COMMISSION STAFF WORKING PAPER Obstacles to access by Andorra, Monaco and San Marino to the EU's Internal Market and Cooperation in other Areas Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS EU Relations with the Principality of Andorra, the Principality of Monaco and the Republic of San Marino Options for Closer Integration with the EU
Date: 2012-11-20
Institutions: European Commission
Subjects: Andorra, European Economic Area, European integration, Monaco, San Marino

EUROPEAN 
COMMISSION 

Brussels, 20.11.2012  
SWD(2012) 388 final 

COMMISSION STAFF WORKING PAPER 

Obstacles to access by Andorra, Monaco and San Marino to the EU's Internal Market 
and Cooperation in other Areas 

Accompanying the document 

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

EU Relations with the Principality of Andorra, the Principality of Monaco and the 
Republic of San Marino 

Options for Closer Integration with the EU 

{COM(2012) 680 final}

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OBSTACLES TO ACCESS BY THE SMALL-SIZED COUNTRIES TO THE 
INTERNAL MARKET AND COOPERATION IN OTHER AREAS 

CONTENTS 

1. Chapter One: Free Movement of Persons and Visa-Free Travel  

1.1. Visa-Free Travel and Schengen 

1.2. Free Movement Of Persons, their Family Members, And Students 

1.3. Free Movement Of Persons in the EU’s Relations With Third Countries 

2. Chapter Two:  Free Movement of Services and Freedom of Establishment 

2.1. Key Obstacles 

2.2. Mutual Recognition of Professional Qualifications 

3. Chapter Three: Free Movement of Goods 

3.1. Andorra 

3.2. Monaco 

3.3. San Marino 

4. Chapter Four: Free Movement of Capital 

4.1. Capital Movements from the Small-Sized Countries into the EU 

4.2. Capital Movements from the EU into the Small-Sized Countries 

4.3.  How  Free  Movement  of  Capital  is  dealt  with  in  the  EU’s  Relations  with  Third 
Countries 

5. Chapter Five: Cooperation beyond the Four Freedoms 

5.1. Cooperation Agreements 

5.2. Common Foreign and Security Policy 

5.3. Specific Concerns of the Small-Sized Countries on Flanking and Horizontal Policies 

5.4. Other Areas of Cooperation 

5.5.  How  Cooperation  Beyond  the  Four  Freedoms  is  Dealt  with  in  the  EU’s  Relations 
with its Close Neighbours (EEA and Switzerland) 

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Purpose and Content of this Staff Working Paper 

This Staff Working Paper is a factual description of the relations between the EU and the 
Principality of Andorra, the Principality of Monaco and the Republic of San Marino, and 
is  based  partly  on  information  provided  by  these  countries  regarding  the  obstacles  they 
face in accessing the Internal Market. It is an indicative guide to these relations, not an 
exhaustive analysis. 

CHAPTER 1: FREE MOVEMENT OF PERSONS AND VISA-FREE 
TRAVEL 

This  chapter  covers  the  free  movement  of  persons,  both  for  the  purposes  of  short-term 
(up to three months) entry, transit and stay (section 1.1.); and for employment and long-
term  residence  (section  1.2.).  Finally,  it  summarises  how  the  EU  deals  with  the  free 
movement of persons in its relations with third countries (section 1.3.). 

1.1. Visa-Free Travel and Schengen 

Situation of the small-sized countries  
Citizens of the three small-sized countries (Andorra, San Marino and Monaco) are third-
country nationals. Nevertheless, they can enter and travel through the EU without a visa. 
Indeed, by virtue of Council Regulation 539/2001,1 nationals of the small-sized countries 
may enter, transit through, and travel freely within the Schengen zone for a period of up 
to  three  months  within  any  six  month  period  without  a  visa.  Although  not  yet  full 
members  of  Schengen,  Bulgaria,  Cyprus  and  Romania  apply  Regulation  539/2001. 
Nationals  from  the  three  small-sized  countries  can  therefore  travel  to  these  countries 
without a visa, under the same conditions that apply in the Schengen zone. Ireland and 
the UK are not members of Schengen and have their own entry requirements, but do not 
require a visa from citizens of the three small-sized countries for stays of no more than 6 
months as general visitor. 

Andorra 
As Andorra is not part of the Schengen area, border controls are carried out at its borders 
with the neighbouring Schengen states, France and Spain. However, Andorra coordinates 
its visa requirements with the Schengen area and accepts Schengen visas. For stays of EU 
citizens  in  Andorra  of  up  to  90  days  there  is  freedom  of  circulation  without  a  visa  or 
permit. For stays longer than 90 days a residence permit is required. 

Monaco 

1  

Council  Regulation  (EC)  No  539/2001  of  15  March  2001  listing  the  third  countries  whose 
nationals  must  be  in  possession  of  visas  when  crossing  the  external  borders  and  those  whose 
nationals are exempt from that requirement (OJ L 81, 21.3.2001, p. 1). 

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Monaco  is  not  a  Contracting  Party  to  the  Schengen  Convention.  However,  by  virtue  of 
two  bilateral  agreements  with  France2,  its  territory  is  within  the  external  borders  of  the 
Schengen area; consequently, EU and Monaco nationals can travel freely without a visa 
throughout the whole of the Schengen area, including Monaco. The agreements provide 
for  the  necessary  security  safeguards  and  the  establishment  of  controls  at  Monaco’s 
external borders, which are carried out by the French authorities at the authorised external 
border  crossing  points  Monaco-Heliport  and  Monaco-Port.  In  addition,  Monégasque 
residence permits are equivalent to Schengen visas. 

Unlike San Marino and Andorra nationals, Monégasque nationals are not permitted to use 
“EU” corridors at Schengen entry points. Monaco would appreciate if its nationals could 
benefit from the same treatment.  

San Marino 
Although San Marino is not a part of the Schengen area, no external border checks are 
carried  out  at  the  crossing  points  between  Italy  and  San  Marino.  San  Marino  does  not 
participate  in  other  elements  of  the  Schengen  acquis,  such  as  police  and  judicial 
cooperation3.  

Use of EU corridors 
A pragmatic approach has been agreed between the EU on the one hand, and Andorra and 
San  Marino  on  the  other,  on  the  facilitation  of  the  entry  of  their  nationals  into  the 
Schengen  area.  The  Council's  Strategic  Committee  on  Immigration,  Frontiers  and 
Asylum (SCIFA) agreed in 2004 that citizens of Andorra and San Marino may use “EU” 
corridors  at  Schengen  entry  points4.  These  measures  are  currently  applied  by  the 
Schengen  Member  States  on  a  pragmatic,  voluntary  basis5  and  are  not  based  on  any 
formal agreement with Andorra and San Marino. 

Problems faced by the small-sized countries 

1.  Nationals of the small-sized countries need a residence permit for stays in the EU 
Member States of over 3 months (please see under "free movement of persons", 
below); 

2.  Contrary  to  the  established  practice  mentioned  above  (which  does  not  apply  to 
Monégasque  nationals),  nationals  of  Andorra  and  San  Marino  are  not  always 
permitted to use the EU/EEA corridor at Schengen entry points.  

2  

3  

4  

Two agreements in the form of exchanges of letters between Monaco and France, signed the 15 
December 1997, adapted the section of the Convention on Good Neighbourly Relations of 18 May 
1963  on  the  entry,  stay  and  establishment  of  foreigners  in  Monaco  to  the  provisions  of  the 
Convention on the Implementation of the Schengen Agreement. 
Report of the Presidency on EU Relations with the Principality of Andorra, the Republic of San 
Marino and the Principality of Monaco, 14 June 2011, doc. 11466/11. 
Presidency  Note  to  the  Council's  Strategic  Committee  on  Immigration,  Frontiers  and  Asylum 
(SCIFA), no. 13020/04, Brussels, 1 October 2004. 
The Presidency note states that they are applied “without prejudice to the application of the regime 

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              of external border controls of third country nationals to the citizens of these countries”. 

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3.  Nationals of the small-sized countries are sometimes asked to show a visa at the 
airport  (by  the  airline  desk  or  immigration  officials)  when  they  want  to  board  a 
plane to return, via EU territory, to their home country from outside Europe. This 
can cause inconvenience and delays. 

1.2. Free Movement of Persons, their Family Members, and Students 

Situation of the small-sized countries  
Given  that  citizens  of  the  three  small-sized  countries  are  not  EU  citizens  and  cannot 
benefit from all the rights that EU law provides for EU citizens, nationals of the small-
sized  countries  require  a  permit  to  work,  study  or  reside  in  the  EU  Member  States. 
Currently, the conditions for obtaining a permit vary, depending on the Member State and 
type  of  employment.  Immigration  is  a  competence  shared  between  the  EU  and  the 
Member  States.  Admission  of  third-country  nationals  is  decided  at  national  level, 
whereas some rights and conditions are harmonised at EU level. Andorra and San Marino 
have cooperation agreements with the EU but their scope as regards rights on movement 
of  workers  is  limited  to  non-discrimination  as  regards  conditions  of  employment6.  The 
Cooperation  and  Customs  Union  Agreement  with  San  Marino  also  provides  for  a  legal 
basis for implementing provisions to set up a limited set of social security coordination 
rules between the EU Member States and San Marino7.  

Bilateral agreements 
Andorra  
Andorra has concluded bilateral agreements with France, Spain and Portugal on the free 
movement  of  persons.  These  agreements  cover  the  right  of  residence  and  professional 
establishment  of  their  citizens  including  student  mobility  and  mutual  recognition  of 
professional qualifications, as well as social security coordination. Andorran workers and 
students need a work and residence permit (or simply a residence permit in the case of 
students).   

Monaco 
Monaco  has  concluded  a  bilateral  agreement  with  France  on  the  free  movement  of 
persons which provides that Monégasque nationals do not require a permit to work, study 
or reside in France. Monaco also has bilateral agreements with France on social security 
coordination  and  the  mutual  recognition  of  professional  qualifications.  What  is  more, 
Monaco signed, on 12 February 1982, a general social security Convention with Italy. 

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7  

Article  5  of  the  Cooperation  Agreement  with  Andorra,  and  Article  20  of  the  Cooperation  and 
Customs Union Agreement with San Marino. 
On 30 March 2012 the Commission adopted a Proposal for a Council Decision on the position to 
be taken by the European Union within the Cooperation Committee established by the Agreement 
on  Cooperation  and  Customs  Union  between  the  European  Economic  Community  and  their 
Member States, of the one part, and the Republic of San Marino, of the other part, with regard to 
the adoption of provisions on the coordination of social security systems (COM(2012) 157 final). 
During the EPSCO Council of 4 October 2012, the Council reached a political agreement on this 
proposal. Once it is adopted, the discussions will start with San Marino in view of the adoption of 
the Decision of the Cooperation Committee and only then these provisions will enter into force. 

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San Marino 
San  Marino  has  concluded  a  bilateral  agreement  with  Italy  on  the  free  movement  of 
persons 8. This allows San Marino nationals to work and reside in Italy. 

Problems faced by the small-sized countries 
Nationals of the small-sized countries face the usual immigration procedures if they want 
to  work,  reside,  bring  their  families  to  or  study  in  the  EU.  In  particular,  their  nationals 
have none of the following rights enjoyed by EU citizens9:  

•  Freedom  of  movement  for  employment  purposes  throughout  the  EU;  the 
experience of San Marino nationals10 shows that the complexity of procedures to 
obtain a residence permit is an obstacle to obtaining employment in EU Member 
States. It is difficult to obtain from businesses a prior declaration of employment, 
which  is  necessary  in  order  to  apply  for  a  stay  permit.  For  stays  over  three 
months,  a  visa  or  residence  permit  is  required.  This  is  granted  on  the  basis  of 
specific  criteria,  such  as  the  availability  of  sufficient  economic  means  and 
accommodation;  

•  The right to stay in the EU after the end of economic activity; for example, if a 
San Marino national is already in the EU when his stay permit for the purposes of 
employment expires, he has to return to San Marino to regularise his position; 
•  The  right  of  residence  and  pursuit  of  an  economic  activity  for  members  of  the 

family;  

•  Free movement of persons for the purposes of education and research; 
•  Access to EU research funding; 
•  Social  security  coordination11  and  the  mutual  recognition  of  professional 

qualifications12. 

8  

9  

Bilateral Agreement on Amity and Good Neighbourhood of 31 March 1939 (law of 6 June 1939, 
no.1320 (1)). 
Unless specified otherwise, provided by Directive 2004/38/EC of the European Parliament and of 
the  Council  of  29 April  2004  on  the right  of  citizens of  the  Union  and their  family  members  to 
move and reside freely within the territory of the Member States (OJ L158, 30.4.2004, p. 77).. 

10         Source: ‘List of Problems encountered by San Marino and deriving from its status as a non-EU 

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12  

Member State’, 2011, p.7.  
Within  the  EU,  the  relevant  legislation  is  Regulation  883/2004  on  the  Coordination  of  Social 
Security Systems. The social security systems of the three countries are not coordinated with the 
security systems of the Member States; however, as the case may be, nationals of the three states 
can  benefit  from  coordination  between  the  legislation  of  Member  States  (Regulation  (EU)  No 
1231/2010  of  the  European  Parliament  an  of  the  Council  of  24  November  2010  extending 
Regulation  (EC)  No  883/2004  and  Regulation  (EC)  No  987/2009  to  nationals  of  third  countries 
who  are  not  already  covered  by  these  Regulations  solely  on  the  ground  of  their  nationality  (OJ 
L344, 29.12.2010, p. 1 ).  
Within  the  EU,  Directive  2005/36/EC  of  the  European  Parliament  and  of  the  Council  of  7 
September  2005  on  the  recognition  of  professional  qualifications  (OJ  L255,  30.9.2005,  p.  22) 
confers  on persons having acquired their professional qualifications in a Member State the right, 
under the conditions laid down in the Directive,  to have access to the same profession and pursue 
it in another Member State with the same rights as nationals. 

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Conditions for EU nationals to work and reside in the small-sized countries 

Andorra 
Frontier  workers,  temporary  workers,  active  residents  and  non-active  residents  who  are 
nationals of one of the neighbouring countries of Andorra, a Member State of the EU, or 
one of the EEA EFTA countries, are given priority as regards immigration authorisations. 
Nationals  of  other  countries  are  subject  to  the  immigration  requirements  established  by 
the international treaties in force in Andorra.  

Authorisations are granted subject to the quotas approved by the government. In the event 
of acceptance, the requester receives an authorisation for one year, renewable three times 
for  a  period  of  two  years,  which  includes  the  right  to  have  medical  insurance  cover, 
family reunification from the end of the first year and access to an employment agency in 
case  of  unemployment.  From  the  end  of  the  seventh  year,  the  renewal  is  granted  for  a 
period of ten years.  

Anyone applying in order to obtain an immigration authorisation for studies or to carry 
out  research  of  scientific  or  similar  nature  can  reside  in  the  country  only  during  the 
duration of the studies or research for which they have received this authorisation. A new 
law  on  Foreign  Investment  entered  into  force  July  19,  2012  and  opens  the  liberal 
professions to nationals of third countries provided that Andorrans have reciprocal rights 
in those countries. Moreover, a new law modifying the Law on Immigration (9/2012) was 
adopted in May 2012 and establishes two requirements, both of which must be fulfilled 
by passive residents: 

- 

- 

to invest an amount of 400.000 euros in the country  

to reside in Andorra for at least 90 days per annum 

It also introduces two new categories of residence permit: 

1.  A residence permit for professionals with an international projection that can be 
granted to foreign individuals with a main permanent residence in Andorra of at 
least 90 days per annum and who carry out a professional activity 

2.  A residence permit by reason of scientific, cultural and sportive interest that can 
be granted to foreign individuals who have a good international reputation in the 
fields  of  science,  culture  and  sports,  and  who  have  their  main  residence  in 
Andorra at least 90 days per annum. The requester must deposit a sum of 30,000 
euros with the INAF (Andorra’s entity for banking supervision) as well as 7,000 
euros  for  each  dependant  (eg  spouse,  child).  This  money  stays  blocked  without 
the payment of interest until the person’s departure. 

Monaco 
To enter and/or reside in Monaco 

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The agreement between Monaco and France of 15 December 199713 provides inter alia  
that: 
•  Any person of foreign nationality who wishes to enter the territory of Monaco and to 
stay  there  for  a  period  not  exceeding  three  months  must  possess  a  document  that 
would be required to enter France (passport, travel or identity document); 
•  French nationals must simply be holders of a French national identity card.  

European Economic Area (EEA) nationals, including EU Member State citizens, do not 
require  a  visa  to  reside  in  Monaco.  However,  to  obtain  a  residence  permit  (carte  de 
séjour),  they  must  apply  to  the  Residents  Section  of  the  Directorate  of  Public  Security 
and submit the necessary documents. 

To work in Monaco as an employee 
As Monégasque nationals are a minority in their own country, Monaco considers that the 
job  priority  system  is  the  only  way  for  Monégasque  nationals  to  live  and  work  in 
Monaco14.  Foreign  nationals  (including  EU  citizens)  wanting  to  work  as  employed 
persons in Monaco require a work permit and every change of job requires a new permit. 
An  employer  who  wishes  to  hire  or  re-hire  a  foreign  national  must  obtain  written 
authorisation before the person starts work. This authorisation can be refused if priority 
jobseekers,  as  defined  by  the  law  of  Monaco,  hold  the  same  qualifications.  Foreign 
nationals  require  a  job  offer,  in  the  form  of  an  employment  commitment  from  the 
Employment Service, in order to obtain a residence permit. 

Unemployment 
Persons  made  redundant  and  residing  in  Monaco  must  register  with  the  Employment 
Service  in  order  to  receive  unemployment  benefits.  Foreign  nationals  must  present 
themselves with a redundancy letter and a valid residence card. 

San Marino 
San  Marino  immigration  law  makes  no  distinction  between  EU  citizens  and  foreign 
nationals. EU citizens and other foreign nationals may freely enter, circulate and stay in 
San  Marino  for  up  to  20  days  without  a  visa.  For  stays  of  between  21  and  90  days,  a 
tourist permit is required. Beyond 90 days, a residence or cohabitation permit (permis de 
séjour) is required. Holders of such a permit have the same rights as San Marino citizens, 
except  voting  rights.  They  can  therefore  look  for  and  accept  offers  of  employment, 
subject  to  registration  in  the  job  seekers  list.  However,  the  laws  of  San  Marino  do  not 
automatically  grant  the  right  of  family  reunification  to  migrant  workers  and  their 
families. 

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14  

Exchange  of  letters  dated  15  December  1997  between  the  Monaco  and  French  authorities 
modifying certain provisions of the France-Monaco Convention on Neighbourly Relations of 18 
May 1963. 
Monégasque nationals account for only 21.6% of residents and over 80% of workers employed in 
Monaco reside outside Monaco. 

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Residence  and  cohabitation  permits  are  not  subject  to  a  quota  system  but  a  special 
authorisation to reside in San Marino is issued by the competent San Marino authorities 
upon  request.  A  quota  system  applies  only  to  certain  kinds  of  temporary  and  seasonal 
jobs. These kinds of stay temporary and seasonal permits (permis de séjour temporaire) 
are granted subject to quotas set annually by the government based on real needs, after 
having heard the opinion of the economic and social categories involved.  

As regards safety, social security and healthcare, the laws of San Marino provide for the 
recognition of all the benefits provided for in the main EU legislative acts. San Marino 
has also entered into specific Agreements with a number of countries (Belgium, France, 
Italy and Switzerland). 

The  EU-San  Marino  Cooperation  and  Customs  Union  Agreement  establishes  a  regime 
free of any discrimination between San Marino citizens and EU citizens as regards work 
conditions, salaries and social security. It also provides for the right to the aggregation of 
the  periods  of  contribution  accrued  in  different  contracting  Parties.  Foreign  workers, 
including  EU  citizens,  in  possession  of  a  regular  residence  permit  (frontier  workers 
excluded)  and  who  are  employed  enjoy  the  same  benefits  guaranteed  to  San  Marino 
employees.  As  regards  the  protection  of  the  rights  of  employees  and  self-employed 
persons  to  supplementary  pension  schemes,  San  Marino  has  adopted  a  legislative 
measure (Law no.191 of 6 December 2011), which establishes a Supplementary Pension 
Fund  (called  FONDISS).  All  workers,  whether  employees  or  self-employed  persons, 
whether  San  Marino  nationals  or  foreigners,  who  are  entered  in  the  first-pillar  pension 
fund automatically join the Supplementary Pension Fund if they have not reached the age 
of 50 when the above-mentioned law enters into force. However, this is without prejudice 
to the right of the workers who are already 50 years of age to join the fund on a voluntary 
basis. 

Every San Marino or foreign citizen who is registered with the national health and social 
security service and resides in San Marino receives a health system card, giving access to 
medical and health facilities. 

1.3. Free Movement of Persons in the EU’s Relations with Third Countries 

As  a  means  of  comparison,  this  section  outlines  how  the  free  movement  of  persons  is 
dealt with in the EU's relations with other (non-EU) west European countries. 

1) Schengen 
Norway and Iceland are Parties to the Schengen Agreement since 1996, and are part of 
the  Schengen  area.  When  the  Schengen  acquis  was  integrated  into  the  EU,  the  special 
relationship with these countries was maintained15. 

15  

Article 6 of Protocol No 19 on the Schengen acquis integrated into the framework of the European 
Union. 

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Switzerland  and  Liechtenstein  are  associated  to  the  implementation,  application  and 
development of the Schengen acquis and form part of the Schengen area16. 

2) Free Movement of Persons 

European Economic Area (EEA) 
The Agreement on the European Economic Area (EEA), provides for the free movement 
of persons under identical conditions as within the EU. This includes the right to entry, 
residence  (Directive  2004/38/EC  has  been  incorporated  into  the  EEA  Agreement)  and 
access  to  work  as  employed  persons17.  The  EEA  Agreement  also  provides  for  social 
security coordination and the mutual recognition of qualifications. The EEA Agreement 
provides for the same transitional arrangements as regards the free movement of workers 
as apply within the EU for workers from Member States that have acceded recently to the 
EU and to whom the scope of the EEA Agreement has been extended. 

Free Movement of Persons Agreement with Switzerland  
The  Free  Movement  of  Persons  Agreement  (FMPA)  with  Switzerland  provides  for  the 
free movement of persons under broadly rather similar conditions as within the EU. This 
includes the right to entry, residence, access to work as employed persons and the right to 
stay in the territory of the Contracting Parties, as well as provide cross-frontier services18. 
However, Directive 2004/3819 has not yet been incorporated into the Agreement, so that 
the  current  legal  situation  closely  mirrors  the  state  of  EU  law  on  the  free  movement  of 
EU citizens as it existed before that Directive was adopted. The Agreement also provides 
for  social  security  coordination  and  the  mutual  recognition  of  qualifications.  Article  10 
FMPA  contains  transitional  provisions,  including  a  safeguard  clause,  that  allow 
Switzerland  to  apply  quantitative  limitations  for  employed  and  self-employed  workers, 
control  on  priority  of  workers  integrated  into  the  labour  market  and  wage  and  working 
conditions  applicable  to  EU  nationals  during  a  transitional  period  after  the  entry  into 
force of the agreement and after extension of the agreement to new EU Member States.   

16  

17  

18  
19  

Agreement with Switzerland of 26 October 2004 (OJ L53, 27.2.2008, p. 52) and Protocol on the 
accession of Liechtenstein to this agreement of  (OJ L83, 26.3.2008, p. 3). 
Liechtenstein  may  apply  quantitative  restrictions  on  new  residence  permits  for  economically 
active and economically non-active persons. This arrangement will be reviewed every five years.  
Under the conditions stipulated in Article 17 of the Agreement. 
Directive 2004/38/EC of the European Parliament and of the Council of 29 April 2004 on the right 
of citizens of the Union and their family members to move and reside freely within the territory of 
the Member States (OJ L158, 30.4.2004, p. 77). 

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CHAPTER 2: FREE MOVEMENT OF SERVICES AND FREEDOM 
OF ESTABLISHMENT 

The small-sized countries face significant obstacles in the area of the free movement of 
services and freedom of establishment. These freedoms are not provided for in any of the 
agreements  concluded  by  the  EU  with  the  small-sized  countries.  While  there  are  no 
restrictions on companies from the small-sized countries establishing a business activity 
or  investing  in  an  EU  Member  State  when  they  operate  in  the  EU  from  a  subsidiary 
established  as  a  company  in  a  Member  State,  such  establishment  may  be  subject  to 
authorisation  if  no  separate  legal  person  is  created;  indeed,  there  is  no  right  of 
establishment for third country legal persons (as for natural persons).  

in  conformity  with  EU  and  national 

Once established in one Member State, the entity in question is free to provide services in 
all  other  Member  States 
law,  without 
discrimination20. However, in the case of companies based in the small-sized countries, 
establishment  in  the  EU  may  increase  their  costs  due  to  the  need  for  an  economic 
presence  and  associated  administrative  procedures.  A  presence  in  the  EU  may  also  be 
necessary  to  meet  the  requirements  of  EU  legislation  on  consumer  protection  (eg  after-
sales  customer  service  based  in  the  EU).  These  constraints  may  particularly  discourage 
small and micro-enterprises from doing business in the EU21. 

2.1. Key Obstacles 
In  addition,  key  obstacles  and  specificities  raised  by  the  small-sized  countries  are 
summarised below.  

Andorra 
Andorran  citizens  do  not  have  access  to  the  liberal  professions  in  the  EU  (lawyers, 
architects,  engineers,  doctors  etc)  and  cannot  establish  themselves  as  self-employed 
persons.  The  only  exceptions  are  France,  Spain  and  Portugal,  with  which  Andorra  has 
signed  bilateral  agreements  allowing  their  nationals  to  establish  themselves  in  Andorra 
for the purpose of exercising an activity in the liberal professions (eg lawyers, architects, 
engineers,  doctors).  Reciprocally,  Andorrans  benefit  from  the  same  rights  in  the 
aforementioned three countries22.  

20  

21  

22  

Although,  as  for  EU  nationals  and  companies,  depending  on  the  kind  of  service  this  may  be 
subject to certain safeguards, such as pro forma registration with a professional body. 
As regards natural persons, nationals of the small-sized countries need a permit to reside and work 
(be  it  as  a  worker  or  a  self-employed  person)  in  an  EU  Member  State  (see  Chapter  on  free 
movement  of  persons).  In  practice,  immigration  law  may  therefore  constitute  a  barrier  to  the 
provision of services by companies or persons established in the small-sized countries.  
Article 7 Trilateral agreement; Law 6/2008 of 15th May on the exercise of liberal professions and 
professional  associations  (Llei  6/2008,  del  15  de  maig,  d’exercici  de  professions  liberals  i  de 
col·legis i associacions professionals). 

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Andorra  has  expressed  its  wish  to  obtain  the  freedom  of  establishment  for  Andorran 
companies  within  the  internal  market  to  support  its  economic  growth.  Nevertheless, 
Andorra has highlighted that it would like to open its own market for establishment and 
services  only  gradually  and  on  the  basis  of  transitional  periods  in  order  to  enable  a 
gradual process of adaptation in the various sectors. 

Andorra  would  also  like  to  become  more  integrated  into  the  EU’s  internal  market  for 
transport services23. Andorran law is in this area is already partly based on the EU acquis. 
Andorra  has  indicated  that  multi-modal  policies  for  transport  are  also  compatible  with 
Andorran  interests.  Andorra  has  bilateral  agreements  with  France,  Spain  and  Portugal 
that  regulate  the  road  transport  of  passengers  and  goods  in  the  contracting  Parties. 
Concerning  road  cabotage,  there  is  a  trilateral  agreement  with  France  and  Spain  and 
bilateral agreements with other countries. The Andorran government is also studying the 
possibility of creating a heliport.  

Driving licenses 
Concerning  the  recognition  of  driving  licenses,  currently  Andorra  recognizes  and 
exchanges driving licenses of the countries with which a bilateral  Agreement  has been 
concluded. Andorra has expressed a wish to find a more general solution to this problem 
considering the small number of Andorran driving licenses exchanged so far.  

Monaco 
The  territory  of  Monaco  is  integrated  into  the  EU  Customs  Union.  Nevertheless, 
companies  of  this  country  do  not  have  access  to  the  EU  road  haulage  market24.  The 
activities  of  these  transport  companies  are  limited  and  encounter  many  difficulties  in 
neighbouring countries, whereas  Monaco  does not impose any restrictions  on European 
transport companies. In the absence of an agreement on that matter with the EU, bilateral 
agreements  would  need  to  be  negotiated  separately  with  each  of  the  Member  States, 
which could be a cumbersome process.  

In  the  field  of  air  transport,  Monaco  was  a  member  of  the  Joint  Aviation  Authorities 
(JAA) and has expressed a wish to join the European Safety Aviation Agency (ESAA) as 
a European third country, in accordance to article 66 of the ESAA rules establishing the 
Agency.  The  civil  aviation  is  under  the  process  of  standardization  in  order  to  meet  the 
required  criteria  of  the  ESAA  and  Monaco  envisages  the  signing  of  an  agreement  with 
the Commission. Furthermore, Monaco Civil Aviation was accredited by EASA in June 
the  Agency. 
2011 

in  accordance  with  article  66  of 

the  rules  establishing 

Monaco  would  like  to  conclude  an  agreement  with  the  EU  that  would  permit 
Monégasque  companies  to  have  the  same  freedoms  as  European  companies  have  in 
Europe  (France  and  Italy  in  particular)  and  Switzerland  and  allow  Monégasque 

23  
24  

Memorandum on relations between Andorra and the EU, p.4. 
Regulation (EC) No 1072/2009 of the European Parliament and of the Council of 21 October 2009 
on  common  rules  for  access  to  the  international  road  haulage  market  (recast)  (OJ  L300, 
14.11.2009, p.72). 

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companies  and  civil  aviation  to  be  recognised  and/or  accredited  at  European  level  in 
matters of security and safety. 

Regarding financial services, Monaco became an official member of the SEPA in March  
2009. As Monaco is not an EU Member State, companies established in Monaco are not 
allowed to provide services in the EU. For instance, financial services including UCITS 
under  Monégasque  law,  cannot  be  marketed  in  the  EU  or  be  included  in  European 
products.  Similarly,  financial  advice  and  portfolio  management  cannot  be  supplied  by 
providers established in Monaco for clients in the EU. 

San Marino 

Financial services and related issues 
San Marino has identified several problems in the area of financial services and related 
areas. Only some of these problems fall within EU competence, whereas others relate to 
inter alia international financial rules and the practices of private companies. Where they 
fall  within  EU  competence,  the  problems  raised  by  San  Marino  concerning  financial 
services  and  related  issues  can  only  be  partly  solved  in  the  framework  of  existing 
agreements. 

Over  the  past  years,  San  Marino  has  undertaken  a  process,  which  is  still  ongoing,  of 
gradual  adjustment  of  its  economic  and  financial  system  to  international  and  EU 
standards.  Cooperation  has  been  strengthened  both  with  international  bodies  (IMF, 
OECD, Moneyval, the EU) and individual countries, in particular EU Member States in 
the areas of anti-money laundering, corporate law, tax cooperation, banking supervision 
and,  more  generally,  banking  and  financial  law.  In  particular,  in  the  revised  Monetary 
Agreement  with  the  EU,  San  Marino  commits  itself  to  comply  with  the  EU  acquis  on 
banking and financial matters according to a specific timetable. 

in 

that, 

this  context, 

Obstacles in other areas 
San Marino has stated that its nationals and companies do not have the right to provide 
services, including notary services, in the EU because there is no agreement with the EU 
on  the  right  of  establishment  or  the  cross-border  provision  of  services.  San  Marino  has 
to  provide 
highlighted 
telecommunication  services  in  the  EU  under  the  same  conditions  as  EU  operators, 
mentioning  in  particular  the  EU  licence  issuing  regime  which  entails  additional 
formalities and therefore costs for its operators. San Marino also regrets that, as a non-
Member State, it is also excluded from EU policy initiatives aimed at improving telecoms 
services in the EU Member States.  
As  regards  the  transport  of  persons,  San  Marino  is  considering  becoming  a  Party  to 
international  agreements,  including  the  Interbus  Agreement25.  The  part  of  the  acquis 
related to railway transport is not applicable to San Marino, as no international railway 

its  companies  are  not  permitted 

25  

Taking  into  account  the  current  situation  of  San  Marino,  characterised  by  the  existence  of  a 
number of bilateral agreements with EU Member States. 

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connections exist. Moreover, San Marino has expressed a possible interest in joining the 
European Aviation Safety Agency (EASA).  

2.2. Mutual Recognition of Professional Qualifications26 
their  professional 
The  small-sized  countries  currently 
qualifications are not systematically recognised by the EU Member States. Under the EU 
system,  Directive  2005/36/EC  aims  to  achieve  the  mutual  recognition  of  professional 
qualifications27 in order to realise the free movement of persons and services in the EU’s 
internal market.  

face  obstacles  because 

26  

27  

Situation in the EEA: Directive 2005/36/EC on the recognition of professional qualifications has 
been  incorporated  into  the  EEA  Agreement,  with  some  adaptations  and  exceptions.  Joint  EEA 
Committee Decision 142/2007.  
EU law distinguishes between professional and academic qualifications, the latter not being an EU 
competence. 

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CHAPTER 3: FREE MOVEMENT OF GOODS 

Bilateral trade in goods between the EU and the three small-sized countries is facilitated 
by  customs  union  agreements:  Monaco  has  one  with  France  and  is  part  of  the  customs 
territory  of  the  EU;  whereas  San  Marino  and  Andorra  both  have  a  customs  union 
agreement with the EU. However, the small-sized countries face market access obstacles 
in the form of technical barriers to trade: in order to be placed on the EU market, goods 
from these countries must meet the EU’s internal market standards and rules, such as on 
product safety and consumer protection. 

Companies based in the small-sized countries may face obstacles to selling their goods in 
the  EU,  even  if  the  country  where  they  are  established  has  unilaterally  taken  over  the 
relevant  EU  acquis  -  the  existence  of  an  agreement  with  the  EU  is  in  most  cases  still 
necessary,  notably  to  recognise  the  legislation  and  its  implementation  as  meeting  EU 
standards.  What  is  more,  even  where  a  small-sized  country  has  an  agreement  with  the 
EU, it needs to be updated to keep pace with the evolution of EU legislation. 

In  the  case  of  Andorra  and  San  Marino,  standard  customs  procedures,  including  a 
declaration, apply. These formalities may occasionally cause delays. 

3.1. Andorra  
To  date,  the  Customs  Union  Agreement  concluded  in  1990  between  the  Principality  of 
Andorra  and  the  EEC,  only  covers  industrial  goods28  produced  in  Andorra  or  third 
country  industrial  products  that  are  put  into  free  circulation  there.  The  Agreement 
provides  for  the  elimination  of  customs  duties,  charges  having  equivalent  effect  and 
quantitative restrictions in trade between the two signatory parties, on the one hand; and 
for the adoption by Andorra of the EU acquis on imports vis-à-vis third countries in the 
customs union and the implementation of measures under the trade policy applied by the 
EU to imports, on the other hand.   

The Agreement also establishes a specific regime for agricultural products (Chapters1-24 
HS)  not  covered  by  the  Customs  Union.  Andorran  agricultural  products  that  meet  the 
conditions  set  out  in  "Appendix  origin"  part  of  the  agreement  are  exempt  from  import 
duties  when  entering  the  EU.  In  return,  Andorra  provides  a  tariff  preference  of  60%  of 
the autonomous rate applied to manufactured tobacco in the EU and will not adopt a an 
import scheme more favourable to goods from third countries than to goods originating in 
the EU.  

Andorra considers the possibility of extending the scope of the customs union to cover all 
Harmonized System (HS) chapters so as to include agricultural products (whether or not 
processed) of HS Chapters 1-24 which are currently only free from import duties when 
they originate in Andorra. 

28  

Chapters 25 to 97 of the Harmonized Commodity Description and Coding System (HS). 

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Furthermore  Andorra,  signed  on  15  May  1997  in  Brussels  a  Protocol  on  veterinary 
matters,  which  has  led  to  tangible  improvements  in  the  conditions  applicable  to  cross-
border  trade  in  live  animals  and  products  of  animal  origin.  Nevertheless,  Andorra  has 
commented 
including  difficult  and  complicated 
administrative  formalities.  Moreover,  Andorra would  like  greater  clarity  concerning  the 
treatment  of  the  exports  of  products  of  vegetable  origin  in  the  EU  territory  after  the 
adoption of the Law of Animal’s Health and Food Security equivalent to EU legislation. 

that  some  problems 

remain, 

With  a  view  to  ensuring  the  smooth  flow  of  bilateral  trade,  the  EU  and  Andorra 
concluded,  in  December  2010,  a  Protocol  extending  the  scope  of  the  customs  union 
agreement to customs security measures. This Protocol stipulates that Andorra shall apply 
customs security measures that are equivalent to the ones in force in the EU. In return, 
some of the security measures - such as the obligation for  traders to present  pre-arrival 
and pre-departure information to customs - are waived for trade between Andorra and the 
EU. 

3.2. Monaco 
Having regard to the 1963 Customs Convention between the Principality of Monaco and 
France29, Monaco is integrated into the Community Customs territory since 196830. The 
French  authorities  are  responsible  for  customs  inspection  and  clearance  and  for  the 
levying  of  customs  duty  for  Monaco.  Monaco  has  therefore  to  apply  EU  customs  law 
(Customs Code and related EU customs regulations such as the common customs  tariff 
on  imports  from  third  countries).  Customs  declarations  are  not  requested  for  the 
movement of goods between Monaco and the Member States of the Union.  

In  addition,  the  Franco-Monégasque  agreements  signed  on  18  May  1963  and  26  May 
2003 provide that value added tax is set and collected at Monaco on the same basis and 
using  the  same  rate  as  in  France.  The  agreements  created  a  shared  account  of  the  tax 
levied in France and Monaco. Monaco is integrated into the European System of VAT. 

Preferential  trade  agreements  concluded  by  the  EU  with  third  countries  may  cause 
questions/difficulty  for  goods  originating  in  Monaco.  The  territorial  scope  of  those 
agreements  is  often  the  territory  of  the  EU  and  not  the  territory  of  the  Customs  Union. 
Therefore,  Monaco  not  being  part  of  the  EU  territory,  certain  third  countries  refuse  to 
grant preferential treatment to goods originating in Monaco. In order to avoid this, such 
agreements should stipulate that the preferential treatment applies to goods originating in 
the EU customs territory, which includes Monaco. 

29  

30  

Convention douanière entre la Principauté de Monaco et la République française (OS n°3038 du 
19 août 1963), Journal officiel de la République française du 27.09.1963, p. 8679. 
Monaco was integrated in the Community Customs territory by Regulation (EEC) No 1496/68 of 
the Council of 27 September 1968 on the definition of the customs territory of the Community and 
this was recalled in subsequent  Regulations, the latest one being Regulation (EU) No 450/2008 of 
the European Parliament and the Council of 23 April 2008 laying down the Modernized Customs 
Code (OJ L 145, 4/6/2008). 

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Goods originating or being in free circulation in Monaco benefit from the free movement 
of  goods  inside  the  EU.  They  may  however  encounter  obstacles  on  EU  territory,  in 
particular  where  the  EU  has  established  specific  rules  harmonizing  the  laws  of  the 
Member States (establishment of the internal market). This explains why the Principality 
signed  a  bilateral  agreement  with  the  EC  in  2003  on  the  application  of  certain 
Community acts on the territory of Monaco31.  

Export of live animals 
Monaco faces legal difficulties with the holding of international festivals involving live 
animals that enter from the EU, such as the Festival International du Cirque. According 
to EU rules, these animals should not be re-exported to the EU because Monaco is a third 
country  and  does  not  have  an  agreement  with  the  EU  in  this  area.  The  EU  has  such 
agreements with other small states32. Their key principles are as follows:  

• 

Imports  from  third  countries  into "small-sized  countries"  must  go  through  a 
Border Inspection Post in a Member State, which is on the outer frontiers of the 
EU;  

•  The small-sized countries apply all relevant provisions of  EU legislation;  
•  Exports  from these  small-sized  countries to  the  EU  are,  on  this  basis,  treated  as 

intra-EU trade. 

At present, Monaco would only be able to export live animals to the EU via an existing 
Border  Inspection  Post  in  France.  The  setting  up  of  such  a  Post  would  require  an 
arrangement  with  France  and  the  formal  recognition  of  Monaco  as  an  eligible  third 
country. 

Food security 
Monégasque  companies  face  difficulties  putting  animal  products  or  products  of  animal 
origin on the EU market, despite Monaco having adopted legislation which is designed to 
be equivalent to the EU acquis on food security. However, the EU has neither reviewed 
the  Monégasque  legislation  in  detail,  nor  has  it  formally  agreed  that  its  provisions  are 
being enforced by a competent authority and inspection services. Monaco currently does 
not  participate  in  the  key  EU  instruments  (EFSA  and  TRACES)  that  provide  for  food 
safety checks33. For the time being therefore, Monaco is not authorised to export food of 
animal origin to the EU34. 

31  

32  
33  

34  

Agreement between the European Community and the Principality of Monaco on the application 
of  certain  Community  acts  on  the  territory  of  the  Principality  of  Monaco  -    OJ  L  334  of 
19/12/2003. 
The EU has such agreements with Andorra, San Marino and the Færø Islands. 
Members  of  EFSA  are  27  EU  member  states,  Norway  and  Iceland.  Countries  involved  in 
TRACES  are  all  EU  member  states,  European  Free  Trade  Association  (EFTA)  countries  and 
Switzerland. 
The reason for that is the absence of Monaco on the positive list of eligible countries laid down in 
Commission  Regulation  206/2010  (meat),  Decision  2005/432  (meat  products),    605/2010  (milk 
products) or Regulation 798/2008 (egg products). 

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17 

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Another  option  that  the  Monégasque  authorities  wish  to  explore  is  the  conclusion  of  a 
sectoral  agreement  with  the  EU  that  would  integrate  Monaco  in  the  TRACES  system 
(Trade Control and Expert System). 

Chemical goods    
As  regards  the  REACH  Directive,  Monégasque  companies  are  unable  to  register  the 
chemical  substances  in  the  central  database  run  by  the  European  Chemistry  Agency 
(ECHA).  This  has  created  difficulties  for  Monégasque  companies  wishing  to  market 
chemical products in the EU. In the absence of the establishment of a registration process 
directly  open  to  companies  from  Monaco  (similar  to  that  available  for  companies  of 
Liechtenstein, Norway and Iceland) access to the REACH database and the EU internal 
market will remain problematic. 

Waste 
Monaco has highlighted that the application of the EU legislation on waste management35 
creates  difficulties  for  Monégasque  companies  which  would  like  to  export  waste  to 
France  for  treatment/disposal.  In  application  of  the  customs  union  with  France, 
Monégasque companies could be assimilated to French companies in order to have access 
to French eco-organisms for the management of their waste. 

Medicinal and cosmetic products 
Monaco  has  reported  that  Monégasque  companies  that  produce  medicinal  products  for 
human  and  veterinary  medicine,  cosmetics  and  medical  devices,  have  in  some  cases 
experienced difficulties in placing them on the market in the EU. Monaco has therefore 
raised concerns about possible conflicting interpretations of the EU-Monaco Agreement 
of 4 December 2003 which covers trade in these products.  

Convention CITES 
Monaco  has  raised  the  issue  of  EU  legislation  implementing  the  Convention  on 
International  Trade  in  Endangered  Species  of  Wild  Flora  and  Fauna  (CITES)  and  its 
effects on Monaco. Monaco is concerned that, in legal terms, the co-existence of a dual 
customs system has led to discriminatory treatment and legal uncertainty for Monaco and 
the companies established there. 

3.3. San Marino 
In  1991  the  EU  and  San  Marino  concluded  an  agreement  on  customs  union  and 
cooperation36.  The  previous  status  of  participating  in  the  Community  customs  territory 
did  not  guarantee  equivalent  treatment  of  Sammarinese  goods  from  third  countries;  the 

35  

36  

Regulation (EC) N° 2006/1013 of the European Parliament and of the Council of 14 June 2006, 
Directive  (EC)  N°  96/2002  on  waste  electrical  and  electronic  equipment  (WEEE)  modified  by 
Directive (EC) n° 108/2003 of 8 December 2003. 
The 1991 Agreement sets up a joint Cooperation Committee with Commission and member states 
representatives  on  the  one  side  and  Sammarinese  officials  on  the  other.  This  Committee  is 
responsible for administrating the agreement and ensuring that it is properly implemented. 

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new agreement established a customs union for industrial and agricultural products, with 
certain exceptions37. It is also important to mention that the "Omnibus" decision38 of the 
EC-San  Marino  Cooperation  Committee  effectively  gives  San  Marino  an  equivalent 
position to Member States as far as trade in food, plants and animals is concerned. 

Customs Problems encountered by San Marino: 
San  Marino  has  identified  several  customs-related  problems.  Only  some  of  these 
problems  fall  within  EU  competence,  whereas  others  relate  to  inter  alia  international 
customs rules and the practices of private companies. Where the problems raised by San 
Marino  concerning  customs  issues  fall  within  EU  competence,  it  should  be  possible  to 
solve them within the framework of the existing agreement. 

Technical harmonization 
Regarding  the  areas  where  European  technical  harmonization  exists,  San  Marino 
operators  have  to  rely  on  representatives  established  in  the  Community  territory,  with 
whom the technical documents of the San Marino producer are deposited. This generates 
additional costs for San Marino operators compared to their Community operators.  

San Marino companies encounter similar difficulties in marketing chemicals in the EU as 
Monégasque  companies.  However,  with  a  view  to  allowing  hazardous  chemicals  and 
pesticides to be imported into San Marino and placed on the international market, and in 
line  with  the  provisions  adopted  in  this  regard  by  the  EU,  San  Marino  has  recently 
the 
designated 
administrative  functions  under  the  Rotterdam  Convention  of  10  September  1998 
concerning  prior  informed  consent  procedure  for  certain  chemicals.  Indeed,  these 
functions also apply to third countries although they are not party to the Convention. 

the  necessary  national  Authority  with 

task  of  performing 

the 

Regarding  the  areas  where  no  European  technical  harmonization  exists,  San  Marino 
cannot  rely  on  the  principle  of  mutual  recognition  by  way  of  referral  to  national 
provisions39. San Marino goods are subject to additional preliminary controls and, in case 

37  

38  

39  

Agreement on Cooperation and Customs Union between the European Economic Community and 
the Republic of San Marino, Official Journal of the European Communities, L 84, of 28.03.2002, 
pp. 43-52; The Agreement contained provisions that were not under the Community competence, 
thus it had to be ratified by national parliaments as well. In order to enable the customs union, an 
interim  agreement  was  concluded  with  the  Commission:  Council  Decision  92/561/EEC  of  27 
November 1992 on the conclusion of an interim Agreement on trade and customs union between 
the  European  Economic  Community  and  the  Republic  of  San  Marino,  Official  Journal  of  the 
European Communities, L 359, 09.12.1992, p. 13; The 1991 agreement finally entered into force 
in 2002. 
‘Omnibus’ Decision No 1/2010 of the EU-San Marino Cooperation Committee of 29 March 2010 
establishing various implementing measures for the Agreement on Cooperation and Customs 
Union between the European Economic Community and the Republic of San Marino (OJ ref: L 
156/13, 23.06.2010). 
San Marino does not participate in the European standard organizations as European Committee 
for  Standardization  (CEN)  and  European  Committee  for  Electro-technical  Standardization 
(CENELEC). 

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of dispute, legal problems may also arise due to the impossibility to invoke this principle, 
as opposed to Community producers.  

Organic agricultural products 
San  Marino  operators  dealing  with  organic  agricultural  products  encounter  difficulties 
when  they  export  or  re-export  these  products  to  EU  countries  since  they  cannot  certify 
them as organic in the same way as EU operators do. More specifically, three categories 
of business encounter these difficulties: 

-  Businesses  that  import  products  from  non-EU  countries  and  then  place  them  on 

the EU market; 

-  Businesses that produce organic products in San Marino and then export them to 

the EU; 

-  Businesses that process agricultural products coming from non-EU countries and 

that export processed products to the EU. 

With  Regulation  (EC)  No  508/2012  of  20  June  2012,  the  European  Commission  has 
already recognised two Italian accredited control bodies40 for San Marino for equivalency 
purposes, under Article 33, paragraph 3 of Regulation (EC) No 834/2007 and Article 10 
of Regulation (EC) No 1235/2008 with regard to the following product categories: 

-  Unprocessed plant products (Suolo e Salute S.r.l.) 

-  Processed agricultural products for use as food (ICEA) 

San Marino intends to submit to the European Commission a request for inclusion in the 
list  of  third  countries  referred  to  in  Article  33,  paragraph  2  of  Regulation  (EC)  No 
834/2007 and in Articles 7, 8 and 9 of Regulation (EC) No 1235/2008. 

To this end, the San Marino has already incorporated into its legal system, via Delegated 
Decree No 94 of 27 July 2012, EU legislation on the production and labelling of organic 
products  and,  more  specifically,  the  following  EC  Regulations,  as  well  as  the  relevant 
amending and implementing acts: 

a)  Regulation (EC) No 834/2007 of the Council of 28 June 2007; 

b)  Regulation (EC) No 889/2008 of 5 September 2008; 

c)  Regulation (EC) No 1235/2008 of the Commission of 8 December 2008. 

With a view to fully implementing the above-mentioned legislation, it is also envisaged 
that Enforcement Regulations be issued by the competent San Marino bodies. 

Health sector related products, including  pharmaceuticals 

40  

Suolo e Salute S.r.l. and Istituto Certificazione Etica e Ambientale-ICEA. 

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Some difficulties with the movement of goods derive from the fact that the San Marino 
health authorities are not accredited to carry out the necessary controls and issue customs 
authorisations  in  relation  to  goods  bound  for  San  Marino,  since  also  in  these  areas  San 
Marino  cannot  benefit  from  mutual  recognition.  This  problem  involves  trade  in  health 
sector  related  products,  including  pharmaceuticals.  Moreover,  for  the  purpose  of  the 
mutual  recognition  of  experiments  regarding  these  products  (with  the  corresponding 
inclusion  in  the  EU  Database  on  Clinical  Trials  –  Eudract),  it  is  necessary  that  San 
Marino products be recognised by the European Medicines Agency (EMA). Without this 
recognition these products cannot be marketed in the EU41. 

Cosmetic products 
With regard to cosmetic products, San Marino companies encounter some difficulties. As 
provided  for  in  Regulation  (EC)  No  1223/2009,  companies  intending  to  place  their 
products  on  the  European  market  may  transmit  the  relevant  notification  in  electronic 
format  to  the  European  Commission  through  the  "Cosmetic  Product  Notification  Portal 
(CPNP)". From 11 July 2013, this procedure will completely replace the current national 
notification through paper documents. Given that only companies having their production 
and/or  distribution  site  in  the  EU  will  have  access  to  the  CPNP  system,  San  Marino 
companies will have no access and will therefore only be able to operate in Europe if they 
establish  a  registered  office  an  EU  Member  State.  San  Marino  is  very  concerned  about 
the potential impact on its economy if this problem is not solved42.  

Value-added Tax (VAT) pre-financing   
San  Marino  has  decided  to  remain  outside  the  EU  VAT  area  for  the  time  being. 
Companies  from  San  Marino  therefore  encounter  difficulties  with  the  cost  of  import 
VAT.  Both  San  Marino  operators  and  purchasers  operating  on  the  EU  market  have  to 
bear additional costs, which derive from the import VAT payment charged on trade with 
EU Member States. However, in the event that the imported goods are used for taxable 
activities of the importers, they may deduct the import VAT in their regular VAT returns. 
Some Member States also allow postponed accounting, which is a simplification allowing 
operators to account for the import VAT in a VAT return instead of paying it to customs.  

41  

42  

The  San  Marino  Ministry  of  Health  plans  to  communicate  information  on  the  updating  of  the 
legislation  in  force  on  this  matter  to  the  EU,  based  on  the  meeting  of  the  EU-San  Marino 
Cooperation Committee of 20 October 2011. 
In the meantime San Marino had already fully incorporated Regulation (EC) No 1223/2009 on the 
basis of Law No 16 of 27 January 2011 on the production of and trade in cosmetic products. 

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CHAPTER 4: FREE MOVEMENT OF CAPITAL 

This  Chapter  on  the  free  movement  of  capital  is  included  for  the  sake  of 
comprehensiveness,  even  though  the  small-sized  countries  experience  very  few 
difficulties  in  this  area.  The  free  movement  of  capital43  is  at  the  heart  of  the  Single 
Market  and  is  one  of  its  'four  freedoms'.  It  enables  integrated,  open,  competitive  and 
efficient European financial markets and services. For citizens it means the ability to do 
many operations abroad, such as opening bank accounts, buying shares in non-domestic 
companies, investing where the best return is, and purchasing real estate. For companies 
it principally means being able to invest in and own other European companies and take 
an active part in their management44. Capital movements mean any one of the following 
when carried out on a cross-border basis: 

•  Foreign direct investment (FDI), including investments which establish or 

maintain lasting links between a provider of capital (investor) and an 
enterprise (in effect setting up, taking-over, or acquiring an important stake in 
a company or institution);  

•  Real estate investments or purchases;  
•  Securities investments (e.g. in shares, bonds, bills, unit trusts);  
•  Granting of loans and credits; and  
•  Other operations with financial institutions, including personal capital 

operations such as dowries, legacies, endowments, etc.  

4.1. Capital Movements from the Small-Sized Countries into the EU 
As  a  general  rule,  the  EU  places  no  restrictions  on  the  free  movement  of  capital  or 
payments from the small-sized countries or any other third state. Article 63 TFEU45 fully 
liberalises capital movements.  It states “within the framework of the provisions of this 
Chapter, all restrictions on the movement of capital between Member States and between 
Member  States  and  third  countries  shall  be  prohibited”.  Art.  63  specifies  that  the  same 
prohibition applies to payments.  

However, some limitations, exceptions and safeguard measures are specified in Articles 
64-66 TFEU. In particular, with respect to third countries, Article 64(1) indicates that the 
extension of the freedom to third countries is not unlimited.  The Member States have the 
right to maintain restrictions on capital movements that existed as at 31 December 1993 
in  the  fields  indicated46.  As  for  Art  64(2)  and  64(3),  they  provide  for  a  differentiated 

43  

44  
45  

46  

In the absence of a definition in the Treaty of 'movement of capital' the Court of Justice of the EU 
has  recognised  the  nomenclature  annexed  to  the  Council  Directive  88/361/EEC  as  having 
indicative value. 
http://ec.europa.eu/internal_market/capital/index_en.htm 
The  Treaty  principle  of  free  movement  of  capital  has  direct  effect,  i.e.  it  does  not  need  any 
implementing  legislation  at  Member  States’  level.  Art.  63  TFEU  directly  confers  rights  on 
individuals, 
Source: 
http://ec.europa.eu/internal_market/capital/framework/secondary_legislation_en.htm 
In  respect  of  restrictions  existing  under  national  law  in  Bulgaria,  Estonia  and  Hungary,  the 
relevant date is 31 December 1999. 

on  which 

national 

courts. 

before 

they 

rely 

can 

on 

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decision-making process. Thus, Art 64(2) states that the “…European Parliament and the 
Council,  acting  in  accordance  with  the  ordinary  legislative  procedure,  shall  adopt  the 
measures  on  the  movement  of  capital  to  or  from  third  countries  involving  direct 
investment - including investment in real estate - establishment, the provision of financial 
services or the admission of securities to capital markets and Art 64(3). The provisions of 
Chapter  4  TFEU  (on  capital  and  payments)  are  also  “without  prejudice  to  the 
applicability  of restrictions on the right of establishment which are compatible with the 
Treaties” (Article 65(2) TFEU). Please also see the appendix to this chapter for details on 
specific exceptions. Freedom of establishment for natural and legal persons is dealt with 
in other chapters. 

Finally, when movements of capital to or from third countries cause, or threaten to cause, 
serious  difficulties  for  the  operation  of  EMU  the  Council  may  take  safeguard  measures 
not exceeding six months under Article 66 TFEU. 

What is more, EU law allows for certain exceptions to the general rule on free movement 
of  capital.  For  example  Art.  65  TFEU  provides  that  the  rules  on  the  free  movement  of 
capital are without prejudice to the right of Member States to take certain measures or lay 
down  certain  procedures,  in  particular  “to  prevent  infringements  of  national  law  and 
regulations” or those “which are justified on grounds of public policy or public security”. 
In addition, Art. 65(2) TFEU states that “the provisions of this Chapter shall be without 
prejudice  to  the  applicability  of  restrictions  on  the  right  of  establishment  which  are 
compatible with the Treaties.  

Andorra 
Andorra has highlighted several specific concerns, related in particular to establishing or 
investing in a business, buying real estate or opening a bank account in the EU. From an 
EU perspective, these points seem rather to be associated with other EU rules, such as on 
the  freedom  of  establishment  (see  Chapter  2)  or  be  due  to  commercial  decisions  of 
private companies. Therefore, they appear not to be restrictions on the free movement of 
capital  from  Andorra  into  the  EU.  Andorra  has  also  pointed  out  that  Regulation 
1889/2005  on  controls  of  cash  entering  or  leaving  the  EU  applies  to  Andorra’s  borders 
with  France  and  Spain.  These  controls  are  designed  to  guard  against  misuse  of  the 
financial system and money laundering and are not a restriction on the free movement of 
capital. 

Monaco 
Monaco has indicated that it is not experiencing difficulties in this area. On request of the 
Monaco authorities, France obtained a derogation from Regulation 1781/2006 on cross-
border transfers, allowing transfers between France and Monaco to be treated as domestic 
transfers.  

San Marino 
The memorandum submitted to the EU by the San Marino authorities highlights several 
specific concerns. Although these appear in the section on the free movement of capital, 
from an EU perspective these relate mainly to the freedom to provide financial services. 

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4.2. Capital Movements from the EU into the Small-Sized Countries 
The  small-sized  countries  place  certain  restrictions  or  conditions  on  the  movement  of 
capital  from  the  EU.  Broadly,  these  mainly  apply  to  three  categories:  the  real  estate 
sector; financial sector; and corporate sector. 

Andorra 
A  new  law  on  Foreign  Investment  entered  into  force  July  19,  2012  and  opens  to 
foreigners  the  sector  of  liberal  professions  on  the  basis  of  reciprocity  for  Andorrans. 
Previously,  the  law  on  foreign  investment  of  200847  had  already  streamlined  and 
liberalised the investment regime. However, under the new law, there will still be a prior 
authorisation  requirement  and  investments  that  would  affect  inter  alia  Andorra’s 
sovereignty, security, law enforcement, environment, public health or general interest can 
be  blocked48.  Foreign  investment  will  also  have  to  fulfil  certain  criteria,  such  as  the 
improvement  of  the  competitiveness,  technological  progress  and  diversification  of 
Andorra’s economy. The new law also foresees a liberalisation of the investment regime 
as  regards:  i)  investment  in  real  estate;  ii)  economic  rights  of  non-nationals  resident  in 
Andorra; iii) the exercise by non-nationals of a liberal profession.  
In  general  terms,  the  new  legislation  contains  the  following  stipulations  on  foreign 
investment: 

Classes and forms 
Foreign investments can be made in cash or non-cash contributions and can be in any of 
the  following  forms:  (a)  direct  investment,  (b)  portfolio  investment,  (c)  real  estate 
investment and (d) other forms of investment. 

Collections and payments 
The collections and payments arising from foreign investments and their liquidation must 
take place through banking entities authorised in Andorra or banking entities registered in 
any  of  the  countries  not  considered  non-cooperative  in  matters  of  prevention  of  money 
laundering and the financing of terrorism, as defined by the Financial Action Task Force 
(FATF). 

Direct investments 
Direct investments consisting of holdings in Andorran companies include the formation 
of  a  company;  subscription  and  acquisition  of  all  or  part  of  the  company  shares  or 
the  acquisition  of  subscription  rights  over  company  shares  or 
participations, 
participations,  debentures  convertible  into  shares  or  participations,  or  other  analogous 
investments which by their nature grant the right to take up a holding in the capital of the 
company, and any legal business in virtue of which political rights are acquired. 

Portfolio investments 

47  
48  

Law on foreign investments in the Principality of Andorra, adopted 8 April 2008. 
The process will be speeded up from a maximum of two months to one month. 

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Portfolio investments are free and not subject either to the duty of application for prior 
authorisation or the duties of formalisation and declaration envisaged in the Law. 

Real estate investments 
Prior  authorisation  from  the  ministry  competent  in  matters  of  foreign  investment  is 
required for investments in real estate to be made by non-resident foreigners; Andorran 
companies with a majority of foreign holdings in the share capital or voting rights49; and 
branches  or  other  types  of  permanent  establishment  in  Andorra  for  non-residents.  Prior 
authorisation  from  the  ministry  competent  in  matters  of  foreign  investment  is  also 
required for investments in real estate to be made by legal entities of foreign nationality, 
including  public  entities  of  foreign  sovereignty.  These  investments  in  real  estate  must 
necessarily be linked to the development of the legal entity’s activity. 

Other forms of investment 
Investments classifiable as other forms of investment require prior authorisation from the 
ministry  competent  in  matters  of  foreign  investment.  The  requirement  of  prior 
authorisation  is  replaced  by  subsequent  declaration  to  the  Register  of  Foreign 
Investments in the case of acquisitions mortis causa. 

Monaco 
According  to  the  agreement  between  France  and  Monaco  of  14  April  1945  on  foreign 
exchange control, the foreign exchange regulations in force in France automatically apply 
in the Principality of Monaco. According to article L151-1 of the French Monetary and 
Financial Code, Monaco is part of French territory for the purposes of foreign exchange 
and financial relations with third countries. 

Thus, as in France, there is no restriction on investments in Monaco from EU countries, 
which have to be declared for statistical purposes only. However, a prior approval from 
the  French  Ministry  of  Economy  is  requested  for  activities  within  the  scope  of  public 
authority, or within the scope of one of the following fields: 

-  activities likely to disturb public order, public safety or national defence interests; 
-  research, production or sale of weapons, munitions, explosive powders or ingredients. 

Investments  subject  to  prior  approval  are  listed  in  articles  R153-1  to  R153-5  of  the 
French Monetary and Financial Code. 

Lastly,  Monaco  law  provides  for  an  administrative  authorisation  to  do  business  and 
registration in the Directory of Commerce and Industry at the time of incorporation of a 
new activity, whatever the field of such activity. 

Portfolio investments 
There are no restriction on portfolio investments. 

49  

i.e. equal to or greater than 50%. 

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Real estate investments 
There are no restriction on real estate investments. 

Banking and financial sector 
The  Principality  of  Monaco  and  France  constitute  a  relatively  homogenous  market  for 
banking  activities.  Indeed,  under  the  Franco-Monégasque  Convention  of  14  April  1945 
and exchanges of letters with France in 1963, 2001, 2005 and 2010, French rules for the 
organisation  of  the  banking  sector  are  applicable  in  Monaco,  and  credit  establishments 
located  in  the  Principality  are  placed  under  the  jurisdiction  of  the  French  supervisory 
authorities.  Any  investment  in  the  banking  sector  is  subject  to  prior  approval  of  the 
French supervisory authorities. 

Financial activities in Monaco are governed by Law No. 1 338 of 7 September 2007 as 
implemented  by  Sovereign  Order  No.  1  284  of  10  September  2007,  while  collective 
investment  undertakings  are  governed  by  Law  No.  1  339  of  7  September  2007  and 
Sovereign Order No. 1 285 of 10 September 2007. 

A  licence  for  the  setting  up  of  financial  activities  is  issued  by  the  independent 
administrative  authority  instituted  by  Law  No.  1  338,  the  Financial  Activities  Audit 
Committee (Commission de Contrôle des Activités Financières, CCAF). 

San Marino 
In general, San Marino legislation permits the free movement of capital from and to the 
EU. Residents in the EU (like other non-residents of San Marino) may transfer and hold 
capital  in  San  Marino50.  However,  there  are  some  restrictions  and  conditions  on 
investment in San Marino, which are summarised here by sector of activity. 

Portfolio investment 
In general, there are no restrictions on portfolio investments in San Marino, including on 
the  establishment,  acquisition  or  management  of  companies  incorporated  under  San 
Marino  law  by  EU  entities.  However,  despite  the  positive  assessment  expressed  by  the 
Moneyval in September 2011, capital flows to and from third countries are still subject to 
enhanced  customer  due  diligence  for  anti-money  laundering  purposes  and  banks 
established  in  San  Marino  must  still  comply  with  specific  reporting  obligations  to  the 
Central Bank in relation to cross-border payments made on behalf of their clients. 

Financial sector 
The  main  piece  of  San  Marino  legislation  on  companies  and  banking,  financial  and 
insurance services is Law no. 165 of 17 November 2005. This Law also establishes the 
conditions  to  obtain  authorisation  for  the  exercise  of  reserved  activities  in  the  banking, 
financial and insurance sectors. For most reserved activities, the authorisation delivered 

50  

Equally,  residents of  San  Marino  may  transfer and hold  capital  abroad. Moreover,  in both  cases 
the legislation of San Marino allows the opening of accounts in a currency other than the euro. 

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by the supervisory authority must be followed by a declaration of non-impediment by the 
Congress of State (Government). The need for this declaration applies both to capital of 
national  and  foreign  origin.  Access  to  the  banking  and  financial  market  by  foreign 
financial intermediaries is subject to the conclusion of a cooperation agreement between 
the San Marino Central Bank and the supervisory authority of the foreign intermediary’s 
country of origin. San Marino insists that this is not a constraint on the free movement of 
capital from the EU, because this provision mirrors EU legislation in this area.  

Real estate sector 
The acquisition of real estate by foreign citizens or entities is subject to the authorisation 
by a state body, namely the Council of the Twelve.  

4.3. How Free Movement of Capital is Dealt with in the EU’s Relations with Third 
Countries 

EEA Agreement 
For  the  EU,  the  Agreement  on  the  European  Economic  Area  (EEA)  is  an  important 
multilateral agreement providing for the free movement of capital and payments. Article 
40  sets  out  this  general  principle:  "Within  the  framework  of  the  provisions  of  this 
Agreement,  there  shall  be  no  restrictions  between  the  Contracting  Parties  on  the 
movement of capital belonging to persons resident in EC Member States or EFTA States 
and no discrimination based on the nationality or on the place of residence of the parties 
or  on  the  place  where  such  capital  is  invested”.  There  are  occasionally  derogations  or 
exceptions  to  this  rule  if  an  EU  or  EEA  EFTA  State  is  in  difficulties,  or  is  seriously 
threatened  with  difficulties,  for  example  as  regards  its  balance  of  payments51.  For 
example, Iceland currently has capital controls in place as a result of the financial crisis. 

Other third countries 
The EU is committed to the use of bilateral investment dialogues and trade agreements to 
ensure  open  investment.  Trade  agreements  are  increasingly  linked  to  a  framework 
agreement  covering  the  political  elements  of  a  partnership  with  a  third  country52.  The 
EU’s  trade  agreements  with  third  countries  generally contain  chapters  on  capital 
movements  and  payments,  with  provisions  ensuring  that  payments  operations  remain 
unrestricted; that transactions related to direct investment remain free of restrictions; and 
that temporary safeguard measures are only possible in the case of serious difficulties for 
the operation of monetary and exchange rate policy.  

The  Lisbon  Treaty  provides  that  the  EU  has  exclusive  competence  on  foreign  direct 
investment  (Article  207  TFEU).  This  will  allow  the  EU  to  negotiate  and  conclude 
comprehensive investment agreements  with third countries, previously a competence of 
the Member States. On 7 July 2010 the Commission adopted a Communication entitled 

51  
52  

See Article 43.4 of the EEA Agreement. 
Such  as  Partnership  and  Cooperation  Agreements  and  European  Neighbourhood  Policy 
Agreements. 

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"Towards a comprehensive European international investment policy" which outlines the 
Commission's approach to future agreements. 

The replacement of the approximately 1200 Bilateral Investment Treaties (BITs) between 
Member States and third countries all over the world by EU agreements will be a long 
term process and require a transition regime. On 7 July 2010 the Commission adopted a 
proposal for a Regulation establishing transitional arrangements for bilateral investment 
agreements  between  Member  States  and  third  countries.  The  Regulation  proposal  is 
currently in ordinary legislative procedure. It shall inter alia empower Member States to 
amend BITs in order to remove incompatibilities with EU law. 

APPENDIX 
In addition to those set out above, specific exceptions to the free movement of capital and 
transitional provisions are also stipulated in53: 

•  Declaration No. 7 to the Treaty on European Union (1992) on Article 73(d)  
•  Protocol Nr. 32 to the Treaty on the European Union allows Denmark to maintain 
existing  legislation  which  restricts  the  acquisition  of  second  homes  by  non-
nationals.  

•  Protocol  Nr.  6  to  the  Act  of  Accession  2003  allows  Malta  to  restrict  the 

acquisition of secondary residences.  

•  Protocol  Nr.  2  to  the  Act  of  Accession  Finland  1994  allows  for  specific 
restrictions  regarding  the  Åland  islands,  including  e.g.  the  acquisition  of  real 
estate  

The Acts of Accession foresee transitional measures (allowing some new Member States 
to  keep  certain  temporary  restrictions  in  some  areas,  e.g.  the  acquisition  of  agricultural 
real estate by non-nationals) . 

53  

Source: http://ec.europa.eu/internal_market/capital/framework/protocols_en.htm 

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CHAPTER 5: COOPERATION BEYOND THE FOUR FREEDOMS 

There  is  potential  to  enhance  cooperation  with  the  small-sized  countries  (Andorra, 
Monaco,  San  Marino)  in  support  of  a  wide  range  of  shared  objectives  in  the  political, 
economic, environmental and cultural domains. This chapter reviews some of the existing 
areas of cooperation between the EU and the small-sized countries such as foreign policy 
and  savings  taxation;  and  highlights  issues  that  the  small-sized  countries  see  as 
problematic for their citizens and companies. 

5.1. Cooperation Agreements  

Andorra 
Of  the  three  small-sized  countries,  Andorra  has  concluded  the  most  wide-ranging 
Cooperation Agreement (2004) with the EU. The Agreement sets out the following areas 
information  and  culture; 
of  possible  cooperation:  environment;  communication; 
education,  vocational  training  and  youth;  social  and  health  issues;  trans-European 
networks  and  transport;  and  regional  policy.  Art.  8  provides  that  the  scope  of  the 
Agreement  may  be  enlarged  by  mutual  consent  of  the  contracting  parties.  However,  in 
practice cooperation under the Agreement has been limited.  

San Marino 
The 1991 Customs and Cooperation Agreement54 between the then EEC and San Marino 
covers  cooperation  in  the  areas  of:  economic  cooperation  (focused  on  SMEs); 
environmental protection; tourism; communication, information and culture. In practice, 
cooperation  in  these  areas  has  been  limited.  The  Agreement  also  provides  for  non-
discrimination  in  matters  of  employment  and  social  security  coordination  (see  free 
movement of persons chapter). Art. 19 provides that the scope of the Agreement may be 
enlarged by mutual consent of the contracting parties. However, in practice, cooperation 
under the Agreement has been limited. For example, there is no cooperation in the field 
of tourism even though it could be beneficial for both sides. 

Monaco 
Monaco does not have a agreement with the EU on cooperation, which is mainly carried 
out on an ad hoc basis.  

5.2. Common Foreign And Security Policy 

Political dialogue 
On the whole, the EU entertains very good relations with the small-sized countries. The 
small-sized countries have no official high-level political dialogue with the EU, but their 
missions  are  accredited  to  the  EU  at  Ambassador  level  and  senior  members  of  their 

54  

Agreement on Cooperation and Customs Union between the European Economic Community and 
the Republic of San Marino (1991).  

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governments  occasionally  travel  to  Brussels  for  meetings  with  their  EU  counterparts55. 
However, no EU delegation is accredited to any of the small-sized countries56. The EU is 
represented in each country by one of its Member States57. 

Foreign Policy 
There is no agreement with the small-sized countries on their alignment to EU positions 
and declarations, but generally they do align of their own accord on a case-by-case basis.  
As regards cooperation between the EU and the small-sized countries in the framework 
of  international  organisations,  at  the  level  of  the  Organization  for  Security  and  Co-
operation in Europe (OSCE), in June 2010 the EU Presidency (which was being held by 
Spain at that time) allowed the Permanent Representations of San Marino and Andorra to 
the Organization based in Vienna to regularly participate in the weekly political dialogue 
meetings,  among  ambassadors  of  EU  Member  States  and  also  of  Canada,  Switzerland, 
Liechtenstein and  Norway  (like-minded countries). San Marino often supports the  EU's 
proposals for Declarations in the OSCE. 

Furthermore,  there  are  contacts  between  several  EU  Delegations  to  international 
organisations and the small-sized countries. At the UN in New York, the EU Delegation 
meets on a monthly basis with the "Friends of the EU" group, of which the small-sized 
countries are members. Cooperation in this area could be developed further. The small-
sized  countries  sent  a  positive  signal  in  this  regard  by  voting  in  favour  of  the  EU’s 
proposed  UN  General  Assembly  Resolution  on  enhanced  observer  status  at  the  UN  in 
2010.  An  agreement  with  the  small-sized  countries  could  provide  for  more  systematic 
cooperation and exchange of information in major international organisations.  

The  small-sized  countries  can  make  an  important  contribution  to  strengthening  foreign 
policy cooperation in Europe, such as between the Council of Europe and the EU (focus 
of San Marino's Chairmanship of the Committee of Ministers of the Council of Europe58 
from  November  2006  to  May  2007).  The  forthcoming  Andorran  Chairmanship  of  the 
Council  of  Europe  may  provide  an  early  opportunity  to  explore  ways  to  enhance 
cooperation  between  the  EU  and  the  small-sized  countries  on  upholding  and 
strengthening democracy and human rights in Europe. 

55  

56  
57  

58  

For example, the Foreign Ministers of Andorra and San Marino visited Brussels in, respectively, 
January and July 2012.  
By way of comparison, the EU's delegation in Bern is accredited to neighbouring Liechtenstein. 
In  Andorra  and  Monaco,  this  is  on  a  six-monthly  rotating  basis.  Italy,  as  the  only  EU  Member 
State to have an embassy in San Marino, represents the EU there. 
This was one of the main objectives agreed upon by the third summit of the Heads of State and 
Government of the Council of Europe (Warsaw, 16-17 may 2005). 

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5.3.  Specific  Concerns  of  the  Small-Sized  Countries  on  Flanking  and  Horizontal 
Policies 

Environment 

Andorra (AD) 
Environmental cooperation between the EU and Andorra is covered by Article 2 of their 
Cooperation  Agreement.  The  potential  areas  of  cooperation  include  climate  change, 
protection  of  nature  and  biodiversity,  environment  and  health,  management  of  natural 
resources  and  waste  management;  with  the  aim  of  reconciling  the  conservation  of  the 
Pyrenean environment with economic development. Andorra has expressed an interest in 
closer cooperation with the EU on environmental protection and is willing to align itself 
with the EU  environmental policies. Andorra  pays particular  attention to environmental 
protection, notably in view of the importance of tourism for the economy.  

Andorra has significant waste incineration capacity and is interested to provide disposal 
services for municipal waste originating in Spain, but the export of waste from the EU to 
third countries (other than members of EFTA) for disposal59 is prohibited by Regulation 
(EC) 1013/2006 on Shipments of Waste (WSR).  

The General Council of Andorra ratified, on December 14, 2004, the "Law 25/2004 on 
waste", which aims to be fully compatible with the laws of neighbouring countries and of 
the  EU.  Periodically,  the  government  approves  modifications  of  the  relevant  texts  to 
adapt them to new European legislation.  

Environmental  impact:  a  draft  law  on  strategic  environmental  assessment  of  plans  and 
programs and environmental assessment is currently underway. The Andorran legislation 
on  environmental  issues  is  inspired  by  European  standards.  However,  a  major 
development in some areas would be necessary to allow for closer integration of Andorra 
with the EU.  

Monaco 
As  regards  environmental  policy,  there  is  no  formalised  environmental  co-operation 
between  EU  and  Monaco,  only  some  ad  hoc  co-ordination  in  the  international 
environmental forums (eg EU-Monaco cooperation to list Atlantic blue fin tuna in CITES 
Convention in 2009/10). Monaco also faces similar problems as Andorra with regard to 
the import and export of waste. 

San Marino 
Cooperation in the field of environment, small and medium-sized enterprises (SMEs) and 
tourism  is  covered  by  the  Cooperation  and  Customs  Union  Agreement,  signed  on  16 
December 1991.  

59  

EFTA  countries  are  excluded,  where  special  provisions  for  these  countries  are  included  in  the 
Regulation.  

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San  Marino  has  described  the  difficulties  it  faces  in  exporting  special  and  municipal 
waste  to  the  EU,  due  to  the  complex  procedures  provided  for  in  Regulation  (EC) 
1013/2006  on  Shipments  of  Waste  (WSR)  with  which  San  Marino  needs  to  comply, 
including  as  regards  the  export  of  small  quantities  of  waste  to  neighbouring  Italian 
regions.  This  poses  particular  problems  for  San  Marino  due  to  the  small  size  of  its 
territory. The existing bilateral agreement with Italy allows San Marino to export special 
and municipal waste to Italy pursuant to Art. 41(1)(c) of the WSR Regulation, but such 
shipments are subject to a prior notification and consent procedure60 (which also applies 
to  waste  shipments  within  the  EU),  which  are  particularly  burdensome  given  the 
geographical and demographic situation of San Marino, as well as its limited quantities of 
exported waste. 

Therefore,  San  Marino  would  like  to  consider  the  possible  application  of  a  simplified 
procedure. Article 30 of the WSR Regulation provides for the conclusion of border-area 
agreements between EU Member States or between a Member State and an EEA state, in 
order  to  render  the  notification  procedure  less  stringent.  However,  since  San  Marino  is 
neither a member of the EU nor of the EEA, the conclusion of such an agreement with 
the  Italian  Republic  requires  prior  notification  and  consent  of  the  Commission,  or  a 
specific decision made by the EU-San Marino Cooperation Committee, in the context of 
cooperation  on  matters  relating  to  environmental  protection  and  improvement  in 
accordance  with  Article  16  of  the  Agreement  on  Cooperation  and  Customs  Union 
between the European Economic Community and the Republic of San Marino, signed at 
Brussels on 16 December 1991. 

Education  
Andorra, Monaco and San Marino have raised the issue that in some EU Member States 
higher university tuition fees apply to students from the small-sized countries than to EU 
nationals. They would like the non-discrimination principle enshrined in the EU Treaty to 
be extended to their students. However, it is worth mentioning that even the nationals of 
acceding states (such as, currently, Croatian nationals) do not enjoy this right. The non-
discrimination principle will only apply to Croatian students from the entry into force of 
its accession Treaty. 

In  addition,  all  the  three  small-sized  countries  expressed  an  interest  in  several  of  the 
components  of  the  EU  Lifelong  Learning  Programme61,  an  internal  EU  programme  in 
which,  as  third  countries,  they  are  not  eligible  to  participate.  The  LLP  programme  is 
coming  to  an  end  in  2013  and  a  new  programme  "Erasmus  for  all"  for  the  2014-  2020 
period  is  currently  under  discussion  in  the  Council  and  the  European  Parliament.  This 
future  single  Programme  for  Education,  Training,  Youth  and  Sport  will  include  an 
external  dimension,  with  activities  open  to  cooperation  with  third  countries  within  its 

60  
61  

Under Article 42 of the Regulation. 
Established  by  the  Decision  1720/2006  of  the  European  Parliament  and  of  the  Council  of  15 
November  2006  establishing  an  action  programme  in  the  field  of  life  long  learning  (LLP 
programme). 

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three  key  actions  (learning  mobility,  cooperation  and  policy  reform)62.  It  will  not  be 
necessary  for  the  three  small-sized  countries  to  conclude  an  agreement  with  the  EU  in 
order that their individuals, organisations and relevant entities can benefit from these new 
opportunities under the future programme. 

Research Cooperation 
The  small-sized  countries  have  expressed  an  interest  in  being  able  to  participate  in  and 
access funding from the EU’s Research Framework Programme (FP). However, Andorra 
has  commented  that  the  cost  of  participation  is  too  high.  The  EU’s  Framework 
Programme  is  open  to  the  participation  of  research  entities  from  all  over  the  world, 
including  those  based  in  the  small-sized  countries.  Such  participation  is  not  conditional 
upon  being  an  entity  from  an  associated  state.  The  same  approach  is  taken  in  the 
Commission proposal for the FP’s successor programme for the period 2014-2020, which 
will be called Horizon 2020. This will also cover innovation (currently managed by the 
Competitiveness and Innovation Framework Programme).  

The legal base and criteria for becoming an associated state are outlined in Art.7 of the 
Commission’s proposal for a  Regulation on Horizon 2020. The Commission’s proposal 
contains  a  provision  that  limits  the  possibility  of  association  to  very  specific  groups  of 
third states, including to the EFTA countries fulfilling certain criteria. However, the EEA 
Agreement  stipulates  that  cooperation  in  research  and  technological  development  shall 
normally  take  the  form  of  participation  of  the  EEA/EFTA  states  in  the  research 
framework  programmes  as    “Associated"  countries.  This  means  that  each  EEA  EFTA 
country has to contribute financially to the programme while any of its research entities 
that  are  successful  in  calls  for  proposal  are  guaranteed  automatic  funding.  Therefore, 
there is a certain presumption that if the small-sized countries were to become parties to 
the  EEA  Agreement,  they  would  be  associated  to  the  Framework  programme  even 
though they may not fulfil the criteria set out in Art. 7. 

Regional Policy, Social Affairs, Health Policy and Other Issues  

Andorra 
In  the  area  of  regional  policy,  the  EU-Andorra  Cooperation  Agreement  has  facilitated 
cooperation  between  Spain,  France  and  Andorra  in  the  context  of  the  EU  Regional 
Policy’s Operational Programme of cross-border cooperation in the Pyrenees (2007-2013 
budget:  EUR  168  million).  There  is  potential  to  deepen  this  cooperation,  which  could 
lead to benefits for people living throughout the region. There are ongoing negotiations 
on taking part in the SUDOE programme63. 

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63  

These  actions  should  support  development,  regional  integration,  knowledge  exchanges  and 
modernisation processes through partnerships between Union and third countries' higher education 
institutions as well as in the youth sector; notably for peer learning, joint educational projects and 
promoting regional cooperation, in particular with neighbourhood countries. 
The  South-East  Europe  Territorial  Cooperation  Programme  (SUDOE)  supports  regional 
development through the ERDF (European Regional Development Fund). 

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As  regards  social  and  health  matters,  cooperation  in  those  areas  is  foreseen  under  the 
Article  5  of  the  Cooperation  Agreement  and  proposes  an  exchange  of  experts, 
cooperation  between  administrations,  cooperation  between  business  and  training. 
Andorra's  adaptation  to  the  EU's  laws  on  consumer  protection  requires  significant 
legislative  procedures.  Andorra  would  like  to  align  with  the  EU  intellectual  property 
rules,  but  this  requires  the  adoption  of  legislation.  Andorra  is  preparing  a  new  law  on 
statistics, based on the model of the European legislation on good practices in statistics, 
and is interested to cooperate with Eurostat.   

San Marino 
As a non-EU country, San Marino cannot take part in the EU statistics agency, Eurostat. 
Its  officials  cannot  enrol  in  statistical  training  services  organized  for  that  purpose,  with 
negative repercussions on further training of people employed in the public sector.  

Monaco  
Monaco’s only fisherman faces the problem that he is not permitted to fish in the waters 
surrounding Monaco because he is not a French or Italian national (and therefore not an 
EU citizen). 

5.4. Other Areas of Cooperation 

Monetary Agreements 
Monetary agreements are the most important bilateral agreements (in two cases renewal 
of  existing  agreements)  signed  recently  by  the  three  small-sized  countries  with  the  EU, 
which  have  committed  gradually  to  incorporate  relevant  EU  acquis64  into  their  internal 
legislation.  The  implementation  of  the  acquis  will  be  closely  monitored  by  the 
Commission  and  will  serve  to  demonstrate  the  legal  and  administrative  capacity  of  the 
small-sized countries to deal with the acquis. The small-sized countries have accepted the 
exclusive competence of the Court of Justice of the EU for the settlement of any disputes 
between the parties in relation to the agreements. 

Agreements on Savings Taxation 
The EU has Agreements on Savings Taxation with the three small-sized countries, which 
provide for measures equivalent to those laid down in Directive 2003/48/EC on taxation 
of  savings  income  in  the  form  of  interest  payments.  Within  this  framework,  savings 
income  in  the  form  of  interest  payments  made  in  these  states  to  beneficial  owners  who 
are individuals identified as residents of a Member State of the EU have to be subject to a 
withholding tax levied by paying agents established on their territory, whose revenue is 
mostly transferred to the Member States of residence of the individual concerned.  

Consultations were held in 2009 with the competent authorities of Andorra, Monaco and 
San  Marino;  during  which  they  confirmed  their  availability  to  amend  their  Agreements 
with  the  EU  in  line  with  the  outcome  of  the  Savings  directive  review  ("level  playing 

64  

As set out in the Annex to each Agreement. 

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field"). Once a negotiating mandate has been adopted as a result of the ongoing debate at 
Council level, these consultations will be followed by formal negotiations to update the 
Agreements.  

Anti-Fraud and Tax Information Exchange 
The Commission is also seeking from the Council a mandate to negotiate Anti-Fraud and 
Tax  Information  Exchange  Agreements  with  Andorra,  Monaco  and  San  Marino,  on  the 
basis  of  the  experience  gained  in  the  framework  of  similar  negotiations  with 
Liechtenstein,  taking  into  account  international  developments  in  this  area.  The 
Commission is envisaging a two-pillar agreement including not only anti-fraud measures 
but also comprehensive administrative tax cooperation. 

5.5.  How  Cooperation  Beyond  the  Four  Freedoms  is  Dealt  with  in  the  EU’s 
Relations with its Close Neighbours (EEA and Switzerland) 

European Economic Area 
The  EEA  is  the  most  advanced  economic  arrangement  that  the  EU  has  with  third 
countries. In this context, the EU holds a regular political dialogue with Norway, Iceland 
and Liechtenstein. The main forum for this dialogue is the biannual EEA Council, which 
brings  together  the  Foreign  Minister  of  the  EU  Member  State  holding  the  rotating 
presidency and the Foreign Ministers of the EEA EFTA countries. In addition, political 
dialogue takes place twice per year with the following working parties: COMAG/MaMa, 
COEST, COMEM/MOG, COAFR, COWEB, COMEP and COSCE.  

The  EEA  EFTA  countries  apply,  are  associated  with,  or  cooperate  with  the  EU  on  the 
EU’s  horizontal  and  flanking  policies  (eg  research  and  technological  development, 
information services, enterprise policy, education, environment, social policies, consumer 
protection, statistics and company law). The following areas are excluded from the scope 
of  the  agreement:  foreign  and  security  policy;  the  common  agricultural,  fisheries  and 
transport  policies;  EU  budget;  regional  policy;  justice  and  home  affairs;  taxation  and 
economic  and  monetary  policy.  The  EEA  EFTA  countries  also  participate  in  EU 
Agencies and are associated to EU Programmes.  

Swiss Confederation 
Switzerland has very close relations with the EU on the basis of more than one hundred 
bilateral  agreements  on  sectoral  matters  (eg  land  transport,  air  transport,  research, 
education,  media  and  culture  etc)  many  of  which  are  without  the  scope  of  the  internal 
market. Switzerland has incorporated the EU acquis in a number of non-internal market 
areas,  either  on  the  basis  of  an  agreement  with  the  EU  or  autonomously.  The  country 
cooperates closely with EU Agencies and is associated to some EU Programmes (eg 7th 
Research  Framework  Programme,  MEDIA,  Lifelong  Learning  and  Youth  in  Action 

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programmes65).  The  EU  signed  a  bilateral  savings  tax  agreement66  with  Switzerland  in 
2004. Switzerland does not have a formalised political dialogue with the EU. As regards 
foreign  policy,  it  tries  to  keep  a  profile  as  a  neutral,  mediator  country,  and  it  does  not 
have an alignment agreement with the EU.  

* * * 

65  

66  

Agreement between the European Union and the Swiss Confederation establishing the terms and 
conditions  for the  participation  of  the  Swiss  Confederation  in  the  ‘Youth  in  Action’ programme 
and in the action programme in the field of lifelong learning (2007-2013). 
Agreement  between  the  European  Community  and  the  Swiss  Confederation  providing  for 
measures equivalent to those laid down in Council Directive 2003/48/EC on taxation of savings 
income in the form of interest payments.  

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