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

A. Introduction

B. Economic issues

1. Economic developments

2. Implementation of recommendations for improvements

C. Commitments and requirements arising from the accession negotiations

1. Administrative and judicial capacity

Public administration

Judicial capacity

Anti-corruption measures

Translation of the acquis into Slovak

2. The chapters of the acquis

Chapter 1: Free movement of goods

Chapter 2: Free movement of persons

Chapter 3: Freedom to provide services

Chapter 4: Free movement of capital

Chapter 5: Company law

Chapter 6: Competition Policy

Chapter 7: Agriculture

Chapter 8: Fisheries

Chapter 9: Transport policy

Chapter 10: Taxation

Chapter 11: Economic and monetary union

Chapter 12: Statistics

Chapter 13: Social policy and employment

Chapter 14: Energy

Chapter 15: Industrial policy

Chapter 16: Small and Medium-sized Enterprises

Chapter 17: Science and research

Chapter 18: Education and training

Chapter 19: Telecommunications and information technologies

Chapter 20: Culture and audio-visual policy

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

Chapter 22: Environment

Chapter 23: Consumer and health protection

Chapter 24: Justice and home affairs

Chapter 25: Customs union

Chapter 26: External relations

Chapter 27: Common foreign and security policy

Chapter 28: Financial control

Chapter 29: Financial and budgetary provisions

D. Conclusion

Statistical annex

A. Introduction

The accession negotiations with Slovakia were successfully concluded on 13 December 2002 and the Treaty of Accession was signed on 16 April 2003. In a referendum held on 16-17 May, a majority of Slovaks expressed their support for membership of the European Union. Following ratification of the Treaty of Accession, Slovakia will join the EU on 1 May 2004.

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

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

The Copenhagen European Council in December 2002 concluded that:

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

and the Thessaloniki European Council in June 2003 stated that:

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

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

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

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

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

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

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

[1] For the European Parliament the rapporteur is Mr Jan Marinus Wiersma.

B. Economic issues

In its 2002 Regular Report, the Commission concluded that

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

Improvements can be made to the macroeconomic situation, which requires urgent measures to reduce both the fiscal and current account deficits. Expenditure reforms, in particular in the health and pension area and as regards subsidies and guarantees, are essential. The unemployment problem necessitates a whole range of structural reforms, including the elimination of disincentive effects in the social protection system and a more flexible labour legislation. Supervision of the financial sector can be further strengthened. The effective implementation of the legal framework for a market economy needs to be further enhanced."

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

1. Economic developments

Slovakia's macroeconomic performance has been improving considerably, although some imbalances remain significant. Real GDP growth accelerated further to 4.4% in 2002. In the first half of 2003, it slowed down to 3.9% as a drop in the growth contribution of domestic demand was not fully compensated by a strengthening of the external growth contribution. Unemployment is falling from its level of 18.6% in 2002 but remained high at 17.7% in the first half of 2003. Employment is growing from an employment rate of roughly 57% in 2002. The current account deficit again reached more than 8% of GDP in 2002. However, it was more than fully covered by FDI inflows which reached almost 17% of GDP in 2002. It has dropped very significantly in the first half of this year. After reaching a record low of 3.3% in 2002, average annual consumer price inflation has re-surged to around 8% this year as a consequence of adjustments to administered prices and higher indirect taxes, while core inflation remains low. Approximating harmonised EU standards (ESA95), the general government deficit reached 7.2% of GDP in the election year 2002. For 2003, the government targets a deficit of 5% of GDP. General government debt decreased from 49.8% of GDP in 2001 to 44.3% of GDP in 2002 - mainly reflecting the use of part of the very high privatisation receipts to retire government debt.

>TABLE POSITION>

a Moving 12 months average rate of change.

P= provisional figures

Slovakia's progress on the reform path, also in the public finance area, has received strong new impetus. Various measures have been decided on and some have already become effective. The government has decided to implement a far-reaching tax reform at the beginning of 2004, mainly consisting of the introduction of a flat income tax rate and a unified value added tax rate, both at 19%. On the expenditure side, one of the main decisions so far relates to reforms of the pay-as-you-go pension system. The introduction of a funded second pension pillar is being prepared. In addition, further steps in a still long agenda for health care and social benefits reform have been taken. The extension of guarantees has been further limited. Measures have also been taken to reduce the structural deficiencies in the working of the Slovak labour market, in particular by a revision of the labour legislation. In many structural reform areas, the government benefits from strong technical support from international financial institutions. The strong political reform commitment will need to be maintained for years to come so that Slovakia continues its catching up with the most advanced acceding countries.

>REFERENCE TO A GRAPHIC>

2. Implementation of recommendations for improvements

The government has been reversing the expansionary fiscal policy stance. Whereas Slovakia notified a general government deficit of 7.2% of GDP for 2002 (ESA 95), the general government deficit target for 2003 is 5.0% of GDP. The government has committed itself to a further deficit reduction to 3.9% of GDP in 2004 and to slightly below 3% of GDP by 2006. The authorities have already reacted to budget execution risks in 2003, which stem predominantly from lower than planned tax revenues, by advancing planned excise tax increases. They seem to be prepared to take further measures, if necessary. For 2004, they have decided to implement fundamental and potentially growth enhancing tax reforms, consisting in particular of the introduction of a flat personal and corporate income tax rate and of a unified value added tax rate, all at 19%. By their very nature, these changes make any revenue forecast highly uncertain and pose a high risk for budget execution, thus necessitating a very conservative budgeting approach and underscoring the need for a swift continuation of structural expenditure reforms.

The restrictive fiscal policy stance supports a narrowing of Slovakia's high current account deficit. The current account deficit amounted to more than 8% of GDP in both 2001 and 2002. The more stringent fiscal policy of the new government, together with the accelerated increase in administered prices in 2003 and 2004, has a dampening effect on domestic demand. It also contributes to a more balanced policy mix and has allowed the National Bank of Slovakia to reduce its key interest rate from 8.25% in April 2002 to currently 6.25%. Together with market interventions, this has helped to mitigate the appreciation pressure on the Slovak crown and prevented an associated loss in competitiveness. Altogether, the current account deficit narrowed to slightly below 5% of GDP in the 12 months ending in June 2003, mainly due to very strong export growth.

The preparation of additional public expenditure reforms, which are necessary to underpin the envisaged fiscal consolidation , has gained very strong momentum. However, most of the necessary measures still need to be further specified, appropriately sequenced and implemented. The government decided on further parametric changes to the pay-as-you-go pension system for the beginning of 2004. However, these reforms remain incomplete, in particular with respect to the targeted increase in the retirement age. Furthermore, the government is preparing the introduction of a funded pension pillar. Additional steps have been taken to improve the financial situation of the health care system, inter alia by introducing co-payments for health care services. Nevertheless, a long reform road still lies ahead in this area. The extension of guarantees has been limited. However, both guarantees and subsidies should be thoroughly screened to implement additional reductions, also in connection with Slovak Railways and agriculture. The development of a detailed medium-term fiscal framework, which consistently embeds and sequences necessary expenditure reductions, is still lagging behind.

The Slovak government has been moving more decisively to tackle the deep-seated structural unemployment problem. Steps against major shortcomings mentioned in last year's Regular Report and the Joint Assessment of Employment Policy Priorities and subsequent progress reports have been implemented or are under discussion. The continuation of reforms in the health and social protection systems are of the utmost importance and should reduce disincentives for employment creation and acceptance, partly by reviewing social assistance benefits and lowering social contribution rates. Similar effects are likely to result from the tax reforms scheduled for next year. Furthermore, specific measures and programmes exist or are being considered to foster employment creation by SMEs, to strengthen regional mobility (partly by ameliorating the housing situation) and to reduce skill mismatches (partly by active labour market measures), although the effectiveness and efficiency of these programmes need to be continuously reviewed.

Progress has been made as regards financial sector supervision but the authorities need to continue to safeguard the expanding financial sector against stability risks. Both the legal framework and the implementation capacity in the supervisory area have been strengthened. A more detailed assessment of related issues is given in Part 3 of this Report (Chapter 3 - Freedom of services).

Further measures to improve the legal framework for a market economy have been instituted. Its effective implementation is also being enhanced. Nevertheless, additional vigorous efforts in the area need to be pursued. Examples of the further strengthening of the legal framework are the substantial acceleration in price liberalisations in 2003, the introduction of a highly regarded collateral law, and the above mentioned improvements in the labour legislation. A new bankruptcy act is being prepared. Slovakia has also embarked on an ambitious reform of the judicial sector. It aims, inter alia, at reducing the heavy workload of judges by recruiting Higher Court Officials, applying case management systems, reinforcing training, also on managerial capacity, and at combating corruption. The effective implementation of the legal and administrative framework, however, will require further significant efforts (see also Section B.1 on the Judicial System).

C. Commitments and requirements arising from the accession negotiations

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

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

Slovakia is generally meeting the commitments it has made in the negotiations.

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

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

Concerning the administrative capacity, Slovakia has largely achieved a sufficient, though still rather fragile, capacity to ensure effective implementation and enforcement of the acquis, notably in the area of the internal market and the various Community policies. Slovakia needs to ensure the full operation of the administrative structures, in particular with a view to guaranteeing the uniform and predictable implementation of the acquis. Particularly close attention is required regarding the structures necessary to implement that part of the acquis which will be applicable only upon accession, in particular as regards sound and efficient management of EC funds.

As part of its continuous monitoring, the Commission services addressed letters to Slovakia in March and June 2003 expressing concern over its preparedness in the sectors of insurance and investment services and securities markets within the free movement of services chapter, the setting-up of a Paying Agency and of the Integrated Administration and Control System and the upgrading of agri-food establishments within the agricultural chapter, the final definition and actual establishment of the administrative structures for the management of the Structural and Cohesion Funds within the chapter on regional policy and co-ordination of structural instruments, and the Public Internal Financial Control sector within the financial control chapter, and calling for urgent action to remedy these shortcomings.

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

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

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

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

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

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

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

1. Administrative and judicial capacity

Public administration

The Law on the Public Service and the Law on the Civil Service, which entered into force in April 2002, set the legal framework for public administration. They aim at creating a professional, impartial, politically neutral, efficient and flexible civil and public service. The key institution responsible for the implementation of the Civil Service Law is the Civil Service Office, established in March 2002. Its functions range from recruitment, training and information to preparing secondary legislation. The relevant secondary legislation was enacted in 2002 and 2003, with some delays in the beginning. The staffing of the new office is nearly complete but considering the broad range of competencies of the office the number of staff seems to be quite limited.

Transparent procedures for the recruitment of civil servants are in place. Recruitment on the basis of the Civil Service Law has started with some delays due to procedural problems. A recent amendment to the law empowering the head of the Civil Service Office to delegate the competencies for recruitment to the service offices (e.g. ministries), however, has made it possible to speed up the recruitment process. A new salary scheme has been introduced into implementing regulations, aiming to ensure adequate criteria and transparent procedures.

Slovak citizens have free access to information on the activity of the public administration, and this right is being widely used.

Administrative control procedures are in place. The citizen's right of recourse against public service actions is guaranteed, including the right to put cases to the Office of the Ombudsman and the Parliamentary Committee responsible for individual complaints and petitions. Codes of ethics for civil servants and employees in the public administration have been published. The control department of the Civil Service Office performs both internal and external control functions.

There is no long-term strategy for training civil servants. Training is carried out by various public and private bodies. There is a need to structure and intensify training activities in the public sector.

On the basis of a constitutional amendment adopted by Parliament in February 2001, self-administration at municipal level has been complemented at regional level with eight self-administrative regions. The first elections for regional self-administrative bodies were held in December 2001. A number of relevant laws have already been enacted, but the legislation and implementation of the reform are not yet completed. The most important outstanding point concerns fiscal decentralisation, which is due to be in place at the beginning of 2005. It is important that the transfer of functions and fiscal decentralisation go hand in hand, ensuring a timely and proper functioning of a democratic, efficient and sustainable self-administration.

One of the four Deputy Prime Ministers is responsible for coordination of EU affairs. He is assisted by a Secretary of State and a section within the Ministry of Foreign Affairs specifically dealing with these issues. The level of staffing in sectors dealing with issues related to European integration seems, in general, still insufficient. The Government has acknowledged the necessity to increase the level of staffing in this area and is in the process of filling the remaining vacancies. Flexible measures and incentives have been introduced to attract qualified staff. There is an urgent need to stick to these plans, notably in the area of regional policy. The high turnover of civil servants, many of whom leave for the private sector, continues to be a problem.

Judicial capacity

The judicial system in Slovakia comprises three tiers: district courts, regional courts and the Supreme Court. At present, there are 55 district courts and 8 regional courts. Regional courts function both as courts of appeal to the district courts and, in certain cases, as courts of first instance. The Government is planning to reduce the number of district courts. The Supreme Court is the highest judicial authority in the country, working as a court of cassation, and as a court of appeal in cases dealt with at first instance by a regional court. Finally, the Constitutional Court is an independent authority, set up to protect compliance with the constitution.

Judicial independence is laid down in the constitution and in a number of laws. The relevant legislation provides for transparent and open recruitment procedures, as well as provisions for remuneration.

On the basis of a constitutional amendment adopted in 2001 a Judicial Council has been set up, comprising 18 members, nominated by the judiciary, the Ministry of Justice, Parliament and the President of Slovakia. The Judicial Council decides, inter alia, on the assignment and transfer of judges, elects and recalls chairpersons of disciplinary court panels, and submits to the President proposals for appointing and recalling judges. It nominates also the candidates for the post of the President and Vice President of the Supreme Court, and comments on draft budgets for the judiciary and on draft legislation concerning the organisation of the judiciary. Apart from an urgent need for permanent premises, the Judicial Council still lacks sufficient material, funding, staff and technical resources, and its financial independence should be ensured. Efforts aimed at improving the technical equipment and software, as well as the premises, of ordinary courts, should continue.

The length of proceedings, in particular in civil and commercial cases, remains problematic. However, additional recent amendments to the Code of Civil Procedure are aimed at further alleviating this situation. The heavy caseload has stayed at a high level. In 2002, the number of cases filed reached approximately 900 000, thus staying at about the same level as in the two previous years. Judicial proceedings have an average length of almost 18 months in civil cases. The average length of criminal proceedings was around 4 months.

The level of public trust in the efficiency and fairness of the judicial system remains low. The current system of disciplinary proceedings needs upgrading in terms of transparency and adequacy of sanctions. Given that the disciplinary system is principally based on judicial self-regulation, its efficiency to a large extent depends on the willingness of the judiciary. Also, more efficient implementation by the respective judicial organisations of the professional codes of ethics, including a system of sanctions with a deterrence effect, would be most desirable.

The Court management system, which allows the random allocation of civil and commercial cases, started to be implemented in the reporting period through pilot projects. This pilot phase has demonstrated that the system improves the efficiency of the court's administrative proceedings and reduces the delays in first-instance proceedings. The full implementation of the Court management system at the Supreme Court would therefore be a welcome step forward, as would the expansion of the system to cover all ordinary courts, including their criminal law departments. In order to further increase the efficiency of court management, the implementation of the Act on Higher Court Officials should continue without delay.

The Judicial (training) academy is currently in the process of being established. Training of judges and court personnel at this institution needs to be launched without delay, including elements of training curricula aimed both at improving management skills within the judiciary and at preparing it for post-accession requirements as regards the implementation of EC law, where considerable deficiencies still exist.

Anti-corruption measures

There is a continuously high public and professional perception of widespread corruption in Slovakia, and tackling it should be a priority. The most affected areas appear to be the health care sector, education, the police and the judiciary. Corporate crime is a specific problem in Slovakia and the business climate is still characterised to a certain degree by legal uncertainty. There is a need for strict enforcement of the existing rules. The public awareness of the need to fight corruption, including in the media is increasing.

The Government elaborated a National Programme for the Fight against Corruption in 1999, on the basis of which Action Plans were drawn up the following year. Its implementation is ongoing. According to the Government, three quarters of the 1 500 concrete actions have been carried out or addressed to a large extent. Many of the proposed actions, however, appear to be vague.

The Laws on Conflict of Interests, on the Special Prosecution Office and on the Specialised Court for Corruption are currently being discussed in Parliament and should, once adopted, represent an important instrument in improving the fight against corruption. As regards transparency in the financing of political parties, further reforms are needed, including an appropriate regulation of membership fees, of tax breaks for donors and of efficient supervision of party financing. Specific measures should also be considered in order to regulate lobbying. The Law on Free Access to Information has contributed to increasing transparency within the administration and to reinforcing the fight against corruption.

Although measures such as the introduction of the random allocation of cases and the change in the Commercial Registry procedure should assist in reducing the risk of corruption and bias in the judiciary, there is a need for focused ethical training at all levels of legal education.

In December 2002, the Government decided to change the institutional framework of the fight against corruption. A new department for the fight against corruption was established within the Government Office, which is directly subordinated to the Deputy Prime Minister and the Minister of Justice. This new department replaced the former Central Co-ordination Unit and the Steering Committee. It is in charge of implementing and co-ordinating the anti-corruption policy formulated by the Government and is involved in the drafting of various relevant laws. Given the clear need for efficient co-ordination of the anti-corruption policy, the current staff within the department should be reinforced. Furthermore, a special anti-corruption unit was established within the General Prosecution Office. It is planned to increase its current staff numbers from 4 to a total of 9 prosecutors. However, a specific problem is the overlap still existing among law enforcement agencies involved in the fight against corruption and financial crimes.

The Civil Code, amended in June 2002, created the legal conditions for ratifying the Council of Europe Civil Law Convention on Corruption, which was approved in March 2003 by the Slovak Parliament. Slovakia is a party to the Council of Europe Convention on Money Laundering, Search, Seizure and Confiscation from the Proceeds from Crime and to the Criminal Law Convention on Corruption, as well as to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. It continues to participate actively in the monitoring of anti-corruption measures adopted by the OECD Working Group on Bribery in International Commercial Transactions, and participates in the Council of Europe Group of States against Corruption, GRECO (see also Chapter 24 - Co-operation in the field of Justice and Home Affairs).

A GRECO evaluation mission visited Slovakia in September 2000. Several of the recommendations resulting from this expert mission have in the meantime been implemented or are in the process of being implemented, notably the reform of the judiciary, of the licensing system and of the investigation procedures, raising awareness about corruption among the population and media and extending the powers of the Supreme Audit Office. Slovakia is strongly encouraged to continue to follow up these recommendations.

Translation of the acquis into Slovak

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

After a slow beginning, Slovakia is now providing a constant and high number of revised texts and is on track. A credible planning has been established by the Translation Coordination Unit in consultation with the EU institutions, and Slovakia is now meeting the needs of the legal revisers. The voluminous translations of the agriculture acquis is being revised at full speed and the flow of texts is catching up with the schedule. After a rather weak start, the quality of the Slovak version of the acquis appears now to be satisfactory in most texts. Problems in older texts which were translated in the earliest stages and which do not meet the expected standard still need to be tackled.

Therefore, if the present flow is maintained, there should be no major problems for the timely publication of the Special Edition of the Official Journal in Slovak.

2. The chapters of the acquis

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

Chapter 1: Free movement of goods

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

The horizontal and procedural measures necessary for the administration of the Community product acquis in the new approach sector are largely in place. The implementing structures for standardisation, metrology, accreditation, conformity assessment and market surveillance are all in place. Improvements to administrative capacity should continue particularly as regards market surveillance to ensure full operational efficiency by the date of accession. Slovakia's Institute for Standardisation (SUTN) and the Slovak Ministry of Transports Posts and Communications are full members of CEN and CENELEC, and ETSI respectively.

Slovakia has transposed almost all of the sectoral legislation under the new approach and in general the legislative transposition has been found to be in line with the acquis. Full transposition of the acquis on cableways and toys is still pending.

As regards the old approach directives, Slovakia has transposed most of the acquis in these product sectors. Transposition of the chemicals acquis has largely been completed. However, the directive on methods of sampling and analysis for fertilisers remains to be fully transposed. Having recognised that the identification of "new" chemical substances on its market is a matter of priority, Slovakia should provide for the appropriate notification of such substances in accordance with the acquis.

The transposition of the pharmaceutical acquis remains to be completed. Renewal in line with EU requirements of all marketing authorisations for pharmaceuticals currently on the Slovak market has not yet been completed. The transposition of the acquis on registration of medicines has been completed but its practical implementation needs to be improved. Also, preparations need to be completed, including the necessary legislative changes, for the application by the date of accession of both the centralised procedure for marketing authorisations and the procedure for the mutual recognition of registrations. Further amendment of existing legislation is also required in order to ensure the introduction of the 90-days period for issuing price orders in line with the EC rules on the transparency of price regulation, as well as to fully align with the acquis on good clinical testing and good clinical practice.

Implementing legislation on foodstuffs, cosmetics, motor vehicles and agricultural and forestry tractors, as well as on the classification of wood, remains to be adopted. Minor changes to legislation on the composition of glass need to be introduced. As concerns foodstuffs in particular, considerable progress has been made but legislative alignment remains to be completed in a number of areas. In the field of food safety, much progress has also been made on improving co-ordination between agencies and this process needs to be completed. Aspects of food safety are also covered under Chapter 7 - Agriculture.

Slovakia has taken the steps necessary to ensure the creation, reinforcement, and operational capacity of the institutions required to manage the acquis in nearly all of the sectors covered by the old approach sector directives. However, further attention is required in particular as regards the administrative structures necessary in the area of food safety in relation to implementing the Rapid Alert System for Food and Feed (RASFF) and the Hazard Analysis Critical Control Points (HACCP) systems.

In the field of public procurement, further amendments to the Public Procurement Act are required to ensure full alignment with the acquis, in particular concerning the definition of bodies governed by public law and cases where the negotiated procedure can be used. The Slovak Public Procurement Office is well organised and operating effectively. However, training of staff should continue particularly in view of the expected legislative changes.

In the non-harmonised area Slovakia has conducted initial screening of its national legislation possibly in contradiction with the principle of free movement of goods; this screening must now be completed and any barriers thus discovered must be removed. New legislation on retail chain stores adopted in July 2003 and containing a number of provisions incompatible with free movement will need to be amended or revoked. Slovakia is still to adopt horizontal legislation introducing a mutual recognition clause covering existing legislation. Minor amendments are required to ensure complete transposition of the acquis concerning cultural goods. Alignment with the arms control directive is essentially satisfactory. Preparations for full application of the regulation on the control of product safety at external borders is under way. Effective co-ordination between the market surveillance authorities and the customs services involved will need to be assured.

Conclusion

Slovakia is essentially meeting the requirements for membership as regards the horizontal and procedural measures necessary for the management of Community legislation in the new approach sectors, the new approach sectoral legislation, and in the area of public procurement. Once the remaining aspects of the new approach acquis are put in place, Slovakia should be in a position to implement this acquis from accession.

Slovakia is partially meeting the requirements in respect of the old approach sectoral legislation and in the non-harmonised area. In order to complete preparations for membership in this area, Slovakia needs to give priority to adopting the acquis in the remaining sectors. In addition to the completion of the alignment in the field of foodstuffs, efforts should continue to improve the administrative capacity in the area of food safety. Additional efforts should be made to provisionally notify "new" chemical substances prior to accession so as to ensure the continued marketing of such substances. Slovakia must pay particular attention to completing the screening of its national legislation in the light of the principle of free movement and to ensuring the implementation and enforcement of the principle of mutual recognition.

Chapter 2: Free movement of persons

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

In the field of mutual recognition of professional qualifications, Slovakia's legislation is not yet fully in line with the acquis. Legislation aimed at transposing the relevant sectoral rules concerning doctors, dentists, general care nurses, midwives, pharmacists, commercial agents, has been adopted and needs now to be implemented. Legislation concerning veterinary surgeons, architects and lawyers urgently needs to be adopted and implemented. As regards the general system of recognition, alignment is largely complete, with only some minor outstanding issues. Although the necessary administrative structures for implementing the acquis on the mutual recognition of professional qualifications are in place, further strengthening is needed. In particular, the remit of the administrative bodies concerned will need to be adapted following the adoption of the relevant legislation, and sufficient training provided to ensure the correct application of recognition procedures.

In the area of citizens' rights legislative alignment has been largely completed, except as regards the right to participate in the European Parliament elections and as regards equal treatment in access to education. The main administrative structures for implementation are in place.

As for free movement of workers a transitional arrangement has been agreed. For the first two years following accession, current Member States will apply national measures, or bilateral agreements, to regulate the access of workers from Slovakia to their labour markets. These arrangements may continue up to a maximum of seven years. Slovakia has adopted legislation aiming at full transposition of the acquis in this area.

With regard to co-ordination of social security systems no transposition into national legislation is needed to achieve alignment with the acquis. A number of bilateral agreements with current Member States, which rely on the same principles as the EU rules in this area, have been agreed. However, the necessary administrative structures need to be further developed.

Conclusion

Slovakia is essentially meeting the commitments and requirements in the area of citizens' rights, free movement of workers and co-ordination of social security systems. Some legislative adjustments need to be made as soon as possible to allow EU citizens to participate in the European elections of June 2004. Equal treatment in the access to education must be ensured. The ongoing measures to ensure adequate administrative capacity in these areas should continue.

The requirements relating to the mutual recognition of professional qualifications have partially been met. In order to complete preparations for membership in this area, Slovakia must urgently ensure the adoption and implementation of the remaining outstanding legislation covering certain sectoral directives, in particular for lawyers. Slovakia also has to reinforce its administrative capacity to implement the acquis on all aspects of mutual recognition of qualifications.

Chapter 3: Freedom to provide services

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

In the field of the right of establishment and the freedom to provide non-financial services, the remaining legal and administrative restrictions need to be removed, particularly those that discriminate against non-nationals. Potential restrictions remain to be identified by Slovakia in the light of the relevant case law of the Court of Justice. This screening must now be completed. New Slovak legislation on retail chain stores adopted in July 2003 and containing a number of provisions incompatible with EC provisions on freedom to provide services will need to be amended or revoked. Some changes are required to the business licensing regime in Slovakia in order to bring it into line with the acquis. In Slovak legislation regulating economic activity, a clear distinction should be made between economic operators providing services in Slovakia temporarily and those established permanently, in order to ensure the free provision of cross-border services. This distinction is currently not reflected in the Commercial Code and the Sole Traders Act.

In the field of financial services, Slovak legislation is largely in line with the acquis in the banking sector. Legislation remains to be fully transposed, however, as regards the directive on electronic money institutions and the need to cover foreign branches of Slovak banks in the deposit guarantee scheme.

The National Bank of Slovakia (NBS) is essentially well positioned to deal with the acquis-related tasks as a supervisory authority in the field of banking. However, the number of on-site examinations by the NBS should be stepped up, the training and number of prudential supervisors increased, the concepts of interest-rate risk and operational risk anchored in the supervisory process, and enhanced co-ordination with the Financial Market Supervision Office implemented.

As regards the insurance sector, legislative alignment remains to be completed. The insurance legislation will need to be amended to address the remaining gaps as regards life, non-life and insurance accounts directives. Recent amendments to the legislation on motor insurance aim at fully aligning with the acquis in this area. The administrative capacity of the supervisory authority, the Financial Market Supervision Office, should be further strengthened, including through the hiring of more staff and continued training.

In the field of investment services and securities markets, the legislation is broadly in line, although further legislative amendments are still needed, as well as the transposition of recent acquis. The directive on financial collateral remains to be transposed. Slovakia benefits from a transitional period as regards the full application of EC investor compensation rules. Legislation needs to be introduced to reflect the timetable for the phasing-in up until end 2006. The administrative capacity of the Financial Market Supervision Office should be further improved.

Concerning the protection of personal data and the free movement of such data, a number of shortcomings in the Slovak legislative transposition still need to be addressed. Also, the viability of the human and financial resources allocated to the Data Protection Office needs to be assured.

As regards information-society services, the directives on conditional access and e-commerce needs to be transposed and implemented before accession. The necessary administrative structures are in place, but further development is required to ensure proper implementation of these directives.

Conclusion

Slovakia is essentially meeting the requirements for membership and is expected to be in a position to implement the acquis in the area of banking services as well as investment services and security markets by the time of accession. It should complete preparations in these sectors.

Slovakia is meeting the majority of the requirements for accession in the areas of insurance and information-society services and the protection of personal data. In order to complete preparations for membership, a number of important directives remain to be fully transposed in these areas. This work must now be accelerated. Enhanced efforts are also needed to remove all administrative and legal restrictions on the freedom to provide the right of establishment and the freedom to provide non-financial services.

Chapter 4: Free movement of capital

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

In the area of capital movements and payments, Slovakia is broadly in line with the acquis, with the remaining alignment taking place according to schedule, in particular as concerns the relaxation of restrictions on institutional investors. The supervisory institutions and procedures are also being strengthened.

In accordance with the transitional arrangement it has been granted, Slovakia will remove restrictions on the acquisition of agricultural land and forests by EU nationals and by EU companies by 2011 at the latest.

In the field of payment systems, Slovakia has completed legislative alignment. As concerns implementing structures, the real time gross settlement system is scheduled to be implemented at the beginning of 2004. A permanent body for the out-of-court settlement of disputes between banks and customers has been set up.

In the area of money laundering, the relevant directives have been transposed into national legislation. Slovakia is also completing implementation of the Financial Action Task Force recommendations, in particular through the phasing-out of anonymous accounts. As concerns administrative structures, further reinforcement of the Financial Investigation Unit and improved co-ordination between the various bodies dealing with money laundering are needed (see also chapter 24 - Justice and home affairs).

Conclusion

Slovakia is essentially meeting the requirements for membership and should be in a position to implement the acquis in the area of free movement of capital from accession. A limited number of specific issues still need to be addressed in these areas before accession and the few remaining restrictions on capital movements, not covered by transitional arrangements, will need to be removed. The bodies involved in the fight against money laundering need to continue to be strengthened.

Chapter 5: Company law

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

In the field of company law as such, Slovak legislation is broadly in line with the acquis. A number of inconsistencies in the transposition of the company law directives remain, however, notably with respect to the Second Directive (co-ordination of safeguards) and with regard to a provision of the Code of Civil Procedure allowing provisional entries in the Register regardless of the legal validity of the decision. Administrative capacity needs to be further improved, particularly as regards the operation of the commercial register and registration procedures and the need to further increase legal certainty in that area.

With regard to accounting, Slovakia's commitments have been met and it is expected to be in a position to implement the acquis in this field from the date of accession. Administrative capacity appears to be adequate.

In the field of protection of intellectual and industrial property rights (IPR), Slovakia is largely meeting its commitments on copyright and related rights. Legislation remains to be adopted as regards the recent information society directive.

As agreed in the accession negotiations, specific transitional rules will apply in relation to pharmaceutical product patents, involving the non-application of Community exhaustion to certain exports from Slovakia, as regards the granting of supplementary protection certificates for medicinal and plant protection products, as well as in relation to the extension of registered or pending Community trademarks to the territory of Slovakia.

As regards enforcement of IPR, administrative structures are in place but need to be strengthened. Particular attention should be paid to the effectiveness of the administrative and judicial bodies (e.g. customs services, the police, the judiciary) involved in IPR enforcement and the fight against piracy and counterfeiting, especially cable retransmission piracy. Co-ordination and co-operation between these bodies should be improved and adequate resources and continued training provided.

The Regulation replacing the Brussels Convention on mutual recognition and enforcement of foreign judgements in civil and commercial matters will be directly applicable upon accession, and accession to the Rome Convention will only be possible upon accession. Slovakia should designate the relevant courts or other authorities to ensure swift implementation of these provisions (see also Chapter 24 - Justice and home affairs).

Conclusion

Slovakia is essentially meeting the requirements for membership, and is expected to be in a position by accession to implement the acquis, in the areas of company law and accounting, and the Regulation replacing the Brussels Convention and the Rome Convention. The transposition of the company law acquis will need to be completed and the operation of the commercial register and registration procedures improved.

The majority of commitments and requirements arising from the accession negotiations in the field of the protection of intellectual and industrial property rights have been met. Further legislative adjustments are required in respect of copyright and related rights, and information society rules. Although the legislation is mostly in line, enhanced efforts are in particular needed to strengthen the enforcement of intellectual and industrial property rights. Better co-ordination and training of enforcement bodies is required (mainly, customs, police and judiciary) and the efficient functioning of a well-trained judiciary should be given particular attention.

Chapter 6: Competition Policy

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

In the anti-trust sector, Slovak legislation covers the main principles of Community anti-trust rules as regards restrictive agreements, abuse of dominant position and merger control. However, Slovakia still needs to ensure that its legislation is not in contradiction with the more recent Community block exemptions. Preparations should continue for the application of the EC's new procedural regulation.

Slovakia has the necessary implementing structures in place, and its Antimonopoly Office (AMO) is functioning well. Further efforts are needed to raise awareness of anti-trust rules among all market participants and to build up a credible and transparent competition culture. Special training for judges should be further developed.

The enforcement record is generally satisfactory. However, in order to ensure further strengthening, priority needs to be given to cases which most seriously distort competition and more deterrent sanctions should be imposed. Internal guidelines on a more stringent enforcement policy recently approved by the AMO should now be put into practice.

In the field of state aid, Slovakia has adopted state aid rules covering the main principles of the acquis. Fine-tuning of the legislative framework taking into account latest developments in the acquis should continue.

The necessary implementing structures are in place. The Slovak State Aid Office has managed to maintain its independence, but still needs to improve its performance. Further efforts are needed to raise awareness of state aid rules among all market participants and aid grantors to build on work already carried out in this area. Slovakia must also pay further attention to training of the judiciary.

The enforcement record is generally satisfactory, but Slovakia should pay more attention to the assessment of aid schemes given the importance of gaining experience in this area in view of the possibilities under the structural funds. The SAO should pay particular attention to state aid control in sensitive sectors.

Slovakia benefits from two transitional periods during which fiscal aid can be granted to one company in the steel sector, to be discontinued at the end of 2009 at the latest, depending on the fulfilment of certain conditions, and to one company in the automotive sector, to be discontinued by the end of 2008, also subject to certain conditions. There are serious concerns as to compliance with one of the conditions for granting aid to one company in the steel sector, namely as regards a production limitation. It is imperative that Slovakia ensures full compliance with the conditions for granting aid attached to the exceptional transitional arrangements granted.

Conclusion

Slovakia is essentially meeting the commitments and requirements arising from the accession negotiations in the anti-trust area and is expected to be in a position to implement this acquis from accession. Slovakia should complete the fine-tuning of the legislative framework and ensure further strengthening of enforcement in this area.

Slovakia is meeting the majority of the commitments and requirements arising from the accession negotiations in the state aid area. In order to complete preparations for membership, attention should be paid to raising awareness of state aid rules among all market participants and aid grantors, to training the judiciary and to continued improvements to the enforcement record.

There are serious concerns as regards the fulfilment of the conditions specified in the Accession Treaty for the exceptional transition arrangement in the steel sector. Slovakia must pay urgent attention to ensuring that the conditions specified in the Accession Treaty for the exceptional transition arrangement in the steel sector are fully respected. Unless immediate remedial action is taken, Slovakia will not meet the requirements for EU membership in this area by accession.

Chapter 7: Agriculture

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

Horizontal issues

The legal framework in view of establishing the Paying Agency and the related procedures remain to be adopted in Slovakia. Notwithstanding the creation of a provisional section of the Agricultural Paying Agency within the Ministry of Agriculture in April 2003, the establishment of the Paying Agency will urgently need to be accelerated. A great deal of work remains to be done (such as agreements with delegated bodies, written procedures and development of the IT system), if Slovakia is to have a functioning Paying Agency by the date of accession.

The establishment of a functioning Integrated Administration and Control System (IACS) is still seriously delayed from both a technical and an organisational point of view. Most of the preparations are still at the planning stage, except for the setting up of the land parcel identification system. Given the work still to be done, and the time remaining, there must now be serious doubts as to whether Slovakia can have a functioning system in place by the date of accession.

Regarding trade mechanisms, the legal framework needs to be adopted and the authority responsible for export refunds and licensing, i.e. the Paying Agency, established. The relevant control tasks will be under the responsibility of the customs services. The administrative structures and procedures still need to be established in most fields.

Concerning quality policy, administrative structures remain to be fully set up. In the field of organic farming, administrative structures are mostly in place, but need to be strengthened.

Slovakia is expected to have implemented the Farm Accountancy Data Network (FADN) by accession.

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

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

Common market organisations

The responsible authority for intervention as well as inspection and authorisation of payments for arable crops will be the Agricultural Paying Agency, which still remains to be established. The Agricultural Intervention Agency is to be the implementing body. The establishment of the actual structures, including intervention centres and storage premises, needs to be accelerated. Further progress is required as regards the acquis on fibre crops, dried fodder and potato starch.

The Intervention Agricultural Agency is responsible for managing most elements of the sugar common market organisation (CMO). Although most of the necessary legal rules have been enforced, practical implementation of the different mechanisms of the CMO of sugar should be accelerated. Enhanced efforts are required to establish administrative structures and procedures for full application of the CMO.

Implementing legislation as regards marketing standards for fruit and vegetables and producers' organisations has been adopted. However, detailed rules still remain to be adopted regarding the operational programmes and control of operational funds. Administrative structures are in place, but the relationship between inspection bodies remains to be clarified, producer organisations should be further encouraged and mechanisms for reporting entry prices should be established. Due attention must be given to the application of marketing standards on the national market.

In the area of wine and alcohol, most of the implementing legislation concerning the CMO for wine has been adopted. Labelling rules on brandy remain to be brought in line with the acquis. There has been progress in finalising the vineyard register, which still needs to be fully completed to cover the whole territory. The register of replanting rights acquired before accession needs to be provided. Administrative structures are partially in place.

A milk quota system is in place in Slovakia. Further legal and administrative adjustments are, however, necessary in order to achieve full compliance with the acquis, in particular with regard to control. Other mechanisms of the CMO, such as intervention and trade with third countries, remain to be set up.

Legislative measures have been adopted regarding carcass classification for beefmeat, sheepmeat and pigmeat as well as for beefmeat labelling. Legislative measures for a price reporting system remain to be adopted. The beef carcass classification regulation has been adopted but is still in its initial stage of implementation and a control system for classification and price reporting needs to be set up immediately. In addition, the training system must be improved to include more practical aspects and an examination, including a practical test, must be carried out.

For eggs and poultry, legislative measures for the marketing standards, price reporting and reporting of production statistics remain to be adopted.

Rural development

The Agriculture Act, which will complete the administrative organisation for rural development in Slovakia, still remains to be adopted. Slovakia's absorption capacity for SAPARD funds has increased, which is an encouraging sign that administrative capacity to use these funds has improved. However, the take-up of SAPARD funds has been slow. There is a need for the Slovak authorities to examine the reasons for this and to take appropriate action. Slovakia has transmitted a formal draft Rural Development Programme for EAGGF Guarantee expenditure to the Commission.

Veterinary and phytosanitary issues

Transposition of legislation on transmissible spongiform encephalopathies (TSEs) and animal by-products has taken place, but still needs to be completed and adapted. TSE surveillance is close to compliance, but some shortcomings need to be remedied (notably as regards laboratory capacity). A total feed ban has not yet been implemented. Official controls in the fields of special risk material removal and disposal of risk material need to be strengthened.

The establishment of the veterinary control system in the internal market has not yet been fully accomplished. Slovakia has not yet joined ANIMO, the computerised network linking veterinary authorities. The acquis for identification and registration of animals has been transposed. A central computer database for bovine animals is operational, but needs upgrading in order to fulfil EU requirements. According to information provided by Slovakia, identification of bovines has been completed nearly to 95 %, although a significant number of small holdings are not yet registered. Enhanced efforts are needed to complete the registration of holdings and animal identification, especially for species other than bovine. The legislation for financing of veterinary inspections and controls still needs to be finalised. Work is also needed to transpose legislation regarding veterinary checks of imports from third countries and rules for imports. Enhanced efforts are required to bring border inspection posts into compliance with EU requirements.

Regarding animal disease control measures, national contingency plans-on-foot and mouth disease and classical swine fever, Newcastle disease and avian influenza have been provided. Slovakia has joined the Animal Disease Notification System (ADNS). Transposition of legislation on trade in live animals and animal products still needs to be completed.

Transposition of legislation on public health protection has been largely finalised, but needs to be adjusted. The upgrading of establishments needs urgent attention in particular in the meat, milk and fish sectors. Transitional arrangements have been granted for a meat and a fish establishment until three years after the date of accession. Products from these establishments will be restricted to the national market in line with the commitment given by Slovakia that all establishments continuing in operation after accession will be in compliance with the acquis. However, there is a high probability that a significant number of agri-food establishments will not be in compliance with the relevant EU requirements at the date of accession.

The acquis on common measures (including zoonoses) has been transposed. Attention must be given to improving the implementation of control systems in relation to residues and veterinary medicinal products.

The acquis in the field of animal welfare has been largely transposed. Administrative structures are in place at central, regional and district level for supervision and monitoring of the compliance with the animal welfare legislation.

In the field of zootechnics, legislative transposition still needs to be completed.

The acquis for animal nutrition remains to be transposed. Further efforts are needed to build up the capacity of the inspection and control bodies and to bring official controls in line with EU requirements.

In the field of phytosanitary legislation, transposition of the acquis on harmful organisms is well advanced, but further adjustments are needed to ensure full compliance. Registration for plant passport purposes remains to be completed and implemented. Transposition of the legislation on marketing of seeds and propagating material should be accelerated. Most legislation on plant protection products is in place, but controls at the user level should be improved in order to ensure full implementation. Legislation on maximum residue limits for pesticides and on methods of sampling for pesticide residues still needs to be adopted. Controls in the area of pesticide residues in food need to be strengthened through the extension of the range of analysis and enhanced laboratory capacity.

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

As regards food safety, transposition of the legislation is still behind schedule and needs to be speeded up and completed. Further adjustments are needed in order to ensure full alignment with the European food safety framework. As regards the administrative structures, legislation on the Rapid Alert System for Food and Feed (RASFF) remains to be put in place - the contact point has been appointed but is not yet fully operational, and co-ordination on food safety issues within the Ministry of Agriculture should be enhanced. Aspects of food safety are also covered under Chapter 1 - Free movement of goods.

Conclusion

Slovakia is essentially meeting the commitments and requirements arising from the accession negotiations, in (as far as the horizontal issues are concerned) quality policy, organic farming, the Farm Accountancy Data Network (FADN) and state aid; and, as far as the common market organisations (CMOs) are concerned, in arable crops, fruit and vegetables, milk, sheep and pigmeat, and eggs and poultry; and in rural development. In the veterinary and phytosanitary field, the requirements relating to animal disease control measures, trade in live animals and animal products, animal welfare, zootechnics and animal nutrition have essentially been met. Subject to good progress being maintained in these areas, Slovakia should be in a position to implement the acquis by accession.

Slovakia is partially meeting the commitments and requirements for membership as regards trade mechanisms, the CMOs for sugar, wine and beefmeat, and in the veterinary field the veterinary control system in the internal market (as regards veterinary checks for import from third countries and animal identification), TSEs and animal by-products (feed ban), common measures (residue controls) and phytosanitary issues (only as regards controls on maximum residue limits for pesticides). Unless efforts are accelerated in these areas, there is a risk that functioning systems will not be in place at accession.

There are serious concerns about Slovakia's preparations to set up its Paying Agency and to implement the Integrated Administration and Control System (IACS) and about public health protection as regards the upgrading of agri-food establishments. Substantial additional efforts are urgently needed in these areas. Unless immediate remedial action is taken, Slovakia will not be in a position to implement the acquis in these areas by the date of accession.

Chapter 8: Fisheries

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

In the field of resource and fleet management and inspection and control, Slovakia has adopted the relevant legislation. The State Statistics Office is in charge of collecting fish-related data. Administrative capacity in this sector should be further strengthened.

In the area of structural actions, the fisheries sector will benefit from the Sectoral Operational Programme for Agriculture and Rural Development. However, the Paying Agency remains to be established.

In the area of market policy, the setting-up of the administrative structures regarding producers' organisations remains to be completed. The State Veterinary and Food Administration is the authority responsible for supervision of placing fish and fishery products on the market and for control of imported fish. In general, administrative capacity regarding controls of the implementation of common marketing standards, and collection and transmission of data concerning the price reference regime, should be enhanced.

As regards state aid to the fisheries sector, Slovakia must bring its national State Aid schemes into conformity with the acquis.

Slovakia has not concluded any international fishing agreements.

Conclusion

Slovakia is essentially meeting the commitments and requirements arising from the accession negotiations, and is expected to be in a position from accession to implement the acquis in the area of fisheries. However, as regards structural actions, the legal framework for the establishment of the Paying Agency remains to be completed. Furthermore, administrative capacity needs to be strengthened in general and, more particularly, administrative structures as regards producers' organisations need to be set up.

Chapter 9: Transport policy

EC transport legislation aims at improving the functioning of the Internal Market by promoting efficient and environment- and user-friendly transport services. The transport acquis covers the sectors of road transport, railways, aviation, maritime transport and inland waterways. Member States are required to adopt and implement legislation concerning technical and safety standards as well as social standards. In order to further develop the European Single Transport Market, EC legislation also includes rules on market liberalisation. An important aspect of EC maritime policy is the establishment of Union-wide maritime safety standards.

The extension of the trans-European transport networks has been defined. The necessary administrative capacity, in both qualitative an quantitative terms, needs to be reinforced in the road and rail sector in order to prepare for the significant investments that will be needed in transport infrastructure .

In the land transport sector, Slovakia needs to complete its legislative alignment with the road transport acquis. Framework legislation is in place and in line with the acquis. Secondary legislation is still being adopted according to schedule in order to complete alignment with the acquis. Alignment with the fiscal and social acquis has been completed, but the latter in some cases requires modifications in order to be completely in line with the acquis. In the technical field, implementing legislation remains to be adopted, notably with regard to speed limitation devices, technical roadside inspections of commercial vehicles, digital tachographs and transportable pressure equipment. Slovakia has agreed to a transitional arrangement put forward by the EU concerning gradual reciprocal access to the cabotage market in the road haulage sector (for a maximum duration of five years). Further efforts are needed in terms of enforcement of legislation, in particular as far as the social and technical acquis are concerned. Administrative capacity is in place, but further strengthening should continue, especially by increasing the number of staff and training specialised staff in key supervisory and control functions. Concerning roadside and company checks in particular, the system needs to be redesigned in order to increase the quantity, quality and efficiency of checks. Training has to be increased and equipment improved accordingly. Co-ordination between relevant enforcement authorities needs to be improved considerably.

Transposition of the rail transport acquis is taking place according to schedule. The process remains to be completed, in particular with regard to the interoperability directives. In the framework of the ongoing reorganisation process, the capacity of railway administration needs to be further strengthened. The Railways Regulatory Authority remains to be established.

On inland waterways transport, legislative alignment is not yet completed, in particular as regards safety advisors for the transport of dangerous goods, the reciprocal recognition of navigability licences, the technical requirements for inland waterway vessels and the systems of chartering and pricing. The administrative capacity is satisfactory.

In the area of air transport, framework legislation is in place but not entirely in line with the acquis, in particular with regard to licensing, security and ground handling. Secondary legislation is still being adopted in order to complete alignment with the acquis, including Joint Aviation Requirements (JARs) implementation. Full membership of the Joint Aviation Authorities remains to be achieved through the implementation of an Action Plan; Slovakia should make particular efforts to become a member before accession as required by the acquis and irrespective of the setting up of the European Aviation Safety Agency (EASA).

In the field of maritime transport, framework legislation is in place and in line with the acquis. However, the adoption of implementing legislation remains to be completed, in particular in relation to the acquis adopted under the "Erika" packages relevant to Slovakia. Administrative capacity is satisfactory.

Conclusion

Slovakia is essentially meeting the commitments and requirements arising from the negotiations as regards trans-European transport networks, rail transport, inland waterways, air transport and maritime transport, and is expected to be in a position to implement the acquis in these areas by the time of accession. Slovakia needs to complete the legal alignment in the areas of rail transport, as well as in the areas of inland waterways, air transport and maritime transport. Slovakia needs to reinforce its administrative capacity in the rail sector and to prepare for the significant investments that will be needed in transport infrastructure. Moreover, Slovakia must establish the Railways Regulatory Authority.

Slovakia is meeting the majority of commitments and requirements in the areas of road transport. In order to complete preparations for membership, enhanced efforts are required by Slovakia in order to ensure enforcement of legislation, in particular as far as the social and technical acquis are concerned. Administrative capacity needs to be further strengthened, in particular concerning roadside and company checks and as regards Roadside Technical Inspections of heavy commercial vehicles.

Chapter 10: Taxation

The acquis on taxation largely covers indirect taxation, as concerns VAT (value-added tax) and excise duties. It lays down definitions and principles of VAT. Excise duties on mineral oils, tobacco products and alcoholic beverages are regulated at EU level as concerns the structure of the duty, the level of minimum rates and the holding and movement of excisable goods. As concerns direct taxation, the acquis covers some aspects of corporate taxes and aims mainly at removing obstacles to cross-border activities between enterprises. Finally, the Community legislation in the area of administrative co-operation and mutual assistance provides tools to prevent intra-Community tax evasion and tax avoidance on both direct and indirect taxation.

In the area of indirect taxation, further transposition of the acquis on VAT is still required. Transposition should be completed in particular as concerns broadening the currently applicable definition of taxable persons, introducing the special schemes for farmers, investment gold and second-hand goods, aligning remaining discrepancies as regards taxable transactions, the taxable scope and the taxable amount. Particular attention should be given to the transposition of the intra-community regime. Furthermore, Slovakia should align the scope of exemptions, except in the areas where it has obtained transitional periods (see below).

Slovakia was granted transitional periods to continue the application of the reduced VAT rate on the supply of construction work for residential housing not provided as part of a social policy and excluding building materials (until 31 December 2007), the supply of heat energy for heating and the production of hot water by private households and small entrepreneurs who are not registered for VAT (until 31 December 2008) and the supply of natural gas and electricity (until one year after accession). Derogations were also granted as concerns the application of a VAT exemption on international passenger transport, and the application of a VAT exemption and registration threshold of EUR 35 000 for small and medium sized enterprises.

As concerns administrative capacity, further extensive efforts should continue to modernise and enhance the efficiency of the Tax Directorate, which is overall weak and suffers from insufficient staffing. Priority should be given to reducing the excessive volume of VAT refunds, and improving tax collection, control procedures and audit functions, also by developing an efficient system of risk analysis. Staff policy and training should be improved.

As concerns excise duties, some further efforts are necessary in order to complete alignment with the acquis. Slovakia needs in particular to introduce the suspension scheme for domestic movements of tobacco products and alcoholic beverages and complete alignment for mineral oils. Furthermore, the suspension scheme needs to be extended to intra-community movements for all the EU harmonised excisable goods. In addition, Slovakia needs to further align its legislation as concerns some exemptions and definitions in the area of cigarettes - including the introduction of a single mixed specific/ad valorem excise duty structure - and tobacco products and alcoholic beverages. The gradual increase of excise duties on cigarettes is proceeding according to schedule, and should reach the EU minimum rate level on 31 December 2008, thereby conforming with the transitional period agreed during negotiations. Slovakia was also granted a derogation to continue applying its excise duty scheme for small fruit grower's distillation, provided that the quantity does not exceed 50 litres of fruit spirit per year per household and that the reduced excise rate is not less than 50% of the standard national duty rate for alcohol. In this respect, Slovakia needs to align its legislation to the conditions of the derogation by accession.

Slovakia needs to accelerate the ongoing restructuring of its administrative structures, in order to be able to apply and effectively implement the acquis in the area of excises. Attention should be focused on the transfer of competencies for tobacco products and alcoholic beverages from the Tax Directorate to the customs authorities, which will be in charge of enforcing the acquis on excises as from accession. Audit functions should also be strengthened in the area of excises.

In the area of direct taxation, Slovakia remains to complete transposition of the directives on Mergers and on Indirect Taxes on the Raising of Capital, and to transpose the directives on the Taxation of Savings Income and on Interest and Royalties. In order to comply with the principles of the Code of Conduct for Business Taxation, Slovakia should amend its legislation providing foreign investors with 100% corporate income tax credits by removing the requirement of foreign participation. The capacity of the tax administration is sufficient, however efforts should continue to improve tax collection and audit procedures.

On administrative co-operation and mutual assistance, Slovakia is taking the necessary steps to transpose the acquis and implement it by accession, both from the legislative point of view and as concerns organisational structures including information technology systems. The central liaison office (CLO) was set up, while the excise liaison office (ELO) remains to be established. Preparations for the VAT Information Exchange System (VIES) and for the System for Exchange of Excise Data (SEED) databases are ongoing and proceeding according to plan. The setting up of SEED for tobacco products and alcoholic beverages should be addressed in particular. Furthermore, Slovakia should take the necessary steps as concerns the establishment of the application for "VAT on e-services".

Conclusion

Slovakia is essentially meeting the commitments and requirements arising from the accession negotiations in the areas of direct taxation and administrative co-operation and mutual assistance and is expected to be by accession in a position to implement the acquis in these areas. Slovakia needs to adopt legislation to complete alignment, Slovakia should maintain the current pace of its ongoing efforts to set up the IT systems allowing for the exchange of computerised data with the Community and its Member States.

Slovakia is meeting the majority of the requirements for membership in the area of VAT and excise duties, in which legislative alignment should be accelerated. Slovakia needs to devote particular attention to strengthening significantly its tax administration in both areas. As regards VAT, enhanced efforts are required notably as concerns audit procedures, collection and control. In the area of excises, increased attention must be given to completing efficiently the transfer of competencies on all the remaining excisable products to the Custom Administration.

Chapter 11: Economic and monetary union

EC legislation on Economic and Monetary Union (EMU) contains specific rules ensuring the independence of central banks in Member States, prohibiting indirect financing of the state by the central bank, and disallowing privileged access of the public sector to financial institutions. These rules must be transposed into the national legislation, despite the fact that Slovakia will not yet adopt the euro as a currency from accession. EMU policy also includes the co-ordination of exchange rate and economic policies, adherence to the stability and growth pact and the statutes of the European System of Central Banks.

Slovakia has met the commitments and requirements arising from the accession negotiations in the area of economic and monetary union and is in a position to implement the acquis as from accession.

Chapter 12: Statistics

The acquis in the field of statistics requires adoption of basic principles such as impartiality, reliability, transparency, confidentiality of individual data and dissemination of official statistics. It also covers methodology, classifications and procedures for data collection in various areas such as statistical infrastructure, macro-economic and price statistics, business statistics, transport statistics, external trade statistics, demographic and social statistics, agricultural statistics and regional statistics. The focal point of the statistical system of a country is the National Statistical Institute, which acts as the reference point for the methodology, production and dissemination of statistical information.

Slovakia is essentially meeting the commitments and requirements arising from the accession negotiations in the area of statistics and is expected to be in a position to implement the acquis as from accession. Slovakia needs to improve the quality and the timeliness of data in certain domains such as national accounts, business and agriculture statistics. Particular efforts should focus on addressing weaknesses concerning the production of regional statistics.

Chapter 13: Social policy and employment

The acquis in the social field includes minimum standards in fields such as labour law, equal treatment of women and men in employment and social security, and health and safety at work. Specific binding rules have also been developed in public health (on tobacco control and surveillance and control of communicable diseases) and recently also with respect to non-discrimination on grounds of racial or ethnic origin, religion or belief, disability, age or sexual orientation. The European Social Fund (ESF) is the main financial tool through which the EU supports the implementation of its Employment Strategy and contributes to social inclusion efforts (implementation rules are covered under Chapter 21, which deals with all structural instruments). The acceding countries are expected to be able to participate in social dialogue at European level, and in the EU policy processes in the areas of employment, social inclusion and social protection.

As regards labour law, most of the EC legislation has been correctly transposed into Slovak law, especially after the adoption, in May 2003, of new amendments to the Labour Code. Transposition of legislation is still required in the areas of working time for seafarers and mobile workers in civil aviation. Transposition of legislation of the new acquis, i.e. involvement of workers in the European Company, is foreseen after accession. The independent guarantee fund for employees is in place and functioning well.

Slovakia has transposed all the necessary legislation in the field of equal treatment of women and men. However, some legal adjustments are necessary to achieve full alignment. The pensionable age for male and female civil servants will have to be equalised upon accession, when the pension scheme constitutes pay within the meaning of the Treaty and EC case law. Furthermore, some adjustments to the Labour Code will be necessary as regards access to employment as well as provisions concerning the protection of women in employment, yet leading to their discrimination. Implementing structures are in place, but further strengthening is needed in order to ensure enforcement of the legislation.

In the area of health and safety at work, most of the legislation has been adopted and is expected to be in force as from accession. However, some further adjustments are necessary in order to achieve correct transposition of the acquis, in particular concerning the Framework Directive on the introduction of measures to encourage improvements in the safety and health of workers at work (protective and preventive services, information, training and consultation of workers) as well as concerning the Directive on mobile and/or temporary construction sites. Transposition of legislation should still be completed in the area of work at height (new acquis). The use of risk premiums to compensate for hazardous working conditions should be abolished. The authorities responsible for the enforcement of health and safety legislation are in place, but further strengthening, in terms of both staffing and technical facilities, is needed. Close co-operation and co-ordination between the different authorities should be systematically planned and practised in order to ensure integrated labour inspection.

As regards social dialogue, the administrative framework is in place. However, the system needs to be progressively improved. In particular, autonomous bipartite social dialogue should be promoted in order to increase its coverage in terms of the labour force and enterprises covered by collective agreements. The social partners' administrative capacity, primarily for entering into social dialogue at European level, needs to be reinforced, too.

In the field of public health, the legislative transposition of the tobacco acquis remains to be completed. As regards surveillance and control of communicable diseases, further measures are necessary in order to reach the necessary capacity to meet the EC requirements in this field. The Case Definitions Decision needs to be implemented. Significant efforts need to be made in the area of intervention epidemiology, and laboratory facilities should be strengthened. Efforts should continue in order to develop a health monitoring system with a view to obtaining health data and indicators comparable with the Community health monitoring system. Attention should be paid to the improvement of the health status of the population and to health expenditure.

Concerning employment policy, efforts are still needed to effectively implement the priorities identified in the Joint Assessment of the Employment Priorities (JAP) in a much more coherent and effective way. It is important to enhance employment rates, in particular for women and older workers, and to address regional imbalances. The reform of the education and training systems, including the lifelong learning system, needs to be accelerated. There is also a need to promote active and preventive labour market policies and to increase incentives for people to work. Important efforts are needed to improve policy co-ordination and ensure appropriate allocation of resources.

As regards the European Social Fund (ESF), the development of administrative structures for management has been delayed and requires continuous attention. Further efforts are needed to enhance professional capacities of staff in central and regional bodies. Intermediate bodies should be more involved in the preparation of programming. Co-operation between the Ministries of Labour and Education should be improved. In general, there is a concern about the preparedness of mainly the regional administration to ensure proper implementation of the ESF programmes. Preparations for participation in the transnational operations of the EQUAL initiative need to be intensified.

The Commission and Slovakia are finalising the Joint Memorandum on Social Inclusion (JIM), which identifies key challenges and possible policy orientations for promoting social inclusion. On this basis, an integrated strategy and a National Action Plan on social inclusion will have to be developed. Analytical work and social statistics systems on poverty and social exclusion should continue to be developed in line with the EU commonly agreed indicators on social inclusion.

In the field of social protection, sustained efforts are required to implement the reforms that have been introduced, including the health care reform and pension reform, which will help to further improve the level and efficiency of social protection.

Concerning anti-discrimination, the EC legislation is only very partially transposed, especially as regards sexual orientation, disability and race or ethnic origin. Legislation remains to be fully aligned with the acquis and the equality body required by the acquis needs to be established. Despite conti