Proposal for a COUNCIL DECISION On the position to be taken by the Community in the Association Council established by the Europe Agreement between the European Communities and their Member States, of the one part, and Poland, of the other part, concerning a dispute on the interpretation of the application of Articles 10(4) and 25 of the Europe Agreement with regard to Polish legislation concerning the price fixing of pharmaceutical products (Regulation from the Minister of Finance on the introduction of the obligation to apply official margins and the principles for setting prices in the sales of imported ready medicaments, serums, vaccines and contraceptives of 31 March 2000) [SEC(2004) 494]

(presented by the Commission)

EXPLANATORY MEMORANDUM

The European Community and its Member States are of the opinion that there is a dispute with Poland on the interpretation of the application of Articles 10(4) and 25 of the Europe Agreement between the European Communities and their Member States, of the one part, and Poland, of the other part, approved by the Decision of the Council and of the Commission (1993/743/EC, ECSC, Euratom) of 13 December 1993 [1], with regard to Polish legislation concerning the price fixing of pharmaceutical products (Regulation from the Minister of Finance on the introduction of the obligation to apply official margins and the principles for setting prices in the sales of imported ready medicaments, serums, vaccines and contraceptives of 31 March 2000).

[1] OJ L 348, 31.12.1993, p. 1

The dispute originates from complaints from the pharmaceutical industry importing in Poland, based on the threat that enormous penalties and reimbursement orders would be imposed upon them because of alleged violation of this legislation.

The European Community and its Member States consider that this former Polish legislation regarding the price fixing of pharmaceuticals was discriminatory against imported products and therefore in breach of Article 10(4) of the Europe Agreement, and constituted an infringement to Article 25 of this Agreement, because it rendered trade between Poland and the Community more difficult.

Contrary to the European Community and Member States' position, Poland considers its former legislation regarding the price fixing of pharmaceutical products non-discriminatory and not in breach of Article 25 of the Europe Agreement. Poland appears to be ready to apply measures imposing fines because of alleged violation of this legislation. Such measures would be applied in connection with the results of investigations conducted in relation to various importing pharmaceutical companies (covering the period 1 May 2000-9 April 2002) and could have serious financial consequences for EU companies involved.

The European Community and its Member States strongly believe that there is sufficient ground to establish that Poland's behaviour in this matter in connection with its former legislation is in breach of Article 25 of the Europe Agreement.

The Commission services have undertaken considerable efforts in the framework of the Association Committee and through letters as well as meetings at the highest level to urge the Polish Government to reconsider its position and to unambiguously ensure the full respect of the Europe Agreement. However, the Polish Government does not seem to be willing to make any commitments in this respect.

The Commission has recommended to the Presidency of the Council to refer the issue to the EU-Poland Association Council according to Article 105 of the Europe Agreement, in order to settle the dispute by means of a decision and, if necessary, to launch an arbitration procedure. It is therefore proposed to the Council to adopt this proposal for a Decision of the Association Council.

Proposal for a COUNCIL DECISION On the position to be taken by the Community in the Association Council established by the Europe Agreement between the European Communities and their Member States, of the one part, and Poland, of the other part, concerning a dispute on the interpretation of the application of Articles 10(4) and 25 of the Europe Agreement with regard to Polish legislation concerning the price fixing of pharmaceutical products (Regulation from the Minister of Finance on the introduction of the obligation to apply official margins and the principles for setting prices in the sales of imported ready medicaments, serums, vaccines and contraceptives of 31 March 2000)

THE COUNCIL OF THE EUROPEAN UNION

Having regard to the Europe Agreement between the European Communities and their Member States, of the one part, and Poland, of the other part, and in particular Article 105 thereof,

Whereas:

(1) The Europe Agreement [2] establishes an association between the European Communities and their Member States, of the one part, and Poland, of the other part. Its Article 105 provides for a procedure to settle any dispute relating to the application or interpretation of the Europe Agreement.

[2] OJ L 348, 31.12.1993, p. 1

(2) The European Community and its Member States consider that the former Polish legislation regarding the price fixing of pharmaceuticals was discriminatory against imported products and therefore in breach of Article 10(4) of the Europe Agreement.

(3) The European Community and its Member States consider that the former Polish legislation regarding the price fixing of pharmaceuticals constituted an infringement to Article 25 of the Europe Agreement, because it rendered trade between Poland and the Community more difficult.

(4) While the abovementioned legislation has been replaced through the adoption of a new pricing regime (Act on Prices of 5 July 2001), the European Community and its Member States are of the opinion that applying measures imposing fines because of alleged violation of legislation that was discriminatory and that infringed the Europe Agreement is unacceptable.

(5) The Commission services have repeatedly asked the Polish authorities to clarify their intentions with regard to the pecuniary consequences of investigations conducted in relation to various importing pharmaceutical companies, covering the period 1 May 2000-9 April 2002.

(6) The position taken by Poland has led the Commission to believe that the Polish Government would not hesitate to apply measures imposing fines because of alleged violation of legislation regarding the price fixing of pharmaceutical products in connection with the results of the abovementioned investigations, with possible financial consequences for the economic operators concerned.

(7) The Polish Government does not seem to be willing to make any commitments to unambiguously ensure a full respect of the Europe Agreement.

HAS DECIDED AS FOLLOWS:

Sole Article

In order to settle a dispute on the interpretation of the application of Articles 10(4) and 25 of the Europe Agreement with regard to Polish legislation concerning the price fixing of pharmaceutical products (Regulation from the Minister of Finance on the introduction of the obligation to apply official margins and the principles for setting prices in the sales of imported ready medicaments, serums, vaccines and contraceptives of 31 March 2000), the Community shall refer the issue to the Association Council established by the Europe Agreement between the European Communities and their Member States, of the one part, and Poland, of the other part.

The position to be taken by the Community in the Association Council shall be based on a draft Decision of the Association Council attached to this Decision.

Done at Brussels, [...]

For the Council

The President

ANNEX

Proposal for an

EC-Poland ASSOCIATION COUNCIL DECISION No... /2004

concerning a dispute on the interpretation of the application of Articles 10(4) and 25 of the Europe Agreement with regard to Polish legislation concerning the price fixing of pharmaceutical products (Regulation from the Minister of Finance on the introduction of the obligation to apply official margins and the principles for setting prices in the sales of imported ready medicaments, serums, vaccines and contraceptives of 31 March 2000)

THE ASSOCIATION COUNCIL,

Having regard to the Europe Agreement between the European Communities and their Member States, of the one part, and Poland, of the other part, and in particular Article 105 thereof,

Whereas:

(1) The Association Council, having examined a claim by the European Community that the former Polish legislation regarding the price fixing of pharmaceuticals was considered discriminatory against imported products and therefore in breach of Article 10(4) of the Europe Agreement, and that, moreover, this legislation constituted an infringement to Article 25 of the Europe Agreement because it rendered trade between Poland and the Community more difficult, has come to the conclusion that the claim was justified and, therefore,

HAS DECIDED AS FOLLOWS:

Article 1

Poland shall not apply any measures imposing fines because of alleged violation of discriminatory and infringing legislation on the price fixing of pharmaceutical products (Regulation from the Minister of Finance on the introduction of the obligation to apply official margins and the principles for setting prices in the sales of imported ready medicaments, serums, vaccines and contraceptives of 31 March 2000) in connection with the results of investigations conducted in relation to various importing pharmaceutical companies, covering the period 1 May 2000-9 April 2002.

Article 2

This decision shall enter into force on the first day of the month following its adoption.

It shall be applicable from 1 April 2004.

Done at Brussels, [...]

For the Association Council

The President