1.Introduction

Protocol 15 of the Agreement on the European Economic Area (EEA Agreement) on transitional periods on the free movement of persons stated that Liechtenstein could maintain in force quantitative limitations for new residents until 1 January 1998 with regard to nationals of EC Member States and other EFTA States. Decision No 1/95 of 10 March 1995 of the EEA Council on the entry into force of the Agreement on the European Economic Area for the Principality of Liechtenstein included a special Declaration by the EEA Council on the free movement of persons. This Joint Declaration states that a review is to be carried out at the end of a transitional period provided for in Protocol 15 of the EEA Agreement, taking into account Liechtenstein’s ‘specific geographic situation’. The same Declaration provides some guidance on what this specific situation implies: ‘The EEA Council recognises that Liechtenstein has a very small inhabitable area of rural character with an unusually high percentage of non-national residents and employees. Moreover, it acknowledges the vital interest of Liechtenstein to maintain its own national identity.’

After the expiry of Protocol 15 of the EEA Agreement on the free movement of persons, Liechtenstein and the European Union came to a specific arrangement in 1999. This arrangement, known as the ‘Sectoral Adaptations’, was initially laid down in the Decision of the Joint Committee 191/1999 and then incorporated into Annexes V (Free movement of workers) and VIII (Right of establishment) to the EEA Agreement. Under the Sectoral Adaptations, the free movement of persons applies to Liechtenstein. However, EEA citizens wishing to take up residence in Liechtenstein have to obtain a residence permit. The Adaptations establish a minimum number of permits to be issued to EEA citizens every year, constituting a yearly net increase in the residing EEA population of 1.75 % (for economically active people) and 0.5 % (for economically inactive people) respectively of their number in 1998. Obtaining residence permits, however, is not a prerequisite to work in Liechtenstein.

In the course of the 2004 enlargement, these arrangements, first agreed for a term of five years, were continued, subject to the requirement that they should be reviewed every five years. Following the first review in 2009, a second review was launched in 2014.

This Communication is part of that review. Its focus is on whether Liechtenstein should be allowed to continue applying these restrictions to the number of residence permits it grants.

2. sectoral adaptations in practice

Liechtenstein issues yearly reports on how it applies the Adaptations. It then shares the reports with its EU counterparts and the European Free Trade Association (EFTA) Surveillance Authority. The information provided below is based on the report Liechtenstein submitted in 2014.

The Liechtenstein authorities can issue a minimum of 56 new residence permits and around 300 new short-term permits (not exceeding 12 months) a year to EEA citizens exercising an economic activity in Liechtenstein. Every year Liechtenstein fulfils its quota obligations for new permits. The number of short-term permits is usually below 300. A supplementary quota is available for people who are not exercising an economic activity and who wish to take up residence in Liechtenstein. This quota is around 20 permits a year. There are no restrictions preventing family members of a holder of a residence permit from joining their spouse/family and taking up residence in Liechtenstein. They also have the right to take up an economic activity.

Year Number of applications by economically active people Number of applications by economically inactive people 2001 502 53 2002 516 45 2003 467 31 2004 500 24 2005 436 16 2006 555 26 2007 615 33 2008 801 44 2009 657 33 2010 587 25 2011 598 41 2012 483 27 2013 464 16

Following the 2009 review, the specific arrangements remained unchanged.

3. The 2014 Review

The current review process started in 2014.

The latest figures provided by Liechtenstein (see table above) show a significant decline in the number of applications for residence permits by economically active and inactive people, following a peak in 2008. The number of applications nevertheless remains 16-23 times higher than the allocable minimum quota, in particular for economically active people.

In the consultations between the European Commission, the European External Action Service and Liechtenstein on a possible change to the current rules, Liechtenstein argued that its absorption capacity remained rather limited and had not changed during the review period. It also argued that the Joint Declaration on Liechtenstein’s Sectoral Adaptations, attached to the 2014 Agreement on the participation of Croatia in the EEA, basically reconfirmed that Liechtenstein’s absorption capacity was unchanged. Liechtenstein therefore suggested that the specific arrangements for Liechtenstein should not be changed and that the next review should take place before May 2019.

In the course of the review, the Commission assessed whether there had been a change in Liechtenstein’s specific geographic situation and in the circumstances described in Decision No 1/95 of the EEA Council, namely that (a) Liechtenstein has a very small inhabitable area of rural character; and (b) Liechtenstein has an unusually high percentage of non-national residents and employees and a vital interest in maintaining its national identity.

The result of the assessment is as follows:

(a) Liechtenstein occupies a territory of 160 square kilometres that has not changed;

(b) Liechtenstein’s population is 36 925. It has grown by more than 4 000 people since 1998 (32 227), the reference year for the Adaptations, and by around 1 300 since 2009 (35 851), the year of the previous review. This might not seem high in real terms but translates into increases of 14 % and around 3 % respectively. The proportion of foreigners has also been rising, up to 33.5 % in 2012 from 33.3 % the previous year, half of whom are EEA citizens. The number of employees is almost equal to the number of residents (over 35 800 persons), 52 % of whom commute from neighbouring countries.

These numbers seem to confirm the special geographic nature and the limited absorption capacity of Liechtenstein.