EXPLANATORY MEMORANDUM

1. CONTEXT OF THE PROPOSAL/BACKGROUND

The attached proposal constitutes the legal instrument for authorising the signature and provisional application of the Association Agreement between the European Union and the European Atomic Energy Community and its Member States, of the one part, and Georgia, of the other part.

Since the European Atomic Energy Community (EAEC) is a Party to the Agreement, a separate procedure applies to the signing and conclusion of this Agreement by the Commission on behalf of the EAEC.

Relations between the European Union (EU) and Georgia are currently based on the Partnership and Cooperation Agreement which entered into force in July 1999. On 10 May 2010 the Council authorised the Commission to open negotiations for a new comprehensive and ambitious Association Agreement, including its Deep and Comprehensive Free Trade Area (DCFTA) part.

The Association Agreement aims to accelerate the deepening of political and economic relations between Georgia and the EU, as well as to advance Georgia's gradual economic integration with the EU Internal Market, in selected areas notably through establishing a DCFTA.

The Agreement is a concrete way to exploit the dynamics in EU-Georgia relations, focusing on support to core reforms, on economic recovery and growth, governance and cooperation in different sectors.

The Agreement also constitutes a reform agenda for Georgia, based on a comprehensive programme of approximation of Georgia's legislation to EU norms and standards, around which all partners of Georgia are invited to align themselves and focus their assistance. EU assistance to Georgia is linked with the reform agenda as it emerges from the Agreement. In view of preparing and facilitating the implementation of the Association Agreement, an Association Agenda has been prepared.

Following the 14th negotiation round in March 2013, the EU and Georgia finalised the negotiations on the Association Agreement. Negotiations on the DCFTA were finalised in July 2013. On 29 November 2013, the EU and Georgia initialled the text of the Association Agreement, including the DCFTA part.

In line with Article 429 of the Association Agreement, it is foreseen to provisionally apply parts of the Agreement. The provisional application is foreseen in view of keeping mutual economic interests and shared values in equilibrium, and the common will of the EU and Georgia to start implementing and enforcing the eligible parts of the Agreement in order to advance an early reform impact on sector specific issues before the conclusion of the Agreement.

2. RESULTS OF THE NEGOTIATIONS

The Council has been informed regularly and consulted in the relevant Council Working Groups, notably in COEST and the Trade Policy Committee (TPC), at all stages of the negotiations. The Commission considers that the objectives set by the Council in its negotiating directives were attained and that the draft Association Agreement is acceptable to the Union.

The final content of the Association Agreement can be summarised as follows:

The Agreement establishes an association between the Union and its Member States, of the one part, and Georgia, of the other part. This constitutes a new stage in the development of EU-Georgia contractual relations, aiming at political association and economic integration and leaving open the way for further progressive developments.

The overall aims of the association focus on promoting a gradual rapprochement between the parties on the basis of common values; strengthening the framework for enhanced political dialogue; promoting, preserving and strengthening peace and stability in both the regional and international dimensions; promoting cooperation on peaceful conflict resolution, advancing Georgia's gradual economic integration with the EU internal market in selected areas; enhancing justice, freedom and security cooperation with the aim of reinforcing the rule of law and respect for human rights and fundamental freedoms, and establishing conditions for increasingly close cooperation in other areas of mutual interest.

The General Principles of the Agreement include a specific set of "essential elements", the violation of which by one of the Parties could give rise to specific measures under the Agreement, including the suspension of rights and obligations. These elements are respect for democratic principles, human rights and fundamental freedoms as defined in relevant international instruments; respect for the rule of law; promotion of respect for the principles of sovereignty and territorial integrity, inviolability and independence; and countering the proliferation of weapons of mass destruction, related materials and means of delivery.

Other General Principles of the Agreement relate to the principles of a free market economy, good governance, the fight against corruption, the fight against trans-national organised crime and terrorism, the promotion of sustainable development and effective multilateralism.

The Agreement sets out the aims of a strengthened political dialogue promoting gradual convergence on foreign and security matters. The Agreement further provides for dialogue and cooperation on domestic reform based on the common principles set out by the Parties. There are also provisions for intensified dialogue on foreign and security policy, including the Common Security and Defence Policy, for the promotion of peace and international justice by implementing the Rome Statute of the International Criminal Court, and for joint efforts on regional stability, conflict prevention, crisis management, anti-terrorism, anti-proliferation and disarmament and arms control. The Parties shall in particular work towards peaceful settlement of the unresolved conflicts in the region.

In the field of justice, freedom and security, the Agreement pays particular attention to the rule of law and to the reinforcement of judicial institutions and practices. The Agreement sets out the framework for cooperation on migration, asylum and border management, on personal data protection, money laundering and terrorism financing and on anti-drugs policy. The Agreement contains provisions on movement of persons, including on readmission, on visa facilitation and on the gradual steps towards a visa-free regime in due course provided that relevant conditions for well-managed and secure mobility are in place. The commitment to combat crime, corruption and other illegal activities and the further development of judicial cooperation in civil and criminal matters is also covered - making full use of relevant international and bilateral instruments.

The Association Agreement also foresees a wide range of sector cooperation, focusing on support to core reforms, economic recovery and growth, governance and sector cooperation in 28 areas, such as: energy, transport, environmental protection and promotion, industrial and small and medium enterprise cooperation, agriculture and rural development, social policies, justice, civil society cooperation, consumer policy, public administration reform, education, training and youth as well as cultural cooperation. In all of these areas, enhanced cooperation starts from the basis of current frameworks, both bilateral and multilateral, with the aim of more systematic dialogue and exchange of information and good practice. Key to the sectoral cooperation parts of the Agreement is a comprehensive menu of gradual approximation with the EU acquis set out in annexes to the Agreement. Specific schedules for approximation and implementation by Georgia of selected parts of the EU acquis will provide a focus for on-going cooperation, and will form the core of Georgia's domestic reform and modernisation agenda.

The Agreement includes an updated institutional framework encompassing cooperation and dialogue fora. Specific decision-making roles are foreseen for an Association Council, and by delegation, for an Association Committee, which may also meet in a specific configuration to address trade issues. Fora for civil society and parliamentary cooperation are also foreseen. The Agreement also includes provisions on monitoring, fulfilment of obligations and dispute settlement (including separate provisions for trade-related issues).

With regard to the DCFTA part of the Agreement, the Commission has reached the objectives set out in the negotiating directives to dismantle import duties on substantially all trade, while providing a strong binding framework to ban all arbitrary trade-restrictive measures, including export duties and quantitative export restrictions. The DCFTA contains an anti-circumvention mechanism for imports of sensitive agricultural products.

In terms of technical barriers to trade, Georgia will progressively adapt its technical regulations and standards to those of the EU. Negotiations for an Agreement on Conformity Assessment and Acceptance of Industrial Products (ACAA) may be launched, with view to ensuring that in specific sectors Georgian legislation and market surveillance systems is in line with those in the EU, so that trade between the Parties can take place under the same conditions as between EU Member States.

As regards trade in animals, plants and their products the DCFTA will provide for the alignment of Georgia's sanitary and phyto-sanitary and animal welfare legislation to the EU's SPS and animal welfare legislation which would consequently lead to further trade facilitation. The DCFTA will ensure the setting up of a rapid consultation mechanism to solve SPS-related trade irritants, including a specific rapid alert and early warning system for veterinary and phyto-sanitary emergencies.

Building on current cooperation on customs matters, the Protocol on mutual administrative assistance in customs matters provides a stronger legal framework to ensure the correct application of customs legislation and the fight against customs fraud.

As regards establishment, the DCFTA provides for national treatment and most favoured nation treatment of companies, subject to limited reservations. With regard to trade in services, the DCFTA foresees a wide market access, as well as the possibility to liberalise further the market access, including as a result of approximation by Georgia with the EU acquis in the fields of financial, telecommunications/electronic commerce, postal and courier, and international maritime transport services.

The DCFTA will provide high levels of protection for all EU agricultural Geographical Indications (GIs), not only those relating to wines and spirits, and any new products added to the list of protected GIs. The Agreement includes the provisions of the EU-Georgia Agreement on Geographical Indications which entered into force on 1 April 2012, including its annexes. It foresees a mechanism enabling full protection of new indications which may be added to the Agreement on Geographical Indications before the Association Agreement enters into force. Moreover, the DCFTA includes provisions on copyright, designs (including unregistered ones), and patents which complement and up-date the TRIPS Agreement and include provisions for the enforcement of Intellectual Property Rights based on the EU's internal rules.

In terms of integration of the public procurement markets, the DCFTA will allow access of Georgia, a non-EEA Member to the EU public procurement market for bids above certain value thresholds, following a period of transition during which Georgia will approximate current and future EU legislation on public procurement. Further access to the EU procurement market for bids below the value thresholds may be discussed once approximation has been successfully completed. As a result, suppliers and service providers will have mutual market access to the public procurement markets, with an exception made for the defence sector.

Through the DCFTA, Georgia will ensure implementation of comprehensive competition laws.

The section on subsidies ensures that transparency principles will be adhered to by Georgia, and contains appropriate reporting obligations to this effect.

On trade-related energy issues, the DCFTA introduces binding provisions on uninterrupted transit of energy goods and access to energy transport facilities with a view to ensuring the security of supply, on the independence of regulatory authorities in the energy field, and to clarify the relationship with Georgia's future commitments under the Energy Community Treaty.

Commitments to pursue sustainable development in trade and to abide by multilateral commitments in this respect are provided for, while ensuring the right to regulate own levels of domestic environmental and labour protection. DCFTA includes a commitment to refrain from waiving or derogating from such standards in a manner that affects trade or investment between the parties.

Effective settlement procedures based on the model of the WTO Dispute Settlement Understanding will provide for swift resolution of bilateral trade disputes, including by allowing the affected party to impose proportionate sanctions, with even faster procedures for urgent disputes on trade-related energy matters.

Specific provisions on transparency and dialogue with the civil society and stakeholders have also been agreed to ensure consultative, open and predictable nature of policy-making in trade-related areas. Furthermore, the DCFTA contains disciplines facilitating the conduct and assessment of approximation process in trade-related areas,

In perspective, Georgia's closer economic integration with the EU through the DCFTA will be a powerful stimulant to the country's economic growth. As a core element of the Association Agreement, the DCFTA will create business opportunities in both the EU and Georgia and will promote real economic modernization and integration with the EU. Higher standards of products, better services to citizens, and above all Georgia's ability to compete effectively in international markets should be the result of this process.

3. LEGAL ELEMENTS OF THE PROPOSAL

On the part of the Union, the legal basis for the signature and provisional application of this Agreement is Article 217, in conjunction with Article 218(5) and the second subparagraph of Article 218(8), as well as Article 218(7) of TFEU. A separate legal instrument applies to the European Atomic Energy Community.

The attached proposal constitutes the legal instrument for the signature and provisional application of the Association Agreement.

In light of the above-mentioned results of negotiations, the European Commission proposes that the Council decides that the Association Agreement between the European Union and the European Atomic Energy Community and their Member States, of the one part, and Georgia on the other part should be signed on behalf of the Union and establishes appointment of the person(s) duly empowered to sign on behalf of the Union.

The proposal foresees that parts of the Agreement will be applied provisionally by the Union without it prejudicing the allocation of competences in accordance with the Treaties.

The fact that the Commission has submitted its proposal as an agreement of the Union and its Member States and Georgia is related to the genesis of this Agreement under the rules of the Treaty before the entry into force of the Treaty of Lisbon.

2014/0085 (NLE)

Proposal for a

COUNCIL DECISION

on the signing, on behalf of the European Union, and provisional application of the Association Agreement between the European Union and the European Atomic Energy Community and their Member States, of the one part, and Georgia, of the other part

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the Functioning of the European Union, and in particular Article 217, in conjunction with Article 218(5) and the second subparagraph of Article 218(8) thereof, as well as Article 218(7) thereof,

Having regard to the proposal from the European Commission,

Whereas:

(1) On 10 May 2010, the Council authorised the Commission to open negotiations with Georgia for the conclusion of a new Agreement between the European Union and Georgia to replace the Partnership and Cooperation Agreement.

(2) Taking into account the close historical relationship and progressively closer links between the Parties as well as their desire to strengthen and widen relations in an ambitious and innovative way, the negotiations on the Association Agreement were successfully finalised by the initialling of the Agreement on 29 November 2013.

(3) Therefore, the Agreement should be signed on behalf of the Union and applied on a provisional basis in accordance with its Article 429, pending its conclusion at a later date.

(4) Article 429 of the Agreement provides for the provisional application of the Agreement before its entry into force,

(5) Pursuant to Article 218(7) of the Treaty on the Functioning of the European Union, it is appropriate for the Council to authorise the Commission to approve modifications to be adopted by the Sub-Committee on Geographical Indications pursuant to Article 179 of the Agreement.

(6) It is appropriate to set out the relevant procedures for the protection of geographical indications which are given protection pursuant to the Agreement.

(7) The Agreement shall not be construed as conferring rights or imposing obligations which can be directly invoked before Union or Member State courts and tribunals.

HAS ADOPTED THIS DECISION:

Article 1

The signing of the Association Agreement between the European Union and the European Atomic Energy Community and their Member States, of the one part, and Georgia, of the other part is hereby approved on behalf of the Union, subject to the conclusion of the said Agreement.

The text of the Agreement to be signed is attached to this Decision.

Article 2

The Council Secretariat General shall establish the instrument of full powers to sign the Agreement, subject to its conclusion, for the person(s) indicated by the negotiator of the Agreement.

Article 3

1. Pending its entry into force, in accordance with Article 429 of the Agreement and subject to the notifications provided for therein, the following parts of the Agreement shall be applied provisionally between the Union and Georgia:

– Article 1;

– Title I;

– Title II;

– Title III: Articles 13-19;

– Title IV;

– Title V: Chapters 3 (Article 285) and 4 (Article 291);

– Title VI: Chapters 1, 2 (with the exception of Article 298 (k)), 3, 4, 6-8, 10, 11, 13, and 20, as well as Articles 354 and 357;

– Title VII;

– Title VIII: with the exception of Article 420(1), to the extent that the provisions of this Title are limited to the purpose of ensuring the provisional application of this Agreement as defined in this paragraph;

– Annexes I, II-XXI, XXII-XXIII, XXIV-XXXI, and XXXIV, as well as Protocols I to III.

2. The date from which the Agreement will be provisionally applied will be published in the Official Journal of the European Union by the Council General Secretariat.

Article 4

For the purposes of Article 179 of the Agreement, modifications of the Agreement through decisions of the Sub-Committee on Geographical Indications shall be approved by the Commission on behalf of the Union. Where interested parties cannot reach agreement following objections relating to a geographical indication, the Commission shall adopt such a position on the basis of the procedure laid down in Article 57(2) of Regulation (EU) No 1151/2012 of the European Parliament and of the Council of 21 November 2012 on quality schemes for agricultural products and foodstuffs[1].

Article 5

1. A name protected under Sub-Section 3 “Geographical Indications” of Chapter 9 of Title IV of the Agreement may be used by any operator marketing agricultural products, foodstuffs, wines, aromatised wines or spirits conforming to the corresponding specification.

2. In accordance with Article 175 of the Agreement, the Member States and the institutions of the Union shall enforce the protection provided for in Articles 170 to 174 of the Agreement, including at the request of an interested party.

Article 6

This Agreement shall not be construed as conferring rights or imposing obligations which can be directly invoked before Union or Member State courts and tribunals.

Article 7

This Decision shall enter into force on the day following that of its adoption.

Done at Brussels,

For the Council

The President

[1] OJ L 343 14.12.2012, p.1

PROTOCOL III

ON A FRAMEWORK AGREEMENT

BETWEEN

THE EUROPEAN UNION

AND GEORGIA

ON THE GENERAL PRINCIPLES

FOR THE PARTICIPATION OF GEORGIA

IN UNION PROGRAMMES

Article 1

Georgia shall be allowed to participate in all current and future programmes of the Union opened to the participation of Georgia in accordance with the relevant provisions adopting those programmes.

Article 2

Georgia shall contribute financially to the general budget of the EU corresponding to the specific programmes in which Georgia participates.

Article 3

Georgia's representatives shall be allowed to take part as observers and, for the points which concern Georgia, in the management committees responsible for monitoring the programmes, to which Georgia contributes financially.

Article 4

Projects and initiatives submitted by participants from Georgia shall, as far as possible, be subject to the same conditions, rules and procedures pertaining to the programmes concerned as those which apply to Member States.

Article 5

The specific terms and conditions regarding the participation of Georgia in each specific programme, in particular the financial contribution payable, as well as reporting and evaluation procedures, shall be determined by agreement between the European Commission and the competent authorities of Georgia on the basis of the criteria established by the programmes concerned.

If Georgia applies for external assistance of the Union to participate in a given Union programme pursuant to Article 3 of Regulation (EC) No 1638/2006 of the European Parliament and of the Council of 24 October 2006 laying down general provisions establishing a European Neighbourhood and Partnership Instrument or pursuant to any similar legislative act of the Union providing for external assistance of the Union to Georgia that may be adopted in the future, the conditions governing the use by Georgia of external assistance of the Union shall be determined in a financing agreement, complying in particular with Article 20 of Regulation (EC) No 1638/2006.

Article 6

Each agreement concluded pursuant to Article 5 of this Protocol, shall stipulate, in accordance with Regulation (EU, EURATOM) No 966/2012 of the European Parliament and of the Council of 25 October 2012 on the financial rules applicable to the general budget of the Union and repealing Council Regulation (EC, Euratom) No 1605/2002, that financial control or audits or other verifications, including administrative investigations will be carried out by, or under the authority of, the European Commission, the Court of Auditors and the European Anti‑Fraud Office.

Detailed provisions shall be made on financial control and auditing, administrative measures, penalties and recovery enabling the European Commission, the Court of Auditors and the European Anti‑Fraud Office to be granted powers equivalent to their powers with regard to beneficiaries or contractors established in the Union.

Article 7

This Protocol shall apply while this Agreement is applicable.

Either Party may denounce this Protocol by written notification to the other Party.

Termination of the Protocol following denunciation by either Party shall have no influence on the checks and controls to be carried out, where appropriate, in accordance with the provisions laid down in Articles 5 and 6 where appropriate.

Article 8

No later than three years after the date of entry into force of this Protocol, and every three years thereafter, both Parties may review the implementation of this Protocol on the basis of the actual participation of Georgia in Union programmes.