Sixteenth annual report on monitoring the application of Community law (1998) /* COM/99/0301 final */



Official Journal C 354 , 07/12/1999 P. 0001



SIXTEENTH ANNUAL REPORT on monitoring the application of community law - 1998 - (1999/C 354/01) COM(1999) 301 final (Submitted by the Commission on 9 July 1999) CONTENTS >TABLE> Each year the European Commission draws up a report on the monitoring of the application of Community law in response to requests made by the European Parliament (resolution of 9 February 1983) and the Member States (point 2 of Declaration No 19 annexed to the Treaty signed at Maastricht on 7 February 1992). The report also meets requests from the European Council and the Council for information on specific sectors. 1. INTRODUCTION The Commission has placed the proper application of Community law by the Member States high among its objectives, to enable Community citizens to enjoy the full benefit of European integration. As can be seen from this report, the sixteenth since the resolution passed by the European Parliament on 9 February 1983, it has provided itself with the practical means of attaining this objective, both through the unprecedented enhancement of the facilities for use of the infringement procedures provided for by Article 169 of the Treaty and by greater use of administrative cooperation, notably via the action plan for the internal market. 1.1. Statistics for 1998 More than ever in the past, the Commission was active in its role as guardian of the Treaties in 1998, as can be seen from the figures below: - the number of reasoned opinions issued in the course of the year reached an all-time high at 675; this is 102 % up on the figure of 334 for 1997, and it is the result of far stricter and far quicker action by the Commission following the internal reforms made since 1996 and strengthened in 1998, - the number of Article 169 letters is down from 1461 in 1997 to 1101 in 1998, simply because the number of proceedings for failure to transpose directives fell; Article 169 letters for failure of legislation to comply with Community law or for incorrect application of Community law rose from 432 in 1997 to 486 in 1998, an increase of 12 % (and 42 % up on 1996), - the number of cases referred to the Court of Justice, at 123, was stable; compared with the number of Article 169 letters and reasoned opinions, this makes it quite clear that the bulk of infringement cases are solved before there is any need to go to the Court, - in 1998 Commission departments were very active in detecting cases of non-conformity and incorrect application of Community law, since the number of cases detected by them rose by 52 % from 261 in 1997 to 396 in 1998 (this figure includes cases opened as a result of parliamentary questions or petitions), - the number of complaints received by the Commission continued the upward course started in 1997, rising by 18 % from 957 in 1997 to 1128 in 1998 (and by 38 % from the 1996 level); the figure would be even higher if the 4000 or so identical complaints about the new Swedish legislation on controls on shipments and parcels containing spirits and tobacco and the hundreds of complaints about the taxes applied by certain Belgian local authorities on satellite dishes were added (given the number of complaints on the latter subject, a standard-form acknowledgement of receipt was published in the "C" series of the Official Journal(1) and on the Community institutions' website), - termination decisions fell by 7 %, from 2112 in 1997 to 1961 in 1998, which is evidence of the large number of cases solved in relation to the application of Community law, - the speed with which cases were dealt with also rose: 25 % of Article 169 letters sent in 1997 concerned infringement proceedings opened in the course of the year, but the figure rose to 48 % in 1998; there was an even sharper rise in the corresponding figure for reasoned opinions, as 19 % of those issued in 1998 concerned proceedings commenced in 1998, as against 1 % in 1997, - as for transparency, the number of cases on which a press release was issued rose from 248 in 1997 to 334 in 1998. These few statistics clearly reveal the impact of the internal reforms implemented by the Commission, initially in 1996 and then in 1998, to improve the operation of the infringement procedure. These reforms will be described in greater detail in this introduction (point 1.2). There was an improvement in the application of Community law by the Member States as regards the transposal of directives (point 1.3), but compliance in general by the Member States remains sadly inconsistent (point 1.4). There are times when the penalty procedures of Article 171 of the Treaty seem to offer the only possibility of inducing a Member State to come into line (point 1.5). 1.2. The reform of Commission working methods in relation to infringement proceedings: new improvements in 1998 In June 1998 the Commission evaluated the operation of its working methods in relation to infringement proceedings under Article 169 of the Treaty, which were reformed in July 1996(2). The exercise applied to all forms of infringement proceeding, irrespective of the area of Community law in issue. The Commission then decided on a range of new internal measures to improve the operation of the relevant procedures, relating to: - faster handling of cases, - greater transparency, and also - better relations with complainants. 1.2.1. Faster handling of cases The improvements here related both to the decision-making machinery and to the implementation of decisions. They are described in a document which has been sent to the European Parliament, the Member States and the Ombudsman (SEC(1998)1733). One of the main changes to speed up the handling of infringement cases was the general use, from April 1998, of fortnightly meetings devoted specifically to the application of Community law. Until quite recently, all but the most urgent infringement cases were considered in four periodic reports (in March, June, October and December). The use of these periodic reports, taking stock of all suspected infringements (up to the Article 169 letter stage) and established infringements (subsequent stages)(3), secures a consistent approach to the various cases, irrespective of the area of Community law in issue, and regular review of the cases referred to the Commission. With the 1996 reform, the Commission added a new possibility of dealing with infringement cases at the fortnightly meetings on Community law (mainly devoted to state aids) so that cases ripe for a decision on the merits could proceed more quickly without awaiting the periodic report. In 1997 only 40 cases were taken at fortnightly meetings, but nearly 400 Commission decisions were dealt with by this new procedure in 1998. Decision-making has thereby been speeded up, since the next stage of the procedure (for example reasoned opinion or referral to the Court) can be embarked on as soon as the time allowed for a reaction from the Member State is up, assuming there is no reaction or only an inadequate reaction. Likewise, where a case is settled, it can be formally terminated more quickly, which gives the Member States a further incentive to come into line with Community law. More generally, the greater frequency of Commission meetings devoted to infringements offers greater efficiency in the processing of cases. The "de-dramatisation" of Article 169 letters, which have been restored to their genuine function of seeking observations, and at the same time the decline in the volume of correspondence prior to that stage, have also made it possible for the Commission to take quicker decisions to open infringement proceedings. The Commission now enforces more rigorously the rules on time limits for a reaction to Article 169 letters and action on reasoned opinions, as the next stage of the procedure is launched as soon as the time allowed for a response to a letter or for action on a reasoned opinion has elapsed without a satisfactory reaction. But there is little point in speeding up decisions if the Article 169 letter or reasoned opinion is not served on the Member State. After all the Member State needs to know the Commission's view of the case before it can furnish an explanation, put an end to the infringement or, if it prefers, let the Article 169 procedure follow its course. In the past, the time required for notification of Article 169 letters and reasoned opinions was measured in months, but in 1998 the Commission adopted the principle of notifying decisions in the week they are taken. To this end, internal rules were amended in the second half of 1998 to ensure that the notification is prepared as fully as possible before the decision and to detect every unwarranted delay. As has been seen, the impact of these rules has already been quite considerable, since 19 % of reasoned opinions issued in 1998 concerned proceedings opened in the course of the year whereas only 1 % of those issued in 1997 concerned proceedings opened that year. 1.2.2. Greater transparency Since the reform of 1996, publicity by means of press releases has been the general rule for all decisions to issue reasoned opinions or refer cases to the Court. But the Commission generally does not issue a press release when it issues an Article 169 letter(4), since such a letter does not determine the Commission's final position but is confined to seeking observations, after which infringement cases become easier to settle. As already indicated, the number of press releases announcing infringement cases rose in 1998, to 334 from only 44 in 1996. This policy of greater transparency will be maintained: information at present available only on paper will be made more accessible via the Internet. 1.2.3. Better relations with complainants Complainants, of course, are not strictly speaking interested parties for the purposes of the procedures of Article 169 of the Treaty, but the fact remains that the Commission attaches great importance to informing them properly of the response to their complaints at all stages of the procedure. Following an own-initiative inquiry by the Ombudsman in 1996(5), the Commission now routinely informs complainants where it plans to propose that a case be terminated. A new version of the complaint form, giving fuller and clearer explanations, has been devised to replace the form in use since 1989(6), so that complainants can be fully aware what they can expect from the infringement procedure and be informed of the other possibilities for asserting their rights. The principle that complaints are treated on a confidential basis is maintained so as to preserve the necessary relationship of trust with complainants and ensure that they suffer no loss. 1.3. Transposal of directives in 1998 The table below gives an overall picture of the rate of notification of national measures implementing all the directives applicable on 31 December 1998. >TABLE> On 31 December 1998 the Member States had on average notified 95,7 % of the national measures needed to implement the directives applicable. The general rise in the transposal rate from the 1997 figure of 94 % is due first and foremost to the tougher means applied by the Commission to enforce Community law, either infringement proceedings proper, or less contentious techniques such as administrative cooperation (and particularly the directive missions), or peer pressure generated by the plan of action for the internal market. Particular attention is drawn to the efforts made by Belgium and Germany to make up their delays, though the transposal rate in Luxembourg, Greece, Italy and, albeit to a lesser degree, France, continues to give cause for concern. Even though the aggregate figures are encouraging, problems subsist in a number of specific areas, notably transport and agriculture, where there has sometimes been no major improvement. The table at the end of Annex IV shows the detailed transposal rate for each Member State and each area in 1998. 1.4. General overview of the application of Community law by the various Member States The table below breaks down by Member State the 2979 infringement cases in motion on 31 December 1998 (including cases where the Commission has not yet decided to commence proceedings and where proceedings are already under way). >PIC FILE= "C_1999354EN.000801.EPS"> It can be seen that France is the Member State against which the largest number of proceedings are in motion, most commonly concerning non-conformity or incorrect application. It is worth noting that France is the Member State against which the largest number of complaints was lodged in 1998 - 203 out of 1128, or 18 %. The application of Community law in Italy, Greece and Belgium also gives cause for concern, partly on grounds of failure to transpose Community directives. >PIC FILE= "C_1999354EN.000901.EPS"> Some Member States are overrepresented at the reasoned opinion and referral stages; the tables below highlight this. The conclusion is that these Member States have greater difficulties in quickly solving cases of infringement of Community law, either because of problems of political or legal substance or simply because they sometimes take a long time to respond to the Commission's Article 169 letters and reasoned opinions. >PIC FILE= "C_1999354EN.000902.EPS"> >PIC FILE= "C_1999354EN.001001.EPS"> 1.5. The continued application of the penalty provisions of Article 171 of the Treaty In 1998, the Commission continued to make use of the penalty provisions of Article 171(2) of the Treaty, taking five decisions to apply for penalties when referring cases to the Court of Justice for the second time(7). Two cases of this kind were actually brought before the Court of Justice in 1998. For the first time, such a decision was taken in a social affairs case, environmental law ranking ahead of all other areas in the use of this instrument. For the first time a referral with application for penalties was taken against Luxembourg, which thus joins Greece (four decisions), Italy (three decisions), Germany (three decisions), France (two decisions) and Belgium (one decision). The effectiveness of the mechanism has been borne out, since Member States responded to most penalty decisions by rapidly coming into line with Community law, either before the case was referred to the Court or shortly afterwards. >TABLE> 2. SITUATION SECTOR BY SECTOR 2.1. INTERNAL MARKET 2.1.1. Implementation of the action plan for the single market The action plan for the single market was announced by the Amsterdam European Council in June 1997 with an ambitious 18-month programme ahead. By the time it finished on 31 December 1998, it was clearly a success. Substantial progress was made, both on the legislative and non-legislative fronts. In most, but not all, cases the progress called for by the action plan was achieved. In spite of the progress made by some Member States, it is clear that the directives which have not yet been implemented will not be before the end of 1998 - one of the objectives set by the action plan. However, there has been a considerable improvement with regard to the percentage of directives not yet implemented in one or more Member States (the "fragmentation factor"), which has fallen to 13,7 % (from 35 % in June 1997). However, the situation varies from Member State to Member State, and a continuing delay in the transposal of directives into national law is a serious worry. Eliminating the delay is vital. The Commission is monitoring the situation on the single market scoreboard, the second and third editions were published in May and October respectively, and it submits a regular progress report to the Council. Following the Commission communication of 13 May 1998 entitled "Making single market rules more effective"(8), the Council, at its meeting on 24 September, called on the Member States to attach the highest priority to efficient, complete and timely implementation of single market rules. Initiatives aimed at strengthening the framework for the implementation of legislation and problem-solving, through the setting up of contact points and coordination centres, have been reinforced. Contact points for businesses and the general public are available on the Internet. Support for these efforts is provided by the Karolus programme, under which exchanges are arranged between officials responsible for the implementation of single market rules from different Member States. On 7 April, the European Parliament and the Council decided to extend the programme until 31 December 1999(9). If the single market is to function effectively, the relevant legislation must also be correctly implemented by the Member States. The Robert Schuman campaign(10), recently adopted by the European Parliament and the Council for a period of three years, aims to ensure better implementation of Community law by providing more training and information for judges and lawyers. In contributing to greater awareness of the practical aspects of Community law among the legal profession, the Robert Schuman campaign is helping to ensure that the single market works to the maximum benefit of ordinary citizens, consumers and businesses alike. The campaign relies on the cooperation of the bodies responsible for training judges and lawyers. These establishments can apply for financial support for training or information campaigns dealing specifically with Community law. In the two pilot phases in 1997 and 1998, over 80 local projects were selected for support under the campaign. The results of projects which are already well under way and positive feedback from professionals in the field show that the campaign has so far been a success and highlight the scale of the training needs of judges and lawyers in Community law, which the campaign is endeavouring to address. The first year of the Robert Schuman campaign will kick off with a call for proposals to be published in the Official Journal of the European Communities at the beginning of 1999. Better, simpler legislation remains a high political priority. 1998 saw the conclusion of phase III and the launch of phase IV of the SLIM initiative, while the conferences on better regulation organised by the United Kingdom and Austrian Presidencies showed the increasing attention being given to this subject at national level. The Business Test Panel, which allows businesses to assess in advance the administrative burden and compliance costs of forthcoming legislative proposals, was also launched as a pilot project(11). The political momentum for simpler, better legislation favours the creation of a business environment enabling businesses and individual citizens to reap the full benefits of the single market. The dialogue with citizens and business launched at the Cardiff European Council provides information, via telephone and Internet, on how to exercise the rights conferred by Community law. It also provides the Commission with feedback on the problems encountered in doing so. OSIS (the one-stop Internet shop), which goes on line this month as part of the dialogue with business, provides ready access to a wide range of useful information on doing business in the single market. On the legislative front, three of the four priority measures set out in the action plan have been agreed: the internal market in gas, the legal protection of biotechnological inventions, and the transparency mechanism for information society services. However, the failure to adopt the fourth priority measure, the European Company Statute, has impeded adoption of a number of related proposals, such as the proposal for a 10th Directive on cross-border mergers. The targets set in the action plan in relation to many other legislative measures have been met. Progress has been particularly notable in the area of electronic commerce. Significant progress has also been made on the liberalisation of telecommunications and electricity. Action to deliver the benefits of the single market to all citizens includes the Commission's proposals for improvements to the rights of entry and residence for workers and its Communication of 1 July outlining a future proposal creating unified rights for all union citizens. The elimination of border controls will now take place within the framework of Article 62 of the EC Treaty as amended by the Treaty of Amsterdam. In its communication on the follow-up to the recommendations of the High-Level Panel on the Free Movement of Persons (Commission communication to the European Parliament and the Council of 1 July 1998, COM (1998) 403 final), the Commission stressed the need to improve information to citizens regarding their rights and to provide better training and information for all those involved in the exercise of free movement. The purpose of this is to ensure that Community law on the free movement of persons is given practical effect. 2.1.2. Free movement of persons and citizenship of the Union 2.1.2.1. Ending discrimination As indicated in the 1997 report, the Commission has been keeping a watchful eye on the question of civil procedure and access to justice, to ensure that national authorities respect the case-law established by the Court in C-43/95 Data Delecta(12), C-323/95 Hayes(13) and C-122/96 Saldanha(14) prohibiting the requirement that Community plaintiffs who bring an action before the courts of a Member State other than their State of their origin must lodge a sum as security for legal costs (the cautio judicatum solvi). On 8 July 1998, the Commission sent the German and Spanish authorities two reasoned opinions contesting, under Article 6 of the Treaty, the obligation for Community nationals to provide such a guarantee provided for in the German and Spanish codes of civil procedure. The case against Germany has since been terminated, after the legislation in question was amended in line with the reasoned opinion. In Spain a bill on civil procedure is now in the pipeline. Pending its adoption, the Commission decided to refer the case to the Court in December 1998. 2.1.2.2. Entry and residence The Directives on the right of residence of students (93/96/EC), retired persons (90/365/EEC) and other persons not in active employment (90/364/EEC) have now been transposed by all the Member States, Germany being the last to do so. The infringement proceedings under way for incorrect transposal of the three Directives are continuing. The Commission decided to take action against France and Italy in the Court of Justice concerning the implementation of provisions on the declaration of financial means by students, the financial means of retired persons and persons not in active employment, sickness insurance for students, retired persons and persons not in active employment. Other proceedings for incorrect transposal of the three Directives are at an earlier stage (Germany and Austria). A number of proceedings for incorrect transposal were closed after the national legislation concerned was amended (Spain, Portugal, Finland and Sweden). On 30 March 1998, the Commission brought an action in the Court of Justice against Greece (Case C-85/98(15)) because of the Greek authorities' practice of demanding a higher fee for the issue of residence permits to members of EU citizens' families who are nationals of non-member countries than to EU citizens themselves. The Commission believes that this difference of treatment is contrary to the Directives on right of residence. 2.1.2.3. Right to vote and stand in elections Following the entry into force of Directive 94/80/EC on 1 January 1996, Union citizens residing in a Member State of which they are not nationals were able to take part in municipal elections in Germany (Schleswig-Holstein, Bavaria and Brandenburg), Austria (Tyrol), the Netherlands, Ireland, Greece and Spain. As guardian of the Treaties, the Commission pursued a number of proceedings in 1998 to ensure that Directive 94/80/EC is transposed by all the Member States. Infringement proceedings against France were terminated after it adopted implementing measures in May. The proceedings initiated in 1997 against Germany (Saxony and Bavaria) are continuing. In its judgment of 9 July 1998 in Case C-323/97(16), the Court of Justice condemned Belgium for failure to notify national implementing measures. Infringement proceedings were also initiated against Austria for incorrect transposal in seven of the nine Länder. On 7 January 1998, the Commission adopted a report on the application of Council Directive 93/109/EC on the right of Union citizens residing in a Member State of which they are not nationals to vote and stand in elections to the European Parliament. The report does not propose amendments to the Directive but sets out possible improvements in the way it is applied. Infringement proceedings for incorrect transposal were initiated against Greece and Sweden, while the proceedings against Italy were terminated after the relevant legislation was amended. 2.1.2.4. Regulated professions Court of Justice decisions The following are noteworthy among the Article 171 cases for failure to comply with earlier Court of Justice judgments: - the proceedings against Greece following the judgments of 15 March 1988 (Case C-147/86(17)) and 30 January 1992 (Case C-328/90(18)) concerning "frontistiria" and private music and dance schools were terminated after new legislation complying with Community provisions was introduced, - the Article 171 proceedings against Italy and France concerning the freedom of tourist guides to provide services (judgment given on 26 February 1991 in Cases C-180/89(19) and C-154/89(20)) are still in motion. Provisions adopted by the Italian regions are still under examination and the entry into force of the draft decree of which France has sent notification is still awaited, - it has been decided to refer the case concerning Greece's failure to notify measures transposing Directive 89/48/EEC (first general system) to the Court a second time, with a request for a financial penalty (Case C-365/93(21), judgment given on 23 March 1995). With regard to other judgments of the Court as yet not implemented, it should be noted that: - Following the judgment given against Spain on 22 March 1994 concerning the freedom of tourist guides to provide services (Case C-375/92(22)), scrutiny of the new decrees on the exercise of that profession adopted by the Autonomous Communities is continuing in cooperation with the Spanish authorities. Cases pending before the Court of Justice The Commission has referred the following cases to the Court: - a case against Germany concerning access to the dental profession (requirements not provided for under the dentists' Directives (78/686/EEC and 78/687/EEC), concerning the admission to the social security register of Community nationals holding diplomas obtained in other Member States which conform to the above directives), - a case against Spain, relating to national legislation transposing the architects' Directive (85/384/EEC), which restricts the activities of migrant architects. The case does not refer to the maximum length of time architects from other Member States may work in Spain as this restriction was deleted from national legislation, - a case against France concerning the recognition of diplomas of psychiatric nursing obtained in other Member States under Articles 48, 52 and 59 of the EC Treaty. The French legislation concerning recognition of such diplomas which are not covered under the sectoral directive lays down, in the Commission's view, a procedure which is not in line with Community law. National implementing measures The Commission has terminated the proceedings initiated under Article 169 of the Treaty against Greece concerning Council Directive 92/51/EEC of 18 June 1992 on a second general system for the recognition of professional education and training, which supplements Directive 89/48/EEC, after receiving the transposal measures from the Greek authorities. The proceedings initiated against several Member States with regard to Directive 94/38/EC amending Directive 92/51/EEC with respect to the level of certain qualifications have all been terminated. Incorrect transposal and incorrect application of directives In 1997 the Commission received around 50 complaints concerning restrictions in breach of Articles 52 and 59 of the EC Treaty and directives on the mutual recognition of professional qualifications. Some of these complaints gave rise to infringement proceedings, while others were shelved as unfounded. The Commission pursued a number of proceedings already in motion against Member States for incorrect transposal or incorrect application of directives. Examples include the case against Spain concerning the duration of the training of nurses responsible for general care, which are at the reasoned opinion stage, and the case against Italy, also at the reasoned opinion stage, concerning the provision of services by lawyers and the establishment of legal practices; the restriction on opening a legal practice provided for in the Italian legislation transposing Council Directive 77/249/EEC (freedom of lawyers to provide services) is contrary to the Court of Justice's judgment in Case C-55/94 Gebhard(23), and the transposal of Directive 89/48/EEC (first general system for the recognition of diplomas) is incomplete as far as the legal profession is concerned. The Commission has also brought cases against Italy before the Court of Justice concerning a residence requirement for dentists wishing to practise in Italy (contrary to Articles 48 and 52 of the Treaty) and the incorrect transposal of Directives 78/686/EEC and 78/687/EEC, in particular the duplication of procedures for gaining access to the profession. With respect to the case against Spain concerning the conditions of recognition of diplomas obtained in Latin America, the Commission decided to suspend the proceedings initiated in 1996 as a result of positive developments. The Spanish authorities signalled progress in the renegotiation of clauses in international agreements concerning the recognition of diplomas. Furthermore, a recent judgment given by the Spanish Supreme Court recognised as legally valid the checks carried out by the Spanish Government in relation to training obtained in a non-member country and the examination which is required for the recognition of qualifications where training is found to be insufficient. Dialogue with national authorities As a means of consolidating administrative cooperation and resolving problems quickly, in 1998 the Commission maintained regular contacts with the national authorities through the group of coordinators for Council Directives 89/48/EEC and 92/51/EEC (general system for the recognition of diplomas) and committees of high-level officials (on public health, for example). 2.1.2.5. Independent commercial agents On 13 July 1998, the Commission sent Italy a reasoned opinion under Article 169 of the Treaty for failing to take the necessary measures to correctly transpose Directive 86/653/EEC on independent commercial agents. Italy transposed the Directive in 1991, but omitted to transpose several provisions concerning the conditions under which an agent is entitled to a payment at the end of his contract, to receive a written copy of his contract and to a commission on operations concluded as a result of his intervention after the end of the agency contract. On 2 December 1998, the Commission decided to refer the case to the Court of Justice. The Commission also sent an Article 169 letter to the United Kingdom for incorrect transposal of Directive 86/653/EEC. The Directive had been partially transposed in 1993 by the Commercial Agents Regulations (SI No 3053 and SI No 483). However, these did not apply to agency contracts where the agent conducted his activities in a Member State other than the United Kingdom and the parties concerned had not chosen the law of another Member State as the law applying to their contract. For example, if an agency contract were concluded by an English principal and a French agent and they decided that the contract would be governed by English law, UK legislation transposing the Directive would not apply and the contract would be governed by pre-existing ordinary law. Consequently, the French agent would not be entitled to compensation after the end of his contract as stipulated by the Directive, which is contrary to its objectives. On 19 November 1998, the United Kingdom amended its legislation in line with the Commission's comments and the case has been closed. 2.1.3. Free movement of goods 2.1.3.1. Articles 30 et seq. of the EC Treaty The single market cannot function properly unless the principle of free movement of goods is respected, so the Commission pays particular attention to ensuring that Articles 30 to 36 of the EC Treaty are correctly implemented. The volume of cases challenging state measures likely to create obstacles to trade remains significant, although statistics show that this volume has remained unchanged over the last three years. In 1998, the Commission received 132 new complaints. At 31 December 1998, there were 323 infringement cases pending. With regard to these figures, it should be noted that litigation surrounding the free movement of goods is evolving. Articles 30 et seq. are more than ever being called on to play the role of a safeguard instrument. Community secondary legislation has reached a highly developed stage and provides single or harmonised rules to avoid a broad range of barriers to trade. However, it is not supposed to replace national law. For one thing, the subsidiarity principle requires Community action to be confined to what it is strictly necessary to do at Community level, i.e. provide legal solutions to problems which extend beyond national limits. For another, even in the most highly regulated industries at Community level there are often aspects affecting products, their presentation, or the activity of businesses in that industry which create problems between different Member States and which must be dealt with on the basis of the Treaty's general rules on the free movement of goods. The preparation of this type of case is increasingly complex from the legal point of view, because it involves determining the extent of the obligations incumbent on the Member States deriving from a multitude of legislative and regulatory sources, both primary and secondary legislation. The cases are also more complex from a technical point of view than they were previously. While Community secondary legislation and the Commission's action on the basis of Article 30 of the Treaty have gradually introduced the principle of free movement into national laws and national administrative practices, this means that cases of barriers with which operators are faced relate less and less to a Member State's acceptance of the principle of mutual recognition, say, but more to the actual way in which the principle is applied in specific cases where certain products are not accepted in the Member State of destination. For the Commission, this involves often in-depth technical analyses of these products, their health or safety implications, and a corresponding analysis of the national rules which prevent them being accepted. The technical and legal complexity of the cases means that the Commission is continuing to emphasise methods of solving these problems that are based on close collaboration with the national authorities. Meaningful dialogue allows the two sides to reconcile the various interests at stake as much as possible, balancing the legitimate concerns of the Member States in protecting public health and safety with the requirement to ensure uniform and effective application of Community rules. In this spirit, the Community is focusing on package meetings as a framework where an open, informal discussion can achieve rapid solutions to the barriers exposed by operators. In 1998, these meetings took place with all the Member States except Luxembourg. In general, the success rate of these meetings is high: of all the cases examined, more than 50 % have been settled, either during the meeting or by the adoption of a measure by the Member State following a commitment made during the meeting. Disputed cases represent on average only just over 10 % of the cases discussed. The effectiveness of the package meetings reflects the interest that the Member States have in this instrument. It was the Member States that asked the Commission to pick up its initiative, launched in 1997, of bringing together once a year the chairmen of the national delegations participating in the package meetings. This meeting, which took place for the second time in February 1998, led to the consolidation of an informal network between the Commission departments and the national chairmen, and between the latter, the effectiveness of which in finding rapid, flexible solutions to complaints relating to isolated, specific cases has been proved. The national officials concerned are sometimes also involved in the running of "compliance units", which could be defined as units in national administrations whose role is to monitor complaints made by operators in the country in question which encounter difficulties in other Member States. These units turn to the Commission when the networks for administrative collaboration are not sufficient for them to resolve the problems raised. They have developed a flexible, informal interface with the Commission departments. To date, units of this kind have been set up in Denmark, the United Kingdom, France and Spain. Prime among the industries in which Commission activity was most called for in 1998 is the motor industry. European Union nationals who leave a Member State in order to set up in another continue to encounter difficulties in registering their vehicles in the destination country, in spite of the existence of clear guidelines stipulating the formalities accepted under the provisions of the EC Treaty on the free movement of goods. Although their number is decreasing as a result of the Commission's interventions in this field over many years, these complaints still represent around 20 % of all the complaints received by the Commission concerning barriers to trade in goods. In 1998, the Commission managed to resolve problems encountered in France, Portugal and Germany. The competent national authorities have now simplified the procedure for registering cars and motorcycles imported by individuals, for example by reducing the time needed to complete the formalities. Other sectors in which the Commission frequently receives complaints from operators concern the marketing of food supplements, as well as food products enriched with vitamins and nutrients. The relationship between trade and the environment also affects European businesses. The Commission has had to investigate certain national arrangements for waste processing, particularly of packaging, and certain systems imposing "eco-taxes". Parallel imports of pesticides, the criteria for setting the prices of pharmaceutical specialities, the sales description of chocolate products and the marketing of objects in precious metals are other fields where intervention by the Commission continues to be called for by Community operators. As far as Court of Justice case-law is concerned, there have been two key judgments in the field in question. Starting with the most recent, the Court vindicated the Commission when it attacked France for having omitted, in its legislation on foie gras and preparations with foie gras as a base, to include a clause of mutual recognition allowing products of this kind that had been lawfully manufactured and/or marketed in other Member States to be accepted. The Court confirmed that the Member States are bound to incorporate such clauses in their legislation each time they subject the marketing of a certain product to precise rules on its composition or other conditions which that product must fulfil (Case C-184/96(24)Commission v French Republic, judgment given on 22 October 1998). This formalises the Commission's established practice of requiring Member States (notably under the notification procedures introduced by European Parliament and Council Directive 98/34/EC (see the following heading)) to insert this type of clause into their national legislation in order to avoid creating technical barriers to trade. The other judgment by the Court whose importance should not be underestimated is that given on 9 December 1997 in Case C-265/95 Commission v French Republic(25). Here too, the Court vindicated the Commission when it accused France of infringing Article 30 of the Treaty by not having taken all the necessary and proportionate measures to prevent individuals from creating barriers to the free movement of fruit and vegetables from Spain. In this judgment, the Court established the principle whereby a Member State is bound to contribute actively to safeguarding the principle of the free movement of goods, even against actions by individuals, failing which it may be held to have failed to fulfil its obligations under the Treaty. This judgment also confirms the validity of the initiative taken by the Commission in response to the request of the Amsterdam European Council of 16 and 17 June 1997 that an appropriate instrument should be proposed so that the Community can react rapidly and effectively to serious attacks on the principle of the free movement of goods. The proposal for a Council regulation creating a mechanism whereby the Commission can intervene in order to remove certain obstacles to trade(26) was given the Council's political agreement on 18 May 1998 and a favourable opinion by the European Parliament on 5 November 1998. It was adopted by the Council on 7 December 1998(27). The Commission welcomes the speed at which all the institutions followed up the European Council's call for an instrument to be produced that could meet the expectations both of the various national administrations and of economic operators. Finally, the Commission welcomes the gradual start-up of the transparency instrument introduced by Parliament and Council Decision No 3052/95/EC, pursuant to which the Member States are bound to notify the Commission of the national measures constituting exceptions to the principle of the free movement of goods. During 1998, 68 national measures were notified, most of them on marketing food supplements. 2.1.3.2. Preventive rules provided for by Directive 98/34/EC(28) (formerly 83/189/EEC) The notification procedure introduced by Directive 98/34/EC is an essential tool for preventing barriers to trade from being raised and for sharing information. Member States are required to report drafts of new technical regulations for vetting before they are finally adopted. The procedure does not cover technical regulations issued to comply with Community provisions. In 1998, the Commission received 604 drafts of technical regulations which were scrutinised by the relevant departments. This compares with 523(29) for 1996 and 900(30) for 1997. These figures show that, in spite of the completion of the internal market, the Member States continue to adopt a great many technical regulations, which could undermine the single market and the integrity of the benefits it has brought to all sectors of the economy. Of the 604 drafts received by the Commission in 1998, 60(31) required a detailed opinion recommending changes to the measure to eliminate infringements of secondary Community legislation or to debar the establishment of new barriers to trade. The Member States, for their part, issued 99(32) reasoned opinions. In one(33) case, measures have been postponed for one year as a draft directive or regulation on the field in question is already before the Council. Since 1989 the Commission has been monitoring compliance with the notification requirement by routinely scrutinising the official gazettes of all the Member States. When it discovers a breach of Directive 98/34/EC, it starts a dialogue with the Member State concerned in order to rectify the situation, or even commences infringement proceedings under Article 169 of the EC Treaty. At the end of 1998, preparatory work was under way on around 30 procedures of this type. Furthermore, on 16 June 1998, the Court of Justice clarified, as part of a preliminary ruling, the scope of the principle of non-applicability of the technical rules adopted in breach of Directive 98/34/EC which it established in its CIA-Securitel ruling of 30 April 1996 (see Case C-226/97 Lemmens). 2.1.3.3. Harmonised legislation Questions on agricultural products are dealt with in point 2.13.2. 2.1.3.3.1. Foodstuffs In general, the Member States have adopted national measures implementing the directives on foodstuffs, but not always strictly within the time limits laid down by the directives. A considerable number of implementing measures were notified to the Commission in 1998. 89 infringement cases for failure to report measures were closed before the end of the year. During 1998, the Commission sent Article 169 letters in 32 cases. 15 reasoned opinions were sent and the Commission referred two cases to the Court of Justice. In response to the failure to implement directives and regulations on foodstuffs properly, the Commission decided to send two Article 169 letters and closed two cases on which reasoned opinions had been issued. A further 10 or so complaints were lodged. Quite a few of these cases were settled following correspondence between the Commission's departments and the national authorities. 2.1.3.3.2. Pharmaceutical products During 1998, almost all the implementing measures which remained to be sent were reported to the Commission. At the end of October 1998, 13 out of 15 Member States had transposed all the directives applicable in the pharmaceutical products sector. Only France and Belgium have yet to complete transposal. Following infringement proceedings initiated by the Commission, the European Court of Justice gave judgment in the following outstanding non-transposal cases in 1998: - 12 February 1998 in Case C-144/97: failure by France to transpose Directive 92/74/EEC - 12 March 1998 in Case C-163/97: failure by Belgium to transpose Directive 92/74/EEC - 15 October 1998 in Case C-283/97: failure by Belgium to transpose Directive 92/73/EEC - 15 October 1998 in Case C-284/97: failure by France to transpose Directive 93/40/EEC Certain general problems also remain concerning the interpretation and application of the pharmaceutical directives by Member States. These cases concern mainly the different interpretations given by Member States to the term "medicinal product" (sometimes resulting in barriers to the free movement of goods) and complaints concerning the alleged failure by the competent national authorities to observe the provisions of the transparency Directive (89/105/EEC). The transposal of Article 4(8)(a)(i) to (iii) of Directive 65/65/EEC by Member States and the management of the re-authorisation of "old" medicinal products are also the subject of current infringement proceedings. The Commission is carefully considering these problems and complaints. It has to be stressed that a draft consolidation of the pharmaceutical legislation (both human and veterinary) is already very advanced and that this consolidation will increase the clarity of the legislation and ultimately the effectiveness of its implementation. It is to be hoped that the Commission communication on the Community marketing authorisation procedures for medicinal products (98/C 229/03), which was published on 22 July 1998 and aims to clarify the centralised mutual recognition procedures, will have the same effect. 2.1.3.3.3. Chemicals The last directives in the chemistry sector, on restrictions on the marketing of certain dangerous substances and preparations and fertilisers, have been transposed into national law by most of the Member States, often after infringement proceedings were opened. 19 reasoned opinions were sent to various Member States for failure to notify the transposal of Directives 96/55/EC, 97/10/EC, 97/16/EC and 97/64/EC, relating to restrictions on the marketing and use of certain dangerous substances, and Directive 96/65/EC, relating to the classification, packaging and labelling of dangerous preparations, and Directive 97/63/EC on fertilisers. There were many infringement proceedings in relation to Directive 97/63/EC on fertilisers, but only four remain open at the end of 1998. Directive 97/56/EC, amending for the 16th time Directive 76/769/EEC on restrictions on the marketing and use of certain dangerous substances and preparations, reached its transposal deadline at the end of the year, but has been transposed by only two Member States. However, Directive 98/3/EC on fertilisers, which is in the same situation, has been transposed by seven Member States. More generally, at the end of 1998, 51 implementing measures for eight directives are still missing. The implementing measures normally comply with the Directives transposed. 2.1.3.3.4. Motor vehicles, tractors and motorcycles On 1 January 1996 the Community type-approval procedure became mandatory for vehicles of category M1. The separate directives became binding as a result. The adoption on 14 July 1997 of Directive 97/24/EC on certain components and characteristics of two or three-wheel motor vehicles completed the Community type-approval procedure for motor scooters, motorcycles and tricycles. The transposal of this Directive was planned for 18 December 1998 at the latest. After that date, type-approval of whole vehicles is possible on an optional basis for a period of six months, and will become obligatory from 17 June 1999. The rate of effective transposal is extremely high and there have been few delays. In the relatively rare cases where there is a delay, opening infringement proceedings is normally sufficient to ensure rapid transposal. However, for certain directives transposal was incomplete at the end of 1998. Seven Member States had not transposed Directive 97/24/EC on certain components and characteristics of two or three-wheel motor vehicles, for instance, while six Member States still had to transpose Directive 98/14/EC on the type-approval of motor vehicles and their trailers, and Directive 97/54/EC on the maximum design speed of wheeled agricultural or forestry tractors. Directives 98/77/EC (measures to be taken against air pollution by emissions from motor vehicles) and 98/90/EC (doors of motor vehicles and their trailers), which should have been transposed by 31 December 1998, had been transposed by only one Member State by then. 2.1.3.3.5. Construction products Following the Court of Justice's ruling against Belgium (judgment of 18 December 1997), the text of the royal decree transposing Directive 89/106/EEC was notified to the Commission on 26 August 1998. As far as the transposal of Directive 89/106/EEC by Austria is concerned, infringement proceedings were opened because certain provisions of the Austrian legislation did not comply with the Directive. As part of a current infringement proceeding against Greece on checks on the quality of certain imported steels, a reasoned opinion was sent to the Greek authorities on 4 December 1998. 2.1.3.3.6. Capital goods (mechanical engineering, electronics, personal protection equipment, gas equipment, pre-packaging, measuring equipment, medical devices and pleasure craft) In 1998, considerable progress has been made on transposing the directives in these sectors. Thus, most of the directives which had a time limit for transposal of 31 December 1998, and particularly Directives 73/23/EEC, 88/378/EEC, 89/336/EEC, 89/392/EEC, 89/686/EEC, 90/385/EEC and 90/396/EEC, which were mentioned in the Fifteenth annual report (1997), have been transposed into national law in all Member States. However, problems remain for four directives which will be examined below. As regards cases of incomplete implementation of the directives or where national law conflicts with the directives, there has also been considerable progress. Difficulties do, however, remain, particularly as regards Directives 89/392/EEC (machines), 89/686/EEC (personal protection equipment) and 90/396/EEC (gas equipment), where about two thirds of the difficulties are concentrated. 78 infringement cases were dealt with in 1998, of which 24 were registered in 1998. At the end of 1998, 37 remain, including nine cases of failure to notify and 28 other cases. In total, in 1998, nine reasoned opinions were sent and one case was referred to the Court of Justice. For the cases of failure to notify, the situation is as follows. Council Directive 93/42/EEC concerning medical devices has not yet been transposed by Belgium. A reasoned opinion has been sent to Belgium regarding Parliament and Council Directive 94/9/EC concerning equipment and protective systems intended for use in potentially explosive atmospheres. Ireland's failure to transpose this directive has also been referred to the Court of Justice. A reasoned opinion has been sent to France, Italy and Luxembourg concerning Parliament and Council Directive 95/16/EC on lifts. Finally, as regards Commission Directive 97/53/EC on electrical equipment for use in potentially explosive atmospheres, a reasoned opinion has been sent to Greece, Luxembourg and Portugal. The transition period provided for by this Directive ended on 16 June 1998. As far as pleasure craft are concerned, at the beginning of 1998 three Member States had not yet transposed Directive 94/25/EC: Belgium, Spain and Ireland. Finland's transposal was only partial, as it was not implemented by the Åland Islands. In this context, all the Article 169 proceedings under way against Spain, Ireland and Belgium were closed, as was that against Finland following notification by these Member States of the national implementing measures concerned. 2.1.3.3.7. Cosmetics During 1998, the Commission established that progress had been made in implementing Community legislation on cosmetics. As far as failure to notify national measures implementing Community directives is concerned, the Commission has been able to close numerous infringement proceedings against Member States. However, the Commission deplores the fact that each of the directives adopted by the Commission since 1995 adapting Council Directive 76/768/EEC to technical progress, as well as the directives on methods of analysis necessary for checking the composition of cosmetic products, currently remain unimplemented by at least one Member State of the Community. It should be pointed out in this context that Directive 97/18/EC (postponing the date from which animal experiments are banned for ingredients or combinations of ingredients) should have been transposed into national law by 31 December 1997 at the latest, in order to provide economic operators with some certainty in the law, whether or not such tests are carried out in the Member States. The fact that the Commission intends shortly to submit to the Council and Parliament a proposal for a directive concerning the banning of trials on animals to test finished cosmetic products and their ingredients does not release the Member States from their obligations. Furthermore, in view of the technical nature of the annexes, the Commission points out the need for each national implementing measure to clearly mention the Directive that it is intended to transpose. As for Council Directive 93/35/EEC amending for the sixth time Council Directive 76/768/EEC, the Commission's action has been partly recompensed in 1998, since this text has since been transposed in all the Member States, albeit to varying degrees. Cases of infringement other than those for failure to notify national implementing measures are being scrutinised very thoroughly by the Commission, and the dialogue which is taking place between it and the national authorities is leading to satisfactory solutions both for the cosmetics industry and for the competent authorities. 2.1.3.3.8. Textiles and shoes Directive 97/37/EC adapting to technical progress Annexes I and II to Directive 96/74/EC of the European Parliament and of the Council on textile names reached its deadline on 1 June 1998. A number of national implementing measures relating to this directive were recorded this year. Only Italy, Belgium and Luxembourg have not transposed this directive, and infringement proceedings are under way against these three Member States. As regards Directive 94/11/EC of the European Parliament and of the Council, of 23 March 1994, on the approximation of the laws, regulations and administrative provisions of the Member States relating to labelling of the materials used in the main components of footwear for sale to the consumer, infringement proceedings have been opened against Luxembourg for failure to notify national implementing measures. 2.1.3.3.9. Liability for defective products By adopting Act No 389-98 of 19 May on liability for defective products(34), France finally transposed Council Directive 85/374/EEC. The Commission had decided on 31 March 1998 to refer the case to the Court of Justice under Article 171 of the Treaty, in the absence of an implementing text. It was the first time that the Commission had asked that financial penalties should be imposed on France under this provision (ECU 158250 per day)(35). 2.1.3.4. Special arrangements relating to freedom of movement Cultural goods On 24 June 1998, the Commission decided to send reasoned opinions to five Member States for failure to notify national measures transposing Directive 96/100/EC of the European Parliament and of the Council amending the Annex to Directive 93/7/EEC on the return of cultural objects unlawfully removed from the territory of a Member State. Following the notification of implementing measures, the Commission decided in December 1998 to close the proceedings concerned for four countries. The Commission is continuing the proceedings against France. As regards Cases C-413/97 (Germany) and C-415/97 (Italy) opened for failure to notify measures transposing the principal directive, Council Directive 93/7/EEC, the Commission withdrew proceedings following notification of the measures during this year. Explosives As regards Council Directive 93/15/EEC of 5 April 1993 on the harmonisation of the provisions relating to the placing on the market and supervision of explosives for civil uses, the implementing measures basically comply with the directives transposed, with the exception of two cases of infringement for incomplete transposal. 2.1.3.5. Customs Union The European Community's customs activity is developing around several functions, the main one of which consists of devising, implementing and managing the customs instruments needed for the application of the European Community's common policies (commercial policy, agricultural policy, environment, public health, etc.) for the purposes of controlling its external frontiers and guaranteeing the security of European citizens and fair trading for businesses and in the internal market and economic and monetary union. Checking the correct implementation of Community provisions, of course, remains an essential element of the Commission's activity in this sector. Thus, in response to this activity, Italy adapted its legislation to the Community customs code in order to comply with the rules governing direct or indirect representation in the performance of customs operations. It should also be pointed out that Germany complied with the Court of Justice ruling of 10 September 1996 in Case C-61/94(36) on the import of dairy products under the inward-processing arrangements. The Commission had argued that these imports could not be authorised, since the customs value was less than the minimum prices set in accordance with the International Dairy Arrangement, approved by the Commission by Council Decision 80/271/EEC of 10 December 1979 concerning the conclusion of the Multilateral Agreements resulting from the 1973 to 1979 trade negotiations(37), and by Council Regulation (EEC) No 1999/85(38) of 16 July 1985 on inward-processing relief arrangements. 2.1.4. Free movement of services and right of establishment 2.1.4.1. Articles 52 et seq. and Articles 59 et seq. In the area of freedom of establishment the Commission referred two Belgian Acts of 1919 and 1921 on non-profit-making organisations to the Court of Justice because they contain provisions contrary to the general principle of non-discrimination on grounds of nationality. In another case involving a nationality requirement, the Commission sent a reasoned opinion to the French authorities on the conditions imposed on companies manufacturing and selling arms that might be used by private organisations or individuals. In the area of freedom to provide services, Dutch law on the registration of certificates requires those who are not domiciled in the Netherlands to provide an address for service there with an official agent. As this requirement is contrary to the principle set out in Article 59, the Commission sent the Dutch authorities a reasoned opinion. A reasoned opinion was also sent to the Italian authorities because an Act establishing lists of licences for forwarding agents required the registration of all natural and legal persons engaged in this activity on a specific list kept by the local chamber of commerce. This registration requirement interferes with the exercise of this activity by economic operators who are not based in Italy but wish to carry out incidental work there pursuant to Article 59. The rules on taking aerial photographs as part of a service provided in Portugal state that foreign companies and individuals will be authorised only in duly justified cases. Such discrimination on the basis of nationality, which cannot be justified on grounds of public safety, has also resulted in a reasoned opinion being sent to the Portuguese authorities. In France, an order on the regulation of gas production and storage equipment states that checks on such equipment under pressure may be carried out outside France only in exceptional circumstances, which puts at a disadvantage companies not based in France that might wish to offer their services there. A reasoned opinion has therefore been sent to the French authorities. Secondments of employees in the Member States exercising their freedom to provide services encounter many difficulties. Reasoned opinions have been sent to the Belgian authorities, for example, regarding the requirement that foreign service providers contribute to a special welfare fund, the Fonds de sécurité d'existence in the metal production industry, the liability for payment of loyalty stamps and bad weather payments in the construction industry, and the obligation to pay bed and board allowances, also in the construction industry. The Commission also referred to the Court of Justice an Austrian regulation making clients of foreign service providers jointly liable for the payment of the salaries of seconded employees, a condition that does not apply to companies based in Austria. Finally, the Commission decided to send a reasoned opinion to the German authorities regarding the discriminatory conditions imposed on foreign companies in the building industry seeking to provide services jointly with other companies as part of an association created specifically for the performance of the service (working group). There is a particular problem with the secondment of nationals of non-Member States as regards conditions for visas, residence and work permits. The Commission has sent reasoned opinions to the Belgian and German authorities on this matter. Certain infringements reveal problems as regards both freedom to provide services and freedom of establishment. Italian state and regional regulations on fairs and exhibitions, for example, give rise to serious problems because they confine the organisation of such events to bodies meeting certain requirements regarding legal status, composition and origin. A reasoned opinion has therefore been sent to the Italian authorities. In the case of private security services the position adopted by the Commission in the case of infringement proceedings was upheld by the Court of Justice. This sector cannot as such be restricted by discriminatory conditions based on nationality or place of establishment, for example for reasons of public safety. The fundamental freedoms of the internal market, such as the freedom of establishment, freedom to provide services and the free movement of workers, apply in full (Case C-114/97 Commission v Kingdom of Spain(39)). The Commission has instituted proceedings against Belgium in the European Court for the same reason and has decided to take similar steps against Italy. EU citizens who are not resident in Spain are required to use the services of a Spanish notary when purchasing real estate located on Spanish territory, even if the deed has already been signed in the presence of a foreign notary. The intervention of the Spanish notary is not concerned with the purchase deed and merely involves a fiscal check on the deed already signed by the parties concerned. The Commission took the view that this regulation violated the right of establishment, freedom to provide services, and the free movement of capital and workers and decided to refer the matter to the Court of Justice. 2.1.4.2. Financial services Dialogue with the national authorities In an effort to consolidate administrative cooperation and find rapid solutions to the problems encountered, the Commission maintains regular contacts with the national authorities in 1998, through institutional committees (Banking Advisory Committee, Insurance Committee, the UCITS (Undertakings for collective investment in transferable securities) Contact Committee), ad hoc interpretation groups (the banking directives group, the insurance group and the capital adequacy directive group, etc.) and high-level working parties (HLSSC - High-Level Security Supervisors Committee for negotiable securities). Complaints and infringements In 1998 the Commission, acting on complaints, started two new infringement proceedings for breaches of Articles 52 and 59 of the EC Treaty and the banking directives. The first involved apparent discrimination on grounds of nationality in the refunding of tax credits to banks established in Italy. An Article 169 letter was sent to Italy enquiring about the criteria used to draw up the list on the basis of which part of the credits were refunded. The second case concerns the requirement that architects in Luxembourg lodge a security with a Luxembourg bank. The case is currently being examined. In 1998 the Commission launched two new infringement proceedings under Article 169 for breaches of Articles 52 and 59 of the EC Treaty and the directives in the insurance sector. Both cases arose from complaints. One of the proceedings launched before 1998 was dropped because the Member State in question complied with Community law. Many of the infringement proceedings reached the stage of reasoned opinion or referral to the Court of Justice in 1998. In the insurance sector the increase in the number of cases of non-compliance or incorrect application may be explained by prolonged infringements on the part of certain Member States. Where dialogue with the national authorities has failed to produce a solution and serious problems of the application of Community law are involved, there is no alternative but to submit the case to the Court of Justice. In the securities sector the Commission started two new infringement proceedings in 1998 against Italy (Articles 59 and 73b) and France (Articles 52, 59 and 73b), on the basis of a complaint. It agreed that the Italian and French legislation discriminated between the domestic market and that of other EU countries and between domestic service providers and those from other Member States. Treaty The infringement case against Greece in the banking sector, relating to the law on subsidies for leased equipment, has been dropped. Greek legislation stated that only equipment leased via a company based in Greece was eligible for state subsidies. The legislation has now been extended to all Community leasing companies. In the insurance sector, the Commission sent a reasoned opinion to Spain in 1998 because Spanish legislation did not comply with the EU Treaty rules on freedom to provide services (Article 59). The Spanish authorities insist that prior authorisation to practise on Spanish territory must be obtained not only by professionals wishing to establish themselves permanently in Spain but also by those wishing to perform services for a limited period. The Court of Justice has consistently ruled, however, that this requirement is in breach of Article 59 of the Treaty, because service providers may not be subject to the same conditions required in the case of freedom of establishment. Such a requirement, moreover, cannot be justified on considerations of general interest, such as consumer protection on the Spanish market, as it is neither necessary nor proportional in terms of the objective pursued. National implementing measures Failure to notify measures In the banking sector the infringement proceedings against the United Kingdom for failure to transpose several banking directives for the territory of Gibraltar were dropped. The directives in question were Directive 89/117/EEC on the accounts of branches of credit institutions, Directive 86/635/EEC on the annual accounts of banks, Directive 93/6/EEC on the capital adequacy of investment firms and credit institutions, Directive 94/19/EC on deposit-guarantee schemes and Directive 96/10/EC on the recognition of contractual netting. The United Kingdom has now notified all the laws and regulations implementing these Directives for Gibraltar. All the reasoned opinions for failure to transpose Directive 95/26/EC (post-BCCI) have been sent to Germany, Spain, Italy, Luxembourg, Belgium, Ireland, France and Greece. On the basis of the replies received to date, the Commission has decided to drop the cases against Greece and the United Kingdom (for failure to transpose the Directive for Gibraltar), as both Member States have now notified the legislation implementing this Directive. France, Spain and Luxembourg have been unable to produce a clear schedule for transposal of the Directive, with the result that the Commission has decided to refer them to the Court of Justice for failure to notify implementing measures. As Germany has now transposed Directive 94/19/EC on deposit-guarantee schemes and Directive 93/6/EEC on the capital adequacy of investment firms and credit institutions and has notified the Commission of its measures, the proceedings before the Court of Justice have been halted. In the matter of insurance, the Commission continues to suspend its decision to refer Spain to the Court of Justice, taken in 1996, for failure to notify national implementing measures for Directive 92/96/EEC (third life insurance Directive); in its judgment in the case relating to Directive 92/49/EEC (third non-life insurance Directive), given on 18 December 1997(40), the Court found against Spain for the same breaches (incomplete transposal) as those cited in the case relating to Directive 92/96/EEC. However, the Spanish authorities notified national measures implementing these two Directives in December 1998. The Commission is currently checking whether transposal is now complete, in which case it will ask for the cases to be dropped in 1999. In the case of Directive 91/674/EEC (annual and consolidated accounts of insurance undertakings) the 1998 decision to refer Spain to the Court did not have to be carried out because national implementing measures were notified. The case has been dropped. The Court ruled against Spain for incomplete transposal of Directive 91/371/EEC (concerning an agreement with Switzerland) in a judgment of 18 December 1997(41). The case has now been suspended pending official notification of the transposal measures recently announced by the Spanish authorities. Although most Member States have now notified measures implementing the third life and non-life insurance directives the transposal and application of these directives has clearly been problematic. There have been several cases of incomplete or incorrect transposal. In the area of securities, the Commission sent a reasoned opinion to the United Kingdom for failure to transpose Directives 85/611/EEC, 89/298/EEC and 89/592/EEC for Gibraltar. The United Kingdom notified implementing measures and the proceedings were terminated. Incorrect implementation or application In 1998 the Commission sent a reasoned opinion to Germany for incorrect application of Directive 92/49/EEC in the insurance sector. More specifically, in its legislation implementing the Directive, Germany formally removed the provision prohibiting the simultaneous transaction of health insurance and other types of insurance by non-German companies wishing to set up branches on German territory or to operate as service providers there, in line with the third non-life insurance directive, which ruled out this possibility. However, Germany introduced a new provision into its social security legislation whereby the employee would benefit from contributions paid by the employer only if the insurance company did not provide both health insurance and other classes of insurance simultaneously, irrespective of where it had its headquarters. This was an indirect violation of Directive 92/49/EEC. Cases before the Court In the banking sector the existence of anonymous accounts in Austria was deemed to be incompatible with the obligation to identify customers when they open an account under Article 3(1) of Directive 91/308/EEC on money laundering. The matter was referred to the Court of Justice, which has not yet given judgment. As regards applications for a preliminary ruling, the Court has not yet handed down its judgment in Case C-410/96 Procureur de la République v André Ambry. Under French law a financial guarantee that can be called in immediately is required in order to obtain an administrative licence (to operate as a travel agent). If the institution providing this guarantee is located in a Member State other than France it must have an agreement with a French bank or insurance company. The Court of Justice was asked for a ruling on whether this requirement was compatible with Community law. Four new insurance cases were referred to the Court of Justice in 1998. The Commission referred France to the Court for incomplete transposal of Directives 92/49/EEC and 92/96/EEC, as no measure to adapt the mutual insurance code to the third non-life and life insurance directives has been notified to date. France was also referred to the Court for incorrect application of the third insurance directives because French regulations require insurers to fill out an information sheet before putting new insurance policies on the market, in breach of Directives 92/49/EEC and 92/96/EEC, which prohibit Member States from stipulating provisions requiring the prior approval or systematic notification of the general and special conditions of insurance policies. Belgium was referred to the Court because its legislation on the supervision of insurance companies excludes accidents at work from Directive 92/49/EEC. The Commission considers that such risks are covered by the Directive where they are insured by private insurance companies. Finland was also found to be committing the same breach and received an Article 169 letter in 1996. Finally, Spain was referred to the Court because its legislation implementing Directive 84/5/EEC did not meet the requirement of Article 1(4) that the body set up in the Member States to provide compensation for damage to property or personal injuries caused by an unidentified vehicle provide a reasoned reply to the victim regarding the payment of any compensation. Cases have been brought against Spain and Luxembourg concerning investment services in the field of securities (Directive 93/22/EEC). However, Spain subsequently notified a law transposing the Directive in November 1998. Proceedings against Germany have been dropped. 2.1.4.3. Commercial communications There is no directive dealing with commercial communications form the single market perspective. However, the Commission received three complaints in this field during the year. It also continued its examination of the ongoing infringement proceedings. It has started discussions with the French authorities on the interpretation of the "Evin" law prohibiting television advertising of alcoholic drinks in the particular case of sporting events abroad. A reasoned opinion on this matter was sent in 1997. The Commission also sent a reasoned opinion to Germany because its legislation on promotional gifts and discounts is deemed to be in breach of Article 59 of the Treaty. The proceedings were started in response to a complaint by an operator selling goods and services through a "Club" based in another Member State. 2.1.4.4. The media The Commission received 10 new complaints in the field of the media, some of which were dropped in the course of the year. It also received over 100 complaints about the taxation of parabolic dishes in one Member State. Among the ongoing cases, the Commission dropped proceedings against Spain for its regulations on advertising flights over Spanish territory as Spain had complied with the Commission's reasoned opinion. 2.1.5. Free movement of capital The situation as regards the free movement of capital and payments in the EU and non-member states is generally satisfactory. Further progress was made during the year to remove certain restrictions on the acquisition of real estate in Austria (Vienna). Although some residual restrictions are still being discovered steady progress is being made to eliminate them. Most of the limited number of complaints from economic operators concern restrictions on the purchase of real estate in other EU states. For example, restrictions in the Tyrol very similar to those applied in Vienna were the subject of a reasoned opinion, and the Commission decided to refer Greece to the European Court of Justice for its procedures on property acquisition. With a view to facilitating cross-border investment, and following the Communication on certain legal aspects concerning intra-EU investment (OJ C 220, 19.7.1997, p. 15) and the circulation of a questionnaire to collect information on national practice, infringement proceedings were started against several Member States in the light of the principles defined in the communication. It was decided to send reasoned opinions to Belgium, in two separate cases, and France. Article 169 letters are to be sent to Ireland, the United Kingdom and Spain. In the case of the latter, a reasoned opinion has also been sent in another case concerning the specific authorisation procedures for intra-EU investment. Other potential cases are under consideration. In the area of transfers of public assets the Commission has decided to refer the restrictions applied in Italy to the Court. Restrictions on foreign investment by pension funds were the subject of Article 169 letters to Belgium and Finland and an Article 169 letter was sent to France on the subject of the proportionality of fines for non-declaration of physical transfers. The Commission also decided to refer to the Court of Justice Belgian restrictions on the purchase by certain categories of residents of particular government bonds issued abroad. 2.1.6. The business environment 2.1.6.1. Company law On 29 September the Court of Justice gave judgment on the action brought by the Commission against Germany for incorrect application of Council Directives 68/151/EEC (companies register) and 78/660/EEC (annual accounts)(42). Under these Directives, companies limited by shares must disclose their annual accounts and Member States must impose appropriate penalties on companies which fail to give their annual accounts appropriate publicity. About 90 % of German private limited companies do not deposit their accounts with the companies register. In its judgment, the Court held that the penalties laid down in German law for such omissions were insufficient to ensure compliance with the disclosure requirement laid down by the two Directives. The Court therefore found that Germany had failed to meet its obligations under these Directives. In 1998 the Commission terminated a number of infringement proceedings for failure to notify national implementing measures, including the cases against Luxembourg concerning transposal of Council Directive 92/101/EEC (amending Council Directive 77/91/EEC on the capital of public limited liability companies) and against Finland concerning Council Directives 78/660/EEC, 83/349/EEC, 90/604/EEC and 90/605/EEC. In all these cases, the Directives in question have been transposed. However, the Commission brought a new action before the Court of Justice against Greece for failure to notify measures implementing Directive 92/101/EEC. 2.1.6.2. Intellectual and industrial property Industrial property There are currently three Directives in force in the field of industrial property, Council Directive 89/104/EEC on trade marks, Parliament and Council Directive 98/44/EC on the legal protection of biotechnological inventions and Parliament and Council Directive 98/71/EC on the legal protection of designs. Under the trade marks Directive, the registration of a trade mark confers on its owner exclusive rights allowing him to prohibit its use for commercial purposes by a third party without his consent. The harmonisation of Member States' legislation on national trade marks is not comprehensive, but confined to aspects which have the most direct impact on the functioning of the internal market. Outside these harmonised fields, the Member States retain complete freedom to lay down arrangements best suited to their traditions, particularly as regards procedural aspects. In principle, the Directive covers only substantive law on registered trade marks; none of its provisions is aimed at harmonising procedures. The scope of harmonisation is defined by the Directive as follows: registered trade marks only (arrangements for protecting trade marks resulting from usage are left up to the Member States); all categories of registered trade marks recognised by national legislation (trade marks in respect of products or services, individual trade marks, collective marks and guarantee or certification marks), though this does not mean that the Member States are required to introduce these various categories of trade marks into their legislation; trade marks which have been registered under international arrangements but have effect in the Member States. Since the uncoordinated development of national laws on the legal protection of biotechnological inventions in the Community could be detrimental to the industrial development of such inventions and the smooth operation of the internal market, Community legislation in this field was seen as essential. However, it was felt there was no need to create a separate body of law in place of national patent law, and the Community framework was confined to laying down certain principles designed to determine the difference between inventions and discoveries with regard to the patentability of certain elements of human origin, the scope of protection conferred by a patent on a biotechnological invention, the right to use a deposit mechanism in addition to written descriptions and the option of obtaining non-exclusive compulsory licences in respect of interdependence between plant varieties and inventions. The Member States must introduce the laws, regulations and administrative provisions necessary to comply with the Directive by 30 July 2000. As is the case with legislation on national trade marks, the harmonisation of the Member States' legislation on designs is not complete but confined to aspects which most directly affect the functioning of the internal market, namely identical conditions for obtaining a registered design right, a unitary definition of the notion of design and of the requirements as to novelty and individual character with which registered design rights must comply, and equivalent protection in all Member States. Outside these harmonised fields, the Member States retain complete freedom to lay down arrangements best suited to their traditions. The Member States must introduce legislation to comply with the Directive by 28 October 2001. Intellectual property Member States generally adopt national measures implementing the directives relating to this sector only after long delays and often only after infringement proceedings have been launched. However, the situation has considerably improved, particularly over the last year. All the Member States except Ireland have notified national implementing measures for all the directives applicable on 1 January 1997. However, only nine Member States have notified measures implementing the Directive on databases, which fell due for transposal on 1 January 1998. The Commission will continue its efforts to make sure that all the Member States transpose the Directives into national law and will also ensure that they are correctly applied, incorrect application appearing to be the main reason for litigation. All the Member States have now notified their national measures transposing Council Directives 87/54/EEC (legal protection of topographies of semiconductors), 91/250/EEC (legal protection of computer programs) and 93/98/EEC (harmonisation of the term of protection of copyright and certain related rights). Reasoned opinions have been sent to Greece, Ireland, Italy, Luxembourg, the Netherlands and Portugal for failure to notify national measures implementing Parliament and Council Directive 96/9/EC on the legal protection of databases. Reasoned opinions have also been sent to Belgium for failure to ratify the last Bern Convention (Paris Act of 1971) and the 1961 Rome Convention, to Portugal for failure to ratify the 1961 Rome Convention and to Ireland for failure to ratify the Bern Convention (Paris Act of 1971). Infringement proceedings against Italy for failure to comply with Council Directive 93/98/EEC and against the United Kingdom for failure to comply with Council Directive 92/100/EEC (lending right) are at the Article 169 letter stage. Finally, the Commission decided to bring two actions before the Court against Ireland for failing to notify national measures implementing Directive 92/100/EEC and Directive 93/83/EEC (satellite broadcasting and cable retransmission). 2.1.6.3. Data protection Parliament and Council Directives 95/46/EC and 97/66/EC on the protection of data in the telecommunications field entered into force on 25 October 1998. Five Member States have notified measures implementing Directive 95/46/EC. Two of them (Greece and Sweden) have fully transposed the Directive, while the others (Denmark, Spain and the United Kingdom) have done so partially. The national measures are being scrutinised to check that transposal is correct and complete. All the Member States which have yet to notify national implementing measures have been sent an Article 169 letter, except those which have informed the Commission that the notification procedure is under way (for example Portugal). Germany, Italy and Spain have notified transposal of Directive 97/66/EC. For more details, see point 2.10 on telecommunications. 2.1.6.4. Public procurement For the internal market to be fully operational in a key sector of the European economy such as public procurement, the relevant Community directives must first be correctly transposed. In 1998 a number of directives in this field had still not been incorporated into national law. For example, the Commission has commenced infringement proceedings against Greece for failure to notify national measures implementing Directives 93/38/EEC (special sectors) and 92/13/EEC (legal remedies in special sectors). An examination of the national measures that have been notified has led to 30 proceedings for failure to comply with Community law, including six which are at least at the reasoned opinion stage. Some of these cases involve questions of principle which could undermine the liberalisation of public contracts awarded in the Member States concerned. Even where directives have been transposed, steps must be taken to ensure that the rules are applied in practice. The Commission therefore continued its monitoring of the application of Community law in the procedures for awarding private contracts, by following up complaints and investigating and checking cases on its own initiative. The Commission processed 397 cases, 237 of them being new cases. It was able to settle 115 cases, mostly as a result of action by the awarding authorities or their supervisory bodies to remedy the irregularities. The dialogue and consultation procedure (package meetings), set up to help Member States find and reach agreement on solutions to outstanding disputes which conform to Community law, undoubtedly helped in this respect. A few examples are worth citing. Following intervention by the Commission, the Italian authorities have cancelled a number of contracts which were the subject of complaints, including a contract for on-board catering services on ferries, a concession for the distribution of drinking water and a contract for clinical engineering services. In Portugal, the regional authorities in the Azores have sent a circular to awarding authorities prohibiting them from including in their systems for assessing tenders any rules which bestow an advantage on firms having performed contracts in that region in the past, as such practices are incompatible with Community law. Germany recently amended the Federal Law against restraints of competition to take account of objections expressed by the Commission in a reasoned opinion concerning remedies in the public procurement field. The new German legislation, which enters into force on 1 January 1999, will ensure that effective scrutiny procedures are available to anyone who has an interest in obtaining a particular public contract and has been or is in danger of being the victim of a suspected infringement. Other cases will have to be or have already been referred to the Court of Justice. For example, the Commission has brought an action against Italy for unwarranted use of the negotiated procedure without prior publication provided for in Directive 92/50/EEC for the award of contracts for the maintenance, management and development of the integrated computer system of the Ragioneria Generale dello Stato and the Italian Court of Auditors. In a case concerning Belgium, the Court upheld the Commission's view that a legislative body such as the Vlaamse Raad must be considered as forming part of the definition of the state and hence as a contracting authority within the meaning of Directive 93/37/EEC on public works contracts. 2.1.6.5. Direct taxation The Commission is continuing the new, comprehensive approach to tax policy which it launched in the context of the Taxation Policy Group chaired by Mr Monti. It hopes that, in line with the conclusions of the Council (Ecofin) meeting on 1 December 1997, proposals will soon be adopted on the elimination of withholding taxes on interest and royalty payments between associated companies and on the taxation of income from savings. As outlined in previous reports, the lack of progress in harmonising direct taxation means that many obstacles persist in this field, but only very few can be classified as infringements of Community law. Most disputes are settled as a result of cases being referred by national courts to the Court of Justice for a preliminary ruling. The taxation of premiums and payments forming part of the cross-border activities of insurance companies is being examined from a legal angle in connection with the rights guaranteed by Articles 8a, 48, 52, 59 and 73b of the EC Treaty. At the same time political preparations are under way for a new initiative to harmonise legislation in this field. The Commission sent a letter to all the Member States asking them for notification of the measures they intend to take, should such measures be necessary, to bring their legislation into line with the judgment of the Court of Justice of 28 April 1998 in the Jessica Safir (Case C-118/96), in which the Court held that Article 59 of the EC Treaty precludes the application of national legislation relating to the taxation of capital life assurance such as that in the case in question, where it diverges from the law as declared by the Court. On 16 July 1998 the Court gave judgment in Imperial Chemical Industries concerning the compatibility with Article 52 of the EC Treaty of the requirement that, for tax relief to be granted on losses incurred by members of a consortium, the subsidiaries must be based mainly in the United Kingdom(43). Recalling previous judgments on this matter, the Court held that Article 52 "precludes legislation of a Member State which, in the case of companies established in that state belonging to a consortium through which they control a holding company, by means of which they exercise their right to freedom of establishment in order to set up subsidiaries in other Member States, makes a particular form of tax relief subject to the requirement that the holding company's business consist wholly or mainly in the holding of shares in subsidiaries that are established in the Member State concerned". As regards the scope of Article 5 of the Treaty for the national courts, in the event of the UK legislation being incompatible with Community law, in cases where the holding company mainly controls subsidiaries established in non-member countries, the Court found that, in these circumstances, "Article 5 of the Treaty does not require the national court to interpret its legislation in conformity with Community law or to disapply the legislation in a situation falling outside the scope of Community law". The proceedings against Greece for incorrect application of Directive 69/335/EEC concerning indirect taxes on the raising of capital(44). Greece imposed a capital duty of 1,3 % on company formations and capital increases, whereas the Directive allows no more than 1 %, and also imposed a 0,5 % levy on the same basis of assessment for the lawyers' welfare fund. But the Commission was able to terminate proceedings against Greece for late transposal of Council Directive 90/434/EEC of 23 July 1990(45) (common system of taxation applicable to mergers, divisions, transfers of assets and exchanges of shares concerning companies of different Member States), as Greece finally adopted national legislation implementing the Directive (Act No 2578 of 16 February 1998) just before the Article 169 judgment given by the Court on 19 February(46). The Commission was also able to terminate proceedings in a number of cases relating to failure to reimburse charges already held by the Court to be incompatible with Community law: one of these was the concessione governativa held incompatible with Directive 69/335/EEC (Cases C-71/91 and C-178/91 Ponente Carni and Cispadana Costruzioni, judgment given on 20 April 1993(47)). In its judgment of 5 March 1998 in response to a reference for a preliminary ruling in Solred SA, the Court maintained the broad interpretation of Article 10 of Directive 69/335/EEC expressed in earlier judgments, taking into account the aims of that Directive(48). The Court held that the prohibition of all indirect taxes under Article 10 of the Directive also applies to taxes which are not imposed on capital contributions as such, but are nevertheless imposed on account of formalities connected with the company's legal form, in other words on account of the instrument employed for raising capital, so that their continued existence would similarly risk frustrating the aims of the Directive (paragraph 21). Article 10 of the Directive therefore precluded the imposition, on operations for the raising of capital, of a general stamp duty charged on all notarial deeds (paragraphs 23 to 25). In a separate judgment given on 27 October 1998, the Court held that Article 11(b) of the Directive must be interpreted as meaning that the prohibition of taxation on debenture loans applies to the duty on notarial deeds recording the repayment of loans. Such a duty cannot come within the derogation provided for in Article 12(1)(d) of the Directive(49). In relation to the same Directive, the Court interpreted the Member States' obligations under Community law regarding reimbursement of amounts wrongly charged in its preliminary rulings in Joined Cases C-10/97 to C-22/97. Giving judgment on 22 October 1998 it held that the national courts must disapply national legislation that imposed charges contrary to Community law and must accordingly rule in favour of those applying for reimbursement of amounts paid by way of such charges. But the reimbursement must be made in accordance with national law, provided it is no less favourable than that applicable to purely domestic actions(50). Moreover, in Case C-228/96 the Court held, on 17 November, that Community law does not preclude Member States from imposing national limitation periods on actions for reimbursement of charges levied contrary to Community law, even if the Member State has not yet changed its rules to bring them into line with Community requirements. The limitation runs from the time when the charge is levied and not from the time when the national charge is subsequently held to be contrary to Community law. 2.1.6.6. VAT Strictly speaking this area is not covered by the tax package adopted by the Council (Ecofin) in December 1997, which sought mainly to relaunch the issue of direct taxation. Nevertheless, the Commission must also pursue a whole series of measures and activities aimed at eliminating distortions to the single market in the field of indirect taxation, in particular VAT. The adoption of a common system based on the country-of-origin principle is still the main goal towards which all efforts in this field are directed. However, given the rate of progress, the Commission is also seeking to push ahead with the simplification and modernisation of the VAT system and with essential harmonisation work arising from specific technical problems. The Commission must also pursue tax policy by ensuring strict compliance with VAT provisions already adopted, in particular the sixth VAT Directive of 17 May 1977 (77/388/EEC) on the uniform basis of assessment(51). Numerous infringement proceedings have been commenced against Member States which have failed to meet their obligations under the Directive. Austria: Contrary to Articles 2 and 28a(1)(a) of the Directive, Austria grants an exemption from VAT for supplies, imports and intra-Community acquisitions of gold ingots, gold coins considered as legal tender, unprocessed gold and related intermediate transactions. Exemptions for gold other than gold for industrial use may by granted only for a transitional period by Member States which already applied such a measure when the Directive was adopted or are authorised to d