WORLD TRADE
ORGANIZATIONWT/REG39/1*
24 April 1998
(98-1527)
Committee on Regional Trade Agreements Original:  English
ESTABLISHMENT OF THE EUROPEAN UNION, SERVICES
Communication from the European Communities and their Member States
The following communication, dated 9 April 1998, has been received from the European
Commission with the request that it be circulated to the WTO Members.
__________
Following the request to examine the European Communities and their twelve Member States
under Article V of the GATS, the EC has prepared answers according to the standard format forinformation on Economic Integration Agreements on Services.
At the outset, some comments are made in order to assist WTO Members in understanding
better the nature of the EC as a Member of the WTO.
First, given the very high degree of integration that has been achieved among Member States
of the European Community, as a customs union, there is a tremendous amount of information that
could be supplied.  We are, however, presenting here in the standard format a summary of the main
elements of the EC(12).
Secondly, the EC came into force a long time before the entry into force of the GATS.  As a
matter of fact, the EC (12) is already a well-known entity under the GATS since it negotiated and
concluded its specific commitments on 15 December 1993, as an economic integration agreement.
Finally, at the time that the EC(12) might be examined, the EC has undergone a process of
further enlargement.  Although for the enlargemen t process (from EC (12) to EC (15)) a separate
examination is taking place, it should be noted that the EC (15) is constituted on the same basic
principles and treaties as the EC (12) and the three new Member States (Austria, Finland and Sweden)
have adopted, as part of their accession to the EC (12), all the existing Community legislation.
                                                     
*This document cancels and replaces WT/REG58/1 issued on 16 April 1998 in English only.WT/REG39/1
Page 2
STANDARD FORMAT FOR INFORMATION
ON ECONOMIC INTEGRATION AGREEMENTS ON SERVICES
EUROPEAN COMMUNITIES
AND THEIR (TWELVE) MEMBER STATES
Situation until 31/12/94
I. BACKGROUND INFORMATION ON THE AGREEMENT
1. Membership and dates of signature, ratificaiton and entry into force
- Membership:  Belgium, Denmark, Federal Republic of Germany, France, Greece, Ireland,
Italy, Luxembourg, The Netherlands, Portugal, Spain and United Kingdom.
- Date of entry into force:
- Belgium, Germany, France, Italy, L uxembourg and The Netherlands signed on
25 March 1957 and entered into force on 1 January 1958;
- Denmark, Ireland and United Kingdom, signed accession treaty on 22 January 1972
and entered into force on 1 January 1973;
- Greece, signed accession treaty on 28 May 1979 and entered into force on
1 January 1981;
- Spain and Portugal, signed accession treaty on 16 June 1985 and entered into force on
1 January 1986.
- Duration:  unlimited period of time.
2. General Description of the Structure of the Agreement
The Treaty establishing the European Economic Community (EEC) and the Treaty
establishing the European Atomic Energy Community (or EURATOM) were signed in Rome on
25 March 1957.  The EEC was established among the 6 founding Members cited above in 1957.  Atthe end of 1994, the EEC was constituted of the 12 Member States cited above.  The EEC was later on
called the European Community (“EC”), following amendment by the Treaty on the European Union,
signed in Maastricht on 7 February 1992.  From a legal point of view, it is the European Communities
who are a Member of the WTO and the annexed Ag reements (i.e. GATT, GATS and TRIPs).  The
reason for this is because WTO matters relate to trade in all areas covered by the following threeCommunity treaties:  the EEC, the European Coal and Steel Community (ECSC) and Euratom.  These
three Communities have legal personality to enter into international treaties creating rights and
obligations, unlike the European Union, who has no le gal personality as such.  Accordingly, for WTO
matters the correct denomination is European Communities even if in oral interventions European
Union is often used.  Moreover, WTO Membership is“European Communities” in plural, because fortrade in goods all three Treaties are relevant and for trade in services the EEC Treaty and Euratom are
relevant.  As regards trade in services, this is a domain of shared competence between Member States
and the Communities.  Accordingly, the official denomination for the GATS' schedule of specific
commitments is European Communities and their Member States.WT/REG39/1
Page 3
For the sake of simplicity, hereafter the European Communities and their Member States will
be referred to as “EC”.
The EC establishes an internal market and an economic and monetary union.  The stated aims
of the EC are very wide-ranging, covering economic, social and political objectives. The internal
market is based on the so-called four freedoms:  free movement of goods, persons, services and
capital. By now the EC is not only an economic integration but it covers other areas than trade
aspects.
For the purposes of the examination under Article V of the GATS, only the economic aspects
relating to trade in services will be addressed.  In addition, in the EC many other common policies
apply such as:  competition, taxation and approximation of laws, commercial policy, culture,
consumer protection, Trans-European Networks, Industry, Economic and social cohesion, research
and technological development, environment and development co-operation, all aiming at the same
objective:  strengthening the economic relationship among the Member States to achieve a real
internal market without barriers to trade.
In short, it is clear that the aims and objectives of the EC go much beyond what is described
in Article V of the GATS, in terms of liberalisation and abolition of discrimination in the sense ofArticle XVII of the GATS.
3. Plan and schedule
Elimination of restrictive or discriminatory measures takes place according to the following
principles:
- upon entry into force of the EC Treaty, Members States are committed to a standstill;
the new Members have to take up the “acquis communautaire;  and
- there is  a general prohibition of any discrimination on nationality.
In addition, approximation of laws is another major way to achieve integration.Article 3 of the EC Treaty stipulates that the activities of the Member States and the EC shall
include the adoption of an economic policy which is based on close co-operation of Member States’economic policies, on the internal market and on the definition of common objectives, and conducted
in accordance with the principles of open market economy with free competition.
In order to ensure the effective liberalisation of trade in services within the EC, whether on a
cross-border basis, through establishment or movement of natural persons supplying services,implementation legislation was taken at Community and Member State level, aiming at creating a
single market comprising an area without internal frontiers in which the free movement of goods,persons, services and capital is ensured.  The time-table for adopting measures with the aim of
progressively establishing the internal market on services, is as follows:
- First stage:  two General Programmes for the abolition of existing restrictions on the
freedom to provide services and the right of establishment within the Community
were established (see EC Official Journal 402 of 15/1/82, p. 32/62).  These
programmes set out the general conditions under which, and the stages by which,
each type of service was to be liberalised.  In order to implement the programme,
which was concluded in 1968, several EC directives were issued by the Council ofWT/REG39/1
Page 4
Ministers.  Since this programme is now fully completed, further details are not
included in this paper.
- 1985 - White Paper:  In 1985, the Commission published a white paper on completing
the internal market which listed 282 proposals for laws and regulations, together with
a timetable, for their implementation.  The White Paper emphasised the need to
liberalise the provision of services on the basis of mutual recognition of nationalregulation.
- 1987 - Single European Act:  This Act, which entered into force on 1 July 1987
confirmed the objective of completing an area without frontiers (internal market) by
1992 and the timetables set out in the 1985 White Paper.
- 1993 - Treaty on European Union:  This Treaty (so-called Union or Maastricht
Treaty), continues the single market process.
The Single Market initiative is explained in more detail under section II. 2 below.
4. Economic and Trade Data
Will be submitted later.
5. Relationship to any wider process of economic integration
As already explained above, the aims of the EC as regards liberalisation of trade in services
form an integral part of a much wider process of economic integration involving goods, services,persons, intellectual property and other factors of production (so-called internal market).  The
legislative measures to achieve these aims have already been taken and the internal market has been
completed.  The EC is now deepening further its economic integration (e.g. creation of a single
currency shortly), which is much more than what is required of economic integration agreements by
Article V of the GATS.
II. PROVISIONS AFFECTING TRADE IN SERVICES
1. Sectors or sub-sectors and modes of delivery
In the EC the integration covers all services sectors and activities.  The measures on services
apply to all modes of supply.  Pursuant to Article 60 of the ECT "Services" include in particular:
- activities of an industrial character;
- activities of a commercial character;
- activities of craftsmen;
- activities of the professions;  and
- freedom to provide services in the field of transport (governed by a separate Title in
the Treaty).
The only service activity which is not covered by the integration rules relates to activities
which are in a given Member State connected, even occasionally, with the exercise of "official
authority". This exclusion is practically identical to  the exception provided for in Article I para 3(b) of
the GATS, i.e. services supplied in the exercise of governmental authority.WT/REG39/1
Page 5
2. Elimination of Discriminatory Measures
The EC is built upon the fundamental principle of non-discrimination for all intra-Community
trade among Member States.
There is a general prohibition of discrimination on grounds of nationality (see Article 6 of
ECT). In addition, the ECT includes more specific prohibitions of discrimination for particular areas,
notably on the right of establishment and supply of services.
According to Article 52 of ECT, restrictions on the freedom of establishment of nationals of a
Member State in the territory of another Member State have been abolished during the transition
period (end of 1968).  The principle of "right of establishment" is comparable (if not broader than) to
the concept of "commercial presence", as a mode of delivery in GATS.  Freedom of establishment
includes the right to take up and pursue activities as self-employed persons and to set up and manage
undertakings, in particular companies or firms in the sense of Article 58 of ECT.  According to
Article 58 of ECT, companies or firms formed in  accordance with the law of a Member State and
having their registered office, central administration or principal place of business within the
Community shall be treated in the same way (n ational treatment obligation) as natural persons
(self-employed and incorporated) who are nationals of Member states.  The abolition of restrictions
applies also to the setting-up of agencies, branches or subsidiaries by nationals of any Member State
established in the territory of any other Member State.
According to Article 59 of ECT, restrictions on the freedom to provide services within the
Community shall be progressively abolished during the transitional period in respect of nationals of
Member States who are established in a State of the Community other than that of the person for
whom the services are intended.  As Article 59 ECT has been interpreted by the European Court of
Justice, it covers within the EC all three other GATS ‘modes of supply (except commercial presencewhich is governed by Article 58 on Establishment).
There is a standstill obligation contained in Article 62 of the ECT, which states that Member
States shall not introduce any new restrictions on the freedom to provide services which has in fact
been attained at the date of the entry into force of the EC Treaty.  As long as restrictions on freedom
to provide services have not been abolished, each Member State shall apply such restrictions withoutdistinction on grounds of nationality or residence to all persons providing services.
The European Court of Justice in Luxembourg has very early in the integration process
construed the various provisions of the EC Treaty as expressions of a general principle of equality,
and requires that similar situations shall not be treated differently unless differentiation is objectively
justified (this is comparable to the concept of de facto national treatment under GATS Article XVII).
It follows from the Court’s case-law that national measures liable to directly or indirectly
hinder or make less attractive the exercise of fundamental freedoms guaranteed by the EC Treaty must
fulfil four conditions:  they must be applied in a non-discriminatory manner;  they must be justified by
imperative requirements in the general interest;  th ey must be suitable for securing the attainment of
the objective which they pursue;  and they must not go beyond what is necessary in order to attain it.
All other type of measures which restrict the free provision of services among Member States are
prohibited.WT/REG39/1
Page 6
- Timetable for liberalisation
All measures necessary to ensure free circulation of capital, services and persons supplying
services have already been taken.  The internal market was realised on 1 January 1993.  Further
legislative initiatives are being taken in peripheral areas in order to deepen further and to facilitate
trade among Member States through mutual recognit ion and/or harmonisation of legislation.  The way
in which the internal market on trade in services has been achieved, can be illustrated by theinformation provided hereunder on some key services sectors and activities.
The Single Market Programme aimed principally at liberalising cross-border trade in the
so-called ‘traditional services’ (banking, insurance and transport).  Services in the ‘new technologies’
were included but without a detailed agenda except for audio-visual services.  In this area, as early as
1984, it was recognised in the ‘Television Without Frontiers’ Green Paper the importance of
establishing a Community-wide broadcasting area for the free circulation of information and culture.
As momentum picked up, the scope and the depth of the legislative programme was progressively
extended such as in the telecommunication services or transport, and further areas were included in
the utilities sectors covering electricity, gas, post and international railway transport.  More recently,
the advent of the information society is exerting new pressure to create the appropriate legislative
framework for the development of the type of information services at EC wide level.
Financial services:  the measures designed to give effect to the single market in financial
securities, banking and insurance came into effect in 1993.  Any firm is able to place securities on the
market and acquire them.  Any bank and insurance company is able to offer its products directly on
any market in the Community without having to se t up a business there.  This freedom is based on
harmonised rules laying down the common essential requirements to be met.  The general approach
adopted in financial services is closely linked to the programme for liberalising capital movements;such liberalisation has become a reality for the 12 Member States since 1 January 1992.
In transport (road, sea and air), liberalisation was split into two phases:  first liberalisation
between Member States.  During the second stage, the objective was to liberalise transport within
Member States by opening up the national markets to non-resident carriers (cabotage).  Cabotage has
been the basic principle since 1 January 1993;  any transport enterprise established in a Member statemay pursue its activity in any other Member state.
In audio-visual services, liberalisation of opening up the provision of broadcasting services
has been achieved.
In the telecommunications sector, the gradual process of liberalisation started with the supply
of terminal equipment in 1988, followed by the supp ly of value-added services and data services and
data and voice services for corporate networks and closed groups of users in 1990, and the opening to
competition of satellite services and equipment in 1994.  Details of the opening up of the progressive
liberalisation on basic telecommunications (i.e. specific time periods for some Member States) are
reflected in the Fourth Protocol to the Schedules of Commitments of the EC.  This process of gradual
liberalisation was completed by the full liberalisation of voice telephony services for the public and of
the network infrastructure achieved in 1998.
3. Restrictions Remaining in Force
The Single Market has been created to open up national markets to competition, thereby
increasing European economic growth, improving ov erall competitiveness and raising standards of
living.WT/REG39/1
Page 7
The completion of the single market during the period 1985-92 involved a major legislative
programme aimed at the elimination of non-tariff barriers, particularly technical and administrative
barriers, to trade and investment and the free movement of (workers and self-employed) persons.
Despite some occasional delays, the White Paper measures aimed at the elimination of
barriers to trade in services have been completed and transposed by Member States into national
legislation 1993/94.
4. Treatment of Services and Service Providers from Third Countries
The EC existed before the conclusion of the services negotiations at the end of 1993.  The EC
negotiated as a single entity its liberalisation commitments.  All measures affecting the supply of
services and the restrictions vis-à-vis service suppliers from a Member not party to the EC are
well-known and fully listed in its schedule of specific commitments.
Accordingly, there are no provisions which affect the treatment of services and service
providers from third countries and no modifications to the Schedule of Specific Commitments of theEuropean Communities and their Member States (WTO doc. GATS/SC/82 of 15 April 1994 and
GATS/EL/31 of 15 April 1994) are proposed.
No provisions in the Agreement raise the level of restrictions on trade in services for any
other WTO Member.
5. Rules of Origin for Community Companies
As far as the establishment from one Member State to another Member State within the EC is
concerned (i.e. so-called secondary establishment), companies or firms formed in accordance with the
law of a Member State and having their registered office, central administration or principal place of
business within the Community shall be treated in the same way as natural persons who are nationals
of the Member States.  In other words, companies or firms which fulfil the conditions laid down inArticle 58 of ECT explained above, and possess an effective and continuous link with a Member
State, (in case the company has only its registered office in a Member State), enjoy the same treatment
as any other company in that Member State.  The concept of "effective and continuous link" with the
economy of a Member State is equivalent to the concept of "substantive business operations" provided
in Article V para 6 of the GATS.  Limitations to secondary establishment or the provision ofcross-border trade in services are only possible in the following situations:
- on grounds which are explicitly laid down in the ECT, i.e. official authority, public
order, public security, public health, and safeguard measures  under Article 115 of
ECT as far as cross-border provision of services is concerned;
-  on grounds admitted by the case law of the Court of Justice, i.e. wrongful
de-localisation with the intention to circumvent requirements lawfully applied by a
Member State.
As far as establishment (i.e. commercial presence) in the EC of subsidiaries of third country
nationals is concerned (so called primary establishment), the law of the relevant Member State
applies, except in cases and to the extent that first establishment conditions have been harmonised
(e.g. majority control for airlines to benefit from the internal market) or where there are provisions on
third-country access to the market (e.g. in financial services and telecommunications).WT/REG39/1
Page 8
Member States are also competent for the establishment and treatment of third country
branches , except and to the extent that there has been harmonisation (e.g. direct branches of non-EC
insurance companies), including the provision of services by a direct branch established in a Member
State into another Member State.
There are no specific rules of origin for consumption abroad and presence through natural
persons.  To benefit from the provisions of the ECT, the nationality of a Member State and residenceof the consumer or the natural person in a Member State is required.
6. Standards / Recognition
Diplomas and professional qualifications obt ained in another Member State are recognised
although in some cases conditions may be imposed to take account of differences in qualifications and
training systems.  Besides a general system prov ided for in Directive 89/48/EEC there are sectoral
directives for doctors, dentists, veterinary surgeons, nurses responsible for general care, midwives,
pharmacists, lawyers and architects.
7. Safeguards
Pursuant to Article 115 of ECT and in order to ensure that the execution of measures of
commercial policy taken in accordance with the EC by any Member State is not obstructed by
deflection of trade, or where differences between such measures lead to economic difficulties in one
or more Member States, the European Commission can recommend the methods for the requisiteco-operation between the Member States.  Failing this, the Commission can authorise Member States
to take the necessary protective measures, the conditions and details of which it determines.
In case of urgency, the Member States can request authorization to take the necessary
measures themselves from the European Commission, which shall take a decision as soon as possible;
the Member States concerned shall then notify the measures to the other Member States.  TheCommission may decide at any time that the Member States concerned can amend or abolish the
measures in question.
In the selection of such measures, priority is given to those which cause the least disturbance
of the functioning of the common market.
Article 115 of ECT is applicable for cross-border provision of services, provided of course the
other conditions laid down in that Article are fulfilled, i.e. deflection of trade results from the national
restrictions inscribed in the schedule of specific commitments or MFN exemptions or from economic
difficulties resulting from such restrictions or exemptions.   Measures authorised under Article 115 are
applied to situations where restrictions on cross-border provision of services is technically feasible.
Pursuant to Article 73f of the ECT, there is  in exceptional circumstances the possibility to
take safeguard measures in the area of movement of capitals, where such  movements of capital to or
from third countries cause, or threaten to cause, serious difficulties for the operation of economic and
monetary union.
8. Subsidies and State-aid
Pursuant to the Article 92 of the ECT, any aid granted by a Member State or through State
resources in any form whatsoever, save for certain exceptions, which distorts or threatens to distort
competition by favouring certain undertakings in the production of certain goods shall, in so far as itaffects trade between Member States, be incompatible with the common market.WT/REG39/1
Page 9
The following are compatible with the common market:
(a) aid having a social character, granted to individual consumers, provided that such aid
is granted without discrimination related to the origin of the products concerned;
(b) aid to make good the damage caused by natural disasters or exceptional occurrences;
The following may be considered to be compatible with the common market:
(a) aid to promote the economic development of areas where the standard of living is
abnormally low or where there is serious underemployment;
(b) aid to promote the execution of an important project of common European interest or
to remedy a serious disturbance in the economy of a Member State;
(c) aid to facilitate the development of certain economic activities or of certain economic
areas, where such aid does not adversely affect trading conditions to an extent
contrary to the common interest.  However, the aids granted to shipbuilding as of 1
January 1957 shall, in so far as they serve only to compensate for the absence ofcustoms protection, be progressively reduced under the same conditions as apply to
the elimination of customs duties, subject to the provisions of this Treaty concerning
common commercial policy towards third countries;
(d) aid to promote culture and heritage conservation where such aid does not affect
trading conditions and competition in the Community to an extent that is contrary tothe common interest;
9. Public Procurement
The EC embraces a common market for public-sector procurement and construction contracts
which is based on various Council directives co-ordinating procurement procedures in all
public-sector procurement subject to the Treaties.
The public procurement directives are based on three main principles:
- EC-wide advertising of contracts so that firms in all Member States have an
opportunity of bidding for them;
- the banning of technical specifications liable to discriminate against potential foreign
bidders;
- application of objective criteria in tendering and award procedures.
The directives on public works were co-ordinated in Council Directive 93/37/EEC (“the
Works Directive”) of 14 June 1993 and the directives on supplies were consolidated in Council
Directive 93/36/EEC (“the Supplies Directive”) of 14 June 1993.  The latter also aligned the text on
Supplies with that on Works. The Council directive 92/50 concerning the coordination of publicprocurement on services has been adopted on 18 June 1992. It should be noted that public works,
supplies and services contracts in the water, energy, transport and telecommunications sectors are
covered by a separate Directive 93/38/EEC.WT/REG39/1
Page 10
III. GENERAL PROVISIONS OF THE AGREEMENT
1. Exceptions and reservations
Liberalisation of the right of establishment and the freedom to supply of services is subject to
limitations justified on grounds of public policy, public security or public health.
Measures can also be taken for national security reasons. In case such measures distort the
conditions of competition in the internal market, the European Commission together with the MemberState concerned can examine how such measures can be adjusted to the EC Treaty rules.
2. Accession
Any European State may apply to become a Member of the European Union. The procedure
to be followed is set down in Article 0 of the Treaty of the European Union.
3. Dispute settlement procedures
The settlement of disputes within the EC is far-reaching, and takes place at several levels or
through several actions.
There is a possibility of action between Member States;  between the European Commission
and a Member State;  between a service provider and a Member State or the EC.  The latter can take
place through national courts in each Member State, the Court of First Instance and European Court of
Justice, both in Luxembourg.
4. Institutional framework
The tasks entrusted to the EC, are carried out essentially by the following institutions:
- European Commission;
- Council of Ministers;
- European Parliament;
- Court of First Instance and European Court of Justice, and- Court of Auditors.
IV. OTHER
__________