stands in implementing all commitments and requirements arising from the accession negotiations for each acquis chapter, both in terms of legislation and from the perspective of implementing structures, including administrative capacity and enforcement. In view of their importance for the implementation and enforcement of the acquis, the overall state of readiness of the public administration and the judicial system and the development of effective anti-corruption measures are assessed in an introductory section to this part.

This report reflects the situation at the end of September 2003. It records decisions actually taken, legislation actually adopted, measures actually implemented and structures actually in place and functioning by that date.

For each chapter of the acquis, this report identifies the areas in which Poland is expected to be, or is already, in a position to implement the acquis and the areas where further action is still needed. Where relevant, the report also points out issues where lagging or deficient preparations are a cause of serious concern. This assessment starts from the premise that Poland must be fully prepared for membership from the date of accession. In cases where transitional arrangements have been agreed in the accession negotiations, their effect on Poland's obligations is duly reflected in the assessment.

Numerous sources of information have been used to compile this report. Poland was invited to provide information on its state of preparedness. The Report also draws on information provided by Poland within the framework of the Association Agreement and the accession negotiations, as well as on peer reviews that have taken place to assess its administrative capacity in specific areas. Council deliberations and European Parliament reports and resolutions have been taken into account in drafting it. [1] Where relevant, the Commission has also drawn on assessments made by various international organisations such as the Council of Europe, the OSCE and the international financial institutions, and by non-governmental organisations.

[1] For the European Parliament the rapporteur is Mr Jas Gawronski.

B. Economic issues

In its 2002 Regular Report, the Commission concluded that

"Poland is a functioning market economy. The continuation of its current reform path should enable Poland to cope with competitive pressure and market forces within the Union.

Improvements can be made to fiscal policy through the implementation of the government's new expenditure norm at all levels of government as part of a more broadly based structural reform of public finances to support fiscal consolidation. Furthermore, restructuring and privatisation, mainly in heavy industry, the financial sector, energy distribution and agriculture, needs to be completed. In addition bankruptcy procedures and the land registry call for further improvement. Finally, central bank independence must be preserved to ensure macroeconomic stability and investor confidence."

The principal purpose of this part of the Comprehensive Monitoring Report is to assess the implementation of recommendations for improvements in the areas identified in last year's Regular Report. The focus is on the change since last year and not on the overall degree of functioning of the market economy or degree of competitiveness. The assessment can be found in Section 2. Section 1 briefly describes recent economic developments in Poland including the continuation of the reform path since last year's Report.

1. Economic developments

Poland has maintained a stable macroeconomic situation and is experiencing a gradual recovery, mainly driven by external demand. After a sharp slowdown in 2001, Poland experienced a modest recovery in 2002. Real GDP grew by only 1.4%, against 1% in 2001. Private consumption and net exports were the main motors of growth, while fixed investment continued to contract sharply. Recent economic developments suggest that the recovery is gradually gaining momentum. Real GDP grew by 2.2% year-on-year in the first quarter of this year and growth accelerated to 3.8% year-on-year in the second quarter. The recovery is mainly driven by exports, despite weak growth in Poland's main trading partners. The competitiveness of Polish exports has been in part strengthened by the real effective depreciation of the zloty observed since mid-2001. Last year, the strong performance of exports, together with the economic slowdown, resulted in a further reduction of the current account deficit to 3.6% of GDP. Thus, the current account deficit is now at levels that can be easily financed by inflows of foreign direct and portfolio investments. However, the fall in FDI inflows experienced in 2002 for the second consecutive year suggests that the Polish economy has become less attractive to foreign investors. Inflation continued to decline sharply in 2002, with headline inflation falling to 0.8% year-on-year in December 2002. Since the beginning of the year, inflation has remained very low. The sharp fall in inflation and the absence of inflationary pressures have allowed the Monetary Policy Council to gradually cut its key reference rate from 19% in February 2001 to 5.25% in June 2003. However, real interest rates in Poland are still high. The loosening of monetary policy has not been matched by an adjustment in the fiscal stance. The growing fiscal deficit and debt, together with high unemployment, are the main economic challenges facing the Polish authorities. On the basis of the Labour Force survey, the unemployment rate almost reached the 20% mark in 2002, while the employment rate stood at 51.5%. Although a moderate improvement of the labour market situation has been visible since February, the pace of the recovery will not be strong enough to make a significant dent in the high level of unemployment (see also Joint Assessment of the Employment Policy Priorities and subsequent progress reports).

>TABLE POSITION>

a Moving 12 months average rate of change.

b Source: Website of the National Bank.

P= provisional figures ; E= estimated data

The reform path has nearly come to a halt since last year's Report. Privatisation considerably slowed down in the past two years and the pace of privatisation in the first months of this year has been disappointing. In 2002, actual privatisation proceeds turned out to be significantly lower than planned, with only one major privatisation deal completed. Despite the government's so-called "anti-crisis" package of July 2002 and the adoption of several sectoral restructuring plans, progress in the restructuring of the remaining state-controlled industries has been insufficient. The economic slowdown has taken a toll on the financial performance of banks. The net profit of the banking sector fell by 37% in 2002, and the first half of this year saw another drop in net profit by about 11% year-on-year. The deterioration in the profitability of banks also reflects the continued increase in non-performing loans. Their share in loan portfolios rose to 20.5% in 2002 against 17.9% in 2001. As a result, banks maintained a very cautious approach to lending. Loans to the non-financial sector grew by only 3.4% in 2002. The rapid rise in housing loans in foreign currency, generally unhedged, accounts for most of the growth in credit. In March, the government gave its broad support to the fiscal reform plan proposed by the former Finance Minister. But the government has so far adopted only the less controversial measures of the plan, including a reduction in the corporate income tax rate from 27% to 19%. The government's willingness to push ahead with the public finance reform is in doubt. A major reform of the labour code was adopted in July 2002. It is designed to enhance the flexibility of the labour market by making it easier for employers to use fixed-term contracts, permitting more flexibility in working hours and cutting overtime pay. Also, initiatives were taken to promote the employment of young graduates as part of the programme "First Job". These measures are welcome, but further reforms are needed to ensure the appropriate balance between flexibility and security, notably to reduce the high tax wedge and increase wage flexibility and to continue with the reform of the education and training systems. In July, the government adopted its Pro-Growth Action Plan for the years 2003 and 2004, which aims at improving the business environment, promoting employment and reducing poverty. The plan includes measures to reduce administrative barriers for firms but additional measures are required to improve the functioning of the judiciary and reduce corruption.

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2. Implementation of recommendations for improvements

The Polish authorities have shown so far some reluctance to tackle the needed fiscal adjustment. A deep restructuring and reduction of public expenditure are, however, crucial in order to further improve the policy mix, reverse the rapid rise in public debt, and prepare Poland's public finances for accession. There was a further deterioration of Poland's fiscal position last year as a result of the economic slowdown and the relaxation of fiscal policy. The general government deficit based on ESA95 increased to 4.1% of GDP from 3.0% in 2001. This deterioration of fiscal accounts combined with the slowdown in privatisation resulted in an increase in the debt-to-GDP ratio by 4.5 percentage points. While remaining low by international standards, the debt ratio is now approaching the thresholds that trigger corrective mechanisms under the fiscal rules laid down in the Polish Constitution and the Public Finance Act. The Polish authorities could have seized the opportunity of the small rebound in growth this year to start the process of reining in the government deficit and the high level of spending. But the spending rule limiting real growth in expenditure to 1%, which the authorities had envisaged appling to the 2003 budget, was finally abandoned. More recently, the preparation of the budget for 2004 gave rise to strong concerns as regards the determination of the Polish authorities to push ahead with the needed reforms. Most significantly, the fiscal reform plan broadly approved by the government in March has been virtually abandoned. Also, the fact that the government initially envisaged the transfer of part of the revaluation reserve of the National Bank of Poland to the state budget reflects a certain reluctance on its part to tackle the fiscal problems. The draft budget for 2004 includes a cut in corporate income tax but contains no adjustment measures on the expenditure side. The adopted deficit target points to a substantial loosening of fiscal stance next year.

The Polish authorities should ensure that any decision on the use of the revaluation reserve does not undermine the financial independence of the central bank. In the ongoing discussions between the monetary authorities and the government on the use of the revaluation reserve, careful consideration should be given to the impact of the decision on the financial ability of the central bank to perform its tasks. In this regard, attention must also be paid to completing the alignment of central bank legislation with the acquis e (see also Chapter 11 - Economic and monetary union).

Progress in restructuring heavy industries, energy distribution and agriculture has been modest since last year and considerable efforts still need to be made to advance the reform agenda in this area. Poland needs to finish the restructuring of the remaining state-controlled industries, in particular in the coal mining, gas, electricity, chemicals, steel and defence sectors. These industries remain a drain on public resources through tax and social security arrears and a build-up of corporate debt. The "anti-crisis" package of July 2002, designed to promote enterprise restructuring and preserve employment, has had disappointing results so far, even though about 50 000 companies applied for the scheme linking debt relief with restructuring commitments. In April 2002, the government adopted a new strategy for the transformation of the energy sector by 2020. The document envisages separation of transmission and distribution in all sub-sectors. In the coal mining sector, political pressure from trade unions forced the government to suspend the restructuring programme adopted in November last year. However, the government adopted a new restructuring programme for the years 2003-2006 in September. There has been little progress in restructuring the gas sector, while in the electricity sector, the main barrier to the creation of a competitive market remains the unresolved issue of long-term contracts. With regard to the still largely state-owned chemicals sector, the government has adopted a new strategy and plans to prepare a restructuring plan that will have to comply with state-aid rules. In the steel sector, a new restructuring programme, including state aids, was submitted to the Commission in April. Subsequently, in July, the Council adopted a decision on the compatibility of the programme with the negotiation commitments. The defence industry is still in need of restructuring. The restructuring of the agricultural sector is still lagging, although progress has been made in land privatisation.

The pace of privatisation has stalled in Poland since last year's Report, and the Polish authorities need to take decisive action to accelerate privatisation. The privatisation process in Poland is not completed yet. At the end of 2002, 76% of GDP was produced in the private sector, and the Treasury still owned or had a majority or controlling stake in about 2100 firms. Last year, the Treasury sold equity shares in only 98 companies and privatisation proceeds amounted to about one third of the revenue target set in the budget for 2002 (PLN 6.8 bn or 0.9% of GDP). The pace of privatisation was also slower than foreseen in the first months of this year. As of end of June, privatisation proceeds amounted to only 16.5% of the PLN 9.1 billion target for the year. Several major privatisation deals initially planned for this year have been cancelled or postponed until 2004. As a result, privatisation proceeds this year will likely fall short of the government's initial expectations. The slowdown in the privatisation process partly reflects the fact that the most profitable firms have been already sold, and that most of the remaining state firms do not easily attract investors. The additional conditions attached to the sales, notably to safeguard employment, further hamper the privatisation process. Also, the insistence of the government on restructuring state-owned companies first before privatising them limits the number of firms up for privatisation.

The new insolvency law adopted in February upgrades the bankruptcy and liquidation framework and brings it into line with the requirements of a modern market economy. The law on insolvency and restructuring which was adopted in February and will enter into force on 1 October, protects creditors rights better than the previous law which was excessively favourable to the debtors. Creditors can petition for liquidation of the debtor firm before the court takes a decision, and at any time after declaration of bankruptcy with the option of concluding an arrangement. However, much will depend on the implementation of the law, in particular on the capacity of the courts to enforce it effectively. In general, the inefficiency of courts remains a major obstacle to the proper enforcement of laws and contracts.

Little progress has been achieved as regards the functioning of the land registry, and the authorities need to pursue their efforts at modernising the system. The absence of a properly functioning land registry makes it difficult to establish ownership over land, and hence, to use property as collateral in loans. This also hampers green field investment, which usually entails the acquisition of new plots. The government is expected to present its long-awaited master plan for the modernisation of the land registry in December.

C. Commitments and requirements arising from the accession negotiations

As we approach the actual date of accession and the entry into force of the mutual rights and obligations enshrined in the Treaty of Accession, it is necessary to focus efforts on ensuring that Poland is fully prepared in all areas of the acquis from the start of its membership. In other words, Poland must meet its commitments and requirements arising from the accession negotiations.

In the 2002 Regular Report on Poland, the Commission found that:

"Poland is generally meeting its commitments made in the negotiations. However, delays have occurred in the areas of agriculture (implementation of the animal identification and registration system), fisheries (adoption of legislation related to resource management, inspection and control, and in the area of market policy), environment (adoption of implementing legislation with regard to water quality, industrial pollution control and risk management, and chemicals). These issues need to be addressed.

Bearing in mind the progress achieved since the Opinion, the level of alignment and administrative capacity that Poland has achieved at this point in time, and its track record in implementing the commitments it has made in the negotiations, the Commission considers that Poland will be able to assume the obligations of membership in accordance with the envisaged timeframe. In the period leading up to accession, Poland needs to continue its preparations in line with the commitments it has made in the accession negotiations."

As regards the administrative capacity to implement the acquis, the overall findings were as follows:

"There continues to be some disparity between progress in the adoption of legislation and the reinforcement of administrative capacity. Continued efforts are needed to set up or strengthen administrative capacities across the board, notably on market surveillance, agriculture and food safety, fisheries and regional policy, the social field, environment, customs and justice and home affairs. Particularly close attention is required regarding the structures necessary to implement those parts of the acquis which will become applicable only from the date of accession, with a special focus on those parts which are essential for the sound and efficient management of EC funds."

As part of its continuous monitoring, the Commission services addressed letters to Poland in March and June 2003 expressing concern over its preparedness in the fields of free movement of goods (alignment with the acquis contained in the new and old approach directives, and in the non-harmonised area), free movement of services (legal alignment in the fields of insurance and investment services and securities markets, Polish language requirements in the banking and insurance sectors and the capacities and independence of the supervisory authorities), agriculture (the setting-up of the Paying Agencies and the establishment of the Integrated Administration and Control System, the management of the milk quotas, the setting-up of an animal identification system, upgrading of agri-food establishments and the establishment of an animal waste system), fisheries (the reinforcement of administrative capacities, including with respect to control functions at both central and regional levels), social policy (alignment with the acquis on labour law and equal treatment), audiovisual policy (legislative alignment), customs union (computerisation and interconnectivity) and financial control (legal alignment and implementing structures in the area of structural action expenditure), competition policy (steel restructuring), and calling for urgent action to remedy these shortcomings.

In order to give further guidance to Poland in its preparation efforts and to give the necessary assurance to current Member States and other future Member States, this part of the comprehensive monitoring report, in Section 2, gives an overview of where Poland currently stands in implementing all commitments and requirements arising from the accession negotiations for each of the 29 chapters of the acquis. It covers the whole body of the acquis, on a chapter-by-chapter basis, both in terms of legislation and from the perspective of implementing structures, including administrative capacity and enforcement.

The principal commitment undertaken by Poland in the accession negotiations is to be fully prepared for membership in all areas by the date of accession. In a number of areas, however, commitments were made to put in place and implement the acquis according to specific timetables even before accession. This report examines the extent to which these commitments have been met, and where delays have occurred, but the principal focus of the assessment remains the requirement that Poland must be fully prepared as from accession. Naturally, in cases where transitional arrangements have been agreed, their effect on Poland's obligations is duly reflected in the assessment. On the other hand, it should be underlined that, in order for Poland to make effective use of its eligibility for Community structural funds from 1 January 2004, the relevant acquis in areas such as public procurement, state aid and environmental protection will need to be fully respected from 1 January 2004 in relation to the implementation of structural funds actions [2].

[2] See also the Commission Communication on the implementation of commitments undertaken by the acceding countries in the context of accession negotiations on Chapter 21 - Regional policy and coordination of structural instuments, 16 July 2003 (COM(2003) 433 final).

For each chapter, a conclusion is provided, which is structured in the following way.

Firstly, it identifies those areas where Poland is essentially meeting the commitments and requirements arising from the accession negotiations and is expected to be, or is already, in a position to implement the acquis from accession. This does not exclude the possibility that certain actions are still to be taken, but these should under foreseeable circumstances not pose particular difficulties.

In a second paragraph, the assessment identifies any areas where important further action is still needed in order to complete preparations for membership. In some cases these preparations are on-going, but enhanced efforts or quicker progress may be called for. These are issues which can still be remedied taking into account the accession date of 1 May 2004 but which require the special attention of the authorities.

Thirdly, where relevant, the assessment also identifies issues that are of serious concern. These are areas where serious shortcomings exist which are likely to persist after accession unless immediate remedial action is taken. These issues require the urgent attention of the authorities. In view of their importance for the implementation and enforcement of the acquis, the overall state of readiness of the public administration and the judicial system and the development of effective anti-corruption measures, together with the question of the translation of the acquis into Polish, are evaluated in a separate Section 1.

1. Administrative and judicial capacity

Public administration

The legislation and structures necessary for the proper functioning of the civil service, as well as the public administration as a whole, are in place, and no major changes are foreseen in the near future. The civil service law has been in force since July 1999 and is generally in accordance with EU standards. It clearly defines the status of civil servants and other public administration employees (i.e. the civil service corps), and describes recruitment procedures, employment and remuneration conditions, and the principal responsibilities of employees. The implementation of the law has, however, proved difficult, and it has not fully addressed the problems it was intended to solve, namely politicisation and lack of professionalism in the public administration. An amendment to the civil service law introduced in January 2002, allowing the appointment to senior posts in the public administration of candidates from outside the civil service corps, was judged unconstitutional by the Constitutional Tribunal.

The public administration is under the constitutional responsibility of the Prime Minister, who appoints the Head of the Civil Service, who in turn is responsible for implementing the civil service law. The Prime Minister has also at his disposal an advisory body, the Civil Service Council, composed of 16 members, half chosen by the Parliament and half by the Prime Minister himself.

The size of the central administration is relatively modest, amounting to about 120 000 employees, and the number of civil servants appointed from open competitions remains minute. The extremely limited share of civil servants among the employees of the central administration (a total of slightly above 1 500 or some 1%) and its persistently slow growth continue to be the main problem in creating a properly functioning, fully professional public service. Political influence in top management remains strong in some areas, but the pace of normalising the situation has speeded up.

The necessary implementing legislation is also in place, but there is no horizontal legislation standardising all aspects of the functioning of the civil service. The segmented structure of the administration means that the approach to strategic planning and policy-making capacities differ significantly from one institution to another, so that any evaluation can only be made case by case. Similarly, the hierarchical character of the Polish administration hampers the development of inter-ministerial or inter-service co-ordination. There is neither a legal definition nor an established practice for the accountability of a public administration employee for his/her individual decisions. This results in a widespread reluctance at lower and middle levels to assume responsibility and a tendency to refer all types of decision to superiors.

Openness and transparency of the public service is guaranteed by the law on access to public information, which has been in force since January 2002. The law provides a good legal basis for the transparent functioning of the public administration, ensuring individual citizens access to the rationale for any decision that concerns them. The basic weakness of the law lies in its incorporation of all the currently binding laws that limit public access to information on the ground of confidentiality.

The Office of the Committee for European Integration is the main co-ordination body dealing with European integration issues. Most of the structures dealing with European integration issues need further strengthening, and some will have difficulty being fully capable of dealing with these new duties in an efficient, timely and professional manner by the date of accession.

General training for the public administration, except for EU-specific training, is supervised by the Office for the Civil Service. The majority of training is planned, organised and financed in a decentralised manner and depends mainly on the commitment of directors-general in individual ministries and central offices, as well as on the budget available for the institution. At the request of the Civil Service Council, the Office for the Civil Service is elaborating a "Strategy on training for the public administration in 2004-2007".

Below the central level, Poland has a three-level administrative structure, introduced in January 1999. It is composed of 2496 gminas (municipalities), 373 powiats (counties), including 65 urban powiats, and 16 voivodships (regions). Regional self-government is conducted through regional governors (voivods) appointed by the central government, and regional assemblies (sejmiks). The voivods are responsible for supervising the compliance of the activities of self-government with national law. The voivodships are also entitled to enter into bilateral and multilateral economic co-operation with foreign partners. However, the introduction of the three-level administrative structure in 1999 was not accompanied by a clearly oriented, long-term programme for local and regional self-government and this could complicate the further implementation of the decentralisation process.

The administrative capacity in specific areas of the acquis shows that for most of them administrative structures are in place, but only in few cases has the capacity reached an optimal level. Human resources, training (including language training) and budgets need to be strengthened, and inter-institutional co-ordination needs to be improved. Generally, the problems result from budgetary constraints, even though the additional amount necessary to correct these shortcomings is often relatively small. In particular, the areas that are critical for Poland to function properly within the EU need to be reinforced. Even within the existing constraints, better results could be achieved if priorities were clearly identified and targeted.

Judicial capacity

The judicial system in Poland comprises 325 district courts, 44 regional courts, 10 courts of appeal and the Supreme Court. The prosecution services have a parallel organisational structure incorporating district, regional and appellate levels. After undergoing substantial reform, the structure of the judicial system has changed, but the impact of the reform and of the reorganisation accompanying it cannot yet be fully evaluated. Despite steady progress, efforts are still needed to improve the efficiency and transparency of the judiciary, so as to enhance the reliability of the quality of judgements. The access of the public to the judicial system remains limited, especially access to general information on procedures, legal aid and the state of play of an individual's own pending case. In general the level of public trust in the efficiency and fairness of the judicial system remains low and the perception of corruption by the public is high.

The most important changes have been introduced at the lowest level of the Polish judicial system, mainly with the introduction of a new layer of courts - borough courts - to deal with misdemeanour cases. This reform is highly significant, because between 85% (2001) and 88% (2002) of all court cases are dealt with at the level of district courts. However, the creation of this new layer of courts was not accompanied by a proportional increase in the number of judges, administrative staff and equipment.

As of December 2002, there were 9 024 judges (appointed judges and assessors) and 5 477 public prosecutors (prosecutors and assessors). In 2002 the courts increased their staff by 230 judges' posts and 50 associate judges' (assessor) posts. Further ambitious increases are planned in 2003, so as to reach the target number of 450 posts for judges and associate judges, 100 senior court clerks and 700 administrative staff. It is intended also to create 100 new posts for prosecutors in the course of 2003. As for administrative support, at the end of 2002 there were 21 083 administrative employees in the courts and 3 695 in the prosecution service, resulting in ratios of 2.2 administrative staff per judge and 0.67 per prosecutor. The figure for the prosecution service is still considered low. The number of computers and printers in the courts and the prosecutors' offices has been increased but remains quite limited. New objective criteria for recruiting judges and prosecutors are in place. However, objective criteria for career assessment, promotion and demotion do not exist yet.

On the other hand, improvement in the efficiency of the courts does not seem to necessitate a further increase in the number of magistrates, but rather changes in procedure and in the organisation and distribution of work. Extensive IT projects are under way in the judiciary, including the development of a nation-wide communication network for courts and public prosecutors' offices to facilitate access to the central databases on legislation in force and international legal co-operation.

There is no clear separation of functions of the Minister of Justice and the Attorney General. Draft legislation addressing this issue is being discussed within the government. It is aimed at separating the two functions, but the provisions as currently formulated will not result in the Attorney General becoming more independent. Further initiatives could be considered to address the question of the hierarchical link to a political authority that may influence indirectly and obliquely the activity of the public prosecutor.

The immunity of judges is provided for in the Constitution, which gives a very broad interpretation of such immunity. The immunity applies to the judge in his professional and private life, as well as after his retirement. It can only be lifted by a collegium composed of randomly chosen judges, and only this part of the procedure is open to the public. The law does not specify explicitly the grounds for lifting immunity. The very wide interpretation of penal immunity of judges, alien to other legal systems in Europe, is not in itself a guarantee of independence, but is viewed rather as a privilege in Poland.

On 1 July 2003, the amendments to the code of criminal procedure, the act on "crown witnesses" and the act on the protection of classified information entered into force. The new provisions aimed at simplifying and accelerating criminal proceedings, so as to reduce the backlog of cases and the number of pending cases, and at ensuring adequate enforcement of judgements. Amendments to the code of civil procedure aimed at accelerating and simplifying procedures entered into force on 14 August 2003. The effects will become evident only after a period of enforcement of the new rules. To reduce the increasing backlog of cases it will be necessary to make frequent use of the simplified procedure and to extend the possibilities of alternative settlement of cases (mediation proceedings).

In the area of criminal law, the length of cases has further declined: in 2001 the average length of proceedings was 6.1 months; in 2002 it was 5.8 months. In the area of civil law it rose slightly from 6.8 months to 7 months. These are average figures for courts all over Poland, but there remains a large difference between the capital, Warsaw, where the situation is still very critical in terms of delays, and the rest of the country. In Warsaw, the average duration of criminal proceedings is around 12 months, while civil cases take 24 months. The situation is similar for commercial cases and transactions associated with the land register.

The system of legal aid is still under-developed and organised in a non-transparent way, with the result that citizens are not informed about their rights. In the criminal procedure code there is no obligation to inform a defendant about the possibility of obtaining legal aid. This lack may lead to the conclusion that the enforcement of the legal aid provisions is not sufficient in the light of the Convention for the Protection of Human Rights and Fundamental Freedoms. The Ministry of Justice does not have statistical data on the granting by judges of requests for legal aid.

The reform of professional training of staff in the justice system (judges, prosecutors, administrative employees) started on 1 November 2002 with the creation of a unit called the "Judicial Training Centre" in the Ministry of Justice. By the end of 2003 this unit intends to develop proposals to unify and harmonise the training system, so as to increase efficiency and to provide new forms of training for all professional groups concerned.

Anti-corruption measures

Corruption is perceived to be increasing from an already relatively high level in Poland. It is considered to affect all spheres of public life. There has been very little progress in combating corruption, and the existing perception has been borne out in various high-profile corruption cases recently.

In September 2002, the Council of Ministers adopted a programme for combating corruption entitled the "Anti-Corruption Strategy". The document states that the government is fully aware of the threat posed by corruption to Poland's development and considers that fighting it is a priority. The strategy is aimed at amending regulations conducive to corruption in areas of public activity that are perceived as most susceptible. The document lists legislation that should be adopted in each of these areas in order to curb corrupt practices, names the institutions responsible for preparing the relevant legislation and sets deadlines for the changes to be accomplished. The strategy does, in itself, not really deal with high-level corruption, with the exception of those issues related to the civil service and financial disclosure by public functionaries.

An official implementation report of July 2003 indicates that while progress in implementing the strategy has been made in a number of areas, the actual impact has been rather limited. One explanation is that the strategy has been overseen by an inter-ministerial team without sufficient administrative and political back-up. Another is the failure to secure broad support for the strategy, which was one of the major assumptions for ensuring its effectiveness.

The number of public officials found guilty of corruption has remained fairly stable. Over two thirds of these offenders were sentenced for giving bribes to public officials (active corruption). Nevertheless, an improvement can be noted with regard to political accountability for corruption offences. Recently several corrupt politicians were dismissed immediately after the media revealed their offences, while similar events in the past went unsanctioned.

Amendments to the Act on Political Parties and the Election Law passed in 2001 and 2002 were aimed at regulating the financing of political parties with a view to curbing high-level corruption. For the most part they are being well implemented, leading to greater transparency in party funding and severe financial penalties for parties which violate the law. However, the new legislation contains some built-in loopholes that may expose the system to abuse. In particular, a provision allowing the creation of foundations that can employ party personnel and be sponsored by private companies makes it possible to create an alternative and non-transparent financial construction that is not subject to control.

The enforcement of another important law aimed at counteracting high-level corruption, the Act on the Execution of Duties of Deputies and Senators of August 2001, which provides for public disclosure of parliamentarians' asset declarations, is being conducted properly, as far as the submission of declarations and transparency of declared assets is concerned. However, the implementation of other provisions of this law needs to be improved.

There has been no progress in the processing of the draft amendment to the so-called anti-corruption law (limiting business activity by people in public office), which was submitted to the Sejm in autumn 2001. Neither has there been any follow-up to a draft law providing for the establishment of an anti-corruption office, which was submitted to the Sejm at the end of 2001.

The follow-up to the motions of the Supreme Chamber of Control (NIK) is highly unsatisfactory. According to a report on NIK's activity in 2001 presented to the Sejm by the President of NIK in October 2002, out of 136 motions calling for urgent changes of the law with a view to counteracting mismanagement of public funds and corruption, only 22 were carried out fully and 12 partly. A special unit within the Agency for Internal Security, which was established in order to tackle corruption of senior officials, is generally perceived to be performing poorly and to lack political independence. It has not disclosed any of the most serious cases of corruption, launching investigations only after they have been revealed by the media.

Poland continues to participate in the Council of Europe Group of States against Corruption (GRECO). In its March 2002 evaluation report GRECO stated that corruption in Poland threatens to undermine the functioning of many public spheres. GRECO addressed 17 specific recommendations to Poland, which it was strongly encouraged to follow up. The Polish authorities have not yet provided a reply on the recommendations made by GRECO on that occasion. GRECO is expecting co-operation from Poland in implementing these recommendations.

Translation of the acquis into Polish

In accordance with Articles 2 and 58 of the Act of Accession, all acts adopted by the Union's institutions and the European Central Bank prior to accession become applicable to the new Member States and are to be published in the Official Journal of the European Union in the new official languages. While the EU institutions take responsibility for the final revision and publication of the translations, it falls to the acceding states to produce the translations and to ensure a thorough legal and linguistic revision.

After a relatively slow start in the beginning of 2003, mainly due to the re-revision by the Translation Coordination Unit of existing translations, the statistics for the number of pages revised and ready for the finalisation procedure which have been transmitted to the EU institutions is now on track. The legal and linguistic quality of the Polish versions of the acquis seems also to have made up much ground and appears now to be satisfactory.

The present flow must be at least maintained, if not increased, to ensure the timely publication of the Special Edition of the Official Journal in Polish by accession.

2. The chapters of the acquis

As indicated, the following review of Poland's ability to assume the obligations of membership has been structured in accordance with the list of 29 acquis chapters. Accordingly, this section opens with an assessment of the acquis relating to the cornerstones of the internal market which are known as the "four freedoms", and continues with a systematic review on each of the chapters, covering all aspects of the acquis, including sectoral policies, economic and fiscal affairs, regional policy, environment, justice and home affairs, external policies, and financial questions.

Chapter 1: Free movement of goods

The principle of the free movement of goods implies that products must be traded freely from one part of the Union to another. In a number of sectors, this general principle is supplemented with a harmonised regulatory framework, following the "old approach" (imposing precise product specifications) or the "new approach" (imposing general product requirements). The transposition of harmonised European product legislation represents the vast majority of the content of this chapter. In addition, efficient administrative capacity to apply horizontal and procedural measures in areas such as standardisation, certification and market surveillance is essential. This chapter also covers detailed EC rules on public procurement, requiring specialised implementing bodies.

The horizontal and procedural measures necessary for the administration of the Community product acquis in the new approach sector are in place. The implementation structures for standardisation, metrology, accreditation, conformity assessment and market surveillance are all in place. Training programmes being carried out by these bodies should ensure their operational efficiency by the date of accession. Particular attention should be given to prepare for the task of market surveillance, of which the role and importance will be enhanced by the entry into force of new approach legislation. The Polish Committee for Standardisation (PKN) is an affiliate member of CEN and CENELEC. Full membership should occur in the near future.

Poland has transposed the majority of the sectoral legislation under the new approach. Still missing or not yet fully aligned legislation relates to cableways, medical devices, non-automatic weighing instruments, marine equipment, and radio and telecommunications terminal equipment. Some adjustments might still be required in other areas. Poland has been granted a transitional period by which existing certificates for medical devices shall remain valid until their expiry or until the end of 2005 at the latest.

As regards the old approach directives, Poland has transposed a significant part of the acquis in these product sectors. Further efforts are required in the areas of textiles, legal metrology, motor vehicles, chemicals, fertilisers, pharmaceuticals, cosmetics and wood.

Progress is noted and good co-operation has been established as regards the transposition of the foodstuffs acquis. However, amendments to the framework law on food and nutrition are still pending and some implementing regulations have not yet been adopted or necessitate further adjustments. The majority of vertical foodstuffs directives still needs to be transposed and implemented.

Poland has taken the steps necessary to ensure the creation, reinforcement, and operational capacity of the institutions required to manage the acquis in nearly all of the sectors covered by the old approach sector directives. In the area of chemicals, having recognised that the identification of "new" chemical substances on its market is a matter of priority, Poland should provide for the appropriate notification of such substances in accordance with the acquis. In the area of pharmaceuticals, implementation of the legislation should not give way to de facto discrimination against imported pharmaceutical products. Furthermore, specific attention is needed to strengthen inter-institutional co-operation in the field of food safety, to train operators and inspectors in the principles of the acquis in this area (such as by the further development of guides on good hygiene practices), to prepare for the full application and enforcement of Hazard Analysis Critical Control Points (HACCP) in all food plants and to continue the restructuring and upgrading of laboratories which will be part of the official control network. Procedures for handling alerts under the Rapid Alert System for Food and Feed need to be finalised. Aspects of food safety are also covered under Chapter 7 - Agriculture.

In the course of the accession negotiations Poland has been granted a transitional period relating to the renewal of marketing authorisations for pharmaceutical products until the end of 2008.

In the field of public procurement the legislative efforts to achieve full alignment with the EC acquis in this area need to be continued. The shortcomings that persist relate to, notably, the definition of bodies governed by public law, the scope of exceptions and the information to be given to unsuccessful candidates or tenderers. The Public Procurement Office has been established and is operational but still needs to be strengthened, in particular in terms of well-trained personnel. Training is also necessary for other actors involved in public tendering in particular to allow a smooth implementation of the Structural Funds and Cohesion Fund assistance.

In the non-harmonised area Poland has conducted a screening exercise for national legislation possibly in contradiction with the principle of free movement of goods; this screening must continue and the identified barriers must be removed. Examples of unjustified trade barriers that remain to be removed relate to, notably, the Polish legislation on the import of second hand vehicles, on alcohol advertising, on the labelling of textile products and the Polish language law. Poland still needs to introduce mutual recognition clauses into its existing legislation. Transposition of the acquis concerning cultural heritage objects is not yet complete. Minor adjustments remain to be brought to the legislation transposing the acquis on arms control. Preparations have been made to apply the rules on product safety checks at external borders from accession.

Conclusion

Poland is essentially meeting the requirements for membership as regards horizontal and procedural measures, necessary to allow for the correct implementation of legislation falling under the new approach as from accession, and the new approach sectoral legislation. The remaining legislative work in the new approach area is under way and should put Poland in a position to apply this acquis as from accession.

Poland is partially meeting the requirements in respect of the old approach sectoral legislation, public procurement and the non-harmonised area. As regards the old approach sectoral legislation, continued efforts are required in most of the sectors. Particular attention should be paid to the completion of the alignment efforts and to strengthening of the administrative capacity in the area of food safety (notably the upgrading and restructuring of laboratories) and the non-discriminatory implementation of the pharmaceutical legislation. Additional efforts should be made to provisionally notify "new" chemical substances prior to accession so as to ensure the continued marketing of such substances. In the non-harmonised area, Poland needs to give enhanced attention to implementing and enforcing the principle of mutual recognition. Urgent action needs to be taken as regards the abolition of persisting trade barriers in order to ensure that Poland is in accordance with the fundamental EU rules on the free movement of goods by accession.. As regards public procurement, unless legislation is adopted shortly and implemented correctly, there is a serious risk that Poland would not have a functioning system in place in time.

Chapter 2: Free movement of persons

The acquis under this chapter provides for non-discriminatory treatment of workers who are legally employed in a country other than their country of origin. This includes the possibility of cumulating or transferring social security rights, which requires administrative cooperation between Member States. In order to facilitate the practice of certain professions, the acquis under free movement of persons also includes specific rules concerning mutual recognition of qualifications and diplomas; for certain professions a harmonised training curriculum must be followed to be able to use the professional title. Furthermore, this area also covers the residence and voting rights of EU citizens in any Member State.

In the field of mutual recognition of professional qualifications, Poland's transposition of the acquis still presents serious shortcomings. Only the legislation on lawyers and commercial agents has been largely aligned. The relevant legislation on the general system of recognition has not been entirely transposed. Intensified efforts are still needed to adopt and implement outstanding legislation on the recognition of qualifications in the health sector, notably doctors, dentists, general care nurses, midwives and pharmacists, as well as on architects. Poland needs to complete alignment in these areas as a matter of priority. Poland has expressed the intention to upgrade qualifications and training of its nurses and midwives. This important issue awaits clarification. The necessary administrative structures for implementation are largely in place but require further strengthening.

In the area of citizens' rights legislative alignment has been largely completed, except for some implementing legislation. Furthermore, legislation on the right of EU citizens residing in Poland to participate in municipal and European Parliament elections has to be adopted. The main administrative structures for implementation are in place.

As for free movement of workers a transitional arrangement has been agreed. For the first two years following accession, current Member States will apply national measures or bilateral agreements to regulate the access of workers from Poland to their labour markets. These arrangements may continue up to a maximum of seven years. Poland has transposed the acquis to a large extent, but the adoption of implementing legislation needs to be completed. The acquis on supplementary pension right of workers moving within the Community remains to be transposed, while access to public sector employment in accordance with the acquis must be ensured.

As to co-ordination of social security systems, no transposition into national legislation is needed to achieve alignment with the acquis. A number of bilateral agreements with Member States, which rely on the same principles as the EU rules in this area, reflect the fact that Poland's administration has some experience with the administrative procedures. However, Poland's administrative structures need to be further developed.

Conclusion

Poland is essentially meeting the commitments and requirements in the areas of citizens' rights, free movement of workers and co-ordination of social security systems. Some adjustments still need to be made, in particular to the legislation on foreigners to allow EU citizens to stay and work freely in Poland, and to participate in the European elections of June 2004. The ongoing measures to ensure adequate administrative capacity in these areas should continue.

The mutual recognition of professional qualifications remains an area of serious concern. The application of the general system of recognition remains to be completed. Substantial shortcomings remain on the co-ordination of training and the recognition of qualifications for doctors, general care nurses, dentists, midwives and pharmacists, and for architects. Poland must significantly and urgently enhance its efforts to adopt outstanding legislation in these areas, and needs to reinforce further its administrative capacity to implement this acquis. Unless immediate action is taken to implement the obligations of EU law, Poland will not meet the requirements for membership in this area.

Chapter 3: Freedom to provide services

Under this chapter, Member States must ensure that the right of establishment and the freedom to provide services anywhere in the EU is not hampered by national legislation. In some sectors, the acquis prescribes harmonised rules which must be respected if the internal market is to function; this concerns mainly the financial sector (banking, insurance, investment services and securities markets) but also some specific professions (craftsmen, traders, farmers, commercial agents). Harmonised rules concerning personal data protection and certain information society services must also be respected.

In the field of the right of establishment and the freedom to provide non-financial services, Poland has partially adjusted its legislation to the acquis. Restrictive provisions in the law on unfair competition concerning the right of establishment need to be lifted. Restrictions on investment by foreign companies still exist in the broadcasting sector. In the gambling sector, an amendment to the law adopted in April 2003 removes the elements of discrimination against foreign investors, but introduces a discriminatory language requirement for members of the management boards of companies carrying out activities in this area. The Polish authorities should urgently address this issue, while at the same time ensuring that amendments to the horizontal Polish Language Law comply with the acquis. Furthermore, discriminatory provisions in the law on alcohol advertising still need to be eliminated. Other potential legal and administrative restrictions remain to be identified by Poland in the light of the relevant case law of the European Court of Justice. This screening must now be completed. In this context, a clear distinction should be made in the Polish legislation between economic operators carrying out activity in Poland on a temporary basis and those establishing themselves permanently, in order to ensure free provision of cross-border services.

In the field of financial services, Poland has partially aligned its legislation with the acquis in the banking sector. Outstanding issues include liquidation procedures, capital adequacy, winding up and strengthening the legal protection of supervisors. The directive on publication of annual accounts by branches of financial institutions located in other Member States still needs to be enacted. As for deposit guarantee systems, transposition is not fully in line with the acquis, while the e-money Directive has only been partially implemented. Efforts to address the problem of a language requirement for members of a bank's management board, as well as the lack of cross-border co-operation between supervisory authorities need to be continued. Poland has committed itself to ensuring the full application of the acquis in respect of co-operative credit institutions by the end of 2007, in accordance with the transitional arrangements it has been granted.

The Commission for Banking Supervision has the required infrastructure and human resources to deal with the acquis-related tasks in this area. The political and operational independence of the banking supervisory authority must be reinforced. Important steps have been made towards effective, consolidated supervision in the whole financial services area.

As regards the insurance sector, Poland is in the process of completing legislative alignment. Clarification is needed on the issue of qualified participation in the insurance legislation. The problem of the language requirement also concerns the insurance sector (see above). The procedure for Poland becoming a signatory of the 'green card' Multilateral Guarantee Agreement, as foreseen in the 1st motor vehicle directive, still needs to be finalised and efforts should be made to cope with the responsibilities linked to this status. The Commission for Supervision of Insurance and Pension Funds is staffed with competent personnel, but continued training and modernisation of the information-technology system are needed. The insurance supervisory authority must be given more functional and operational independence.

In the field of investment services and securities markets, the legislation is still not sufficiently aligned, in particular as far as transposition of the investment service and insider dealing directives is concerned. Recent legislative efforts made with the adoption by the Council of Ministers of draft amendments to the Securities Law need to be continued as a matter of high priority. The draft text on securities constitutes progress but further and substantial improvements are still necessary in order to fully transpose the acquis in this area on time. Furthermore, the new directives on undertakings for collective investment in transferable securities are yet to be transposed. This will have to be a priority, bearing in mind the well-developed market for investment funds. The directive on financial collateral still needs to be transposed. Poland was granted a transitional period regarding the level of investor compensation until the end of 2007. Administrative capacity has reached an adequate level. The independence of the Polish Securities and Exchange Commission (PESC) remains to be ensured, while mutual co-operation with the supervisory authorities in the field of banking and insurance needs to be strengthened.

Concerning the protection of personal data and the free movement of such data, Poland is essentially meeting the various commitments and requirements arising from the accession negotiations, and should be in a position to implement the relevant acquis from the date of accession. Nevertheless, outstanding issues in this area, such as the lack of a system of prior checking, persist and the legislation must still be fine-tuned. The draft legislation adopted by the Government in this regard does not tackle all present shortcomings and if enacted as such, would still not fully align the acquis in this field. The supervisory authority for the protection of personal data, which is fully independent and very efficient in the performance of its tasks, would benefit from further strengthening.

As regards information-society services, the legislation is to a great extent aligned with the acquis. Some elements of the directive on electronic commerce still need to be implemented. The building-up of the necessary administrative capacity for the implementation of this directive and the implementation of information technology in public administration will follow the strategy for developing the information society ePoland, a response to the eEurope initiative.

Conclusion

Poland is essentially meeting the requirements for membership in terms of transposition of the acquis in the fields of personal data protection and information-society services. Some important specific issues still need to be addressed if Poland is to be in a position to implement this acquis fully by the time of accession.

Poland is partially meeting the commitments and requirements for accession in the areas of the right of establishment and the freedom to provide non-financial services, banking, insurance services, and investment services and securities markets. In order to complete preparations for membership, enhanced efforts are required to complete the alignment in those areas, as well as to eliminate restrictions to the establishment and free provision of services. Poland needs to lift disproportionate language requirements for board members of service providers, particularly in the financial sector, and to clarify legislation with respect to the procedure for the cross-border exchange of information between banking supervisors. The operational independence of the supervisory authorities must be sufficiently safeguarded. Close attention must be paid to full alignment with the acquis in the field of investment services and securities markets. Unless Poland intensifies its efforts to arrive at full alignment with the acquis in the area of investment services and securities markets upon accession there is a risk that it would not meet the requirements for membership in this area.

Chapter 4: Free movement of capital

Under this chapter, Member States must remove all restrictions in national law on the movement of capital between themselves, but also with third countries (with some exceptions) and adopt EU rules to guarantee the proper functioning of cross-border payments and transfers of all forms of capital. The acquis under this chapter also includes harmonised rules on payments systems and the fight against money laundering, requiring adequate enforcement capacity.

In the area of capital movements and payments, Poland is to a large extent in line with the acquis. Further adjustment is still needed with regard to sectoral legislation restricting foreign direct investment. This is in particular the case in the broadcasting sector and in privatised companies covered by golden shares incompatible with the acquis. With regard to investment rules of Polish open pension funds, existing quantitative restrictions on the acquisition of foreign assets have not yet been removed. Furthermore, Poland must still eliminate certain restrictive elements in its foreign exchange legislation that do not comply with the acquis, notably restrictions on granting foreign exchange permits and the introduction of a maximum limit on the purchase or sale of foreign means of payment.

In accordance with the transitional arrangement it has been granted, Poland will remove restrictions on the acquisition of secondary residences by EU nationals not resident in Poland by May 2009 at the latest. Similarly, in accordance with another transitional arrangement, Poland will remove restrictions on the acquisition of agricultural land and forests by EU nationals by May 2016 at the latest. Poland needs also to ensure that restrictions regarding the acquisition of real estate that are not covered by the transitional arrangements, are effectively removed by the date of accession. In addition, Poland should demonstrate that the recently adopted authorisation procedure for acquiring land respects the terms of the Accession Treaty.

In the field of payment systems, Poland is completing its legislative alignment, while the implementing structures are in place and function adequately. The outstanding issues include legislation on cross-border credit transfers (the current legislation covers only banks). In the area of settlement finality minor adjustments remain necessary.

In the area of money laundering, Poland still has to amend its anti-money-laundering legislation to be fully in line with the most recent acquis by extending the range of subjects obliged to report suspicious transactions to cover lawyers, accountants, tax advisors and auditors. Poland has extended reporting obligations to cases where funds are intended for the financing of terrorism. While Poland ensures full compliance with the recommendations of the Financial Action Task Force, its implementing structures, notably the Financial Intelligence Unit, could be improved by introducing more efficient operating procedures (see also chapter 24 - Justice and home affairs).

Conclusion

Poland is essentially meeting the requirements for membership and should be in a position to implement the acquis in the area of capital movements and payments and payment systems from accession. A limited number of specific issues will still need to be addressed in these areas before accession, notably the removal of restrictions on foreign investment in the broadcasting sector and in companies subject to golden shares held by the authorities, as well as on investment of Polish open pension funds in foreign assets. In addition, the rules on the acquisition of agricultural land need to be respected.

The commitments and requirements in the fight against money laundering are partially met. In order to complete preparations for membership, Poland must transpose the recent acquis and further reinforce its administrative capacity to effectively implement the acquis on money laundering.

Chapter 5: Company law

Under this chapter, Member States must adopt and apply harmonised rules required for the proper operation of companies in the internal market. They concern five legislative fields: company law in the strict sense, accounting law, intellectual property rights, industrial property rights, and the recognition and enforcement of judgements in civil and commercial matters as well as of contractual obligations.

In the field of company law as such, the Polish legislation is to a large extent aligned with the acquis. The Commercial Companies Code and the Law on the National Court Register, along with their respective implementing regulations, are in force. They will require certain amendments to rectify some inconsistencies and omissions. As regards administrative capacity, some strengthening remains necessary; in particular, training for judges and administrative staff should be intensified.

With regard to accounting, legislative alignment has been almost completed; only the Law on Statutory Auditors still contains some elements which are not fully compatible with the acquis (the Eighth Directive) and needs to be adjusted. The administrative structures are adequate.

In the field of protection of intellectual and industrial property rights (IPR), the October 2002 amendments to the Polish Copyright Act largely align the Polish legislation with the acquis on copyright and related rights but this act will still need to be amended further to fully transpose the 2001 acquis on copyright and related rights in the information society. The Industrial Property Law should also be modified in order to achieve full alignment in this area, notably as regards Community designs and trademarks and geographical indications. Poland needs to address the problem of local manufacturing requirements violating the Community principle of non-discrimination. Accession to the European Patent Convention is pending.

Specific transitional rules will apply in relation to pharmaceutical product patents, involving the non-application of Community exhaustion to certain exports from Poland, as regards the granting of supplementary protection certificates for medicinal and plant protection products, as well as in relation to the extension of registered or pending Community trademarks to the territory of Poland. As regards enforcement of IPR, administrative structures are largely in place. Staffing has increased and training has been carried out in a number of these administrative and judicial bodies, but a system for the collective management of copyright and related rights still needs to be set up. There remains a need to increase overall enforcement capacity, in particular in the Ministry of Culture and in the Patent Office. Training, in particular of judges and prosecutors, needs to be intensified. Further efforts are needed especially to cope with the high level of piracy in software and music and video products. Better co-ordination among enforcement bodies (in particular customs, police and judiciary) needs to be pursued. Poland should carefully implement its new strategy on intellectual property protection, adopted in August 2003 and meant to step up the fight against piracy and counterfeiting.

The Regulation replacing the Brussels Convention on mutual recognition and enforcement of foreign judgements in civil and commercial matters will be directly applicable upon accession and accession to the Rome Convention will only be possible upon accession. Poland has designated the relevant courts which will deal with applications and appeals.

Conclusion

Poland is essentially meeting the requirements for membership, and is expected to be in a position to implement by accession the acquis, in the areas of company law and accounting, and the Regulation replacing the Brussels Convention and the Rome Convention. Some adjustments still need to be made to the company law acquis and full alignment in the field of accounting will require some amendments to the Law on Statutory Auditors.

The majority of commitments and requirements arising from the accession negotiations in the field of the protection of intellectual and industrial property rights have been met. Further legislative adjustments are required in respect of copyright and related rights, in particular to fully transpose the information society rules in this area, and in respect of industrial property rights, notably on Community trademarks and designs, as well as geographical indications. Enhanced efforts are in particular needed to strengthen the enforcement of intellectual and industrial property rights. Administrative capacity needs to be improved, better co-ordination among enforcement bodies is required and the efficient functioning of a well-trained judiciary should be given close attention.

Chapter 6: Competition Policy

The competition acquis covers both anti-trust and state aid control policies. It includes rules and procedures to fight anti-competitive behaviour by companies (restrictive agreements between undertakings and abuse of dominant position), and to prevent governments from granting state aid which distorts competition in the Internal Market. Generally, the competition rules are directly applicable in the whole Union, and Member States must fully co-operate with the Commission on the enforcement of these rules.

In the anti-trust sector, Poland has adopted legislation containing the main principles of the Community anti-trust rules as regards restrictive agreements, abuse of dominant position and merger control. However, preparations should continue for the application of the EU's new procedural regulation.

Poland has the necessary implementing structure in place, and the Office for Competition and Consumer Protection (OCCP) is functioning satisfactorily. In view of the decentralised application of the antitrust rules under the EU's new procedural regulation, further strengthening of the administrative capacity would still be opportune. Further efforts are still needed to raise awareness of the anti-trust rules of all market participants and to build up a credible and transparent competition culture. Special training for judges should be further developed.

The enforcement record is overall satisfactory. In order to ensure further strengthening, it would be particularly opportune to focus on serious distortions of competition, such as cartels, as well as to focus investigations on practices that are important for the market structure. Furthermore, the policy on sanctions (fines on competition infringements) should be further reinforced.

In the field of state aid control, Poland has adopted state aid rules covering the main principles of the acquis. With respect to the transposition of the substantive rules, Poland satisfies the basic requirement for the establishment of the necessary legislative framework. In particular, the recent amendments to the state aid legislation have brought the rules into closer conformity with the EU acquis.

The necessary implementing structures are in place, and the Office for Competition and Consumer Protection (OCCP) is functioning satisfactorily. Further efforts are still needed to raise awareness of the state aid rules among all market participants and aid grantors. Poland must also pay particular attention to training of the judiciary.

The enforcement record is not wholly satisfactory. In particular, shortcomings have been identified in the handling of rescue and restructuring aid as well as of research and development aid. In these areas, the assessment of the aid measures has not always been carried out in line with the acquis and has diverged from the Commission's practice. It is important for the OCCP to be particularly vigilant on all measures proposed by the Government in these areas and on measures destined for sensitive industries. Furthermore, recent measures aimed at bailing out several troubled shipyards give rise to concern. Moreover, measures destined for companies in restructuring (the so-called "anti-crisis" package) must be compatible with the EU rules on rescue and restructuring aid. In general, reinforced efforts are required to ensure fully satisfactory enforcement.

Poland benefits from a transitional arrangement in relation to certain fiscal aid benefits. This necessitates modifications of individual fiscal benefits (including the conversion of those benefits to large companies) granted under the Act on Special Economic Zones of 1994. Poland has introduced draft amendments with a view to introducing the agreed modifications of the fiscal benefits by accession. These amendments aim to bring the national legislation into conformity with the provisions of the Accession Treaty.

Poland also has a transitional arrangement (Protocol on steel) under the Accession Treaty for the restructuring of its steel industry by the end of 2006. In this context, Poland is allowed to grant restructuring aid until 2003 to a pre-defined group of steel companies for which the restructuring process must be completed by 2006. Poland is also obliged to report on the implementation of the restructuring programme on a half-yearly basis. Furthermore, it is important to observe that no restructuring aid may be granted exceeding the specified amounts or to companies outside the group of steel mills specified in the special Protocol of the Accession Treaty.

Conclusion

Poland is essentially meeting the commitments and requirements arising from the accession negotiations in the anti-trust area and is expected to be in a position to implement the acquis in this area as of accession. In completing preparations for membership, Poland must continue to develop a track record of enforcement of the anti-trust legislation.

Poland is partially meeting the commitments and requirements arising from the accession negotiations in the state aid area. In order to complete preparations for membership, Poland must urgently ensure proper enforcement of all State aid measures, particularly of aid destined for rescue and restructuring as well as research and development purposes. Furthermore, Poland must urgently ensure that all aid measures for companies active in the sensitive sectors (particularly shipbuilding and ship repair) are in full compliance with the special rules applicable in these industries. Moreover, attention should be given to finalising adoption and ensuring implementation of the amendments to the Act on Special Economic Zones in order to introduce the agreed modifications of the fiscal benefits by accession. Finally, Poland must ensure full implementation of the agreed framework for the restructuring of the steel industry, and in particular, guarantee that no restructuring or any other incompatible aid is granted to steel companies that are not covered by the Protocol on steel.

Chapter 7: Agriculture

The agriculture chapter covers a large number of binding rules, many of which are directly applicable. The proper application of these rules and their effective enforcement by an efficient public administration are essential for the functioning of the common agricultural policy. This includes the setting up of management systems such as a Paying Agency and the Integrated Administration and Control System, which are covered under "horizontal issues" below, and also the capacity to implement rural development actions. The acceding countries must be ready to be integrated into the common market organisations for a range of agricultural products, including arable crops, fruits and vegetables, and meat. Finally, this chapter covers detailed rules in the veterinary field, which are essential for safeguarding animal health and food safety in the internal market, as well as in the phytosanitary field, including issues such as seed quality, harmful organisms and plant protection products.

Horizontal issues

In the area of Paying Agencies, the Agency for Restructuring and Modernisation of Agriculture (ARMA) will be in charge of rural development measures and direct payments, including IACS, and the Agricultural Market Agency (AMA) will be responsible for market mechanisms. These two bodies remain to be accredited by the Ministry of Finance. Preparations will need to be accelerated in particular as regards the setting up of the financial management and accounting computer applications as well as the recruitment and training of new staff.

There is a serious risk that a functional Integrated Administration and Control System (IACS) will not be in place. This is particularly due to the difficulties associated with recruiting and training the huge number of staff required for different functions implementing a proper IT system, as well as because the basic land use information of the cadaster contains errors and is out of date for a range of parcels.

The Agency for the Agricultural Markets (AMA) will be responsible for the administration of trade mechanisms. The relevant control tasks will be under the responsibility of the customs services and the Agriculture and Food Commercial Quality Inspectorate will supervise the quality parameters. Legislative measures for the period after accession remain to be adopted. The preparation of administrative structures and procedures must be accelerated, with particular attention to the export refunds monitoring system and to good communication between the three institutions (see also Chapter 25 - Customs union).

As regards quality policy, Poland has not yet adopted Community definitions and rules for products of protected origin and geographical indication. The Polish fine food programme is due to be brought in line with EU requirements upon accession.

The Polish Act on organic farming is not fully in line with the acquis. The control structures need to be reinforced and certifying bodies accredited.

The Farm Accountancy Data Network (FADN) liaison agency will be the Institute of Agricultural and Food Economics. The regions have been defined. The network to collect data from farms is gradually being expanded. The national committee remains to be set up.

State aid measures in the field of agriculture remain to be brought in line with the acquis at the time of accession.

As concerns direct payments to farmers, Poland has decided to apply the single area payment scheme (SAPS) in the first years after accession.

Common market organisations

The AMA will be responsible for the implementation of the arable crops common market organisation (CMO). The ARMA will be responsible for payments related to dried fodder. The adaptation of the actual structures needs to be accelerated. The list of intervention centres for all major cereals has been adopted. For tobacco and hops, subject to continued good progress Poland should have implemented the acquis satisfactorily by accession.

The legal basis for the sugar sector is well established, though some further rules still need to be adopted for full alignment. AMA is the responsible body for the sugar common market organisation (CMO) while the control tasks are delegated to the Agriculture and Quality Inspectorate. Procedures for the different trade mechanisms of the CMO have been elaborated. A quota system is in place, including inter-professional agreements, but needs to be fully harmonised with the acquis.

Implementing legislation as regards marketing standards for fruit and vegetables as well as the establishment of producers' organisations has been adopted. Administrative structures to control quality requirements are in place. However, attention must be given to the application of marketing standards on the national market and controls at the export stage still have to be implemented. The setting up of producers' organisations remains to be encouraged and approval of programmes needs to be separated from payments. Mechanisms for reporting entry prices remain to be set up.

In the area of wine and alcohol, the CMO for wine remains to be fully set up. Quality standards on spirit drinks are partially in line with the acquis. Assessment of the necessity to implement parts of the wine CMO (wine zones) based on a 2002 census needs to be made. Poland needs to complete further its preparations to implement the CMO for wine and all the spirit drinks acquis, in particular the ex officio protection of geographical wine and spirit drinks names.

AMA is responsible for the implementation of the milk quota system as well as for intervention, disposal measures, and import and export tasks in the milk sector. The administrative structures of the AMA have been substantially strengthened in order to ensure the milk quota management. In general, there has been good progress for the preparation of the application of the milk quota system. However, some major challenges are still ahead, such as the identification and control of all direct sellers and appropriate staffing in regional offices. As for the other mechanisms of the CMO of milk and milk products, Poland intends to apply the procedures that have already been established.

Implementing legislation remains to be adopted regarding carcass classification and price reporting for beefmeat, sheepmeat and pigmeat as well as for beefmeat labelling. For beef carcass classification the exact method of organising, introducing and controlling classification has yet to be finalised and the Polish Authorities are therefore behind schedule in implementing the EU Beef Carcass Classification Scheme.

For eggs and poultry, legislative measures remain to be adopted. As regards administrative structures for marketing standards, price reporting and the reporting of production statistics, enhanced efforts are required if Poland is to have a functioning system by accession.

Rural development

The implementation law for the Rural Development Plan (RDP) remains to be adopted. The Ministry of Agriculture and Rural Development has been appointed as the managing institution and ARMA as the implementing body and Paying Agency for the RDP. The Agency already has experience with the implementation of SAPARD, which has been accelerated recently following delays earlier on in committing funds to beneficiaries. Poland has informally transmitted its draft RDP to the Commission. Enhanced efforts are required if Poland is to benefit from EAGGF Guarantee funded rural development measures from 1 January 2004. In particular, the management and implementation of rural development measures needs to be clarified and administrative capacity has to be strengthened. With regards to forestry the Act on Appropriation of Agricultural Land for Afforestation is not totally in line with the acquis, and should be amended.

Veterinary and phytosanitary issues

As regards veterinary issues, serious concerns remain about the adoption of four basic veterinary acts. Poland will only be meeting the majority of the requirements for membership once these basic veterinary acts have been adopted and implemented.

Transposition of legislation on transmissible spongiform encephalopathies (TSEs) and animal by-products has been partly achieved. TSE surveillance needs to be upgraded, in particular as regards testing of risk animals. A collection system for cadavers is not yet in place and animal waste treatment plants remain to be upgraded. A total feed ban has not yet been implemented.

As regards the establishment of the veterinary control system in the internal market, particular efforts are needed to accelerate legislative work and to strengthen the administrative structures for controls at the site of origin and non-discriminatory spot checks during transport and at destination. Poland has not yet joined the ANIMO system. Poland has transposed the main parts of the acquis for identification and registration of animals. Registration of bovines is close to completion. However, enhanced efforts are still needed to upgrade the bovine database. The law on financing veterinary inspections and controls has not yet been adopted. Legislation as regards veterinary checks of imports from third countries has recently been adopted. Transposition regarding rules for import remains to be completed. Additional efforts have to be made if all seven proposed border inspection posts are to be ready in order to meet EU requirements at accession: jwinoujkcie, Gdynia, Warsaw-Ok)cie, Bezledy, Kukuryki, Korczowa and Szczecin.

Regarding animal disease control measures, national contingency plans on foot and mouth disease, classical swine fever, Newcastle disease and avian influenza have been provided. Poland has joined the Animal Disease Notification System (ADNS) on a voluntary basis.

Most of the legislation on trade in live animals and animal products still needs to be approved and implemented.

Legislation on public health protection has been partially adopted but needs adjustments. Urgent attention must be given to the new framework act in this sector. Transitional arrangements have been granted for certain meat establishments until the end of 2007 and for certain milk establishments and for raw milk quality until the end of 2006. Products from these establishments will be restricted to the national market. However, milk-processing establishments and competent authorities are not yet prepared for the channelling of raw milk on quality grounds. Poland has given a commitment that all establishments continuing to be in operation after accession will be in compliance with the acquis. There is a high probability that a significant number of agri-food establishments will not be in compliance with the relevant EU requirements at the date of accession.

The acquis on common measures (including zoonoses) has partly been transposed. The residue-monitoring programme does not meet EU requirements.

The acquis in the field of animal welfare remains to be transposed. Efforts need to be accelerated to transpose legislation and to fully implement the acquis. Poland has been granted a transitional arrangement until the end of 2009 as regards the conditions for laying hens in certain farms.

In the field of zootechnics, steps have been taken to align Polish legislation with the acquis.

Full harmonisation of the Act adopted in 2001 and implementing regulations adopted in 2002 for animal nutrition remains to be achieved and implemented.

In the field of phytosanitary legislation, a new draft Act on the Plant Protection is still under examination. Consequently, the acquis on harmful organisms is not yet transposed. An issue of concern is that Poland would not be able to provide at the date of accession the same level of phytosanitary guarantees for potato production as achieved in the current Member States. Commitments have been made to address this issue. The acquis for plant protection products remains to be transposed. A transitional period for marketing certain plant protection products until the end of December 2006 has been provided to Poland. As regards quality of seeds and propagating material, the new seed act has been adopted but implementing legislation is still pending.

Poland has to ensure that international veterinary and phytosanitary agreements are brought into compliance with the EU acquis by accession.

As regards food safety (see also Chapter 1 - Free movement of goods) the administrative structures are in place under the overall co-ordination of the Ministry of Health, supported by the Chief Sanitary Inspectorate. In addition, the Ministry of Agriculture is supervising three inspectorates: the Chief Veterinary Inspectorate, the Plant Protection and Seed Service and the Agriculture and Food Commercial Quality Inspectorate. Moreover the Office for Competition and Consumer Protection, with the Trade Inspectorate is carrying out control activities at different levels in the area of food safety. The large number of inspectorates remains an issue of concern, as it leads to co-ordination problems.

Conclusion

Poland is essentially meeting the commitments and requirements arising from the accession negotiations, among the horizontal issues as regards quality policy, organic farming, the Farm Accountancy Data Network (FADN) and state aid; among the common market organisations (CMOs) as regards arable crops, sugar, fruit and vegetables, wine, sheep and pigmeat; and in the veterinary field as regards animal disease control measures and zootechnics. Subject to good progress being maintained is these areas, Poland is expected to be in a position to implement this acquis from accession.

Poland is partially meeting the commitments and requirements for membership in the areas of trade mechanisms; the CMOs for milk, beefmeat and eggs and poultry; rural development; in the veterinary field as regards veterinary control system in the internal market (with the exception of movement control of animals), trade in live animals and animal products, common measures, animal welfare, animal nutrition; and phytosanitary issues (with the exception of potato ring rot and wart disease). Unless efforts are accelerated in these areas, there is a risk that functioning systems will not be in place at accession.

There are serious concerns about Poland's preparations to set up its Paying Agencies and to implement the Integrated Administration and Control System (IACS). For veterinary issues, urgent attention must be paid to the adoption and implementation of four basic veterinary acts. Serious concerns remain regarding TSE and animal by-products (concerning the collection system of cadavers and the rendering plants), and movement control of animals and with regards to plant harmful organisms (control of potato ring rot and wart disease). Urgent progress is needed in public health (in the upgrading of agri-food establishments). Unless immediate remedial action is taken, Poland will not be in the position to implement the acquis in these areas by the date of accession.

Chapter 8: Fisheries

The acquis on fisheries consists of regulations, which do not require transposition into national legislation. However, it requires the introduction of measures to prepare the administration and the operators for participation into the Common Fisheries Policy (in the areas of market policy, resource and fleet management, inspection and control, structural actions and state aid). In some cases, existing fisheries agreements or conventions with third countries or international organisations need to be adapted.

In the field of resource and fleet management and inspection and control, the Act on Maritime Fisheries, as well as all implementing regulations, have been adopted. Through this legislation, Poland has introduced the basis for fishing licences, fishing logs, unloading declarations, the register of fishing vessels and the satellite system of the fishing vessel monitoring system (VMS). The Act on Maritime Fisheries is currently undergoing revision. Regarding implementation, the hardware and software systems have been installed for VMS as well as for the Fishing Vessel Register, but the systems cannot be used because of a lack of specialised personnel. The rate of re-measurement of fishing vessels is too low. Poland should complete re-measurement upon accession. Training of staff at the Fisheries Department of the Ministry of Agriculture and Rural Development (MARD) and at the three Regional Fisheries Inspectorates, as well as the setting up of the system for catch registration, including the Sea Fisheries Information System, is ongoing. However, the capacity of the fisheries administration, notably with respect to control functions, needs to be strengthened significantly at central and in particular at local level by employing additional staff, by additional training and by providing the institutions with equipment to control fishing activities. Information from central level and co-ordination between all levels of administration must be improved.

In the area of structural actions, Poland has submitted the Sectoral Operational Programme to the Commission. Structural policy will be co-ordinated by the newly created unit for Fisheries and Fish Processing which has been set up in the Fisheries Department of MARD and implemented by the Agency for Restructuring and Modernisation of Agriculture and the three Regional Inspectorates for Fisheries. Effective co-operation of these institutions needs to be strengthened. Their capacities must be reinforced. The fishing fleet register has been set up, but is not yet functional. The measurement of fishing vessels is ongoing. To reach the goal in time, the administrative capacity for managing the structural policy and in particular the administration of the Financial Instrument for Fisheries Guidance (FIFG) needs to be enhanced significantly.

Regarding market policy, the legal framework establishing the organisation of the market in fisheries has been adopted. The market policy and coverage of market regulation such as setting up producers' organisations, has not been fully implemented. The implementation of marketing standards, control and organisation of first sales t