COMMUNICATION FROM THE COMMISSION - Opinion on Croatia's Application for Membership of the European Union

TABLE OF CONTENTS

A. INTRODUCTION

a) Preface

b) Relations between the EU and Croatia

B. CRITERIA FOR MEMBERSHIP

1. Political Criteria

1.1. Democracy and the Rule of Law

1.1.1. The Parliament

1.1.2. The Executive

1.1.3. The Judiciary

1.1.4. Anti-corruption measures

1.2. Human Rights and the Protection of Minorities

1.2.1. Civil and Political Rights

1.2.2. Economic, Social and Cultural Rights

1.2.3. Minority rights, protection of minorities and refugees

1.3. Other obligations defined by EU Council conclusions of 29 April 1997

1.3.1. Cooperation with the International Criminal Tribunal for the former Yugoslavia (ICTY)

1.3.2. Regional Co-operation

1.4. General Evaluation

2. Economic Criteria

2.1. Economic developments

2.2. Assessment in terms of the Copenhagen criteria

2.3. General evaluation

3. Ability to assume the obligations of membership

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

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 coordination of structural instruments

Chapter 22: Environment

Chapter 23: Consumer and health protection

Chapter 24: Co-operation in the field of 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

C. SUMMARY AND CONCLUSIONS

1. Political Criteria

2. Economic Criteria

3. Capacity to take on the other obligations of membership

Annexes

A. INTRODUCTION

a) Preface

Application for Membership

Croatia presented its application for Membership of the European Union on 21 February 2003 and the Council of Ministers decided on 14 April 2003 to implement the procedure laid down in Art. 49 of the Treaty on the European Union, which states: "Any European State which respects the principles set out in Article 6(1) may apply to become a member of the Union. It shall address its application to the Council, which shall act unanimously after consulting the Commission and after receiving the assent of the European Parliament, which shall act by an absolute majority of its component members."

Art. 6.1 states "The Union is founded on the principles of liberty, democracy, respect for human rights and fundamental freedoms, and the rule of law, principles which are common to the Member States."

That is the legal framework within which the Commission submits the present Opinion.

Context of the Opinion

The Croatian application for membership is part of an historic process, in which the Western Balkan countries are overcoming the political crisis of their region and orienting themselves to join the area of peace, stability and prosperity created by the Union. In the "Thessaloniki Agenda for the Western Balkans" adopted by the European Council of June 2003, the EU stressed "that the pace of further movement of the Western Balkans countries towards the EU lies in their own hands and will depend on each country's performance in implementing reforms, thus respecting the criteria set by the Copenhagen European Council of 1993 and the Stabilisation and Association Process conditionality"

The European Council in Copenhagen in June 1993 concluded that:

"The associated countries in Central and Eastern Europe that so desire shall become members of the Union. Accession will take place as soon as a country is able to assume the obligations of membership by satisfying the economic and political conditions.

Membership requires:

- that the candidate country has achieved stability of institutions guaranteeing democracy, the rule of law, human rights and respect for and protection of minorities;

- the existence of a functioning market economy, as well as the capacity to cope with competitive pressure and market forces within the Union;

- the ability to take on the obligations of membership, including adherence to the aims of political, economic and monetary union.

The Union's capacity to absorb new members, while maintaining the momentum of European integration, is also an important consideration in the general interest of both the Union and the candidate countries".

This declaration spelled out the political and economic criteria for examining the accession requests of the applicant countries.

The European Council in Madrid in December 1995 referred to the need, "to create the conditions for the gradual, harmonious integration of the application countries, particularly through: the development of the market economy, the adjustment of their administrative structure, the creation of a stable economic and monetary environment".

The Stabilisation and Association Process conditionalities were defined by the Council on 29 April 1997 and included co-operation with the International Criminal Tribunal for the Former Yugoslavia (ICTY) and Regional co-operation. These conditions are a fundamental element of the Stabilisation and Association process and are integrated into the Stabilisation and Association Agreement signed with Croatia.

In its Opinion, therefore, the Commission analyses the Croatian application on the basis of Croatia's capacity to take on the obligations of meeting the criteria set by the Copenhagen European Council of 1993 criteria and the conditions set for the Stabilisation and Association process, notably the conditions defined by the Council in its Conclusions of 29 April 1997

The Contents of the Opinion

The structure of the Opinion takes account of the conclusions of the European Council in Copenhagen. It:

* describes the relations up to now between Croatia and the Union, particularly in the framework of the existing agreement;

* analyses the situation in respect of the political conditions mentioned by the European Council (democracy, rule of law, human rights, protection of minorities) including the fulfilment of the Stabilisation and Association Process conditionalities;

* assesses Croatia's situation and prospects in respect of the economic conditions mentioned by the European Council (market economy, capacity to cope with competitive pressure);

* addresses the question of Croatia's capacity to adopt the obligations of membership, that is the acquis of the Union as expressed in the Treaty, the secondary legislation, and the policies of the Union;

* makes finally a general evaluation of Croatia's situation and prospects in respect of the conditions for membership of the Union, and a recommendation concerning accession negotiations.

In assessing Croatia in respect of the economic criteria and its capacity to assume the acquis, the Commission has included a prospective assessment; it has attempted to evaluate the progress which could reasonably be expected on the part of Croatia in the coming years, before accession, taking account of the fact that the acquis itself will continue to develop. For this purpose, and without prejudging the actual date of accession, the Opinion is based on a medium-term time horizon of approximately five years.

During the preparation of the Opinion, the Commission has obtained a wealth of information on Croatia's situation from the Croatian authorities, and has utilised many other sources of information, including the member states, international organisations (Council of Europe, OSCE, UNHCR, ICTY, Stability Pact, IMF, World Bank, EBRD, EIB etc.) and NGOs.

b) Relations between the EU and Croatia

Amid increasing tension within the Socialist Federal Republic of Yugoslavia, Croatia declared independence on 25 June 1991. This was suspended for three months and confirmed on 8 October 1991 (by Parliament's decision on the abrogation of the state-legal ties with the former SFRY). An armed conflict, resulting in the displacement of ethnic groups, subsequently broke out and parts of the country were occupied by the local Serb rebels and Yugoslav People's Army (JNA). The EU recognised Croatia as a sovereign State in January 1992 and in May 1992 the country was admitted to the United Nations. In May and August 1995, Operations "Flash" and "Storm" enabled Croatian forces to take control of all occupied territories with the exception of Croatian Danube Region (Eastern Slavonia) which remained under UN protection. Croatia became party to the Dayton/Paris Peace Agreement of December 1995 which recognises the international borders of Bosnia and Herzegovina and confirms the right of all refugees to return to their homes. The Erdut Agreement of November 1995 provided for the peaceful reintegration of Eastern Slavonia into Croatia which was completed in January 1998. However, during this period progress in areas such as democratisation, respect of human rights, including minority rights, and the rule of law was insufficient to justify an upgrading of relations with the EU

The parliamentary elections in January 2000 and the election of Stjepan Mesic as President of the Republic in February 2000 marked a turning point in relations between the EU and Croatia. The new Croatian leadership immediately showed determination to entrench democratic values and principles and made rapid and significant progress on the main political outstanding questions, notably the respect of human rights, including minority rights, democratisation of the media, full compliance with the Dayton/Erdut Agreements, cooperation with ICTY and improved relations with neighbouring countries

This commitment was reflected in a rapid development of relations with the European Union. In May 2000, the Commission adopted a "Feasibility Report" [1] proposing the opening of negotiations for a "Stabilisation and Association Agreement (SAA)". Since November 2000 Croatia benefits from the autonomous trade measures granted unilaterally by the European Union to the countries of the Stabilisation and Association Process. The Stabilisation and Association Agreement was signed in October 2001 and an Interim Agreement (IA) is in force since March 2002.

[1] COM (2000) 311 of 24 May 2000

A resolution adopted in December 2002 by all political parties in the Croatian parliament defined Croatia's accession to the EU as a strategic national goal and asked the Government to submit an application for EU membership. This application was submitted by the Government in February 2003. The cross-party consensus on the political goal of EU membership was also maintained after the change of Government following the November 2003 parliamentary elections. Membership of the European Union and NATO, relations with neighbours, developing economic diplomacy, and changing Croatia's international image are the five priorities of the foreign policy announced by the new Government.

Contractual Relations

The Stabilisation and Association Agreement (SAA) between the European Union and Croatia was initialled on 14 May 2001 and signed on 29 October 2001. The ratification process of the Stabilisation and Association Agreement has not yet been completed. Once it enters into force, the SAA will be the legal framework for relations with the European Union for the entire period prior to a future accession of Croatia. It will provide a framework for political dialogue and enhanced regional co-operation, promotes the expansion of trade and economic relations between the parties and establishes a basis for Community technical and financial assistance. The institutional framework of the SAA will provide a mechanism for implementation, management and monitoring all areas of relations. Subcommittees will examine questions at technical level. The Stabilisation and Association Committee will provide for discussions at senior officials level and is aimed at finding solutions to problems arising under the SAA. The Stabilisation and Association Council will examine the overall status of and perspective for relations and provides the opportunity to review Croatia's progress in the Stabilisation and Association Process.

Pending the entry into force of the SAA, an Interim Agreement has been applied provisionally from 1 January 2002 and entered into force on 1 March 2002. The Interim Agreement applies the provisions of the SAA related to trade in goods as well as those on competition, and intellectual, industrial and commercial property rights. The Agreement establishes a Free Trade Area between the parties in agreement with relevant WTO provisions. It puts the EU's far-reaching autonomous trade measures, in force since November 2000, on a contractual basis (with the exception of the "entry price system" for certain fruit and vegetables, which was removed under the autonomous trade measures). These measures grant Croatia free access to the EU-market for virtually all products, with preferential tariff quotas for wine, baby beef and certain fishery products. The Interim Agreement is asymmetric in favour of Croatia, which is to gradually liberalise its import trade from the EU over a transition period ending on 1st January 2007. By that date, Croatia will have eliminated all tariffs on imports of industrial goods and on several agricultural and fishery products , whilst maintaining duties and tariff quotas for certain more sensitive agricultural and fisheries products.

Two meetings of the Interim Committee were held in April 2002 and April 2003. A system of five subcommittees has started to work, which serve as useful fora for technical discussions of all issues linked to the implementation of the Agreement and to the legal approximation process. In general, Croatia has properly implemented the Interim Agreement and it has contributed to the smooth functioning of the various joint institutions. However, during the first two years of application, there have been certain problems in implementation in the field of agricultural trade.

An additional protocol to the Interim Agreement / SAA regarding trade in wine and spirits and reciprocal recognition, protection and control of wine names and of designations for spirits and aromatised drinks is in force since March 2002.

An Agreement on trade in textile products between the European Community and the Republic of Croatia has been applied since January 2001.

Negotiations on a protocol adapting the Stabilisation and Association Agreement and the Interim Agreement to take into account the upcoming accession of ten new Member States to the Union have been concluded. While the Interim Agreement will apply to the enlarged EU as from 1st May 2004, the protocol is necessary to allow the ten new Member States to become formally party to the SAA. Technical adaptations are also necessary in various areas, including to adapt the trade preferences in the SAA/IA for agricultural products, both basic and processed, as well as fishery products, with a view to avoid disrupting traditional trade between Croatia and the enlarged Union. It is recalled that the Free Trade Agreements between the new Member States and Croatia will be terminated on 1st May 2004, when the new Member States apply the Common Commercial Policy.

The Ministry for European Integration coordinates the implementation of the SAA in a highly efficient and professional way. The Government has set up European Integration coordinators in all state administration bodies as well as a number of inter-ministerial working groups for the harmonisation of legislation.

In October 2001 Croatia adopted an Implementation Plan for the SAA for planning and monitoring legislative and non-legislative measures linked to obligations under the SAA. Croatia produces regular reports on the execution of this plan. In December 2002 Croatia adopted the first "National Programme for the Integration of the Republic of Croatia into the EU". This strategic document set out Croatia's ambitions and tasks regarding political and economic criteria, the harmonisation of the Croatian legal framework with the acquis, the enhancing of administrative capacity and an information strategy for the Croatian public. The programme foresaw the adoption of 83 laws and pieces of secondary legislation in order to advance the harmonisation of the Croatian legal framework in 13 chapters of the acquis. In general, these measures were adopted within the envisaged timeframe. A second National Programme was adopted in January 2004 comprising all chapters of the acquis.

Croatia has worked intensively towards aligning its legislation with the acquis communautaire and numerous important legislative texts have been adopted by Parliament, in particular during 2003. However, in general, the establishment of the necessary administrative structures and more generally the strengthening of administrative and judicial capacities have not developed at the same pace, thereby putting at risk the effective implementation and enforcement of the new legislation. Croatia needs to give particular priority to administrative and judicial capacity building and fully integrate this dimension into its National Programmes.

Trade Relations

The EU is Croatia's main trading partner. Between 1998 and 2002 trade between the EU and Croatia increased substantially. EU imports from Croatia increased by 38%, from EUR1.8 billion in 1998 to EUR2.5 billion in 2002. EU exports to Croatia grew by 47% over the same period, from EUR4.4 billion to EUR6.5 billion. The respective evolution of imports and exports led to a worsening of Croatia's trade deficit with the EU, which leapt by more than 50%, from EUR2.6 billion in 1998 to EUR4 billion in 2002. Furthermore, Croatia has a trade deficit of approximately EUR 1 billion with the countries acceding to the EU in May 2004. While Croatian exports represent about 23% of GDP, approximately 54% of its external trade was with the EU in 2002. This figure rises to nearly 70% when considering trade with the countries acceding to the EU in May 2004. Croatia's share of EU's external trade stood at 0.45% in 2002.

In 2002 Croatia's exports to the EU consisted mainly of textiles (22% of the total) and machinery and electrical equipment (18% of the total). The EU's exports to Croatia consisted mainly of machinery and electrical equipment (25% of the total), vehicles, aircraft, vessels and associate transport equipment (17% of the total) and chemicals (10% of the total).

Croatia is a member of the World Trade Organisation and the Central Europe Free Trade Agreement. It is active in the Trade Working Group under the Stability Pact for South East Europe. In this context, Croatia has negotiated a network of bilateral free trade agreements with all its neighbouring countries.

Community Assistance

Overall, between 1991 and 2003 Croatia received EUR550 million of EU assistance. Between 1991 and 2000, this assistance was focused on emergency support through the European Commission's Humanitarian Aid Office (ECHO) and the Obnova programme. The EU consolidated its assistance in 2000 under the Community Programme for Assistance, Reconstruction, Development and Stabilisation (CARDS), at the same time as launching the Stabilisation and Association process (SAp). In 2001, EUR60 million was allocated to Croatia under the CARDS programme.

In accordance with the CARDS regulation, a Country Strategy Paper, defining the main areas for co-operation for the period 2002-2006, was adopted in December 2001. The associated multi-annual indicative programme (MIP) sets out in more detail priorities for the period 2002-2004. In the framework of the CARDS National Programmes, the total financial allocation for the period 2001 and 2004 amounts to EUR257 million for the following five main priorities: democratic stabilisation, economic and social development, justice and home affairs, administrative capacity building, and environment and natural resources.

Croatia is directly involved in CARDS programming, including discussions on current strategies and agreement on the MIP. These discussions involve not only the National Aid Coordinator, but also the relevant Ministries, potential beneficiaries, international financial institutions and the non-governmental sector.

Croatia is also a beneficiary of the CARDS Regional Programme, the European Initiative for Democracy and Human Rights, Life Third Countries, the Youth Programme - Third Countries Co-operation, Regional Co-operation in Mine Action in South East Europe and a number of other specialized programs.

Implementation of CARDS assistance has been slow but there are signs of improvement due to increased absorption capacity in the Croatian administration. Since January 2002, the EC Delegation in Zagreb is responsible for the management of assistance and implementation has speeded up considerably. In order to use pre-accession funds effectively, Croatia will need to develop the necessary administrative capacity.

Several twinning projects (Border Police, Customs, Statistical Agency, and Asylum) are ongoing and more are planned in the sectors of integrated border management (IBM), agriculture, and the judiciary.

The Croatian administration needs to continue its efforts to meet agreed project conditionality (e.g. policy decisions, establishment and strengthening of institutions, allocation of human and financial resources) but some progress can be noted.

A Commission-EU Member State co-ordination mechanism on assistance has been in place since 2001, to maximise the impact of CARDS and member states' bilateral aid.

Effective co-operation also exists with other donors. Since 1993, the World Bank has supported 21 projects totalling US$1.064 million and provided a number of grants to the amount of US$20 million. Lending is focused on investment in infrastructure, health, agriculture and forestry, enterprise and financial sector reform, capital market development, as well as judicial and pension system reform. Since 1994, the European Bank for Reconstruction and Development (EBRD) has made investments totalling EUR1.325 million, including over EUR300 million in 2002. The focus of investment is the corporate sector (pharmaceutical, food, cement, and communications), financial sector and municipal infrastructure. In 2002, the European Investment Bank (EIB) has provided loans to the amount of EUR130 million for regional development (transport and communications infrastructure), economic and social cohesion, and environmental protection.

B. CRITERIA FOR MEMBERSHIP

1. Political Criteria

The European Council in Copenhagen in 1993 decided on a number of "political" criteria for accession to be met by applicant countries. A country must have achieved "stability of institutions guaranteeing democracy, the rule of law, human rights and respect for and protection of minorities". In the case of the Western Balkans the conditions defined by the Stabilisation and Association Process are also a fundamental element of the EU policy, which will be assessed in this Opinion.

In the meantime, through the entry into force of the Treaty of Amsterdam in May 1999, the political criteria defined at Copenhagen have been essentially enshrined as a constitutional principle in the Treaty on European Union. Article 6(1) of the consolidated Treaty on European Union reads: "The Union is founded on the principles of liberty, democracy, respect for human rights and fundamental freedoms and the rule of law." Accordingly, Article 49 of the consolidated Treaty stipulates that "Any European State which respects the principles set out in Article 6(1) may apply to become a member of the Union." These principles were emphasised in the Charter of Fundamental Rights of the European Union, that was proclaimed at the Nice European Council in December 2000.

In carrying out the assessment required in this connection, the European Commission has drawn on a number of sources of information: answers given by the Croatian authorities to the questionnaire sent to them by Commission in July 2003, bilateral follow-up meetings, discussion with Member States' embassies, assessments by international organisations (including Council of Europe, OSCE, UNHCR, Stability Pact), reports produced by international and local non-governmental organisations, minority representatives, etc.

The following assessment includes a systematic examination of the main ways in which the public authorities are organised and operate, and the steps they have taken to protect fundamental rights. It does not confine itself to a formal description but seeks to assess the extent to which democracy and the rule of law actually operate. This assessment relates to the situation by the end of February 2004. It does not examine in detail any changes which have taken place in the past or which may come about in the future, though it generally takes account of any stated intention to reform a particular sector.

1.1. Democracy and the Rule of Law

Parliamentary democracy in Croatia was established following the spring 1990 elections. The new Constitution was adopted in December 1990, on the eve of the outbreak of the war in the former Yugoslavia. Croatia gained independence in 1991; since then a number of constitutional changes have taken place. The constitutional changes in 2000 and 2001 were introduced in order to abolish the Upper House of the Parliament and strengthen the role of Parliament and Government vis-à-vis the President of the Republic. The 3 January 2000 elections resulted in the end of the 11 years rule of the Croatian Democratic Union (HDZ), President Tudjman's party. During the period 2000-2003, Croatia, under a coalition of (initially) 6 parties, made significant achievements in areas related to the rule of law and democracy. The Constitutional system was respected and institutions functioned normally.

The President of the Republic is elected by direct universal suffrage for a renewable five-year term of office. He calls elections for the Parliament, calls referenda, gives the mandate to form the Government to the person who enjoys the confidence of the majority of the members of Parliament, and performs other duties specified by the Constitution. In co-operation with the Government, the President also takes part in the formulation and implementation of foreign policy. The President is the Supreme Commander of the armed forces, appoints and relieves military commanders of duty. Under precisely defined circumstances, the President may dissolve the Parliament if the Government does not pass a vote of confidence, or if the State Budget is not adopted within 120 days from the date it was proposed. The President is responsible for possible violations of the Constitution that he may commit while performing his presidential duties. The procedure for determination of his responsibility is initiated on proposal by a two-thirds majority of all members of parliament. The Constitutional Court rules on such question with a two-thirds majority of its judges.

The current President of the Republic is Mr. Stjepan Mesi, elected in February 2000 in two rounds; the next elections are to be held by February 2005.

The Constitution was adopted on 22 December 1990 after the first multi-party parliamentary elections held in the spring of 1990. It was amended in 1997, 2000 and 2001 by a two-thirds majority vote of all the members of the parliament as foreseen by the Constitution. It established Croatia as a parliamentary democracy. However, the operation of institutions in Croatia encountered a number of difficulties in the first decade after independence. The revision of the Constitution in November 2000 moved Croatia from a semi-presidential system to a full parliamentary system. This has resulted in a positive reshaping of the relationship and the balance of power between the President, the Parliament and the Government.

1.1.1. The Parliament

Role and Structure

The Parliament (Sabor), is made up of a single chamber, the House of Representatives. This has, according to the Constitution, a minimum of 100 and a maximum of 160 representatives elected for a four-year term. The electoral law provides for proportional representation through party lists in 10 electoral constituencies. Eight seats in the Parliament are reserved for minorities who form the 11th constituency. The Serb minority has three guaranteed seats, the Italian and Hungarian one each, the Slovaks and Czechs are entitled to one representative, while other minorities are divided into two groups of which each is entitled to one representative. The Croatian Diaspora, which constitutes the 12th electoral unit, is also entitled to Parliamentary representation. The number of elected Diaspora representatives depends on the so called "non-fixed" quota, i.e. the number of members elected from Diaspora constituency is calculated by dividing the total number of votes cast abroad by the average number of votes necessary to secure a mandate in Croatia's ten constituencies.

The Parliament can be dissolved by itself or by decision of the President of the Republic if the Government loses a confidence vote in Parliament or if the State budget is not adopted within 120 days of its proposal by the Government.

Member of parliaments enjoy parliamentary immunities. The Opposition's role and involvement in the working of the country's institutions is recognised. The parliamentary minority is entitled to propose its candidate for the position of the vice-president of the Parliament. Opposition representatives in Parliament are also members of 25 parliamentary committees: 12 are chaired by HDZ and 13 by the other parties.

Croatia has a multiparty system. 94 political parties are registered. There are no obstacles to the establishment of parties, they receive state funding in proportion to the number of seats they obtained at the previous elections.

The Parliament exercises legislative power and shares the right of legislative initiative with the Government. Usually all laws undergo a lengthy parliamentary procedure of three consecutive readings. However, the Constitution allows for an urgent procedure of two readings. Many laws have recently been adopted through the urgent procedure.

One fifth of the parliamentary representatives can initiate the procedure for a vote of confidence in the Government.

The Parliament can call for referenda on proposals for amendments to the Constitution, on any legislative proposal or on any issue considered of importance.

Functioning of the Parliament

The last parliamentary elections were held on 23 November 2003. The Croatian Democratic Union (HDZ), the party of former President Tu!jman, won 66 out of 152 seats, including 4 seats of the Diaspora. The new HDZ Government received the support of the Croatian Social Liberal Party (HSLS) and the Democratic Centre (DC) coalition, the Croatian Pensioners Party (HSU), and the minority representatives.

The new Parliament held its constitutive session on 22 December 2003 and the new Government of Prime Minister Ivo Sanader received a vote of confidence on 23 December 2003 (88 MPs voted in favour, 29 MPs against and 14 abstained)

The Croatian Democratic Union (HDZ), which had been in the opposition in the previous legislature (2000-2003) has showed a strong determination to transform itself into a democratic party with a pro-European vocation. However some statements made in the recent past, when HDZ was in opposition, are still a matter of concern for the Commission. It still need to be demonstrated whether all elected members have really distanced themselves from radical nationalism.

Since Croatia became an independent State, parliamentary elections were held in 1992, 1995, 2000 and 2003. There has been an obvious improvement in the electoral process during the last two general elections which were assessed as generally free and fair. Both the last two elections have resulted in the formation of coalition governments.

Parliament functions satisfactorily, its powers are respected and the opposition fulfils its role. Parliament sometimes suffers from the lack of a quorum, which can unduly prolong the legislative process.

1.1.2. The Executive

Role and Structure

The decision on the appointment of the Prime Minister is taken by the President of the Republic, and co-signed by the President of the Parliament, after the Parliament has given a vote of confidence on the Government. Ministers are also approved by Parliament, upon a proposal by the Prime Minister. The Government is answerable to Parliament. The Prime Minister and the members of the Government are jointly responsible for Government decisions, while each minister is responsible for his/her area.

At the request of the Parliament, the Government is obliged to inform the Parliament of its policy, the execution of acts and other regulations and matters within its authority. The institute of interpellation, provided for by the Constitution, governs the accountability of the Government to the Parliament and the matter of confidence in the Prime Minister, individual members of the Government or the Government as a whole. In the period between 1990 - 2004 there have been 9 interpellations.

On the basis of the Constitution, the Government has autonomous regulatory powers that enable it to issue decrees for the implementation of the laws. It can be authorized by parliament to regulate certain issues by decrees apart from those regarding human rights and freedoms, minority rights, electoral system and organisation and functioning of the local and regional self-government. However, these decrees can last no longer than a year. In addition, the Government is authorised to pass decrees with the force of law regarding the existing economic policy that is under the original Parliamentary scope of authority when the Parliament is not in session or during the period in which the Parliament is dissolved due to elections. However, these decrees must be submitted for parliamentary approval as soon as the Parliament convenes.

The Government is responsible for the work of all bodies of the State Administration which includes ministries, State Administration organisations and offices of public administration. Ministries and State Administration organisations are central bodies of the State Administration, but offices of the state administration are also established in the local (regional) self-government units. In addition, for certain tasks, branch-offices can be established at county, municipal or city level.

The structure and tasks of the state administration have been revised and defined by the Law on the Organisation and Scope of the Ministries and State Administrative Organisations adopted on 22 December, which establishes 14 ministries and 5 state administration organisations. A Central State Office for Administration was also created in December 2003, which is not yet fully operational. The Law on Civil Servants and Public Employees governs the terms of employment. The Law on Government regulates the work and authority of the Government while the Law on Obligations and Rights of State Officials regulates state officials' rights and duties.

The Constitution establishes the structure of local administration. Units of local self-government are "municipalities" and "cities". Units of regional self-government are "counties". 426 Municipalities, 121 Towns and 20 Counties (including the town of Zagreb, which has the status of a County) have been established by law. Local government responsibilities are defined by Local Government Act of 2001 and include responsibilities such as water supply and sewerage, primary health care, pre-school and primary education, etc. Local financing is regulated by the Act on Financing Local Government. It is based mainly on tax sharing and various non-tax revenues. Local self-government collects revenue from own revenue sources (revenue from its own assets, county and municipal taxes, fines, charges and fees), shared taxes (income tax, profit tax, tax on real estate transactions, gambling tax) and grants.

The army and the police are under civilian control. There is an on-going reform of the army, which will lead to a significant reduction in the number of military personnel. The army is under the control of Parliament and the executive. The law provides for the civil control of the Secret Services by the Council for Supervision of Secret Services, whose members have been appointed recently.

The police service is also being restructured. In April 2003 the Ministry of Interior announced a Reform strategy plan which is still ongoing. Croatia has clearly decided to move from a wartime system to a system compatible with EU standards. Sustained efforts to implement such a significant change are still required, however.

The general level of security in Croatia remains satisfactory. There have been only a few ethnically related incidents.

Functioning of the Executive

The Law on Civil Servants and Public Employees of 2001 provides a legal basis for the status of civil servants and other public employees. The Law does not make any distinction between state officials (political appointees) and civil servants, thereby leaving unresolved issues such as status, role and obligations of political personnel in the civil service, tenure of political appointees within the civil service, modalities/procedures for the conversion of the status of political appointees to that of civil servants.

The current number of rulebooks (i.e. internal documents for each Ministry defining job descriptions, number of staff, etc.) and inconsistencies between them, create the conditions for a multitude of civil service management standards. The Law suffers from further deficiencies, especially with regard to a system of promotions, mobility, separation from service and disciplinary measures. The rules governing recruitment and selection of candidates could also be improved. It is an accepted view that salaries of civil servants are too low to attract adequate numbers of young and educated professionals to work in the state administration, especially as that they have to have the same or higher education than those working in other sectors.

Actions and decisions of civil servants, when deciding on individual citizens' rights and obligations, are based on the Law on General Administrative Procedure. Every administrative decision can be appealed to a second-degree administrative body. If appeals are not upheld, there is then recourse to the Administrative Court. However, as established by the decision of the Constitutional Court [2], regarding civil rights and obligations, the Administrative Court is not a court of full jurisdiction in the terms of the European Court of Human Rights case law, because [see Paragraph 1.1.3. on Judiciary].

[2] Decision of Constitutional Court No. U-I-745/1999, of 8 November 2000, Official Gazette 112/00

In addition, recourse can be had to the Ombudsman, elected by the Parliament for a term of 8 years. This length of term helps strengthen the independence of the post from political pressure. In the last few years many cases have been brought to his attention. In 2002 he received 1,558 complaints. In 104 of these cases he sent a recommendation to the administration concerned and only 72 complainants succeeded in his/her complaint. The Ombudsman investigates citizens' complaints of bureaucratic abuse both by state authorities and by individual public servants. In addition to investigating individual cases, the Ombudsman studies other matters relevant to the protection of constitutional and legal rights brought to his knowledge from other sources (such as mass media), reporting on irregularities in the work of state administration bodies and agencies. The Ombudsman reports annually to the parliament.

The Standing Orders of the Government of the Republic of Croatia from 2000 provide the legal framework for policy formulation and cover also inter-ministerial consultations. There is no single body responsible for providing a coordinated overview of policy to decision-makers. Since there are multiple structures, the policy planning and coordination tends to be rather politicised and fragmented.

The Ministry for European Integration is responsible for coordination with regard to European Integration matters. All the ministries have a network of European coordinators, and specific European Integration units have been established within some ministries.

There is no central training institution for civil servants, or a Government training programme. The reorganisation of the Ministry of Justice, Administration and Local-Self Government, of November 2003 provided for the creation of the Training Centre for Civil Servants under the Ministry of Justice. Following the adoption of the Law on the Organisation and Scope of the Ministries and State Administrative Organisations of 22 December 2003, a Decree was adopted by the Government on 22 January 2004 on the Internal Structure of the Central State Office for Administration. The Decree foresees 11 organisational units, including the Centre for training and education of state employees Currently the Ministry for European Integration organises EU training for civil servants.

The development of local government is still under way. Decentralisation foreseen in the Government programme 2000-04 has been slower than originally foreseen and should be speeded up. Since July 2001, the reform of local government was implemented at county level and in 32 cities. The following areas were transferred from the state to the county budgets: elementary and secondary education, social care centres and homes, hospital investment maintenance, and to the city budgets: elementary education. Since the beginning of 2002, hospital maintenance, the foundation and financing of social care centres and homes for the elderly and disadvantaged persons have been transferred to counties. The transfer of personnel and salaries in education was never enforced. The financial situation, albeit regulated by the Act on Financing Local Government of local government, should be better clarified.

1.1.3. The Judiciary

Role and Structure

The Croatian judicial system is organised hierarchically in three instances. 122 municipal courts, 114 misdemeanour courts, 12 commercial courts and 21 county courts act as courts of first instance. The county courts also decide on appeals against decisions by municipal courts. Croatia guarantees the right of appeal (county courts, High Misdemeanour Court, High Commercial Court, Supreme Court). The Supreme Court is the highest court in Croatia.

The President of the Supreme Court and the State Attorney are elected by Parliament and appointed by the President of the Republic.

The Administrative Court should ensure judicial protection against final administrative decisions. However, the Constitutional Court ruled in November 2000, that the Administrative Court is not a court of full jurisdiction in accordance with Article 6 (right to fair hearing) of the European Convention of Human Rights, in particular because of its limited ability to establish independently the facts of a case and to hold oral and contradictory hearings.

he Constitutional Court decides on conflicts of interest among the three branches of government and is authorised to assess the conformity of laws with the Constitution and the conformity of by-laws with the Constitution and laws. It is also empowered to decide upon constitutional petitions submitted by individuals who consider that their constitutional rights have been violated by the final acts of state authorities or bodies of local or regional self-government. The Constitutional Court is facing a constant increase in the number of individual petitions submitted. It is also the competent appellate authority to conduct proceedings regarding decisions on the dismissal or disciplinary responsibility of judges. According to the Croatian system the Constitutional Court is not considered to be part of the judiciary.

The independence of the Croatian judiciary is guaranteed by the Constitution and by the Courts Act. Judges are confirmed in their posts and appointed to a permanent position after serving a five-year probation period. Their permanent status is guaranteed by the Constitution. Judges are appointed by the State Judicial Council on the basis of opinions received from the judicial councils which are formed in each court. The Ministry of Justice examines whether the candidates comply with the formal requirements, while the relevant parliamentary committee and the president of the relevant court can also express their opinion. State attorneys (prosecutors) are appointed by the State Attorney Council following a similar procedure. Both Councils are autonomous and independent bodies. As regards the selection of candidate judges, no competitions are organised. To become a judge, a lawyer has to fulfil two eligibility criteria: first, to pass the bar exam and second, to have a certain number of years of work experience, depending on the category of court he is applying for. According to the Courts Act, judges may not be members of political parties or carry out other activities that may influence their autonomy, impartiality or independence.

Judges enjoy immunity in accordance with the Constitution and the Courts Act. In order to lift the immunity of a judge and to give approval for the institution of criminal proceedings against him, a proposal has to be submitted to the State Judicial Council by the competent State Attorney Office. The State Judicial Council decides on accountability of judges for misconduct or breaches of rules of profession in disciplinary proceedings. However, the evaluation of the performance of judges by the State Judicial Council remains largely theoretical. Apart from one case pending for corruption allegations, there have only been a few decisions of the State Judicial Council in disciplinary proceedings against judges. There is no Code of Ethics binding for all judicial officials. However, the Association of Croatian Judges (a local NGO) has adopted an ethical code for its members.

The tasks of court counsellors and clerks are described in the Rules of Procedure on Internal Organisation of the Judicial Body. Judges have many tasks which could be carried out by clerical staff. In order to relieve judges from administrative tasks, legislative changes were adopted by Parliament in January 2004.

The judicial system is still recovering from a period of high staff turn-over and shortages. Vacancies are gradually being filled with young judges, attorneys and clerical staff but a further overall increase in the number of staff is planned in principle. However, Croatia already has a high number of judges in relation to the number of citizens as compared to EU and acceding countries. There were 1868 judges, 513 State attorneys, 378 court counsellors and 6023 court clerks (2.8 for every magistrate) in late 2003.

The budget for the judiciary in 2003 (including prosecutors and the prison system) amounted to EUR231 million, compared to EUR192 million in 2002. This amount included EUR10.2 million for investment in buildings and office equipment, up from EUR5.5 million in 2002. A further increase of the budget for the judiciary by approximately 10% has been approved for 2004.

Infrastructure and equipment for the judiciary remains a serious problem. Computerisation of commercial courts, the cadastre and land books has only just started, and large investments are needed. While 3300 computers have been delivered in recent years, 2500 more are planned to be delivered in 2004-2005. Courts do not yet have access to data bases of law enforcement agencies. Automation of the court management system should be finalised by 2008. There are no computerised networks yet that would link different courts. Court buildings are mostly old and worn-out and need to be refurbished and/or reconstructed.

The Centre for Professional Training of Judges and other Judicial Officials was created in 1999 but became partly operational only in 2003. Although formally it is an autonomous service within the Ministry of Justice and foresees continuous training for judges and prosecutors, in practice the Centre has not yet built up sufficient capacity to cope with its tasks. It has only 4 staff including the Director and no permanent budget. At present, trainers are not selected through a competition and not evaluated on their performance. The Centre urgently needs to elaborate a training strategy, establish a team of trainers and start providing long-term training as well as training events in the regions. While the Centre has organised seminars on an ad hoc basis (mainly funded by international donors), e.g. on European Court of Human Rights procedures, case law and other topics, training in EU law has not yet started. The Centre should also establish institutionalised co-operation with the Supreme Court, which is supposed to supervise the training of judges according to the Courts Act. An additional problem is the fact that courts lack budgetary resources for training. Plans to strengthen the Centre or to establish a Judicial Academy should be pursued with vigour.

Functioning of the Judiciary

In the second half of the 1990s, Croatia's judicial system lacked independence and efficiency, and had staff shortages. While considerable improvements have been made and the independence of the judiciary has been established, major challenges remain to be addressed. The main problems are the widespread inefficiency of the judicial system and the amount of time needed to hand down and enforce judgments as well as weaknesses related to the selection and training of judges. Moreover, too many issues are brought before courts that could in principle be decided by other means. All these factors combine to cause a very large backlog of cases. An additional problem is that the courts and parts of the state administration do not always respect or execute in a timely way the decisions of higher courts. Citizens' rights are therefore not yet fully protected by the judiciary in accordance with the provisions of the Constitution.

There is a backlog of about 1.38 million cases, indicating serious constraints in the judiciary's ability to handle the work load. In order to shorten court procedures and alleviate the work load in courts a number of measures have been announced recently: while the Codes of Criminal and Civil Procedure have been amended to simplify and speed up procedures, it remains to be seen what the real impact will be. Further steps are needed in this area. In criminal cases, the main investigative authority should move from the courts to the State Attorney's Office. Non-disputed inheritance cases should be processed by public notaries rather than courts. First steps in this direction have been taken with the adoption of the Inheritance Act. The Act on Amendments to the Court Registers Act seeks to simplify, speed up and reduce the cost of the procedure for registration in the Court Register. Finally, the Mediation Act foresees in alternative dispute resolution, but Croatian citizens are not yet familiar with the institute of mediation, so tangible results cannot be expected soon.

The structural reform of the Croatian judicial system started with the adoption by the government in November 2002 of a strategic document on the "Reform of the Judicial System" and an Operational Plan adopted in July 2003. The strategy identified a set of measures addressing a number of structural weaknesses. It included proposals for the establishment of a professional training system, alleviation of the work load in courts and simplification of court proceedings. It foresaw the adoption of new laws, purchase of equipment and filling of judicial vacancies, although the time frame was rather unrealistic. The reform proposed in 2002 did not address the issue of changes to the Courts Act that would enable mobility of judges, provide for obligatory training and link professional achievement to promotion.

In January 2004, the Parliament provided new impetus for the continuation of judicial reform by adopting a package of amendments to the Courts Act. Aimed at reducing the backlog, the amendments envisaged the redistribution of cases from overburdened courts to courts having the same jurisdiction but a smaller case-load, to widen the competences of court counsellors in order to carry out certain procedural actions and thus to relieve judges, and to extend the possibility of transfer of judges, with their consent, from one court to another. In addition, the amendments provided for a detailed description of the obligations of judges and a better evaluation system. The Government has also adopted proposals to entrust execution procedures to enforcement officers vested with public powers. However, this measure requires amendments to the Enforcement Act, which have yet to be adopted by Parliament. In addition, full use should be made of changes to the Civil Procedure Code, in force since December 2003, which introduced time-limits and other measures to prevent abuse of procedural possibilities. The implementation of all these measures will require substantial efforts on the part of the Croatian authorities.

The enforcement of judgements in the criminal area is under the authority of execution judges and is regulated separately from the enforcement of other types of judgments referring to different, especially financial, claims. The biggest part of the backlog of cases within the Croatian judiciary is connected with registration cases and the enforcement of civil judgments, especially those imposing financial obligations on debtors or requiring certain types of action from them. Plans to reform the Enforcement Act should therefore be pursued with vigour.

1.1.4. Anti-corruption measures

Croatia has ratified the Criminal and the Civil Law Conventions of the Council of Europe and has adapted national legislation accordingly. Corruption is defined as a criminal offence. Croatia acceded to the Group of States against Corruption (GRECO) in December 2000. The GRECO Plenary meeting addressed sixteen Recommendations to the Croatian authorities in May 2002. These recommendations deal with both legislative and administrative measures. Croatia is due to submit a report on its implementation of the Recommendations to GRECO in the near future.

Croatia is not a Member of the OECD but participates in the working group of non-members and takes an active part in the Anti-Corruption Network (ACN). Preparations for accession to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions are underway.

International reports and surveys indicate that corruption in Croatia continues to be a problem and affects various aspects of society. Despite significant efforts during the past years to intensify the fight against corruption, further action needs to be taken.

At the national level Croatia has adopted and implemented various anti-corruption related laws. Furthermore a comprehensive plan of actions and measures as well as a national anti-corruption programme exist. However, so far no follow-up on the implementation of the national programme has been produced, even though many of the deadlines in the programme had been set for 2001. National legislation has been partly aligned with the provisions of the 1995 Convention on the Protection of the Communities' Financial Interests and its protocols, although further improvements are necessary. Various legal acts, in particular the Act on the Prevention of Conflicts of Interest in Performing Public Duties, contain provisions to prevent conflicts of interest between the private and public sectors.

With the establishment of the Office for the Suppression of Corruption and Organised Crime (USKOK) there is a specialised body to investigate and prosecute corruption. The Office operates as a special unit within the State Attorney's Office. Close co-operation is foreseen with the Office for the Prevention of Money Laundering. However, USKOK is not yet fully operational and its administrative and operational capacity needs to be considerably improved. Training is provided at different levels and via different organisations and programmes.

There are various sources of statistics on corruption. The State Attorney issues an annual report with statistics on corruption cases which is debated in the Croatian Parliament. Furthermore the Ministry of Interior keeps separate statistics on corruption offences and the Croatian Bureau of Statistics collects relevant data from state administration bodies including the State Attorney's Office and USKOK.

Various measures are being taken to upgrade staff capacities, improve working conditions and provide adequate facilities and IT equipment for the courts, the State Attorney's offices and USKOK. However, significant further improvement will be required. In addition, more action should be taken to raise public awareness of corruption as a serious criminal offence.

1.2. Human Rights and the Protection of Minorities

Croatia has put in place a number of legislative provisions to guarantee the respect human rights and the rights of minorities. The Constitution deals with fundamental freedoms and rights. These rights can also be underpinned by certain International conventions, foremost of which is the European Convention for the Protection of Human Rights and its main additional protocols. Taken as a whole, this constitutes - pursuant to Article 6 of the Treaty on European Union - part of the acquis any state wishing to join the European Union must first have ratified these texts.

Croatia has been a member of the Council of Europe since 1996, ratified the European Convention for the Protection of Human Rights and the additional protocols 1997. Individuals may take their case to the European Court if they consider that their rights under this Convention have been violated.

Among the other international conventions protecting human rights and minorities, Croatia has ratified the European Convention on the Prevention of Torture, the European Charter for Regional and Minority Languages but has to sign the 1996 European Social Charter. It has ratified the existing key UN conventions in the field of human rights with their Protocols.

In accordance with Article 140 of the Constitution, international Treaties are part of the internal legal order of the Republic of Croatia and apply over ordinary national legislation.

1.2.1. Civil and Political Rights

Access to justice is guaranteed by the Constitution. Legal aid is available in criminal cases. In civil cases, only the Bar Association provides free legal aid. Foreigners cannot receive legal aid in civil cases. There is no free legal aid for individuals without citizenship (such as many of the Roma community). The Bar Association set its own fees for legal services. There is no legal aid in civil cases organised by the state or state control over the eligibility criteria for legal aid offered by the Attorney Bar Association. The Law on Court Fees exempts returnees and internal displaced persons (IDPs) from the obligation to pay court fees. The Law on Asylum, however, does not specify how legal assistance will be provided to asylum seekers.

The death penalty has been abolished and Croatia has signed Protocol 13 to the Convention for the Protection of Human Rights and Fundamental Freedoms concerning the abolition of the death penalty in all circumstances; this entered into force on 1 July 2003. Torture, inhuman and degrading treatments are forbidden by the Constitution. Forced or obligatory labour is not permitted either.

In October 2002, Croatia adopted a National Plan for the Suppression of Trafficking in Human Beings in line with international standards. Currently, under the 1997 Criminal Code, trafficking in human beings is only criminalised under Article 175 which penalises slavery with no specific reference to trafficking. [3]

[3] The July 2003 amendments to the Criminal Code amended Article 175 bringing it into line with the International Convention that specifically refers to trafficking in human beings. However for formal procedural reasons, the Constitutional Court annulled, on 27 November 2003, the amendments to the Criminal Code adopted by Parliament on 9 July that were due to enter into force on 1 December 2003. The Constitutional Court decided that the amendments had been adopted without the qualified quorum

The Croatian Constitution prohibits all forms of discrimination including discrimination on the basis of race. The Criminal Code prescribes criminal responsibility for those who violate the equality of citizens on the basis of race; it provides for criminal liability for those who, on the basis of difference in race, sex, colour of skin, nationality or ethnic origin violate basic human rights and freedoms. There is no specific criminal provision forbidding acts of xenophobia.

Arbitrary arrest is forbidden by the Constitution. Nobody can be arrested or put into custody without a written judicial order. Any arrested person has the right to appeal to the court which decides on the legality of the deprivation of liberty and must be immediately informed of the reasons for the arrest. In addition, the Constitution provides for compensation to be paid to a person unjustly arrested. The length of the pre-trial detention is defined precisely in the law with guarantees for the person deprived of his/her liberty that it is on line with international standards.

The right to vote is guaranteed and defined by the Constitution, for all citizens who have reached the age of 18 years. This provision also applies to citizens who are abroad at the time of the elections.

Freedom of association and assembly are guaranteed by the Constitution. The relevant law, which entered into force on 1 January 2002, has been implemented without reported problems. The number of registered Civil Society Organisations in Croatia is rapidly growing and increasingly diversifying. Whilst in 1999, only 15,375 NGOs were registered, the total number had increased to 23,740 by August 2003. In addition 70 foundations, 6 funds and 120 international NGOs are also registered. Throughout the years, the role of NGOs has been extremely important in advancing human rights particularly in areas such as refugee issues and election monitoring.

Freedom of expression is guaranteed by the Constitution. Before 2000, overt pressure, harassment, economic extortion and arbitrary prosecutions were practised. The situation has improved considerably since 2000. The media is now to a large extent deregulated and generally subject to free market rules. There are particular concerns, however, that possibilities remain for political influence at local level.

The print media is characterized by a wide variety of daily newspapers. There are five daily national papers plus daily papers with local/regional markets. There are three political weeklies. Newspapers, apart from two national daily newspapers, have been privatised, and journalists no longer encounter major obstacles in the exercise of their profession. There is a large degree of political diversity. Nevertheless further measures should be taken to ensure transparency in media ownership. The dominant position in the distribution sector by one group of publishers could result in unfair treatment of competitors (namely some of the biggest publishers control more than 50% of the biggest distribution network in Croatia).

In the audio-visual field, there are more than 130 radio stations and foreign broadcasters airing their programmes. The state TV broadcaster (HTT) has lost its monopoly position. The privatization of the third national TV channel to a Croatian RTL consortium could promote the development of the private broadcasting sector and introduce competition and pluralism within the television market. In addition to the three TV channels that cover the whole country, there are several regional TV networks. There are no restrictions regarding access to foreign news sources. Foreign TV channels are available on satellite and on cable TV.

The legal and administrative framework currently in force in Croatia was adopted with the intention of harmonizing Croatian legislation with European standards. However, there are concerns about the remaining possibilities of political influence on regulatory bodies that have been created.

There are four important laws in the field of Media: (i) the Law on Croatian Radio-Television (HRT) of March 2003, regulates the functioning of the State broadcaster, HRT, and provides for programme principles and obligations. The procedure for the appointment of the members of the HRT Council does not provide the necessary transparency, nor does it secure the political independence and plurality of views required of broadcasting regulators. The members of the Council were selected [4], after a long delay, more on the basis of political preference than relevant experience. Civil society representatives should play a larger role in the appointment and nomination of Council members;. (ii) The Law on Electronic Media, adopted in July 2003, governs electronic radio and TV broadcasts, as well as electronic publications. It also outlines the procedure for the allocation of licences for public and private radio and TV broadcasters. A Council for Electronic Media (a supervisory regulatory body) will grant and cancel licences for frequency allocations, exercise supervision and hear complaints. The procedure for the appointment of the members of the Council does not provide the necessary transparency, nor does it secure the political independence, and the plurality of views, proper funding and staffing required for broadcasting regulators, The adopted Law is not fully in line with the European Convention on Trans-frontier Television and the Television Without Frontiers Directive (see also Chapter 20-Culture and Audio-visual). (iii) Law on Telecommunications, adopted in July 2003, aims at opening the way for liberalisation in the field of telecommunication services by creating conditions for new operators in the fixed and mobile telecommunication services. The law establishes a Telecommunications Agency as an independent regulator, which deals with frequency allocation and other technical issues. However the relations between the Telecommunication Agency and the Council for Electronic Media are not clearly defined and might lead to deadlocks in the work of the two bodies. The law is largely in line with international standards but its aspects related to broadcasting need urgent reform. (iv) The Law on Media, (formerly called "Law on Public Information") adopted in October 2003, regulates the basic principles for the work of non-electronic (i.e. mainly printed) media, such as the freedom of expression, the right of the public to information, protection of privacy and media ownership. However, in January 2004 the Constitutional Court repealed the Law for procedural reasons (it was not adopted by absolute majority despite the fact that it was dealing with fundamental human rights). According to the Constitutional Court decision, the Media Law can apply provisionally until 30 April 2004. Croatia should ensure that revised Media Law takes full account of Article 10 of the European Convention on Human Rights (ECHR) as well as other relevant Recommendations adopted by the Committee of Ministers of the Council of Europe.

[4] On 17 October 2003 Parliament agreed on the selection the members of the Council. Six members have been nominated by the previous ruling coalition and five by the opposition. The Council consists of 11 members from different civil society groups.

The Law on Changes to the Criminal Code adopted in July 2003, which included the criminalization of libel by journalists, was annulled by the Constitutional Court in November 2003 because it was not adopted by an absolute majority. It is now important that, in the revised law, the legislation concerning libel reflects European Standards (as defined in the jurisprudence of the European Court of Human Rights).

In conclusion, changes are required to bring the above mentioned laws into line with European standards, in accordance with the recommendations formulated in February 2004 by the joint expert mission of the Council of Europe, the European Commission and OSCE.

The right of ownership is recognised by the Constitution. However foreigners are still subject to certain limitations defined by law, notably as regards ownership of agricultural land, forests, protected parts of nature (national parks, natural reserve etc.). Foreign natural and legal persons may become owners of real estate in Croatia under condition of reciprocity and upon approval by the Ministry of Foreign Affairs. Also in the case of inheritance, foreigners must meet the condition of reciprocity.

The process of restitution of dispossessed property during the Yugoslav communist regime has been regulated by a Law that entered into force in January 1997. The process is proceeding very slowly; after 7 years of implementation only in 34% of cases (more than 51.000 cases were submitted) has a legally valid decision been made and only 21% of claims have been positively decided. The Law provides for the possibility that only the first line descendants may request compensation under the condition that they satisfy certain eligibility requirements. The Government is unable to predict a timeframe within which the procedure shall be completed.

The respect of privacy is guaranteed. The Constitution guarantees inviolability of homes, freedom and privacy of correspondence. Only a court may order the search of a home or other premises by means of a motivated warrant.

According to available information there are no registered stateless persons in Croatia as a result of the dissolution of the SFRY.

1.2.2. Economic, Social and Cultural Rights

In 1999 Croatia ratified the 1961 European Social Charter and the Additional 1999 Protocol, both of which entered into force in March 2003. In February 2003, Croatia also ratified the 1991 Protocol amending the European Social Charter. Croatia has not yet signed the 1996 European Social Charter.

The Croatian Constitution provides for economic, social and cultural rights. Entrepreneurial and market freedoms are guaranteed and the State is committed to ensuring all entrepreneurs have an equal legal status. Furthermore, the right to work with full access to all jobs and duties for everyone under the same conditions including the right of employees and of members of their families to social security and social insurance are recognised. There is a range of different welfare benefits included in the Constitution. The Constitution provides for the universal right to health care and special care for the weak, helpless and disabled, with emphasis on social integration programmes. However, budgetary constraints limit the scope of those rights. Families enjoy special protection. Motherhood and childhood are protected by the State.

Croatia, as a successor state of Yugoslavia, implements the UN Convention on the Rights of the Child. Croatia should present the second initial report on progress on implementation of the Convention in May 2004. In summer 2003, Croatia introduced the institution of the Children's' Ombudsman.

There are no obstacles to establishing trade unions. The right to strike is guaranteed with some restrictions for the armed forces, the police, the public administration and the public services (e.g. health personnel).

There is a right to free primary education and free access to secondary and higher education with freedom to establish private schools and educational institutions.

Religious freedom is guaranteed. While the church is separated from the State, an agreement between Croatia and the Holy See establishes a favourable framework regarding the work and activity of the Catholic Church within society. Religious teaching is not obligatory but is performed within the state educational system. Croatia has signed similar agreements with the major faiths in Croatia (e.g., Catholic, Orthodox, and Muslim) apart from Judaism. The return of Jewish property is the main obstacle to concluding such an agreement.

Homosexual relations are recognised by the Law. The Law on Equality of Sexes prohibits discrimination on the basis of sexual orientation.

1.2.3. Minority rights, protection of minorities and refugees

Minorities

According to the 2001 census, 7.5% of the Croatian population are members of 16 national minorities. The most numerous are the Serbs with 4.5% of the total population, followed by Bosniacs (0.47%), Italians (0.44%), Hungarians (0.37%), Albanians (0.34%), and Slovenes (0.3%). According to the latest official statistics, the corresponding proportion of Roma was 0.21% but the actual figure is probably significantly higher.

Croatia has ratified all the Council of Europe conventions which it has signed, such as the European Convention on Human Rights and Fundamental Freedoms, the Framework Convention for the Protection of National Minorities, the European Charter for Regional and Minority Languages, as well as the UN Convention on Civil and Political Rights. Furthermore, Croatia has concluded bilateral agreements on protection of national minorities with Hungary and Italy. A bilateral agreement with Serbia and Montenegro is in preparation.

The Constitutional Law on the Rights of National Minorities (CLNM), adopted on 13 December 2002, sets the domestic legal framework for minority rights in Croatia. National minorities are guaranteed the right of having up to eight representatives in Parliament. At local level, minorities have the right to have representatives in elected bodies as well as judicial and administrative bodies of municipalities and cities. The CLNM also provides for minority representation in judicial and administrative bodies at state and local level.

In addition, an advisory Council of National Minorities at national level and local advisory bodies to city/municipality councils were established. The government should work closely with the Council of National Minorities in implementing the CLNM.

Furthermore, a special legal framework is in place regarding the rights of the Serb minority in the Danube region; this was established by the Erdut Agreement and the Government Letter of Intent of 1997. While most of the rights guaranteed under the Erdut Agreement are transposed into the CLNM, some specific rights arise from the Letter of Intent, such as proportional representation in the police force and the judiciary and rights to minority schools.

Members of national minorities in Croatia exercise their right to use their mother tongue officially on an equal basis on the territory of cities/municipalities and counties, if their share of population is at least one third or if so provided by international agreements. Also, they have the right to education in their language from pre-school onwards (up to secondary education) in accordance with the Constitution, the Constitutional Law on the Rights of the National Minorities (2002), the Law on the Use of the Language and Script of National Minorities (2000) and the Law on Education in the Language and Script of National Minorities (2000).

An educational institution with tuition in a language and script of a national minority can be a public institution, funded by the State Budget, or a private school established by any legal or natural person under the same conditions that apply to the establishment of any educational institution. The principles of equality and non-discrimination, protection of the national identity, social integration, freedom to establish educational institutions, educational programmes and curriculum and the provision of adequate teacher training appear to be incorporated in the Croatian legislation. These principles are consistent with the basic principles contained in the Council of Europe Framework Convention for Protection of National Minorities and the European Charter for Regional or Minority Languages.

Ombudsman could play an important role for protection of minority rights but faces serious budgetary constraints. There is a Government Office for National Minorities. In the 2003 State budget, HRK 20 million (EUR 2.6 million) are allocated for minorities to be distributed through that Office.

Eight representatives of national minorities were elected at the parliamentary elections on 23 November 2003, which is an increase compared to the 2000 elections where 5 representatives were elected by national minorities.

According to the last Census 331,383 Croatian citizens who are members of 16 national minorities have the right to elect 471 Minority Councils with 6662 councillors and 143 representatives on local (municipality) and regional (county) level. Elections for local advisory Councils of Minorities were held on 18 May 2003. However, due to the short preparation period, low support from the Government and the low organisation at the level of minority organisations, only less than half of the Councils to which minorities are entitled under the Constitutional Law on National Minorities have been elected. Additional elections for members of the Councils of National Minorities were held on 15 February 2004 in 15 counties, 64 towns, and 132 municipalities. The turnout was around 8% of the total minority population. There are still misunderstandings and a lack of awareness with regard to the formal establishment of the local Councils, not only among the local authorities but also among the minority groups themselves.

According to the Constitutional Law on National Minorities, by-elections have had to be held in those counties/municipalities where not enough minority representatives could be nominated through party lists. These by-elections were only held on 15 February 2004 whereas, according to the CLNM, they should have been held by 23 March 2003. It should be noted that under the Law on Local Elections of 2001 these elections should have been held already by September 2002.

With regard to minority representation in state administrative and judicial bodies, as envisaged by the CLNM, minorities are still underrepresented. The Government, referring to practical difficulties, the constrains of the State budget and, in the case of the judiciary, to the independence of courts in selecting judges, has not developed a programme to remedy under-representation in the long term. Although a significant number of positions in the State administration and the judiciary have been advertised, it is not known whether members of national minorities are among the new employees. Also, certain legislation has still to be brought in line with the CLNM, such as the Law on State Administration, the Law on Courts, the Law on the State Judicial Council and the Law on the State Prosecutor's Office. Appropriate measures to address and remedy this situation, need consequently, to be taken.

With regard to the media, minorities and issues of their concern have been increasingly, albeit not yet adequately, covered over recent years, both in electronic media and in the press. Although hate speech is constantly decreasing, national minorities are perceived and presented as separate entities and not as an integral part of the society. Provisions of the CLNM that public radio and TV stations at national and local level have to produce and/or broadcast programmes for minorities in their languages have still to be implemented.

With regard to Court proceedings on discrimination against minorities, there are no indication of any verdicts in which discrimination against minorities or criminal guilt for spreading racial hatred has been established.

The Serb minority is in a distinct situation. First, although it is still the minority with the largest number of citizens, its share of population has decreased dramatically from 13% (1991 census) to 4.5% (2001 census) of the population. Secondly, relations between the Croatian State and the Serb minority are burdened by the legacy of the recent war, i.e. return of refugees and restitution of their property [see paragraph on "refugees" below]. With the independence of Croatia their status changed from that of a constitutive nation in former Yugoslavia to a national minority. In December 2003 the new Government signed an agreement with the representatives of Serb minorities, and offered them several positions in the administration. It is to be noted, however, that the existing institutions of the Serb minority (political parties, schools, cultural organisations) can work without any obstacles. In the Danube region, most of the provisions of the Erdut Agreement and the Government Letter of Intent have been implemented, with the important exception of proportional representation of Serbs in the judiciary. The State, still needs to make additional efforts to integrate the Serb community into Croatian society at all levels.

The Roma minority deserves special attention. The Roma population officially accounts for 0.21 % of the population (9,463 persons, according to the 2001 census). However, their estimated number is significantly higher (30,000 to 40,000) as Roma often declare themselves as members of the majority group or do not register. Most Roma are not integrated into Croatian society and suffer discrimination in all fields of public life such as access to employment, health and political representation.

In view of the acute social exclusion in which most of the Roma population lives in Croatia, on 16 October 2003, the Government adopted, encouraged by the Council of Europe and OSCE, a National Programme for the Roma. The Programme envisages a series of measures to ensure the social inclusion of the Roma, preserving their tradition and culture. It addresses issues such as status, political representation at local level, employment, children's rights, education, health care, social welfare, housing and environmental protection. It remains to be seen, however, whether the funds allocated to this initiative in the 2004 State Budget are adequate to implement the Programme.

There is a very high number of cases pending in the ECHR against Croatia. This appears to reflect (i) procedural problems in the Croatian judiciary including the extent to which the Constitutional Court is able to act as an effective domestic remedy on human rights issues and (ii) substantive human rights concerns, regarding some legislation, particularly laws governing property issues related to the war.

Refugees

Croatia has ratified the 1951 Geneva Convention on Refugees. A number of refugees from BiH have been given refugee status under the Croatian Law on the Status of Displaced Persons and Refugees. The definition of refugees under that Law differs significantly from that of the Geneva Convention. While the Law on the Movement and Stay of Foreigners prescribes procedures for granting asylum, there has been no positive decision granting asylum. On 1 July 2004, the new Asylum Law should enter into force.

In the period 1991-1997, the total number of refugees and Internal Displaced Persons (IDPs) from without and within Croatia, was approximately 950,000.

As a result of the recent war, approximately 550,000 Croats [5] became displaced (IDPs). The number of Croatian Serb refugees, resulting mainly from the 1995 operations Flash and Storm, through which Croatia took over control of all occupied areas, was 370,000 (330,000 in Serbia and Montenegro and 40,000 in BiH). In addition, 32,000 Serbs were registered as IDPs at the end of 1997 in the UNTAES region (Eastern Slavonia). In addition to the 950,000 refugees and IDPs there were also the Bosnian Croats who either established themselves eventually in Croatia (approximately 130,000) or transited through Croatia to another country.

[5] The terms Croat and Serb indicate ethnic affiliation whereas Croatian indicates citizenship of the Republic of Croatia.

By the end of 2003, the number of Croatian Serb refugees was approximately 209,000 (189,500 in Serbia and Montenegro and 19,500 in BiH). The number of IDPs of Serb ethnic affiliation was 1,700. By the end of the same period 108.000 Croatian Serb refugees returned to Croatia.

Mainly as a result of the long displacement and obstacles to their return, a large number of the current Serb refugees appear to have opted for local integration in the country in which they reside. The census conducted in the second half of 2000 by the Governments of the then FRY and BiH in cooperation with UNHCR indicated that the maximum potential for return of the remaining refugees was around 30%, i.e. approximately a little more than 83,000 individuals (76,500 from SaM and 6,500 from BiH). A survey carried our for the OSCE Mission to Croatia in the second half of 2003 has yielded a potential for return of 15% of the refugees currently in SaM and BiH, which corresponds into a number of approximately 30,000 individuals.

The main issues refugees face upon return are housing, mines, economic re-integration, potential harassment based on "war crimes" allegations and the inhospitable atmosphere within the receiving local communities. In addition there are administrative problems such as non recognition of pension rights based on working years in the formerly Serb controlled areas. In terms of economic re-integration, the Government has put in place measures for the economic development of the areas of return but with no specific measures intended for returnees. The necessary budgetary resources have been made available and the process of de-mining is planned to be completed by 2010.

During the war and afterwards, many houses and/or apartments were either destroyed or occupied. Thus, the housing problem can be divided into three parts which are: (i) reconstruction; (ii) repossession of property and (iii) provision of housing care for former tenancy right holders.

Reconstruction: to date, the Government has reconstructed approximately 130,000 out of the 200,000 destroyed houses and apartments. Seven percent (7%) of this programme has been funded by the International Community. There appear to be no major delays in the implementation of the reconstruction programme of the estimated 16,000 remaining houses and it is expected to be completed by the end of 2005. This would facilitate the return of approximately 48,000 individuals. With the amendments of 2000 to the Law on Reconstruction, the last discriminatory legal provisions were removed. The deadline for request for reconstruction was the end of 2001. In March 2004, in accordance with the agreement signed with Serb representatives the Government re-opened the deadline for submission of new requests for reconstruction from 1 April to 30 September 2004. This will probably mean that reconstruction programme will have to continue until 2006.

Repossession of property: The repossession of residential property awarded to temporary users under the Law on Temporary Take Over and Administration of Specified Property is regulated by the 2002 Amendments to the Law on Areas of Special State Concern. The Law on Ownership and Other Proprietary Rights governs the repossession of other types of property, for example, business properties and agricultural land, which could also have been assigned to temporary users through the Law on Temporary Take Over and Administration of Specified Property. Funds have been provided by the Government to provide alternative accommodation. By the end of 2003, out of the total number of approximately 20,000 applications for houses to be repossessed [6], just under 16,000 have been repossessed (out of which 4,000 remained empty since there is no knowledge of owners' whereabouts). However, the pace of property repossession is very slow. The main reasons are (i) the self imposed task to provide alternative accommodation to occupants as pre-condition for repossession (which means that the owners' rights are not fully acknowledged); (ii) the lack of urgency at lower level in the state administration, to provide alternative accommodation to the occupants in time [7]; and (iii) the failure of courts to order evictions and the non-enforcement of decisions for the eviction of illegal occupants. Originally, the Government planned to finalise property restitution by the end of 2002. This deadline was then postponed to the end of 2003. However, the new deadline has not been met. By end of 2003, 3,500 houses were still occupied for which around 2,200 requests for repossession have been made. The Government's agreement with the Serb representatives stipulates that this process should be completed by the end of 2004.

[6] This concerns repossession of houses that were awarded for occupation under the Law on Temporary Take Over and Administration of Specified Property of 1995.

[7] Restitution of property to the owner is envisaged only after alternative housing is provided for the temporary occupant. This means that the interest of temporary occupants are given precedence over the legal rights of owners.

Housing for former tenancy right holders: Until recently, refugees who lived in socially owned houses with occupancy/tenancy rights had no access to housing if they decided to return to Croatia. This lack of remedy discriminately affected the refugees from urban areas. In July 2002, the amendments to the Law on the Areas of Special State Concern [8] opened a possibility for remedies for former holders of tenancy rights, for the first time, in these areas. On 12 June 2003, the Government also adopted a Decision to also provide housing care for those former tenancy right holders outside the Areas of Special State Concern who wish to return [9]. This Decision foresees that publicly financed housing would be made available to the applicants. The deadline to submit a request is the end of 2004. The deadline for providing housing care is 31 December 2006. The programme does not address the issue whether the termination of occupancy/tenancy rights were legally justified and there are a large number of domestic court proceedings ongoing and at least one case has been declared admissible to the ECHR ("Blecic v. Croatia").

[8] See Map attached. The Areas of Special State Concern, defined by a Law of 1996 (subsequently amended) were designated for the purpose of eliminating the consequences of the war, ensuring the faster return of IDPs and refugees, encouraging demographic and economic revival and achieving a balanced development of all regions in Croatia.

[9] The amendments to the Law on the Areas of Special State Concern, adopted in July 2000 and July 2002, deal with this issue for cases inside these areas.

As the Implementation Plan of the Government decision was signed after considerable delay only on 29 October, there are no concrete results yet. To date no decision in favour to former tenancy right holders has been taken. The Government expects to meet all requests by the end of 2006. In the 2004 State budget, approved on 4th March 2004, budget is allocated for the construction of approximately 1,500/1,600 apartments to cover the first requests. It is hard to assess the impact of these measures on return.

In conclusion the Croatian Government has put in place provisions to provide housing solutions to refugees and IDPs who wish to return. However, the implementation of these provisions, with the exception of the reconstruction programme, has to be accelerated and improved. The return of some other types of property than housing has still not been addressed in the same legal way as the repossession of housing. Also, additional efforts should be made as regards the sustainability of returns. This concerns the improvement of the economic situation and the general atmosphere in the areas of return.

1.3. Other obligations defined by EU Council conclusions of 29 April 1997

The government has committed itself to comply with its obligations under the Dayton/Paris Agreements. It respects the sovereignty and territorial integrity of Bosnia and Herzegovina. Under the Erdut Agreement, signed in November 1995, Croatia accepted a number of obligations in order to achieve the peaceful re-integration of the area of Croatian Danube Region (Eastern Slavonia, Baranja and Western Sirmium) under the sovereign control of the Croatian Government as of January 1998 (when UNTAES, the UN Transitional Authority, withdrew from the territory). This Agreement, and its Letter of Intent of January 1997 to the UNSC, continues to be legally binding obligations. Some provisions have been incorporated in the Constitutional law on National Minorities, not yet fully implemented. In particular Croatia maintains its commitment to implementing all obligations related to the return of refugees and internally displaced persons (IDPs).

1.3.1. Cooperation with the International Criminal Tribunal for the former Yugoslavia (ICTY)

Croatia's cooperation with the International Criminal Tribunal for the former Yugoslavia (ICTY) has improved significantly in the past few months. In April 1996 Croatia adopted the Constitutional Law on the Co-operation with ICTY and established the "Office of the Government for co-operation with the International Court of Justice and International Criminal Courts". So far ICTY indicted a total of 5 Croatian citizens from the Republic of Croatia for criminal offences committed in the Republic of Croatia and 27 Croats from Bosnia and Herzegovina for criminal offences committed in the territory of that state.

None of the three Croatian citizens indicted in 2001 and 2002, has been transferred by the Government to ICTY for different reasons. Mr. Rahim Ademi (indicted on 8 June 2001) voluntarily surrendered to the Tribunal in July 2001; Gen. Janko Bobetko (indicted on 17 September 2002) died in April 2003, after the Government challenged ICTY on some parts of the indictment which, in the Government's opinion put into question the political justification and legitimacy of a particular action of the Croatian Army; and General Ante Gotovina indicted on 8 June 2001 related to alleged war crimes that occurred during and after "Operation Storm" in 1995, based on individual and command responsibility) is still at large. On 1st March 2004 Croatia received sealed indictments against former Army Generals Cermak and Markac who voluntarily surrendered to the ICTY on 11 March 2004.

Of the 27 Croat indictees from Bosnia and Herzegovina, four were arrested in Croatia and transferred to ICTY. Eighteen voluntarily surrendered to ICTY. Among these, in early April 2004, the ICTY unsealed an indictment dated 4 March against six Croats who served as political and military officials in the so-called "Herceg-Bosna", a war-time entity established by ethnic Croats in Bosnia and Herzegovina. All six suspects, who have Croatian citizenship and permanently resided in Croatia, voluntarily surrendered to the ICTY on 5 April, appeared before the Tribunal on 6 April and entered pleas of not guilty to all 26 counts in the indictment. The others Croat indictees from Bosnia and Herzegovina have been arrested by SFOR or authorities in other countries.

Croatia has recently taken steps to provide access to internal documentation, and allows interviews with potential witnesses to the satisfaction of ICTY. In October 2003 Croatia adopted the Law on Witness Protection to ensure permanent protection to witness in criminal proceedings [10].

[10] The Law prescribes four types of protection: corporal and technical protection, transfer of the person, measures for hiding the identity and ownership, change of identity.

In August 2003 the UN Security Council called upon Croatia to intensify its co-operation with ICTY and in particular to surrender indicted fugitive General Ante Gotovina to the Tribunal. Croatia delayed execution of the arrest order in the case of General Bobetko before his death.

Croatia accepts the notion of command responsibility as defined by the ICTY Statute (Art. 7.3) and the Rome Statute of the ICC (Art. 28). The current Criminal Code does not explicitly penalize command responsibility. The Law on amendments to the Criminal Code (of July 2003), which introduced into the national legislation the basic type of command responsibility from the Rome Statute, was abolished by the Constitutional Court in November 2003, because the Law was not adopted with the necessary majority of votes. However, the Supreme Court has suggested in at least one decision that commanders can be held responsible under the currently applicable Criminal Code for the failure to prevent war crimes about which they knew or should have known.

In conclusion co-operation with ICTY has improved significantly in the past months. In April 2004 the Prosecutor stated that Croatia is now co-operating fully with ICTY. However Croatia needs to take all necessary steps to ensure that the remaining indictee is located and transferred to ICTY.

The authorities appear determined to improve conditions for prosecution of war criminals in domestic courts. In the period from 1991 to 2003, criminal proceedings for about 3,100 persons were instituted out of which more than 1,300 persons were indicted and 548 persons were sentenced by final verdict (the majority "in absentia").

A special office for war crimes does not exist. Special Investigative departments in the 4 County Courts in Split, Zagreb, Rijeka and Osijek for the prosecution of war crimes have been established by the Law on the Implementation of the Rome Statute of the International Crime Court (ICC), adopted on 17 October 2003. However, these Departments do not function - and the responsibility for their establishment falls on the Presidents of the County Courts who have not yet taken any action. It is still unclear how the jurisdiction (territorial, material) will be defined and by whom, how judges would be trained and if there is the possibility for the four departments to cooperate amongst themselves should they have to exchange documents/evidence.

Statistical data suggest that a single standard of criminal responsibility is not yet applied equally to all those who face war crime charges before Croatian courts. Defendants of Serb ethnicity are disadvantaged at various stages of judicial proceedings compared to Croats. Thus, Serbs were more likely to be convicted than Croats in 2003, although the differential decreased from 2002. While the number of Serbs prosecuted in 2003 increased as compared to that in 2002, the number of Croats decreased substantially. The Supreme Court reversed a considerable number of convictions of Serbs on appeal, ordering new trials on the basis of errors by the trial court. In addition, local prosecutors and courts continued to conduct in absentia proceedings (27 out of 32 Serbs convicted of war crimes in 2003 were convicted in absentia). Such proceedings are used almost exclusively against Serbs, and many of these are collective ind