Proposal for a decision of the Council and of the Commission on the Community position within the Stabilisation and Association Council on the transition to the second stage of the Association between the European Communities and their Member States, of the one part, and the former Yugoslav Republic of Macedonia, of the other part, pursuant to article 5 of the Stabilisation and Association Agreement
Date: 2009-10-07
Institutions: Council of the European Union, European Commission
Subjects: European Community, North Macedonia, approximation of laws, capital market, provision of services, right of establishment, stabilisation and association agreement

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COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 7.10.2009 
COM(2009) 280 final 

Proposal for a 

DECISION OF THE COUNCIL AND OF THE COMMISSION 

on the Community position within the Stabilisation and Association Council on the 
transition to the second stage of the Association between the European Communities 
and their Member States, of the one part, and the former Yugoslav Republic of 
Macedonia, of the other part, pursuant to article 5 of the Stabilisation and Association 
Agreement 

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EXPLANATORY MEMORANDUM 

1. 

INTRODUCTION 

The Stabilisation and Association Agreement (SAA), establishing an Association between the 
European  Communities  and  their  Member  States,  of  the  one  part,  and  the  former  Yugoslav 
Republic of Macedonia, of the other part, entered into force on 1 April 2004. 

Article  5  paragraph  1  of  the  SAA  states  that  the  "Association  shall  be  realised  over  a 
maximum of ten years divided into two successive stages". The purpose of this division into 
successive stages is to "implement progressively the provisions of the SAA". 

Paragraph  3  of  the  same  article  stipulates  that  "four  years  after  the  entry  into  force  of  this 
Agreement,  the  Stabilisation  and  Association  Council  shall  evaluate  the  progress  made  and 
decide  about  the  passage  into  the  second  phase  and  its  duration,  as  well  as  on  any  possible 
changes  to  be  brought  about  as  regards  the  content  of  the  provisions  governing  the  second 
stage.  

In February 2008, following a letter from the government of the former Yugoslav Republic of 
Macedonia informing the Commission of its readiness to initiate preparations for the passage 
into the second stage, the Commission started to assess the progress made by the country in 
this respect. 

The  Commission  asked  the  former  Yugoslav  Republic  of  Macedonia  to  provide  up-to-date 
information  concerning  the  areas  where  specific  provisions  of  the  SAA  govern  the  second 
stage, i.e. establishment, supply of services and current payments and movement of capital. 

2. 

IMPLEMENTATION OF THE OBLIGATIONS UNDER THE FIRST STAGE OF THE SAA  

The Commission's analysis of the country's answers has led to the conclusion that the country 
is ready to comply with the obligations deriving from the transition to the second stage. In its 
2008 Progress  Report1, the  Commission stated that  "the country fulfils  all the commitments 
foreseen  under  the  first  stage  of  implementation  of  Title  V  (Movement  of  workers, 
establishment, supply of services, capital) of the SAA". 

3. 

OBLIGATIONS UNDER THE SECOND STAGE OF THE SAA   

The transition to the second stage of the Association has the following implications: 

Establishment 

•  Following article 48 paragraph 5(c) of the SAA, the Stabilisation and Association Council 

shall: 

1 

SEC (2008) 2695 final, The former Yugoslav Republic of Macedonia - 2008 Progress Report , 5. 11. 
2008, Brussels 

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–  examine the possibility to extend the right to acquire and enjoy ownership rights 
over  real  property  to  branches  of  Community  companies,  where  these  rights  are 
necessary for the conduct of economic activities for which they are established. 

Pursuant  to  this  article,  both  Parties  shall  discuss  the  extension  to  branches  of  Community 
companies  of  the  rights  that  are  during  the  first  stage  enjoyed  only  by  subsidiaries  of 
Community companies. 

Nevertheless,  the  former  Yugoslav  Republic  of  Macedonia  has  already  taken  some  steps  to 
liberalise its real estate market. A Community company can already freely acquire ownership 
rights over apartments and residential buildings through its branches following the adoption 
of the following legislation: 

•  Law  amending  the  Law  on  Ownership  and  Other  Real  Rights  (enacted  in  July 
2008,  Official  Gazette  No.  92/08),  laid  down  provisions  ensuring  that  natural 
persons and legal entities of the Community shall enjoy equal rights as citizens of 
the country as regards ownership of real estate, including construction land, and 
long-term lease of agricultural land.  

•  Law  on  Construction  land  (enacted  in  July  2008,  Official  Gazette  No.  82/08), 
which further specifies rights and obligations with respect to construction land. 

The  right  of  ownership  of  construction  land  by  Community  companies  requires  prior 
authorization, and restrictions on acquisition of agricultural land remain in place.  

•  Following article 54 of the SAA, the former Yugoslav Republic of Macedonia shall: 

–  have  the  possibility  to  introduce  or  maintain  measures,  which  derogate  from  the 
provisions  of the Chapter Establishment of  the  SAA  as  regards  establishment  of 
Community  companies  and  nationals  of  certain  industries,  only  with  the 
authorization  of  the  Stabilisation  and  Association  Council  and  under  conditions 
determined by the latter. 

These measures shall be reasonable and necessary to remedy the situation and shall cease to 
apply at the latest two years after the end of the first stage. 

Article  54  applies  to  industries,  which  are  undergoing  restructuring  (or  facing  serious 
difficulties), face the elimination (or a drastic reduction of the total market share) or to newly 
emerging industries in the country. 

Although  during  the  first  stage  of  the  Association,  the  former  Yugoslav  Republic  of 
Macedonia is free to apply these measures without the authorization by the Stabilisation and 
Association Council, it has never used this possibility.  

Supply of services 

•  Following article 55 of the SAA, the Stabilisation and Association Council shall:  

–  as from the second stage, take the measures necessary to implement progressively 
the  provisions  in  paragraph  1  of  this  article,  where  the  SAA  foresees  to  allow 
progressively  the  supply  of  services  by  Community  or  the  former  Yugoslav 

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Republic  of  Macedonia  companies  or  nationals  which  are  established  in  a  Party 
other than that of the person for whom the services are intended. 

Article  55  paragraph  2  provides  that,  in  step  with  the  liberalization  process  foreseen  in  the 
paragraph  above,  the  Parties  shall  permit  the  temporary  movement  of  natural  persons 
providing  the  service  or  who  are  employed  by  the  service  provider  as  key  personnel  (as 
defined in Art 53). This includes natural persons who are representatives of a Community or 
the former Yugoslav Republic of Macedonia company or national and are seeking temporary 
entry for the purpose of negotiating for the sale of services or entering into agreements to sell 
services for that service provider, where those representatives will not be engaged in making 
direct sales to the general public or in supplying services themselves.  

In taking the aforementioned measures, account will be taken of the progress achieved by the 
Parties  in  the  approximation  of  their  laws.  The  Stabilisation  and  Association  Council  may 
further  discuss  specific  details  as  regards  implementation  of  these  measures,  following 
progress made by the country in this area. 

In  the  light  of  Article  55  paragraph  3  of  the  SAA,  the  Parties  to  the  Agreement  should 
continue the ongoing review and simplification of requirements and procedures that apply to 
the provision of services in their territory. 

Current payments and movement of capital 

•  Following article 59 paragraph 2 of the SAA, the former Yugoslav Republic of Macedonia 

shall: 

–  ensure  free  movement  of  capital  relating  to  portfolio  investment  and  financial 

loans and credits with a maturity shorter than a year. 

The  former  Yugoslav  Republic  of  Macedonia  has  already  ensured  that,  upon  entry  into  the 
second  stage,  the  above-mentioned  provisions  will  be  implemented,  through  the  following 
legislation: 

•  Law on Foreign Exchange Operations (Official Gazette No: 34/2001; 49/2001 and 
103/2001,  latest  amendments  to  the  law  enacted  in  July  2008,  Official  Gazette 
No.81).  Article  59  of  this  law  (transitional  provisions)  explicitly  stipulates  that 
"upon  the  expiry  of  the  first  stage  of  the  Stabilization  and  Association  and 
Agreement"  the  current  restrictions  on  portfolio  investments  in  securities  by 
residents "shall cease to have effect".  

•  Abolishment  of  Decision  on  the  manners  and  the  conditions  of  non-residents 
operations  with  securities  (abolished  in  December  2007,  Official  Gazette  No. 
159/07),  by  which  the  country  ensured  liberalization  of  portfolio  investments, 
with the exception of certain restrictions to residents, which will automatically be 
repealed  with  the  passage  to  the  second  stage  (as  foreseen  by  Article  59  of  the 
Law on Foreign Exchange Operations, see above). 

•  Following article 60 of the SAA, the Stabilisation and Association Council shall: 

–  examine  ways  of  enabling  Community  rules  on  the  movement  of  capital  to  be 

applied in full. 

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Pursuant to this article, both Parties shall discuss further gradual approximation of the former 
Yugoslav  Republic  of  Macedonia's  legislation  with  the  acquis  in  the  area  of  movement  of 
capital, aiming to achieve full alignment. 

Under  this  provision,  the  Stabilisation  and  Association  Council  could  discuss,  during  the 
second stage, the issue of opening and holding of bank accounts abroad by the residents of the 
former  Yugoslav  Republic  of  Macedonia.  The  current  legislation  of  the  country  foresees 
certain limitations in this regard. This might in practice prevent residents of the country from 
undertaking  portfolio  investments  in  EU  Member  States,  notwithstanding  the  fact  that  this 
right has been granted to them by Article 59 paragraph 2 of the SAA.  

Gradual approximation of laws  

•  According  to  article  68  of  the  SAA,  the  former  Yugoslav  Republic  of  Macedonia  shall 
endeavour  to  ensure  that  its  laws  will  be  gradually  made  compatible  with  those  of  the 
Community. This gradual approximation should concern primarily internal market-related 
acquis as well as "other trade-related areas" in the first stage.  

However, the ongoing process of gradual approximation of legislation of the former Yugoslav 
Republic  of  Macedonia  with  the  EU  acquis  has  covered  all  areas  already  in  the  first  stage, 
similarly  as  with  all  other  candidate  countries,  including  those  where  approximation  was 
foreseen  to  take  place  only  in  the  second  stage.  This  gradual  process  of  approximation  will 
therefore be continued. 

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Proposal for a 

DECISION OF THE COUNCIL AND OF THE COMMISSION 

on the Community position within the Stabilisation and Association Council on the 
transition to the second stage of the Association between the European Communities 
and their Member States, of the one part, and the former Yugoslav Republic of 
Macedonia, of the other part, pursuant to article 5 of the Stabilisation and Association 
Agreement 

THE COUNCIL OF THE EUROPEAN UNION, 

THE COMMISSION OF THE EUROPEAN COMMUNITIES, 

Having  regard  to  the  Treaty  establishing  the  European  Community  and  in  particular  Article 
310 in conjunction with Article 300 (2), second subparagraph thereof, 

Having  regard  to  the  Treaty  establishing  the  European  Atomic  Energy  Community,  and  in 
particular the second paragraph of Article 101 thereof, 

Having regard to the proposal from the Commission, 

Whereas: 

(1) 

(2) 

(3) 

(4) 

(5) 

(6) 

The Stabilisation and Association Agreement between the European Communities and 
their Member States, of the one part, and the former Yugoslav Republic of Macedonia, 
of the other part, entered into force on 1st April 2004. 

Article  5  of  the  Stabilisation  and  Association  Agreement  provides  for  a  transition 
period of a maximum of ten years divided into two successive stages.  

The first stage began on 1st April 2004, date of entry into force of the Stabilisation and 
Association Agreement.  

Pursuant  to  Article  5,  paragraph  3,  of  the  Stabilisation  and  Association  Agreement, 
four years after the entry into force of this agreement, the Stabilisation and Association 
Council shall evaluate the progress made and decide about the passage into the second 
phase  and  its  duration,  as  well  as  on  any  possible  changes  to  be  brought  about  as 
regards the content of the provisions governing the second stage.  

The parties are determined to comply with the obligations deriving from the transition 
to the second stage of the Association. 

The  former  Yugoslav  Republic  of  Macedonia  has  taken  the  measures  necessary  to 
ensure  compliance  with  all  obligations  resulting  from  the  transition  to  the  second 
stage, 

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HAVE ADOPTED THIS DECISION: 

Single Article 

The decision to be taken by the Community within the Stabilisation and Association Council 
established  by  the  Stabilisation  and  Association  Agreement  between  the  European 
Communities and their Member States, of the one part, and the former Yugoslav Republic of 
Macedonia, of the other part, concerning the transition to the second stage of the Association, 
is the attached draft decision of the Stabilisation and Association Council. 

Done at Brussels,  

For the Council 
The President 

For the Commission 
The President 

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ANNEX  

DRAFT DECISION NO. …/09 OF THE STABILISATION AND ASSOCIATION 
COUNCIL, 

OF … 2009 

ON THE TRANSITION TO THE SECOND STAGE OF THE ASSOCIATION BETWEEN 
THE EUROPEAN COMMUNITIES AND THEIR MEMBER STATES, OF THE ONE 
PART, AND THE FORMER YUGOSLAV REPUBLIC OF MACEDONIA, OF THE OTHER 
PART, PURSUANT TO ARTICLE 5 OF THE STABILISATION AND ASSOCIATION 
AGREEMENT  

The Stabilisation and Association Council, 

Having  regard  to  the  Stabilisation  and  Association  Agreement  between  the  European 
Communities and their Member States, of the one part, and the former Yugoslav Republic of 
Macedonia, of the other part, and in particular its Article 5, paragraph 3, thereof, 

Whereas: 

(1) 

(2) 

(3) 

(4) 

(5) 

Article 5, paragraph 1, of the Stabilisation and Association Agreement provides for a 
transition period of a maximum of ten years divided into two successive stages. 

The first stage began on 1st April 2004, date of entry into force of the Stabilisation and 
Association Agreement. 

Pursuant to Article 5, paragraph 3, of the Stabilisation and Association Agreement, the 
Stabilisation  and  Association  Council  shall  evaluate  the  progress  made  and  decide 
about  the  passage  into  the  second  phase  and  its  duration,  as  well  as  on  any  possible 
changes  to  be  brought  about  as  regards  the  content  of  the  provisions  governing  the 
second stage. 

The parties are determined to comply with the obligations deriving from the transition 
to the second stage of the Association. 

The  former  Yugoslav  Republic  of  Macedonia  has  taken  the  measures  necessary  to 
ensure  compliance  with  all  obligations  resulting  from  the  transition  to  the  second 
stage, 

HAS DECIDED AS FOLLOWS : 

Article 1 

The  transition  to  the  second  stage  referred  to  in  Article  5  (3)  of  the  Stabilisation  and 
Association Agreement between the European Communities and their Member States, of the 
one  part,  and  the  former  Yugoslav  Republic  of  Macedonia,  of  the  other  part,  hereby  takes 
effect. 

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Article 2 

This  decision  shall  enter  into  force  on  the  day  of  its  adoption  by  the  Stabilisation  and 
Association Council. 

Done at Brussels, …. 2009. 

For the Stabilisation and Association Council 

The President 

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