Communication from the Commission to the Council, the European Parliament, the European Economic and Social Committee and the Committee of the Regions - Second Implementation Report of the Internal Market Strategy 2003-2006
Date: 2005-01-27
Institutions: European Commission
Subjects: application of EU law, economic integration, national implementing measure, report, single market

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 27.1.2005 
COM(2005) 11 final 

. 

COMMUNICATION FROM THE COMMISSION  
TO THE COUNCIL, THE EUROPEAN PARLIAMENT, 
THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE 
AND THE COMMITTEE OF THE REGIONS 

Second Implementation Report of the Internal Market Strategy 2003-2006 

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TABLE OF CONTENTS 

PART A: INTRODUCTION ..................................................................................................... 3 

PART B: THE PRESENT STATE OF THE INTERNAL MARKET....................................... 4 

PART C: STATE OF IMPLEMENTATION OF THE STRATEGY...................................... 10 

PART D: CONCLUSION – REMAINING DEFICITS IN KEY PRIORITY AREAS .......... 14 

1. 

2. 

3. 

4. 

Completing the legal framework................................................................................ 14 

Taking better care of the existing framework ............................................................ 14 

Ensuring greater coherence and synergy with other Community policies................. 14 

Ensuring the Internal Market legal framework is better attuned to the global 
economic framework.................................................................................................. 15 

ANNEX 1: IMPLEMENTATION REPORT SCOREBOARD............................................... 16 

1. 

2. 

Transposition by Member States of Internal Market rules into national law............. 16 

Application by Member States of Internal Market rules: infringements ................... 21 

ANNEX 2: STATE OF PLAY WITH REGARD TO INDIVIDUAL ACTIONS .................. 22 

1. 

2. 

3. 

4. 

5. 

6. 

7. 

8. 

9. 

Facilitating the free movement of goods.................................................................... 22 

Integrating services markets....................................................................................... 27 

Ensuring high quality network industries .................................................................. 30 

Reducing the impact of tax obstacles......................................................................... 32 

Expanding procurement opportunities ....................................................................... 35 

Improving conditions for business ............................................................................. 37 

Meeting the demographic challenge .......................................................................... 40 

Simplifying the regulatory environment .................................................................... 41 

Enforcing the rules ..................................................................................................... 44 

10. 

Providing more and better information ...................................................................... 47 

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PART A: INTRODUCTION 

This  report  forms  part  of  the  economic  and  employment  policy  “implementation  package” 
together with the Broad Economic Policy Guidelines (BEPG) and the Employment Guidelines 
(EG)  implementation  reports.  All  three  reports  will  be  presented  in  support  of  the 
Commission’s Report (Lisbon Mid Term Review) to the Spring European Council 2005. 

The  recent  Kok1  report  reminds  us  of  the  importance  of  the  Internal  Market  in  enhancing 
competitiveness and creating the wealth necessary to raise living standards and maintain the 
European  social  model.  This  echoes  the  principal  message  of  the  Internal  Market  Strategy 
2003-2006.2 

Whilst  each  Member  State  has  prime  responsibility  for  ensuring  that  its  own  economic 
policies are conducive to promoting growth and prosperity, the Internal Market is a common 
project to which all Member States must contribute and from which we all stand to gain. In 
EU-25, this is an even greater challenge but the potential rewards are also greater. This was 
the second main message of the Internal Market Strategy. 

Economic  success  for  the  European  Union  thus  relies  upon  collective  responsibility;  a 
combination  of  Member State initiatives and European action designed to integrate national 
markets into one large Internal Market. Such action needs to address both the supply and the 
demand side, taking account of the interests of businesses and consumers. This report on the 
implementation of the Internal Market Strategy 2003-2006 confirms the need to act together. 
Its  analysis  of  the  progress  and  delays  so  far  shows  that  more  needs  to  be  done  to  get 
agreement on key proposals and to make the Internal Market work better in practise, whilst 
market integration remains more or less static. 

At  the  start  of  its  mandate  and  as  the  mid-term  review  of  the  Lisbon  Strategy  gains 
momentum,  the  Commission  welcomes  the  opportunity  to  raise  the  profile  of  the  Internal 
Market and build stronger support for its completion and its effective functioning in practice. 

1 

2 

High  Level  Group  chaired  by  Wim  Kok :  Facing  the  Challenge :  the  Lisbon  strategy  for  growth  and 
employment, 3 November 2004. 
COM(2003) 238 final of 7.5.2003. 

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PART B: THE PRESENT STATE OF THE INTERNAL MARKET 

In  addition  to  slow  economic  growth,  other  key  indicators  continue  to  suggest  that  Internal 
Market integration is stagnating. 

Prices across the EU are not converging … 

When trade is easy, the resulting competition keeps the price of similar goods close together 
across the EU. In goods sectors where the Internal Market has made trade much easier – e.g., 
clothing, footwear and alcohol – prices have converged most3. Overallincluding in the Euro 
zone,  continuing  barriers  mean  that  prices  of  similar  goods  across  Member  States  remain 
obstinately different (see graph 1). 

Graph 1 

Despite the Internal Market, prices across the EU remain 
dispersed…

Most expensive EU15 
Member State 

Cheapest EU15 
Member State

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0
0
1
=
5
2
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160

140

120

100

80

60

40

20

0
1995

Most expensive new 
Member State

Cheapest new 
Member State

1996

1997

1998

1999

2000

2001

2002

2003

source: Eurostat & Commission services

3 

Engel, C. & Rogers, J. (2004) “European product market integration after the euro”, Economic Policy, 
July, pp.348-384. 

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Trade is slowing… 

Manufacturing  trade  between  Member  States  has  stagnated  since  2000  and  actually  fell  in 
2003. Trade in services seems more durable (although data are only available up to 2002), but 
the  poor  performance  of  goods  dominates  the  overall  trade  figures  –  as  trade  in  services  is 
only  about  20%  of  the  value  of  goods  trade.  A  slowdown  in  trade  means  less  competitive 
pressure on prices. 

Graph 2 

n
b

€

2000
1800
1600
1400
1200
1000
800
600
400
200
0

Overall trade in the EU15 is slowing...

total trade

goods trade

services trade

1996

1997

1998

1999

2000

2001

2002

2003

Source : Euros tat (2003 e s timate d for s e rvice s )

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And foreign investment flows are rather volatile… 

Graph 3 

Investment between Member States is more volatile 
than investment within Member States...

40%

35%

30%

25%

20%

15%

10%

5%

0%

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EU15

new MS

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

source: Eurostat and Commission services

Studies  suggest  higher  foreign  investment  leads  to  higher  productivity  growth  in  recipient 
economies4. Increased cross-border investment between Member States in the EU has been a 
significant  driver  of  Internal  Market  integration  and  has  grown  substantially  faster  than 
domestic investment over the last decade. In EU 15 the total value of FDI flows in 2000 was 
twelve  times  larger  than  in  1992,  but  by  2003  had  fallen  to  (a  still  respectable)  4  times  the 
1992 level. 

There could be many reasons for the volatility in FDI over recent years including the end of 
the “dot com” boom and 9-11. Nonetheless, the volatility of FDI flows compared to domestic 
investment (see graph 3) suggests that integration still has some way to go and that investors 
do not yet see investment in the Internal Market in the same way that they see investment in 
their domestic markets. 

The graph also indicates that inflows of foreign investment compared to total investment are 
higher in the new Member States than they are in EU 15 (apart from the exceptional years of 
1999 and 2000). The new Member States also receive a disproportionately high share of intra-
EU FDI inflows compared to their economic size (see graph below), although they start from 
a much lower investment base. This would seem to suggest that Internal Market integration is 
an important factor in the development of the supply side economy in the new Member States 
and that access from them to the EU Internal Market may be an important magnet for foreign 
investment. 

4 

Aghion, P. et al (2004) “Entry and productivity growth: evidence from microlevel panel data”, Journal 
of the European Economic Association, April-May 2(2-3), pp. 265-76. 

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Graph 4 

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U
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f
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S

10%

8%

6%

4%

2%

0%

The new Member States' share of intra-EU foreign 
investment is greater than their share of EU GDP…

FDI

GDP

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

source: Eurostat & Commission services

Foreign  investment  between  EU  15  Member  States  focuses  on  service  sectors.  Generally, 
services  receive  three  times  more  foreign  investment  than  manufacturing;  in  2000,  services 
received eight times more. EU businesses also favour services over manufacturing in the rest 
of the world, but markedly less than they do in the EU (see graph 5). 

Graph 5 

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9.0

8.0

7.0

6.0

5.0

4.0
3.0

2.0

1.0

0.0

Services dominate EU FDI…

intra-EU15

extra-EU15

1995

1996

1997

1998

1999

2000

2001

source: Eurostat

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Which is why integrating the EU’s service markets is so important… 

Intra EU foreign direct investment is very much dominated by services. Given that services 
also  dominate  the  EU  economy,  the  potential  benefit  of  welding  together  the  EU  services 
market  is  clearly  enormous.  That  explains  why  a  Services  Directive,  which  can  unleash  the 
full potential of the services sector, including by facilitating the freedom of establishment, is 
so important. 5 

Recent  analysis6  highlights  how  fragmented  service  markets  can  be7:  in  accountancy,  for 
example,  national  regulations  mean  that  a  Member  State  firm  looking  to  do  business  in 
another  Member  State  faces,  on  average,  business  costs  23%  higher  than  a  domestic 
competitor.  Eliminating  such  barriers  would  boost  productivity,  thus  increasing  wages 
throughout  the  EU  economy  by  an  average  0.4%  and  employment  0.3%  8.  Other  analysis9 
estimates that EU trade could increase 15 to 30% were service markets integrated, whilst the 
stock  of  foreign  investment  in  services  would  rise  20  to  35%.  Lack  of  competition  in  the 
financial  services  sector  leads  to  bad  deals  for  consumers:  higher  prices,  and  less  access  to 
credit.  It  is  estimated  that  pre-2000,  barriers  to  foreign  firms  in  the  banking  sector  raised 
prices  by  roughly  5.3%.  Integrating  financial  services  could  raise  EU  GDP  by  an  estimated 
€130 billion (in 2002 prices) and business investment by 6.0%. 

As is tackling legal uncertainty… 

In  sectors  where  there  is  no  specific  EU-legislation  and  thus  where  the  principle  of  mutual 
recognition  could  apply10,  neither  producers  nor  market  surveillance  authorities  are  sure  to 
what  extent  products  from  one  Member  State  can  enter  another  Member  State’s  market 
without modification; according to the European Business Test Panel, 53% of businesses are 
not even familiar with the principle. About 80% of respondents in a recent survey11 thought 
that regulatory difficulties are the main problem in doing business in the Internal Market. 

The impact of this uncertainty is economically significant: it is estimated that failure to apply 
the principle of mutual recognition properly cut trade in goods within the Internal Market by 
up to 10% or €150 billion  in  200012.  As  a result,  consumers’  choice is limited and they are 
obliged to pay more because the full force of competition is not exploited. 

5 
6 

7 
8 
9 

10 

11 
12 

COM(2004) 2. 
EC (forthcoming) Economic Assessment of the Barriers to the Internal Market for Services, Copenhagen 
Economics. 
For 20 Member States. 
op cit. 
CPB document N° 69, October 2004, Free movement of services within the EU 
http://www.cpb.nl/eng/pub/document/69/doc69.pdf 
According to the principle, no Member State has the right to forbid, except on demonstrated grounds of 
legitimate  interests  like  the  protection  of  health  or  safety,  the  sale  on  its  territory  of  any  product 
lawfully produced or marketed in another Member State. 
RIIA and Accenture (2004) “Unfinished Business: Making Europe’s Single Market a Reality” 
EC 
p. 24 

(2001)  http://europa.eu.int/comm/internal_market/en/update/economicreform/cardiff02ensta.pdf, 

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And Europe’s public procurement markets…  

In  2002  the  total  EU  procurement  market  was  worth  €1.5  trillion  or  over  16%  of  GDP. 
Traditionally,  Member  States  have  favoured  domestic  companies,  but  this  vast  market  is 
being prised open: the number of public calls for tender published in the Official Journal as a 
proportion of the total value of public procurement has grown steadily but still only accounts 
for 16% of the total value of public procurement. 

Graph 6 

Public procurement in the EU is growing more open...

120000

100000

80000

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N

60000

54731

40000

78996

74338

67371

61826

106346

93658

88802

48922

50841

58513

20000

28551

34563

38385

40353

43365

0

1995

1996

1997

1998

1999

2000

2001

2002

Source: Commission services

No. of invitations to tender

No. of Contract Award Notices

Extending  Internal  Market  public  procurement  rules  is  economically  essential.  Public 
authorities that made purchases using procurement rules paid prices approximately 34% less 
than authorities who did not use the rules13. Italy estimates it has already saved €3.7 billion 
out  of  a  total  of  €23  billion  of  purchases  in  2003.  Ireland  estimates  it  could  make  potential 
savings of €1 billion over the next 5 years from e-procurement alone. 

More  open  procurement  would  stimulate  trade,  productivity  and  growth.  It  would  also 
contribute to sound macro-economic finances; saving just 10% of current public procurement 
expenditure  would  bring  all  pre-May  2004  EU-15  Member  States  under  the  fiscal  deficit 
limits set by the Stability and Growth Pact. 

13 

http://europa.eu.int/comm/internal_market/publicprocurement/docs/public-proc-market-final-
report_en.pdf 

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PART C: STATE OF IMPLEMENTATION OF THE STRATEGY 

Internal  market  integration  may  have  temporarily  stalled  but  the  expansion  of  the  internal 
market  to  the  ten  new  Member  States  since  last  May  has  gone  relatively  smoothly.  Market 
integration  in  EU  25  will  offer  opportunities  for  a  fresh  economic  impulse.  As  last  year’s 
Implementation  Report14  pointed  out,  there  remains  scope  for  a  significant  increase  in  trade 
and  investment  between  EU  15  and  EU  10  in  the  short  to  medium-term.  There  is  reason 
therefore  to  be  optimistic  about  the  contribution  that  the  Internal  Market  will  continue  to 
make to Europe’s competitiveness. 

In  addition  to  the  positive  effects  of  a  larger  internal  market,  several  measures  have  been 
adopted  over  the  last  few  years,  in  areas  such  as  financial  services,  network  industries  or 
company law, which can be expected to begin producing positive effects on the ground.  

It is also encouraging that two thirds of the actions foreseen have been achieved by the end of 
2004  (see  examples  in  table  1),  although  many  of  these  tend  to  be  Commission  proposals, 
which in order to contribute to growth and competitiveness still need to be decided upon in 
Council and Parliament and implemented effectively by the Member States. (More details on 
the state of play on each action are set out in Annex II.) 

Table 1: Progress in implementing the Strategy 

PROGRESS 

Services Markets 

WHAT IS AT STAKE ? 

A  key  proposal  for  a  directive  to  facilitate 
cross-border  trade  and  establishment  is 
now  under  discussion  in  Council  and 
Parliament.  The  Spring  Council  in  2004 
called for its adoption within the timeframe 
envisaged, meaning before the end of 2005 

A  recent  study  from 
the  Netherlands 
Bureau  for  Economic  Policy  Analysis 
estimates  that  an  efficiently  functioning 
internal  market  in  services  could  increase 
trade  (between  15  to  30%)  as  well  as 
foreign  direct  investment  (between  20  to 
35%).15 

Financial Services 

40  out  of  42  measures  of  the  Financial 
Services  Action  Plan  have  now  been 
agreed.  Financial  markets  are  beginning  to 
integrate  as 
to 
implementation  and  enforcement  of  the 
new legislative framework. 

is  shifting 

the  focus 

Studies16 suggest e.g. that narrower spread 
of  equity  and  bond  rates  would  allow  a 
potential increase in EU GDP of 1.1% over 
the next decade; an increase in employment 
of  0.5%,  and  an  average  reduction  in  the 
cost of capital of 0.5%. 

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15 

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COM(2004) 22 final of 21.1.2004. 
CPB document N° 69, October 2004, Free movement of services within the EU 
http://www.cpb.nl/eng/pub/document/69/doc69.pdf 
Report  to  the  EC  by  London  Economics,  November  2002,  Quantification  of  the  macro-economic 
impact  of  integration  of  EU  Financial  markets;  and  European  Commission,  Economic  Papers, 
November 2002, Financial Market Integration (ECFIN 597/02). 

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Consumer Policy 

Important  measures  to  promote  consumer 
interests  have  been  agreed  or  are  well  on 
their  way  to  being  adopted.  This  includes 
the  proposal  for  a  directive  on  Unfair 
Commercial  Practices,  the  regulation  on 
Consumer  Protection  Cooperation  and  the 
General Product Safety Directive. 

Taxation 

Three  Directives  were  adopted  in  the 
company  tax  field,  including  amendments 
to  the  Parent-Subsidiary  Directive.  In  the 
VAT  area,  a  notable  success  was  the 
adoption  of  a  Directive  concerning  VAT 
rules  applicable 
the  provision  of 
to 
electronic services. 

Internal Market Governance 

A  survey  showed 
in  5 
consumers have confidence in cross border 
shopping.17 

that  only  1 

Many  of  the  persistent  barriers  to  free 
movement are tax related. A recent survey 
of 
the  European  Business  Test  Panel 
indicates  that  compliance  costs  increase 
considerably for cross border activities.18 

The  SOLVIT  problem-solving  network 
now comprises all countries participating in 
the Internal Market. Case flow has doubled 
in  2004.  Of  the  500  cases  dealt  with,  72% 
resolved  successfully.  The 
have  been 
average time to solve a case is 10 weeks. 

responded 

20%  of  companies 
to  a 
Commission  survey19  that  they  would  be 
interested in trading in the Internal Market, 
but  either  do  not  have  enough  information 
or fear that they will run into administrative 
problems. 

There  is  evidence  of  a  growing  recognition  of  the  importance  of  a  smoothly  functioning 
internal  market  for  Europe’s  economic  and  social  future.  Nonetheless,  this  in  itself  has  not 
been enough to lead to speedier and more ambitious decision-making on a number of critical 
files (see Table  2).  This  is  probably because decisions tend to get  blocked or  delayed when 
narrow  interests  of  individual  Member  States  or  of  particular  groups  in  society  prevail  over 
the long–term strategic interests of the EU and of its citizens as a whole. 

The Community Patent is a case in point. The cost of inaction goes well beyond the benefits 
of a cheaper patent. Rapid adoption would be a strong signal of political will to achieve the 
Lisbon goals. 

17 

18 
19 

On  consumer  confidence  in  the  retail  Internal  Market,  cross  border  transactions  and  consumer 
protection :  Eurobarometer  57.2  and  Flash  Eurobarometer  128  Views  on  business-to-consumer  cross 
border trade (November 2002) ; Eurobarometer 59.2 – Consumer protection in the EU (October 2003). 
SEC(2004) 1128 of 7.9.2004. 
Survey, 10th anniversary of the internal market. 
http://europa.eu.int/comm/internal_market/score/index_en.htm 

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Table 2 Delays in delivery of actions 

DELAYS 

WHAT IS AT STAKE?  

Industrial and intellectual property  

Failure  of  the  Competitiveness  Council  to 
agree an affordable Community Patent. 

Presently, whereas it costs around € 10.000 to 
obtain patent protection in the USA, it costs € 
50.000  alone  to  achieve  protection  in  only  8 
EU countries. 

Sales Promotions 

For more than 3 years, the Council has  been 
unable to agree on a measure to facilitate pan-
European sales promotions. 

Sales promotions are an indispensable part of 
companies’  strategies  when  seeking 
to 
expand in new markets. 

Professional Qualifications  

A  radical  simplification  of  the  system  for 
recognition  of  professional  qualifications 
(merging  fifteen  existing  directives  into  one) 
has  been  delayed  partly  because  of  slow 
progress in the Parliament. 

Implementation of IM rules 

Timely  implementation  of  Internal  Market 
Directives  has  considerably  worsened  since 
2003.  Only  2  Member  States  (LT,  ES)  meet 
the  European  Council’s  target  of  keeping 
transposition deficits at or under 1.5%. There 
has  been  no  reduction  in  the  stock  of 
infringements for EU-15. 

Public procurement 

It is important for citizens’ rights, innovation 
and  competitiveness  that  free  movement  of 
skilled professionals in Europe is facilitated. 

incorrect 

transposition  and 
Late  and/or 
application  of  Internal  Market  legislation 
causes 
legal  uncertainty  and  undermines 
confidence  of  citizens  and  businesses  in  the 
exercise of their rights. 

While  a  new  public  procurement  framework 
is  now  being 
has  been  adopted  and 
implemented,  concerns  remain  as  to  the 
effective  application  of  the  rules  in  the 
Member  States  despite  an  increase  in  tender 
publications in some Member States. 

The  EU’s  public  procurement  market 
represents more than 16% of the EU’s GDP. 
Commission  studies  confirm  that  the  proper 
application of the rules reduces prices paid by 
around 30%. 

Making  the  most  out  of  the  internal  market  is  not  only  a  matter  of  taking  decisions.  It  also 
requires a change of attitude in that Member States should think and act more “European” and 
change  administrative  practices  accordingly.  European  companies  would  welcome  such  a 
change – business organisations point out that from their experience domestic legislation and 
administrative practices often do not accord with Internal Market principles. 

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UNICE,  for  example,  surveyed  its  members  and  found  that  over  half  have  to  adapt  their 
products in order to sell in more than one Member State, while nearly half have to duplicate 
product testing if they want to sell in multiple Member State markets20. And service providers 
also  face  onerous  and  often  conflicting  national  or  local  rules.  This  picture  is  confirmed  by 
other national surveys.21 

Against  a  background  of  continuing  stagnation  in  European  market  integration  (see  Part  B 
above),  this  is  worrying  news.  Turning  inwards  will  do  great  harm  to  Europe’s  economic 
growth prospects. It is no accident that Member States with solid Internal Market records tend 
to have more competitive and more dynamic economies. In this context initiatives to remove 
obstacles faced by companies from other Member States wanting to do business, such as those 
presently undertaken by Denmark22 deserve praise and represent a best practice model which 
should be of interest to other Member States. 

20 

21 
22 

UNICE (2004) “It’s the Internal Market, stupid! A company survey on trade barriers in the European 
Union”, Brussels. 
Swedish survey on trade barriers for services 2003-11-03, dnr 100-416-2003. 
Denmark  has  established  a  Taskforce  for  the  Internal  Market  (T.I.M.),  to  screen  rules  and  their 
compatibility with the Internal Market. Positive results have already been achieved. 

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PART D: CONCLUSION – REMAINING DEFICITS IN KEY PRIORITY 
AREAS 

Analysis  of  the  current  state  of  implementation  points  to  the need  for  a  stronger  focus  on  a 
number of core strands over the remaining period of the Internal Market Strategy: 

1. 

Completing the legal framework 

While much of the Internal Market’s legal framework is already in place, there are 
still important gaps in key economic areas. In the field of goods, the revision of the 
New Approach and a possible regulation on the application of the mutual recognition 
principle  stand  out.  Important  proposals  for  action,  such  as  the  Services  Directive, 
are  on  the  table  of  the  Council  and  the  Parliament  and  need  to  be  adopted  and 
implemented  as  soon  as  possible.  The  same  goes  for  the  Community  Patent  and 
computer-implemented inventions and the remaining FSAP measures. 

2. 

Taking better care of the existing framework 

Agreeing  rules  at  European  level  is  only  the  beginning.  To  produce  the  desired 
effects on the ground they must be implemented on time and effectively enforced in 
each of the twenty-five Member States. It is the Member States who have a crucial 
role to play in making the Internal Market work on a day-to-day basis. In particular, 
this  involves  co-operating  more  with  each  other  and  with  the  Commission, 
exchanging  information,  providing  mutual  assistance  and  solving  problems.  Such 
networking  needs  to  be  facilitated  by  modern  information  systems,  such  as  those 
which  underpin  the  SOLVIT  network.  In  addition,  optimal  use  has  to  be  made  of 
business  networks,  including  for  SME's,  such  as  the  network  of  European 
Information Centers (EIC's). 

3. 

Ensuring greater coherence and synergy with other Community policies 

Internal Market policies do not operate in a vacuum. They need to be dovetailed with 
other  important  policy  objectives,  wherever  possible,  to  establish  synergies.  The 
immediate  priorities  are  the  links  to  consumer,  competition  and  environmental 
policy. Synergies with other areas, such as regional and agricultural policies, are also 
important.  The  competition  effects  of  an  efficiently  functioning  Internal  Market 
benefit consumers in the form of wider choice and more competitive prices. In turn, 
the importance of a strong consumer dimension of a well-functioning Internal Market 
has been recognised by the European Council23 and is a priority for all Community 
institutions.  Consumers  must  also  be  confident  that  products  are  safe  and  that  their 
rights will be well protected. Measures must therefore be designed in such a way as 
to preserve the competition-stimulating effects of free movement on which economic 
benefits for consumers depend whilst protecting them from health, safety and other 
risks.  In  addition  environmental  policies,  combined  with  free  movement,  may 
provide  opportunities  for  innovation  and  greater  competitiveness  through  better 
resource efficiency and new investment opportunities.  

23 

European Council 20 and 21 March 2003 

EN 

14 

   EN 

 
                                                 
4. 

Ensuring  the  Internal  Market  legal  framework  is  better  attuned  to  the  global 
economic framework 

In today’s highly globalised economy, the impact of legislation adopted thousands of 
miles  away  is  increasingly  felt  in  the  EU  and  vice  versa.  Where  companies 
increasingly operate globally, for example in finance, regulation cannot lag behind. 
The  strategy  therefore  calls  for  a  strengthening  of  dialogue  with  major  trading 
partners.  The  aim  of  dialogue  is  to  arrive  at  effective  legislation  which  enhances 
market  opening  and  reduces  the  regulatory  burden  for  businesses  participating  in 
world  markets.  Thus,  the  dialogue  should  promote  convergence  and  reduce 
regulatory divergence or conflict. The rewards possible from successful cooperation 
can be significant in terms of jobs and growth. 

EN 

15 

   EN 

 
ANNEX 1: IMPLEMENTATION REPORT SCOREBOARD 

1. 

Transposition by Member States of Internal Market rules into national law 

Member  States  persistently  fail  to  transpose  Internal  Market  rules  correctly  and  on 
time.  The  transposition  deficit24  for  the  EU  has  got  significantly  worse  and  now 
stands  at  3.6%.  This  is  a  long  way  from  the  1.5%  interim  target  set  by  successive 
European Councils. And the real target is, of course, 0% because timely and correct 
transposition is a legal obligation. 

The  deficit  for  the  EU  15  Member  States25  is  2.9%,  which  represents  a  very 
significant  step  backwards  after  their  progress  in  reducing  the  deficit  since  the 
Lisbon summit in 2000. When all 25 Member States are included in the calculation, 
the deficit rises to 3.6% - too high, but still considerably better than the 7.1% deficit 
at enlargement thanks to the sustained notification efforts of the new Member States. 
Concretely,  this  means  that  the  Commission  is  still  awaiting  1428  notifications  of 
national implementing measures.  

Of  all  Internal  Market  directives,  over  a  quarter  (27%  or  427  directives)  have  not 
been fully transposed in at least one Member State26. This figure is much higher than 
before – and its rise is in large part due to enlargement, as many of the directives still 
to be transposed by each of the EU 10 Member States27 are not the same. 

Member States’ failure is not only a breach of their legal obligations - it also deprives 
businesses  and  citizens  in  practice  of  their  rights  and  undermines  the  day-to-day 
working of the Internal Market. 

24 

25 

26 
27 

The transposition deficit shows the percentage of Internal Market directives not yet communicated as 
having been fully transposed, in relation to the total number of Internal Market directives which should 
have been transposed by the deadline. (1579 as at 15/11/2004). 
Belgium,  Denmark,  Germany,  Greece,  Spain,  France,  Ireland,  Italy,  Luxembourg,  the  Netherlands, 
Austria, Portugal, Finland, Sweden, United Kingdom. 
This is usually referred to as the fragmentation factor. 
Czech  Republic,  Estonia,  Cyprus,  Latvia,  Lithuania,  Hungary,  Malta,  Poland,  Slovenia  and  Slovakia. 
The transposition deficits for the EU 10 Member States are still to a certain extent provisional, as part of 
the national implementing measures are still under verification by the Commission. Wherever there has 
been a notification, the Commission deems this to reflect a full transposition unless it establishes after 
analysis that this is not the case. This means that the transposition deficits in reality could be higher. 

EN 

16 

   EN 

 
                                                 
Figure 1: Urgent action needed  to 
reduce burgeoning transposition deficit,
but notable progress by New 
Member States since May

e
g
a
t
n
e
c
r
e
P

8

7

6

5

4

3

2

1

3.5

3.0

EFTA

3.9

3.6

3.0

1.8

5

4

3

2

1

0

1.5

1.0

1.2

0.9

1.7

1.5

May 00

Nov. 00

May 01

Nov. 01

May 02

Nov. 02

May 03

Nov. 03

June 04

Nov. 04

7,1

3,6

2.9

2.5

2.0

1.8

2.1

2.4

2.3

2.2

May 00

Nov. 00

May 01

Nov. 01

May 02

Nov. 02

May 03

Nov. 03

June 04

Nov. 04

EU15 in blue; EU25 in red

Average EU transposition deficit 

Of those countries in the First Division: 

•  Lithuania  and  Spain  are  to  be  commended  for  being  the  only  Member  States  to 

have met the 1.5% interim target set by the European Council. 

•  The Netherlands has improved on its recent disappointing record. 

•  Hungary has made impressive progress in reducing its transposition deficit and is 

now in fourth place. 

•  Germany has made major strides in reducing its transposition deficit, but there is 

further to go.  

•  Despite being in the First Division, the transposition deficits of the other Member 
States  have  got  worse.  The  performances  of  Denmark,  Finland,  the  UK  and 
Ireland  are  particularly  disappointing,  as  they  have  all  regularly  met  the  1.5% 
interim target in the past. 

EN 

17 

   EN 

 
Figure 2: First division:
 Lithuania and Spain top the league

EF T A

3

2

1

0

1. 0

1. 4

2 . 7

          NO          
15

          IS            
2 2

            L I             
4 1

e
g
a

t

n
e
c
r
e
P

10

9

8

7

6

5

4

3

2

1

0

1.0

1.3

2.0

2.0

2.0

2.1

2.3

2.3

2.4

2.5

2.5

2.9

    LT   
15

  ES  
21

  NL  
31

   HU  
32

  SE  
32

   AT   
33

  DK  
36

   FI   
37

   IE   
38

  DE  
40

   UK   
40

  PL  
46

Number of Directives not notified

1,5% 
target

Transposition deficit, by Member State, as at 30 November 2004 

The transposition deficit of countries in the Second Division is more than double the 
1.5% European Council target. Of these countries: 

•  All EU 10 Member States in the Second Division have reduced their deficit since 

EU accession. 

•  The Czech Republic is bottom of the league, and still has to transpose over 150 
directives.  However  it  can  be  expected  that  its  performance  will  improve  soon. 
The efforts of France to reduce its deficit are beginning to bear fruit. 

•  Belgium, Luxembourg, Italy and Greece have all gone into reverse gear, recording 

their worst transposition deficits for many years. 

Figure 3 : Second Division: France, Slovenia and Portugal top of the Second 
Division while Czech Republic is far behind the next worst country

e
g
a
t
n
e
c
r
e
P

10
9
8
7
6
5
4
3
2
1
0

3.2

3.2

3.2

3.4

4.2

4.4

4.5

5.0

5.1

6.0

6.3

7.0

9.6

1,5% 
target

   FR   
50

   SI    
51

   PT   
51

   BE   
54

   LU   
67

   CY  
69

    IT    
71

   EE   
79

   EL   
80

   MT   
95

   SK   
99

  LV 
110

  CZ 
151

Number of Directives not notified

Transposition deficit, by Member State, as at 30 November 2004 

EN 

18 

   EN 

 
What  is  striking  is  that  the  performance  of  almost  all  EU  15  Member  States  has 
deteriorated  significantly  since  enlargement.  Only  Germany,  France  and  the 
Netherlands have reduced their deficits since then. 

Figure 4 : EU15 Member States'
 deficit in free fall since enlargement

EF T A

17

L I

7

NO

2

IS

18

15

12

9

6

3

0

26

24

22

22

22

21

19

18

17

9

7

4

-11

-12

-13

30

25

20

15

10

5

0

-5

-10

-15

d
e

i
f
i
t

o
n

t

o
n

s
e
v

i
t
c
e
r
i

D

f

o

r
e
b
m
u
N

DK

IT

BE

PT

UK

EL

IE

LU

FI

ES

AT

SE

NL

FR

DE

Change  in  the  number  of  outstanding  directives,  by  Member  State,  since  May  2004.  For  example, 
Denmark’s  backlog  has  increased  by  26  directives,  while  Germany  has  reduced  its  backlog  by  13 
directives. 

What is equally striking is that the EU 10 Member States have significantly reduced 
their  deficits  since  their  EU  accession.  Many  now  have  better  records  than  EU-15 
Member States. 

Figure 5 : EU10 Member States make huge strides to reduce their 
deficit

-14

-36

-38

-94

-136

-180

-207

-209

-522

3

50

-50

-150

-250

-350

-450

-550

d
e

i
f
i
t
o
n

t
o
n

s
e
v

i
t
c
e
r
i

D

f
o

r
e
b
m
u
N

LT

PL

SI

EE

SK

HU

LV

CY

CZ

MT

Change  in  the  number  of  outstanding  directives,  by  Member  State,  since  May  2004.  For  example, 
Malta has reduced its huge backlog by 522 directives. 

Ensuring  that  delays  in  transposing  Internal  Market  directives  do  not  go  on 
indefinitely  is  also  important.  This  is  why  the  European  Council  set  a  ‘zero 

EN 

19 

   EN 

 
 
 
 
 
 
 
 
 
tolerance’ target for directives whose implementation is over two years late. Of the 
EU 15 Member States: 

•  Only Sweden, Portugal and the Netherlands met this target and they deserve credit 

for doing so. 

•  France almost halved the number of directives whose transposition is over 2 years 

late, but is still in last place (with Germany). 

•  The  records  of  Luxembourg,  Greece,  Italy,  Austria,  Denmark  and  Spain  all 

deteriorated. 

Figure 6 : EU15 Member States taking longer and longer to remedy late 
transposition

d
e

i
f
i
t
o
n

t
o
n

s
e
v

i
t
c
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r
i

D

f
o

r
e
b
m
u
N

10

5

0

5

5

4

3

3

FR

DE

LU

BE

EL

3

IT

3

1

1

AT

DK

ES

1

IE

1

FI

1

0

0

0

UK

NL

PT

SE

dotted lines = decrease of 2 years overdue directives since May 2004
red = increase of 2 years overdue directives since May 2004

Number of overdue directives with a deadline for transposition into national law before 15/11/2002 
which have not been transposed by 30/11/2004. 

The  fact  that  EU  10  Member  States  only  joined  the  EU  in  May  2004  should  not 
preclude  the  application  of  this  ‘zero  tolerance’  target  to  them.  The  number  of 
directives that they need to transpose to meet this target is set out below. 

Figure 7 : EU10 Member States have much to do to meet the zero 
tolerance target

d
e

i
f
i
t
o
n

t
o
n

s
e
v

i
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c
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i

D

f
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r
e
b
m
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N

90

80

70

60

50

40

30

20

10

0

85

CZ

67

LV

63

MT

42

SK

37

EE

22

CY

20

PL

20

SI

8

HU

7

LT

Number of directives to be transposed to meet the ‘ zero tolerance’ target. 

EN 

20 

   EN 

 
 
 
 
 
 
 
 
 
2. 

Application by Member States of Internal Market rules: infringements28 

For  the  Internal  Market  to  work,  Member  States  must  apply  the  rules  correctly. 
Where  they  do  not  do  so,  they  deprive  businesses  and  citizens  of  their  rights  and 
undermine  confidence  in  the  Internal  Market.  This  is  why  the  Internal  Market 
Strategy 2003-2006 called for a 50% reduction in infringements by 2006 through a 
combination  of  better  compliance,  prevention  and  use  of  alternative  methods  of 
problem-resolution (such as SOLVIT). 

France, Spain, Belgium, Austria, Ireland, the Netherlands, Portugal and Finland have 
all made progress towards meeting this goal, but much more needs to be done. 

Regrettably,  other  Member  States  have  not  followed  their  good  example.  The 
position of Italy, already the country with the most infringement procedures against 
it,  has  got  worse  since  the  objective  of  a  50%  reduction  was  set.  Greece,  the  UK, 
Luxembourg, Sweden and Denmark have also all seen the number of infringements 
against them increase. 

Figure 8 : Member States not doing enough 
to reduce infringements of Internal Market rules

E FTA

2 5

NO

10

L I

9

IS

3 0

2 5

2 0

15

10

5

0

s
e
s
a
c

n
e
p
O

160

140

120

100

80

60

40

20

0

149

116

103

99

84

67

63

58

IT

FR

ES

DE

EL

BE

UK

AT

51

IE

48

48

40

32

31

25

NL

PT

LU

FI

SE

DK

red = increase in the number of open cases since May 2003
dotted lines = decrease in the number of open cases since May 2003

Open infringement cases as at 31/10/2004 

28 

This section concerns the EU 15 Member States, as no formal infringement proceedings have yet been 
taken against the EU 10 Member States concerning the Internal Market corpus. 

EN 

21 

   EN 

 
 
                                                 
ANNEX 2: STATE OF PLAY WITH REGARD TO INDIVIDUAL ACTIONS 

Key: 
+ 
+/- 
- 

= 
= 
= 

completed or well on track 
some progress, behind schedule 
no progress 

1. 

Facilitating the free movement of goods 

Action 

Status  State of play 

Expected impact  

+/- 

Commission  Communication  explaining 
how  the  principle  of  mutual  recognition 
in  the  field  of  goods  should  be  applied. 
The  Commission  is  also  considering 
proposing  some  binding  rules,  possibly 
in the form of a Regulation, which would 
make  the  application  of  the  principle 
easier and more predictable for business. 

Enhancing  the  implementation  of  the 
New Approach Directives. 

+ 

EN 

the 

Communication, 

the 
Following 
Commission  launched  a  wide  consultation  on 
the  practical  application  of  the  principle  of 
mutual  recognition.  Using  the  results  of  this 
consultation  (which  included  asking  the  views 
of  the  European  Business  Test  Panel)  the 
Commission  is  now  assessing  the  possible 
options  for  enhancing  legal  certainty.  In  the 
light  of  the  results,  it  will  take  a  decision 
whether  or  not  to  propose  legislation.  This 
decision is expected before the end of 2005. 

In  May,  2003,  the  Commission  adopted  a 
Communication 
(COM  240  of  7.5.2003) 
setting  out  its  views  on  how  to  improve  the 
operation  of  the  “New  Approach”  Directives. 
In  November  2003  the  Council  subsequently 
adopted 
the 
objectives contained in the Communication and 

a  Resolution,  welcoming 

22 
EN 

is 

to  reduce  uncertainty  among 
The  aim 
economic operators and national administrations 
about  their  rights  and  obligations  in  the  non 
harmonised field of goods and thus to encourage 
the  mutual 
more 
recognition principle. It has been estimated that 
non- or misapplication of the mutual recognition 
principle cuts trade within the EU by 10%. 

the  basis  of 

trade  on 

The  New  Approach  has  been  a  very  successful 
way  of  facilitating  trade  in  goods  within  the 
Internal  Market.  The  aim  of  the  Directive  is  to 
confidence, 
levels 
strengthen 
transparency,  and  administrative  cooperation 
between Member State authorities on which the 
New  Approach  depends  and  thus  to  further 

the 

of 

 
 
 
 
to 

the  Commission 

propose 
inviting 
appropriate  actions  in  the  fields  of  conformity 
assessment  and  of  market  surveillance.  The 
Commission  is  currently  working  on  a  draft 
legislative proposal consolidating and updating 
the basic legal texts for the New Approach and 
the  Global  Approach  (Council  Resolutions  of 
7.5.1985  and  of  21.12.1989,  and  Council 
Decision 93/465/EEC). 

Concluding performance-based contracts 
standardisation 
with 
organisations. 

European 

+ 

These contracts have since been concluded. For 
example  CEN  is  trying  to  reduce  the  time  it 
takes to make a standard and has set a target of 
three years. 

Commission 
Integrated Product Policy (IPP) 

Communication 

on 

+ 

EN 

The  Communication  was  published  in  June 
2003  (COM  (2003)  302  final).  The  Council 
welcomed 
its 
the  Communication 
conclusions  of  27th  October  2003.  The 
Commission  is  presently  implementing  the 
actions  foreseen;  for  example  it  has  launched 
two  pilot  projects  concerning  mobile  phones 

in 

23 
EN 

facilitate the free circulation of goods 

The  revision  of  the  New  Approach  will  not 
question  the  fundamental  principles  behind  the 
it  and 
New  Approach,  but  would  update 
strengthen  it  by  filling  the  gaps  identified  in  its 
operation: 

•  Reinforce and co-ordinate market 

surveillance systems (enforcement of 
legislation at national level) 

•  Ensure coherence of rules for the operation of 
Notified Bodies (e.g. certification, testing) 
•  Ensure that accreditation remains a public 

authority activity 

•  Make certain that CE marking is protected. 

The timely production of European standards is 
an essential part of making European legislation 
work,  e.g.  in  the  fields  of  construction  or 
machinery.  A  lack  of  standards  hinders  trade 
and drives up costs. 

their 

throughout 

IPP  aims  to  reduce  environmental  impacts  of 
products 
life  cycle.  The 
Communication  sets  out  a  variety  of  ways  to 
achieve  this  objective,  such  as  increasing  the 
availability 
product 
information  and  stimulating  “green”  public 
procurement  (see  handbook  on  environmental 

environmental 

of 

 
 
 
 
and teak furniture. 

public  procurement  SEC  2004/1050).  It  sets  a 
framework  within  which  Member  States  can 
develop their own IPP strategies. It is important 
that approaches are co-ordinated at EU level so 
as to enhance their effectiveness and to prevent 
divergent national approaches from fragmenting 
the Internal Market. 

the 
Commission  Communication  on 
integration of environmental aspects into 
the European standardisation process. 

+ 

environmental 

The Communication was adopted  in  February, 
2004 (COM 2004 (103) final) and endorsed by 
Council in October. Two workshops have been 
organised to raise awareness of the importance 
of 
for  European 
standardisation.  The  European  Standardisation 
Organisations  have  since 
to 
implement  the  approach,  e.g.  by  more  closely 
associating representatives from environmental 
organisations to the standard setting process. 

taken  steps 

aspects 

This  aims  at  ensuring  that  greater  account  is 
taken  of  environmental  considerations  at  all 
stages  in  the  standardisation  process.  This  will 
of 
not 
environmental  goals,  but  also  facilitate  free 
movement  of  goods  as  the  scope  for  divergent 
national standards diminishes. 

achievement 

support 

only 

the 

Proposal  for  a  Directive  on  unfair 
business 
commercial 
consumer 
practices. 

to 

+ 

The  Commission  made  a  proposal  in  June 
2003.  Council  reached  political  agreement  in 
May  2004.  The  EP  has  meanwhile  begun  its 
second reading. 

The  directive  would  establish  a  general 
prohibition  of  unfair  commercial  practices.  It 
will give consumers the same protection against 
unfair  business  practices  and  rogue  traders 
irrespective  of  where  they  shop  in  the  EU. 
Outlawing  unfair  practices  is  good  for  all 
reputable businesses. 

Commission  to  implement  its  Action 
Plan on European Contract Law. 

+ 

The  consultation  on  the  2003  Action  Plan 
generated  considerable 
interest  both  from 
Member  States  and  stakeholders.  In  October, 

Divergences between national contract laws may 
create  problems  for  consumers  as  well  as  for 
traders.  Without  seeking  to  impose  a  single 

EN 

24 
EN 

 
 
 
 
 
solution, the Commission is keen to ensure that 
consumer  protection  and  free  movement  of 
products  are  fostered  -  and  not  hindered  -  by 
national contract laws. 

2004,  the  Commission  published  its  follow-up 
Communication  (COM  2004  651  final)  on 
European Contract law and the  revision of the 
acquis  (COM  2004  651  final),  which  sets  out 
the  steps  to  be  taken  to  draw  up  a  Common 
Frame  of  Reference  (CFR).  The  work  on  the 
CFR,  which  will  take  account  of  the  ongoing 
review of consumer protection law, is expected 
to contribute to improving the coherence of the 
legal  framework.  The  Communication  also 
describes actions to promote EU-wide standard 
contract terms, whilst indicating parameters on 
the  basis  of  which  the  opportuneness  for  an 
optional  contract-law  instrument  should  be 
assessed. 

+ 

+0 

The  framework  directive  has  been  adopted  in 
2004.  Member  States  have  until  the  middle  of 
2005 to implement it into national law. 

The  aim  is  to  extend  the  highly  successful  EU 
Whole  Vehicle  Type-Approval  system  for  cars 
to other types of vehicles. 

The Commission made its proposal (amending 
Council  Directive  92/42/EEC  and  Directives 
96/57/EC and 2000/55/EC) in August, 2003.  

The  European  Parliament  completed  its  first 
reading  in  April  2004.  The  Council  adopted  a 
common  position  in  November  2004.  Final 
adoption is expected in the first half of 2005. 

is 

The  aim 
the  promotion  of  sustainable 
development  by  facilitating  the  free  movement 
of  energy-using  products  within  the  Internal 
Market, by increasing security of energy supply 
and  by  strengthening  environmental  protection. 
Reducing the overall environmental impact of a 
product  throughout  the  whole  life  cycle  is 
achieved  by  integrating  environmental  aspects 
into product design. 

to 

recast 

Proposal 
framework 
Directive  on  motor  vehicles  and  their 
trailers. 

the 

The Council and European Parliament to 
adopt  the  framework  Directive  for  the 
setting  of  eco-design  requirements  for 
energy-using products. 

EN 

25 
EN 

 
 
 
standardisation  bodies 

The Commission to provide mandates to 
European 
to 
develop new standards or revise existing 
ones  to  ensure  compliance  with  the 
requirements  of  the  General  Product 
Safety Directive.  

+ 

The  Commission 
comprehensive 
marking at national and European level. 

to  undertake 
a 
study  on  voluntary 

+/- 

The Commission has identified a first group of 
products  for  which  a  standardisation  mandate 
will  be  given  to  CEN  in  early  2005.  The 
Commission  will  monitor  implementation  of 
the  Directive  over  the  period  of  the  Strategy 
and  prepare  a  report  on 
its  application, 
including an assessment of market surveillance 
and  enforcement  in  the  Member  States  by 
2006. 

After  discussions  with  Member  States  and 
other  interested  parties,  the  Commission  takes 
the  view  that  conducting  a  study  may  not  be 
the best way to resolve the underlying problem 
the  proliferation  of  national  voluntary 
of 
marks,  which  are  private-sector  based.  The 
problem of voluntary marks, which may act as 
a  barrier  for  companies  from  other  Member 
States to enter the market, can best be remedied 
by  promoting  European-level  marks.  Such 
marks  whilst  helping  consumer  choice  do  not 
carry  the  risk  of  fragmenting  the  Internal 
Market  and  of  raising  costs  for  SMEs  without 
measurable benefits. 

The  aim  is  to  promote  European  standards 
which  will  facilitate  compliance  with 
the 
requirements  of  the  General  Product  Safety 
Directive.  Its  aim  is  to  ensure  that  consumer 
products  placed  on  the  EU  market  are  safe, 
whilst  facilitating  free  movement  of  products 
within the Internal Market.  

For many SMEs trying to penetrate new markets 
the  advantage  of  name 
without  having 
recognition or branding, displaying adherence to 
well  known  national  voluntary  marks  is  often 
necessary.  However,  the  costs  of  adhering  to 
multiple  voluntary  marks  in  different  Member 
States  are  high,  and  in  many  cases,  prohibitive. 
Voluntary marking, therefore, whilst often well-
intentioned, may in effect result in keeping non-
national  companies  off 
the  market.  The 
promotion  of  European  level  marks  is  intended 
to facilitate market entry in particular for SMEs. 

EN 

26 
EN 

 
 
 
 
2. 

Integrating services markets 

Action 

Status  State of Play 

Expected impact 

Proposal  for  a  Directive  on  Services  in 
the Internal Market. 

+ 

Adoption  of  the  Regulation  on  Sales 
Promotion 

- 

The Commission made its proposal in January, 
2004.  Discussions  are  gaining  momentum  in 
Council  and  Parliament.  The  first  reading  is 
expected  to  be  completed  during  the  first  half 
of  2005.  The  European  Council,  recognising 
the  importance  of  this  measure  for  Europe’s 
competitiveness  and  the  Lisbon  Strategy,  has 
requested  that  it  be  agreed  before  the  end  of 
2005.  

Parliament  delivered  a  very  supportive  first 
reading  in  2003.  Nonetheless,  Council  has  so 
far  failed 
is 
disappointing. The main areas of contention are 
the scope and the type of instrument. 

to  reach  agreement,  which 

The  Internal  Market  is  still  rife  with  barriers  in 
the field of services of a legal and administrative 
nature.  These  range  from  duplicative  licensing 
requirements,  economic  needs  tests  to  outright 
bans. Removing these restrictions would free up 
the  enormous  growth  and  job  creation  potential 
of  more  than  half  of  the  economy  which  is 
the  Commission’s  proposal. 
covered  by 
According  to  estimates,  intra-EU  trade  and 
investment would get a major boost.  

the  Member  States  and 

If  adopted,  this  would  make  it  far  easier  for 
businesses 
to  use  and  communicate  sales 
promotions  (discounts,  premiums,  free  games, 
promotional  contests  and  games)  across  the 
thus 
borders  of 
encourage  cross-border  sales  of  their  products 
and  services.  The  proposal 
is  particularly 
important  for  SMEs  since  sales  promotions  are 
the  most  affordable  forms  of  commercial 
communications  and  are  therefore  used  by  all 
companies including micro-enterprises. It is also 
of  fundamental  importance  for  the  European 
direct marketing/mail order sectors. 

EN 

27 
EN 

 
 
 
Adoption of Directive on the recognition 
of professional qualifications 

+/- 

Slower  than  expected  progress  of  work  in 
Parliament has resulted in considerable delays. 
It is expected that the measure can be adopted 
during the second half of 2005. 

Commission  Communication  on 
competitiveness of business services 

the 

+ 

The Communication was adopted in December 
2003  (COM  (2003)747  final).  In  light  of  the 
results  of  the  consultations,  a  detailed  Action 
Plan  will  be  proposed  during  2005.  This  will 
include actions to promote the development of 
European  standards  and  measures  to  improve 
statistical coverage of services sectors. 

to 

services  other 

The  Commission,  subject  to  the  results 
of  a  feasibility  study,  to  propose  an 
extension 
than 
information society services of Directive 
98/34/EC 
requiring  notification  of 
national  technical  rules  and  regulations 
regarding  products  and 
information 
society services. 

+ 

The  results  of  the  feasibility  study  have  been 
received  at 
last  year.  The 
Commission  intends  to  make  a  proposal  for  a 
Directive during the first half of 2005. 

the  end  of 

This  simplified  measure  should  make  it  easier 
for skilled professionals to provide cross-border 
services  and  establish 
in  other 
Member  States.  Greater  mobility  of  skilled 
professionals  is  important  for  the  achievement 
of the Lisbon objectives. 

themselves 

Whilst  the  Services  Directive  aims  at  removing 
legal and administrative barriers to cross-border 
service provision and establishment, its positive 
effects can be strengthened by a number of non-
legislative initiatives, e.g. in the field of service 
quality standards.  

Extending the requirement for Member States to 
notify  technical  rules  to  services  (other  than 
information  society  services)  will  help  prevent 
future barriers to trade and establishment whilst 
also  promoting  exchanges  of  view  between 
Member  States  as  to  the  regulation  of  services 
industries. 

Adoption of the Prospectuses Directive. 

+ 

The Directive was adopted  in November 2003 
(2003/71/EC).  The  Commission  has  organised 
a  number  of  technical  workshops  to  help 
Member  States 
the  directive 
correctly and on time (by July 2005).  

implement 

This measure will make it easier for companies 
to  raise  money  on  an  EU-wide  basis  as  it 
obviates  the  need  for  multiple  prospectuses  to 
meet  different  requirements.  This  simplification 
to  protect 
is  accompanied  by  provisions 

EN 

28 
EN 

 
 
 
Communication 
settlement. 

on 

clearing 

and 

+ 

The  Communication  was  adopted  in  April 
2004 (COM (2004)312.  

The  Commission  to  propose  a  new 
Capital Adequacy Directive.  

+ 

(COM 

The  Commission  adopted  the  proposal  in  July 
2004 
(2004)486).  The  proposed 
implementation date is end 2006. The proposal 
is  still  under  negotiation  in  Council  and 
Parliament.  

The Council and European Parliament to 
adopt the Investment Services Directive.  

+ 

The  directive  was  adopted  in  April  2004 
(2004/39/EC).  Its  transposition  deadline  is 
implementing  measures 
2006.  Commission 
will follow as from beginning 2005.  

investors. 

Improved  clearing  and  settlement  arrangements 
are  essential  to  an  efficient  and  integrated 
securities  market.  Current  bottlenecks  raise  the 
costs  of  money  transfers  between  Member 
States. 

to  maximise 
requirement 

the 
The  overall  aims  are 
effectiveness  of  capital 
rules, 
ensure  continuing  financial  stability,  maintain 
confidence  in  financial  investment  and  protect 
consumers.  The  new  regime  is  also  designed  to 
ensure  that  capital  requirements  for  lending  to 
small 
are 
and  medium-sized 
appropriate and proportionate. 

enterprises 

This measure must be seen against the backdrop 
of  major  structural  changes  in  EU  financial 
markets  over  the  past  five  years.  It  will  offer 
investment  firms  a  "single  passport"  which 
allows  them  to  operate  across  the  EU  on  the 
basis of the rules in their home state, while at the 
same time providing investors with a high level 
of protection. 

The Council and European Parliament to 
adopt the Transparency Directive. 

+ 

The  directive  was  agreed  in  May  2004  after  a 
single  reading.  However,  formal  adoption  has 
been delayed because of translation constraints 
and  is  expected  shortly.  The  transposition 

The aim is to increase the quantity and quality of 
information  (e.g.  on  shareholding  and  changes 
of  shareholding)  investors  have  access  to  with 
regard to publicly quoted companies. Apart from 

EN 

29 
EN 

 
 
 
 
to 

response 

In  light  of  the  Council  and  European 
Parliament’s 
the 
Commission’s  report  on  the  safety  of 
services  for  consumers,  the  Commission 
has to decide whether to make a proposal 
for  a  legislative  framework  aimed  at 
supporting  national 
monitoring  and 
policies and measures in this area.  

deadline  foreseen 
adoption. 

is  24  months  after 

its 

+/- 

A Commission report on the safety of services 
for  consumers  was  adopted  in  June  2003 
(COM 2003) 313 final). The Council endorsed 
its findings in a Resolution of November 2003. 

The Commission has not yet decided on future 
initiatives, which will depend on the results of 
several projects and further analysis. 

safeguarding  investors'  interests,  the  proposal 
should  help 
integrate  Europe's 
further 
securities  markets  and  increase  the  availability 
of funds for investment. 

to 

The  aim  is  to  ensure  as  far  as  possible  that 
services  which  consumers  use  are  safe.  The 
approach will cover the systematic collection of 
data  on  accidents,  injuries  and  risks  (currently 
available data is inadequate), procedures for the 
exchange of information on national policy and 
regulatory developments and procedures for the 
establishment  of  European  standards  where 
necessary. 

Council  and  European  Parliament  to 
adopt the Consumer Credit directive. 

- 

The Commission adopted an amended proposal 
in October, in response to the Parliament's first 
reading amendments.  

Aim  of  the  directive  is  to  enable  progress 
towards  an  effective  single  credit  market  with 
greater choice and strong consumer protection. 

3. 

Ensuring high quality network industries 

Action 

Status  State of play 

Expected impact 

Single  European  Sky  for  air  traffic 
management 

+ 

Four  regulations  were  adopted  in  March  2004 
and  have  entered  into  force  in  April.  In 
addition,  all  institutional  arrangements  have 
been  completed  for  the  implementation  of  the 
Single  Sky  Initiative.  The  first  implementing 
rules are now being prepared and a programme 
for  modernisation  of  air  traffic  management 

More  efficient  use  of  Europe’s  air  traffic 
management  should  help  reduce  air  transport 
delays  and 
increasing 
lower  costs  whilst 
passenger safety. 

EN 

30 
EN 

 
 
 
Second package of measures to revitalise 
European railways 

+ 

systems (SESAME) is being launched. 

The  2nd  rail  package  was  adopted  in  April, 
2004.  It  provides  for  a  complete  market 
opening  of  rail  freight  by  1  January  2007, 
develops a common rail safety approach in the 
EU  and  sets  up  a  European  Railway  Agency. 
Member  States  will  have  to  implement  the 
provisions  before  1  May  2006  (31  December 
2005 for rail freight market opening). 

This  should  result  in  more  competitive  rail 
freight services, promoting a shift from road-to-
rail by offering business better conditions and a 
higher-quality service. 

Council  mandate  to  the  Commission  to 
negotiate  an  open  skies  agreement  with 
the US 

Adoption  of  legislation  completing  the 
Internal Market for gas and electricity 

The Commission will undertake a review 
of  the  legal  and  administrative  situation 

EN 

+ 

+ 

+ 

The  Commission 
received  a  negotiating 
mandate from the Council in June 2003. There 
were  six  negotiating  sessions  EU-US  between 
October  2003  and  June  2004.  A  first  step 
agreement could not be signed yet, because of 
the  issue  of  access  to  the  US  domestic  market 
for  EU  airlines.  Further  negotiations  will  take 
place in 2005 with US. 

This  would  allow  the  restructuring  of  EU  air 
transport industry by removing current obstacles 
to  airlines’  mergers,  generate  employment  and 
expand  opportunities 
for  airlines,  airports, 
tourism, business links and cargo transport. It is 
for  example  estimated  that  an  EU/US  open 
aviation  area  would  generate  consumer  benefits 
of at least 5 billion $ a year. 

The  market  for  non  household  customers  has 
been open since July 2004. Market opening for 
household  customers  is  due  for  July  2007;  the 
directives  were  adopted 
June  2003 
(Directives 2003/54/EC and 2003/55/EC. 

in 

This  will  increase  competition  in  distribution 
and  supply  and  widens  choice  for  businesses 
(and for households from 2007). Competition is 
expected to exert downward pressure on prices. 

The Commission has completed its review and 
expects shortly to publish its findings. 

The effective application of existing Community 
the  Treaty  guarantees  for 
rules, 

including 

31 
EN 

 
 
 
an 

include 

analysis  of 

in the water and waste-water sector. This 
will 
the 
competition  aspects,  in  full  respect  of 
Treaty guarantees for services of general 
interest  and  environmental 
economic 
provisions.  

Green 
Partnerships.  

Paper 

on 

Public 

Private 

+ 

The  Commission  published  its  Green  Paper 
in April 2004 (COM (2004) 327). 

The  public  consultation  ended  30  July  2004. 
Some  200  contributions  were  received.  The 
Commission  is  analysing  these  contributions 
and  expects  to  draw  policy  conclusions  and, 
where  appropriate,  prepare  concrete  initiatives 
during 2005. 

interest  and 
services  of  general  economic 
environmental  provisions,  can  contribute  to 
creating  the  conditions  for  a  modernisation  of 
the water sector. Investment needs in this sector 
to  meet  high  quality  and  environmental 
standards are significant.  

The aim of the green paper is to start a process 
to increase legal certainty for public and private 
bodies  who  wish 
joint 
(infrastructural)  projects.  Achieving  greater 
legal  certainty  can  be  expected  to  increase  the 
level  of 
the 
development of high-quality public services.  

and  promote 

investments 

develop 

to 

4. 

Reducing the impact of tax obstacles 

Action 

Status  State of play 

Expected impact 

Proposals  amending  the  existing  Parent 
Subsidiary  Directive  (90/435/EEC)  and 
the 
Directive 
(90/434/EEC)  

existing  Merger 

+ 

Parent Subsidiary Directive: 

The  Commission  submitted  a  proposal  in  July 
2003.  After  intensive  technical  discussions  in 
in 
Council, 
Directive 
December 
2003/123/EC). 
is  1 
January 2005.  

(Council 
Implementation  date 

the  proposal  was  adopted 

2003 

These  Directives  eliminate  double  taxation  and 
allow  companies  organising  their  operations  on 
a cross-border basis to defer payment of certain 
taxes.  The  amendments  extend  the  benefits  of 
these  Directives  to  more  types  of  companies 
to 
the  Merger  Directive, 
and,  as  regards 
additional types of restructuring operations.  

EN 

32 
EN 

 
 
 
 
Communication reporting on progress in 
the  company  tax  field  and  examining 
providing 
different 
companies  with  a  consolidated  tax  base 
for 
activities 
(COM(2003)726) 

EU-wide 

options 

their 

for 

+ 

Merger Directive: 

The  Commission  submitted  a  proposal  in 
October  2003.  Intensive  technical  discussions 
in Council started in November 2003. Political 
agreement  was 
in 
reached 
December 2004. Formal adoption is due to take 
place beginning of 2005.  

in  Council 

presented 

Commission 

The 
the 
Communication  in  November  2003.  2  options 
were  identified  for  further  action.  A  pilot 
scheme  for  SMEs  to  use  'home  state'  rules  to 
compute  their  tax  base  across  the  EU  ('Home 
State Taxation - HST') and the development of 
a  common  consolidated  corporate  tax  base  for 
all  companies  operating  across  the  EU.  Work 
on a Commission Recommendation concerning 
HST  is  progressing  with  a  target  date  of  early 
2005  for  approval  by  the  Commission.  The 
Commission  is  currently  finalising  the  details 
of  a  technical  working  group,  which  under  its 
chairmanship  will  carry  out  the  preparatory 
work  on  defining  a  common  consolidated 
corporate  tax  base.  The  work  of  this  expert 
group is expected to provide a major input into 
a formal Commission proposal for such a base. 

A  consolidated  base  could  be  achieved  without 
harmonising corporate tax rates and would go a 
long way towards solving the problems faced by 
companies.  It  would  also  make  the  functioning 
of  the  Internal  Market  more  transparent  by 
making  it  easier  to  compare  the  merits  of 
carrying out operations in different locations.  

Communication  setting  out  review  and 

+ 

The  Communication  (COM  (2003)614)  was  Simplifying the VAT system for businesses and 

EN 

33 
EN 

 
 
 
update  of  VAT 
(following 
2000) 

the  Strategy 

strategy  priorities 
in 
launched 

adopted  in  October  2003  and  sets  out  further 
steps  to  modernise  and  simplify  the  VAT 
system. 

decreasing  its  costs  is  a  major  aim  of  the 
strategy as set out in the Communication..  

A proposal to  take  concrete  measures to 
simplify VAT obligations for companies, 
amongst  which  the  introduction  of  a 
single  place  of  VAT  compliance  for  all 
businesses  trading  in  Member  States 
where they have no establishment.  

+ 

Directive  was  proposed  end  of  October  2004 
(COM (2004) 728) and will soon be discussed 
by Council and EP.  

an 

initiative  would  decrease 

the 
Such 
administrative  burden  of  VAT  for  companies. 
This  will  lower  compliance  costs  and  make  it 
easier to do business across borders. 

Communication on the effect of case law 
of the ECJ on dividend taxation systems. 

+ 

The  Communication  (COM  (2003)  810)  on 
"Dividend 
the 
Internal  Market"  was  adopted  in  December 
2003. 

taxation  of 

individuals 

in 

Several  Member  States  have  changed  their 
systems  of  dividend  taxation,  in  order  to  take 
account  of  court  judgments  (in  particular  C-
and  C-319/02  – 
35/98  –  Verkooijen, 
Maninnen).  Several  infringement  procedures 
are underway. 

+/- 

This  will  be  proposed  the  second  quarter  of 
2005.  

The  Commission  to  present  legislative 
proposals to remove the obstacles to the 
free  movement  of  cars  in  the  Internal 
Market. 

EN 

34 
EN 

This  aims  to  eliminate  discrimination  in  some 
Member  States  who  impose  a  higher  tax  on 
cross-border  dividends 
than  on  domestic 
dividends.  Such  rules  are  a  strong  disincentive 
to  the  cross-border  holding  of  shares  and  slow 
down  the  creation  of  pan-European  equity 
markets.  

Aim  is  to  modernise  and  simplify  the  existing 
vehicle  taxation  systems  and  to  better  co-
ordinate  them,  with  the  final  aim  of  removing 
tax  obstacles  and  distortions  to  free  circulation 
of cars within the Internal Market and use fiscal 
measures  as  a  tool  to  reduce  CO2  emissions 

 
 
 
 
5. 

Expanding procurement opportunities 

Action 

Status  State of play 

Expected impact 

from passenger cars. 

Adoption  of  the  "legislative  package" 
which  updates 
legal 
the 
framework for public procurement. 

existing 

+ 

The  new  directives  were  adopted  in  March 
2004.  Member  States  have  until  31  January 
2006 to implement them into national law.  

The  Commission  to  develop  an  Action 
Plan on e-procurement. 

+/- 

The  action  plan  has  been  adopted  by  the 
Commission 13 December 2004. 

The  Commission  to  publish  a  Green 
Paper  assessing  the  need  for  any  further 
defence 
initiatives 
procurement. 

European 

in 

+ 

The  Commission  published  its  Green  Paper  in 
summer 2004  (COM  (2004)608).  Deadline for 
January  2005.  The 
comments 
Commission  will  then  analyse  the  results  and, 
if appropriate, propose specific initiatives. 

end 

is 

EN 

35 
EN 

The aim is to simplify public procurement rules. 
The  new  rules  facilitate  the  use  of  electronic 
procurement and are sufficiently flexible for the 
complex contracts which can arise, for example, 
in the context of Trans-European Networks. 

The action plan provides a blueprint for actions 
in order to allow substantial part of procurement 
to  be  carried  out  electronically  by  2006.  The 
first step will be to translate the legal provisions 
of 
into 
the  public  procurement  package 
functional  requirements.  The  Commission  will 
to  European  standards 
also  give  mandates 
organisations,  where  necessary, 
to  develop 
technical standards for e-procurement 

The aim is to promote value for money in what 
is  a  €  30  billion  EU  market  for  defence 
procurement.  Providing  greater  clarity  about 
Treaty  exceptions  is  expected  to  contribute  to 
more open procurement which in turn will help 
EU  industries  become  more  competitive  on  the 

 
 
 
 
 
+/- 

- 

+/- 

co-operation, 

The  Member  States  should  strengthen 
administrative 
notably 
through  the  further  development  of  the 
fledgling  Public  Procurement  Network 
(PPN) established on the initiative of the 
Danish 
authorities.  Member  States 
should ensure that the PPN is sufficiently 
well  funded  so  as  to  be  able  to  meet  its 
ambitions. 

The Member States should stimulate and 
develop  procurement  training  (possibly 
using  the  Internet),  particularly  to  raise 
the awareness of European rules amongst 
procurement  officials  at  all  levels  of 
government.  Best  practices  could  be 
exchanged through the PPN. 

Commission 

to 
Remedies 

to 
strengthen 

propose 
The 
the 
amendments 
Directive, 
Procurement 
possibly  including  the  strengthening  of 
the  powers  of  national  surveillance 
authorities  on  which  it  will  conduct  a 
prior consultation. 

global market.  

is 

to 

The  aim 
resolve  any  cross-border 
procurement  problems  at  the  pre-contracting 
stage  and  to  promote  the  exchange  of  best 
practices (using benchmarking techniques).  

The  PPN  network  has  meanwhile  been 
expanded  to  include  all  25  Member  States.  It 
rotating 
meets  annually  and 
Presidencies. While it is a useful forum for the 
exchange  of  information,  there  is  little  to  no 
information  on  actual  performance  of  the 
is 
network 
concerned. 

as  problem-solving 

relies  on 

far 

as 

The  PPN  has  decided 
to  concentrate  on 
exchanges  of  best  practices  relevant  for  the 
proper  and 
the 
legislative package 

implementation  of 

timely 

raise 

should 

awareness 

the  need 

This 
amongst 
procurement officials at all levels of government 
of 
to  comply  with  European 
procurement  rules.  It  can  be  expected  that  this 
will  contribute  to  higher  publication  rates, 
clearer  tender  documents,  fewer  infringements 
and less need for legal action. 

The  Commission  has  consulted  stakeholders, 
including  members  of  the  European  Business 
Test  Panel,  on  possible  options.  It  is  now 
carrying out an extended impact assessment on 
the  different  options.  In  light  of  the  outcome, 
the  Commission  may  make  a  proposal  for  a 
directive before the end of 2005.  

This  will  promote  better  compliance  with  the 
rules  as  bidders  will  have  access  to  more 
effective redress mechanisms.  

EN 

36 
EN 

 
 
 
6. 

Improving conditions for business 

Action 

Status  State of play 

Expected impact 

Regulation on the Community Patent. 

- 

language 

Council  so  far  failed  to  reach  agreement, 
especially  because  of 
issues. 
Currently  the  Commission  is  reflecting  on  if 
and  how  to  take  this  further.  The  Kok  Report 
calls on Member States to “deliver or drop it”. 
Two  accompanying  proposals  on  jurisdiction 
and on the setting up of a Patent Court are also 
before Council. 

The proposed system will establish a single EU-
wide  patent,  bringing  important  benefits  for 
innovators  in  terms  of  obtaining,  enforcing  and 
managing their rights. It will provide protection 
in  25  Member  States  for  around  the  same  price 
(or  slightly  less)  as  is  currently  paid  for 
protection in just 5 countries. 

Adoption  of 
enforcement  of 
rights. 

the  directive  on 

the 
intellectual  property 

+ 

The Directive was adopted in April 2004 on its 
first  reading.  The  transposition  deadline  is 
April 2006. A meeting with the Member States 
has  been  scheduled  in  February  2005  to 
monitor the implementation process. 

This  will  create  a  level  playing  field  for  the 
enforcement  of  intellectual  property  rights  in 
different  EU  countries.  It  is  an  essential  part  of 
the fight against piracy and counterfeiting which 
causes immense damage to the EU economy. 

Directive  on 
computer-implemented inventions. 

the  patentability  of 

+/- 

Council  reached  a  political  agreement  in  May 
2004. This still has to be formalised. Attention 
will then shift to the Parliament. 

Take-over bids Directive 

+/- 

This  was  adopted 
transposition deadline is May 2006. 

in  April  2004.  The 

This will clarify and make more transparent the 
boundaries  of  patent  law  in  this  field.  It  will 
stimulate 
innovation  and  benefit  software 
developers and suppliers as well as the users of 
patentable technology. 

A  Directive  ensuring  a  high  degree  of 
level  would  have 
harmonisation  at  EU 
facilitated 
restructuring. 
However, the agreement reached in Council falls 
short  of  what  is  required  to  create  a  genuinely 

pan-European 

EN 

37 
EN 

 
 
 
 
Legal 
International Accounting Standards. 

endorsement 

of 

existing 

+ 

Communication on statutory audit. 

+ 

The  Commission  has  adopted  a  regulation  in 
September  2003  endorsing  IAS  for  use  in  the 
EU  as  from  2005.  All  IAS  standards  will  be 
endorsed  before  1.1.2005  except  for  IAS  39 
(which  is  about  derivatives)  which  is  only 
partially  endorsed.  IFRS  2  has  been  submitted 
to  the  Accounting  Regulatory  Committee  in 
December 2004 and will be adopted by the end 
of January 2005. Further work will need to take 
place in the International Accounting Standards 
Board  on  IAS  39  to  eliminate  the  existing 
carve outs. 

The  Communication  was  published  in  May 
2003 (COM (2003) 286) and  was followed by 
the  proposal  for  a  Directive  in  this  field.  (See 
action below). 

Proposal  to  modernise  the  8th  company 
law  Directive  on  statutory  audit  of 
annual 
consolidated 
accounts.  

accounts 

and 

+ 

The  proposal  was  adopted  in  March  2004  and 
is  currently  being  negotiated  in  Council  and 
EP. Expected adoption by mid-2005. 

EN 

38 
EN 

level playing field.  

their 

accounts 

All  EU-listed  companies  are  now  required  to 
prepare 
in 
consolidated 
accordance  with  IAS  from  2005.  IAS  are 
established  by  the  International  Accounting 
Standards Board but have to be endorsed for use 
within  the  EU.  This  will  improve  competition 
and  transparency  and  makes  free  movement  of 
capital easier.  

This  sets  out  priorities  for  2003  and  beyond 
aimed at improving and harmonising the quality 
of  statutory  audit  in  the  EU.  It  will  ensure  that 
investors  can  rely  fully  on  the  accuracy  of 
audited accounts, prevent conflicts of interest for 
auditors and enhance the EU's protection against 
Parmalat-type scandals. 

If  adopted,  this  will  strengthen  access  to  and 
regulation of the audit profession and will aim to 
ensure  proper  oversight  of  the  audit  profession 
at national level and appropriate co-ordination at 
EU level. 

 
 
 
Proposal  for  a  10th  Company  Law 
Directive on cross-border mergers. 

+ 

Currently  the  proposal  is  being  discussed  in 
Council and EP. 

The  Council  agreed  a  general  approach  at  the 
end of November, 2004.  

If adopted, this proposal will make cross-border 
mergers  simpler  for  all  companies  with  share 
capital. However, it will be especially useful for 
small and medium-sized businesses that want to 
operate in more than one Member State, but not 
throughout  Europe,  and  thus  are  not  likely  to 
seek 
the  European 
Company Statute. 

incorporation 

under 

Proposal  for  a  14th  Company  Law 
Directive  on  cross-border  transfer  of 
registered office. 

The  Council  to  adopt  the  proposed 
reform of the merger regime. 

+ 

+ 

The proposal is expected to be adopted by the 
Commission in January 2005. 

If  adopted  this  proposal  will  harmonise  current 
legislation in the EU with regard to the transfer 
of a company’s seat. 

The  reform  of  the  Merger  Control  Regime 
jurisdictional  and  procedural 
included  both 
issues. It ensures the continuing effectiveness of 
merger  control  in  the  context  of  globalisation 
and enlargement of the EU.  

The new Council Regulation (139/2004) on the 
control of concentrations between undertakings 
and  the  Implementing  Regulation  (802/2004) 
have  entered  into  force  on  1  May  2004.  The 
Commission  has  also  adopted  “Guidelines  on 
the  assessment  of  horizontal  mergers”  (OJ  C 
31,  05.02.2004)  dealing  with  the  substantive 
aspects  of  the  reform  as  well  as  a  “Notice  on 
Case  Referral  in  respect  of  concentrations” 
setting  out  the  principles  of  the  jurisdictional 
reform. 

The  Commission  to  adopt  a  new  block 
exemption  Regulation  with  regard  to 
technology agreements. 

+ 

This  regulation  has  been  adopted  27  April 
2004. 

The  aim  is  to  facilitate  technology  transfer 
agreements between companies. 

EN 

39 
EN 

 
 
 
to 

Commission 

a 
The 
Communication  on  the  management  of 
copyright  and  related  rights 
the 
Internal Market. 

adopt 

in 

The  Member  States  to  continue  their 
efforts to further reduce the total amount 
re-directing  aid 
of  state  aid  while 
objectives 
horizontal 
towards 
of 
the 
as 
such 
interest, 
Community 
environment,  research  and  development 
and SMEs. 

7. 

Meeting the demographic challenge 

+ 

+ 

The  Communication  was  adopted  in  April 
2004(COM (2004) 261). A further consultation 
was  launched  amongst  stakeholders  and  an 
extended impact assessment is now under way 
in preparation for a Directive on the Collective 
Management of Rights. 

Total  state  aid  provided  remains  under  1%  of 
GDP.  Specific  country  information  can  be 
found 
the  state  aid  scoreboard  from 
November 2004 COM(2004) 750 final. 

in 

initiatives  aim  at 

the 
These 
measures necessary to create a more favourable 
environment for the cross-border marketing and 
licensing of these rights. 

implementing 

The  aim  is  to  reduce  the  amount  and  distortive 
effect  of  state  aid,  thus  creating  a  more  level 
playing field in the Internal Market. 

Action 

Status  State of play 

Expected impact 

Analysis of Member States’ compliance 
with ECJ case law relating to cross-
border provision of and access to health 
services 

the 
The  Commission 
desirability  of  proposing  a  Directive  on 
portability of occupational pensions. 

examine 

to 

+ 

+/- 

EN 

The analysis has been carried out and shows 
that the Internal Market in health services is 
not functioning satisfactorily. The Services 
Directive seeks to clarify the legal situation in 
this respect.  

The objective is to make it easier for citizens to 
benefit from medical treatment in other Member 
States provided that certain requirements are 
fulfilled. This is particularly important in cases 
where there are long waiting lists in the home 
Member State. 

A  second  stage  consultation  was  launched  in 
September 2003 (first round was in June 2001). 
It  suggested  action  to  be  taken  by  the  social 
partners to address obstacles to the acquisition 

40 
EN 

Aim  is  to  facilitate  the  free  movement  of 
workers  across  Europe.  The  proposal  for  a 
Directive  will 
fixing  minimal 
requirements  based  on  the  current  situation  in 

aim 

at 

 
 
 
of  pension  rights,  to  improve  the  preservation 
of  acquired  pension  rights  and  to  facilitate  the 
transfer  of  pension  rights  between  schemes. 
Since  there  was  no  agreement  amongst  the 
social  partners,  the  Commission  is  currently 
preparing  a  proposal  for  a  Directive  (to  be 
adopted in 2005). 

the Member States. It will constitute a first step 
in  a  progressive  approach  to  improve  the 
portability  of  occupational  pension  rights  for 
mobile workers. 

The Commission to continue its action to 
tackle tax discrimination against pension 
funds  established 
in  other  Member 
States.  The  Commission  will  vigorously 
pursue  any  cases  which  come  to  its 
attention  and  ensure  that  the  relevant 
ECJ 
is  complied  with 
jurisprudence 
throughout the EU. 

+ 

The  Commission  is  presently  examining  the 
relevant national rules and taking the necessary 
steps  to  ensure  their  compliance  with  the 
Treaty.  Several  member  states  have  already 
eliminated  tax  obstacles  or  have  announced 
that they will do this soon. Eight infringement 
cases have already been opened. 

Aim is to eliminate tax discrimination to create a 
level  playing  field  for  pension  funds  with  the 
result  that  citizens  who  decide  to  work  in 
another  Member  State  will  not  have  to  change 
pension  funds  to  continue  to  benefit  from  tax 
relief and so that companies operating in several 
Member States can run a single pension fund for 
all employees. 

8. 

Simplifying the regulatory environment 

Action 

Status  State of play 

Expected impact 

Ex-ante impact assessment 

+/- 

Simplification of existing EU rules. 

+/- 

The  majority  of  Commission  initiatives  taken 
in  2004  have  been  subject  to  extended  impact 
assessment  (compared  to  17%  in  2003).  In 
2005, this will be the case for all initiatives. 

If  carried  out  properly, 
impact  assessment 
introduces  greater  transparency,  provides  an 
objective  basis 
and 
improves the quality of any new rules. 

for  decision-making 

The screening of different policy sectors has 
been completed. A number of proposals to 
simplify the rules have already been made and 
others are in preparation. These range from 

Whilst  many  Internal  Market  measures  have 
considerably  reduced  paperwork  and  removed 
obstacles  to  trade,  it  is  important  that  the 
Community  institutions  tackle  those  measures 

EN 

41 
EN 

 
 
 
rules in the automotive sector to company law. 
Meanwhile, the Council has drawn up a 
shortlist of priority measures which offer scope 
for simplification (e.g. on company law, waste) 
which the Commission will take into account 
in its on-going simplification work. In the 
agricultural sector, an important process for the 
simplification of its legislation has been 
launched with first results in 2004 (98 legal 
acts declared obsolete) and further actions are 
planned for 2005. 

too  burdensome  or 
which  have  become 
overcomplicated. Simplifying or removing these 
will bring significant economic benefits.  

Simplification  is  a  shared  responsibility  –  so 
Member  States  will  also  need  to  make  a 
contribution  by  ensuring  that  they  implement 
EU  rules  in  the  simplest  way  possible  (Inter 
Institutional  Agreement  on  better  law  making 
2003/C321/01). 

identify 

Several  Member  States  have  launched  such 
mechanisms,  for  example,  Belgium  and  the 
Netherlands.  Meanwhile,  the  Council’s  efforts 
simplification  priorities  have 
to 
triggered 
consultations  with 
(national)  business  organisations  and  other 
NGOs.  Such  methods,  if  they  can  be  put  on  a 
more  permanent  footing,  would  obviate  the 
need for a mechanism at EU level.  

extensive 

Efforts  at  achieving  better  regulation  will  only 
result  in  tangible  benefits  if  there  are  ways  to 
identify  bad  regulation.  Once  the  problems  are 
identified, steps can be taken to address them.  

Mechanism  for  reporting  on  particularly 
complex rules. 

- 

The Commission to draw up an “Internal 
test”  following 
Market  compatibility 
European 
the 
consultations  with 
Parliament and Member States. 

+ 

The  problem  of  possible 
incoherence  or 
conflict  between  national  and  EU  rules  has 
been addressed in a number of ways. First, the 
Commission is working with Member States to 

These  tests  would  act  as  guidance  for  national 
legislators at all levels of government to ensure 
that  their  actions  do  not  inadvertently  impinge 
on the free movement principles of the Treaty.  

EN 

42 
EN 

 
 
 
 
 
that 

they 

implement 

the  mutual 
ensure 
recognition  principle  in  their  national  law, 
where  possible  in  a  horizontal  way  (most  new 
Member  States  have  done  this).  Furthermore, 
in  its  Recommendation  on  Transposition  of 
law29, 
Internal  Market 
the  Commission 
encourages  Member  States  inter  alia  to  avoid 
“gold-plating” and take account of the Internal 
Market 
implementing 
directives.  Lastly,  the  Commission  plans  to 
propose  an  extension  of 
the  notification 
requirement  for  national  technical  rules  and 
regulations  to  services  (which  already  exists 
for  goods  and  information  society  services). 
These  approaches  –  taken  together  –  should 
risk  of  conflict 
reduce 
considerably 
between national and European rules. 

dimension  when 

the 

to  develop  with 

the 
Commission 
Member  States  indicators  to  measure 
progress 
towards  a  higher  quality 
regulatory  framework  for  the  Internal 
Market. 

+/- 

The  Commission  has  received  the  results  of  a 
major  study  on  possible  indicators  which  it  is 
it  has 
currently  analysing. 
developed  with 
a 
questionnaire for business which can be used to 
track  progress  over  time.  This  survey  will 
shortly be launched via the European Business 
Test Panel. 

In  parallel, 
the  Member  States 

It  is  important  that  policy-makers  have  some 
way  of  monitoring  and  measuring  progress  on 
better regulation, information which it can share 
with the general public. Such indicators will also 
help  identify  delays  or  bottlenecks  which  can 
then be tackled. 

29 

SEC(2004) 918. 

EN 

43 
EN 

 
 
 
                                                 
The  Commission  to  develop  a  coherent 
approach  to  the  question  of  legislative 
technique  and 
legal 
the  choice  of 
instrument in the Internal Market. 

+/- 

(i.e. 

This  concerns  particularly  the  use  of  different 
instruments 
harmonisation,  mutual 
recognition)  and  coherence  between  Internal 
Market  and  other  important  policies,  such  as 
consumer policy.  

It  is  important  that  the  different  instruments 
chosen  to  support  various  policy  objectives  are 
the  appropriate  ones  and  that  they  are  as  far  as 
possible  mutually  supportive.  There  is  certainly 
scope  for  improving  further  the  links  between 
Internal  Market  and  other  policies  and  for 
developing  the  kind  of  evidence-based  system 
which  will  help  policy-makers  to  decide,  for 
example, when harmonisation should be pursued 
(instead  of  mutual  recognition)  and  at  what 
level. 

9. 

Enforcing the rules 

Action 

Status  State of play 

Expected impact 

Meet  transposition  targets  as  set  by  the 
Spring European Council. 

- 

The  record  gets  worse  every  year  (deficit  has 
risen  from  2.3%  to  3.2%  since  2003  –  see 
annex I). Targets set by the European Council 
seem  to  have  little  to  no  effect.  The  Dutch 
presidency  has  now  asked  Ministers  to  notify 
by which date the national deficit will be at or 
below  the  European  Council’s  target.  It  is 
hoped  that  Ministers  will  want  to  deliver  on 
their personal commitment. 

Member  States  who  do  not  respect 
their 
transposition obligations deprive businesses and 
citizens  of  their  rights,  distort  competition  and 
prevent  the  exploitation  of  the  full  economic 
benefits  of  a  properly  functioning  Internal 
Market. 

Commission 

a 
The 
Recommendation 
“best 
practices”  to  speed  up  and  improve  the 

to 
setting  out 

issue 

+ 

The recommendation, which was based on best 
practices  provided  by  Member  States,  was 
published in July (SEC (2004)918). 

This is an attempt to promote learning amongst 
Member  States  to  help  them  organise  their 
internal  systems  for  the  implementation  of  EU 

EN 

44 
EN 

 
 
 
quality  of 
Market Directives. 

transposition  of 

Internal 

directives as efficiently as possible. This should 
translate into better transposition records. 

As a follow-up to the Competitiveness Council 
held  at  the  end  of  September  2004,  Member 
States  agreed  to  conduct  an  internal  screening 
of their administrative procedures and practices 
to  identify  those  best  practices  which  can  be 
used  to  improve  their  records.  Results  will  be 
reported in 2005. 

Organising 
dialogues 
“preventive” 
between  the  Commission  and  Member 
States  after  adoption  but  before  national 
implementation of Directives. 

+ 

The aim is to achieve better and more consistent 
implementation  of  the  rules  and  avoid  delays. 
Prevention  (i.e.  detection  of  problems  early)  is 
always better than cure (the Commission having 
to  take  legal  action  for  non-conformity  of 
national implementing measures). 

The  Commission  holds  transposition  “package 
meetings” with Member States to  clarify legal 
provisions  and  help  speed  up  implementation. 
These  have  been  held  with  most  EU-15 
Member  States;  and  will  start  with  the  new 
Member  States  as  from  2005.  In  parallel,  the 
increasingly  organises  more 
Commission 
technical  discussions  with  all  Member  States 
shortly after adoption of a directive to promote 
understanding 
consistent 
to 
include  market 
implementation.  Examples 
abuse,  occupational  pensions  and  financial 
conglomerates. 

secure 

and 

the 

that  a 
The  Commission  proposes 
standard  transposition  period  should  be 
set  within 
Inter-Institutional 
Agreement  on  Better  Regulation,  from 
which  departures  are  only  permitted  if 
this can be justified by the complexity of 
the measure. 

EN 

+ 

This  standard  transposition  period  (2  years 
maximum) is now set in the Inter Institutional 
Agreement (2003/C 321/01). 

This  will  make  the  transposition  process  and 
obligations  more  predictable  and  in  so  doing 
facilitate planning. 

45 
EN 

 
 
 
to  detect, 
This  will  establish  a  network 
investigate  and  stop  cross  border  rogue  traders. 
There  is  also  the  possibility  to  conclude  EU 
agreements with third countries to do the same. 

This  will  make  the  transposition  process  and 
obligations more transparent. 

in  practice.  Stronger 

The  aim  is  to  strengthen  administrative  co-
operation  so  that  the  Internal  Market  can  work 
better 
links  between 
national administrations of the different Member 
States  can  be  expected  to  contribute  to  greater 
confidence in each other’s systems and controls. 

for  a  Regulation  on  co-
Proposal 
operation  between  national  authorities 
responsible 
the  enforcement  of 
consumer protection laws. 

for 

to 

make 

The  Commission  to  propose  a  legal 
certain 
instrument 
implementation 
as 
electronic  notification  of  implementing 
measures  and  the  use  of  concordance 
tables, mandatory. 

aspects, 

such 

+ 

+/- 

The  Regulation  was  adopted  in  October,  2004 
(EC2006/2004).  Member  States  have  until 
December  2006  to  implement  its  provisions. 
facilitate 
Informal 
implementation has already started.  

cooperation 

to 

in 

the  above  mentioned 

This  has  proven  not  to  be  necessary  anymore 
as  the  mandatory  use  of  concordance  tables  is 
included 
Inter 
Institutional  Agreement.  A  large  number  of 
Member  States  notify  electronically  and  the 
Commission  expects  that  this  will  further 
increase in 2005. 

The Commission to publish the results of 
a  study  on  the  different  options  for 
improving  the  enforcement  of  Internal 
Market law. 

+/-  While  the  Commission  continues  to  take  the 
view  that  Member  States  should  take  more 
ownership  of  the  Internal  Market,  it  has 
decided  after  discussions  with  the  Internal 
to  pursue  a 
Market  Advisory  Committee 
bottom-up  rather  than  a  top-down  approach. 
This means that it will give priority to putting 
in  place  the  (information)  systems  to  enable 
amongst 
Member  States 
themselves, 
and 
providing  mutual  assistance.  It  will  start  with 
developing  a  system  that  can  support  the 
administrative  co-operation  needed  for  the 
services  directive.  Member  States  will  of 
course  want  to  ensure  that  their  internal 

to 
exchanging 

information 

co-operate 

EN 

46 
EN 

 
 
 
Internet  facility  setting  out  the  various 
redress  procedures  available  to  citizens, 
consumers and businesses. 

+/- 

organisation  takes  account  of  this  need  to  co-
operate. 

Access  to  a  wide  range  of  information,  advice 
and redress networks will be provided through 
the  Your  Europe  portal,  to  be  launched  in 
January  2005  (see  last  action  under  next 
chapter).  

This  will  allow  citizens,  consumers  and 
businesses to see the whole range of possibilities 
available  to  them  and  the  time  and  costs 
involved  in  each  option.  It  will  enable  them  to 
choose the means of redress most suited to their 
needs. 

10. 

Providing more and better information 

Action 

Status  State of play 

Expected impact 

Member  States  to  draw  up  national 
information plans. 

Member  States  to  take  responsibility  for 
national-level 
made 
available  through  the  Dialogue  with 
Citizens. 

information 

- 

+ 

Only four Member States have submitted such 
information  plans.  It  is  therefore  proposed  to 
pursue 
Internal  Market 
information in other ways, particularly through 
the Your Europe portal project (see below). 

cooperation  on 

The  pre-existing  information  has  now  been 
updated, with the exception of a small number 
of  documents  on  which  information  from  the 
responsible  Member  State  is  still  awaited.  In 
the  case  of  the  new  Member  States,  the 
exercise of preparing the necessary fact sheets 
has  been  launched.  In  order  to  ensure  that 
information remains up to date, Member States 
should  take  ownership  of  the  fact  sheets  and 
keep them up to date. 

Better information will lead to more citizens and 
the  many 
taking  advantage  of 
businesses 
opportunities  offered  to  them  by  the  Internal 
Market. 

The  Dialogue  provides  citizens  with  targeted, 
practical information about how to exercise their 
Internal market rights. It does so by providing a 
series of EU level guides dealing with different 
areas  (e.g.  living,  working  and  studying  in 
another  Member  State)  and  national  fact  sheets 
to 
providing  detailed 
exercise  Internal  Market  rights  in  individual 
Member States.  

instructions  on  how 

EN 

47 
EN 

 
 
 
the 
The  Commission 
Dialogue  web-sites  to  provide  better 
access to practical information.  

improve 

to 

The  Commission  to  extend  the  Citizens 
Signpost  Service  to  the  new  Member 
States. 

The  Commission  and  Member  States  to 
extend 
the  Euroguichet  (network  of 
European Consumer Centres (ECC). The 
aim  is  to  have  at  least  one  ECC  in  all 
MS. 

+ 

+ 

+ 

launched 

A  new  user-friendly  Dialogue  with  Citizens 
website  was 
2004 
(http://europa.eu.int/citizensrights). 
Improvements  to  the  Dialogue  with  Business 
website are being pursued in the framework of 
the Your Europe project (see below). 

in  May 

See above 

The  service  was  extended  to  new  Member 
States  on  1  May  2004.  About  500  enquiries 
were  received  from  residents  of  the  new 
Member States between May and November. 

Enable  citizens  from  new  Member  States  to 
the  service  which  provides 
benefit 
practical  advice  and/or  signposting 
to  an 
appropriate local, national, or EU organisation 

from 

The  Commission  is  working  on  extending  the 
network,  and  from  beginning  2005  merging  it 
with  the  European  Extra-Judicial  Network 
(EEJ-Net).  EEJ-Net  is  a  network  of  clearing 
houses  which  inform  and  assist  consumers  in 
using  alternative  disputes  resolution  schemes 
throughout the enlarged EU. 

Currently,  there  are  15  ECCs  in  13  Member 
States.  There  will  in  principle  be  a  contact 
point  of  the  merged  network  in  each  "old" 
Member  State  as  well  as  in  Norway  and 
Iceland.  Merged  centres  will  be  created  in 
some of the New Member States in 2005. 

is 

The  aim  of 
to  provide 
the  network 
information  to  consumers  and  assist  them  in 
pursuing  cross  border-complaints.  The  merger 
with  the  EEJ-Net  should  create  a  credible 
system 
trust  by 
that  all  stakeholders  can 
providing  consumers  with  a  seamless  and 
effective  service.  There  are  a  number  of  other 
significant  benefits  that  such  a  merger  could 
bring:  more 
and 
financial  management;  greater  profile  and 
coherence  of  the  actions  and  a  strengthening  of 
the  knowledge-base  (a  combined  structure  will 
enable  statistical  data  to  be  more  efficiently 
processed). 

administrative 

efficient 

The  Commission  to  set  up  a  top-class 
information  portal  bringing  together  the 

+ 

The first version of the Your Europe portal will 
be launched in January 2005. 

EN 

48 
EN 

The  new  portal,  which  is  financed  under  the 
between 
IDA 

(Interchange 

of  Data 

 
 
 
 
related 

Dialogue  and  the  Signpost  Service  with 
other 
as 
SOLVIT,  European  Consumer  Centres, 
Fin-Net and EEJ-Net. 

initiatives, 

such 

Administrations)  programme,  will  provide 
access  to  a  wide  range  of  practical  information 
for  citizens  and  businesses  at  both  EU  and 
national level as well as to advice and problem-
solving  services.  It  is  managed  by  an  editorial 
board  with  representatives  of 
the  Member 
States.  Work  will  continue  with  a  view  to 
developing  an  improved  version,  including  e-
services, by 2006. 

EN 

49 
EN