 
  WORLD TRADE  
ORGANIZATION  WT/REG139/2 
10 February 2004 
 
 (04-0518) 
Committee on Regional Trade Agreements Original:   English 
  
 
 EUROPE AGREEMENT BETWEEN THE  
EUROPEAN COMMUNITIES AND THE CZECH REPUBLIC, SERVICES 
 
Questions and Replies
 
 
 The following communication, dated 5 February 20 04, is being circulated at the request of the 
Delegation of the European Commission and of  the Permanent Mission of the Czech Republic. 
  This document reproduces the questions addressed  to the Parties and the responses submitted. 
The questions and replies set out below are or ganized in accordance with document WT/REG139/1. 
_______________ 
 
 
I. BACKGROUND INFORMATION ON THE AGREEMENT 
4. Economic and Trade Data 
 
1. Can the parties please provide available inform ation on the volume of trade affected by 
the agreement? The data provided free-of-charge on the Eurostat Internet site is insufficient to 
answer this question. 
 The statistics provided by Eurostat are the only data available at present. Almost all trade in 
services between the EU and the Czech Republic woul d fall under the provisions of the Agreement. 
As a proportion of the EU’s total foreign cross-border trade in services (export+import) trade in 
services with Czech Republic represents 1 per cent.   
II. PROVISIONS AFFECTING TRADE IN SERVICES 
1. Provisions in the Europe Agreement whic h are relevant to the scope of the GATS 
 
2. We have been unable to access the annexes to  the Europe agreement from the Internet 
sites identified in your submissions. 
 (a) Please identify all secto rs covered by the agreement. 
 
 (b) Please identify all sectors excluded from the agreement and explain why they 
have been excluded. 
  (c) Please explain why the parties consid er the agreement has substantial sectoral 
coverage. 
 
(a) (b)  The Agreement covers all sectors, with the exception of the following sectors: 
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 • Air transport services, inland-waterways transport services and maritime cabotage 
transport services. 
 
• Acquisition and sale of natural resources, acquisition and sale of agricultural land and 
forests,  cultural and historic monuments and buildings. 
 
 The establishment of EU companies in th e Czech Republic in the following sectors is 
liberalised by the end of  the transitional period:  
- financial services 
- acquisition of State-owned assets under privatization process, 
- ownership, use, sale and rent of real property, 
- dealing and agency activities in r eal property and natural resources. 
  No sector is excluded from the chapter on the liberalisation of the supply of services.  (c)  It is considered that the Agreement res ponds to this requirement, given that it has an 
extremely comprehensive number of sectors covered,  with only a real exclusion (transport services) 
regarding right of establishment, it affects almost all trade in services between the Parties, and it 
covers all modes of supply.  
3. Please identify all provisions in the agreement that provide for the absence or 
elimination of discrimination, in the sense of Article XVII, between or among the parties, in 
each of the sectors identified in response to Qu estion 2.  If any of these provisions are not 
effective upon entry into force of the agreement, ca n the parties identify the date on which each 
will become effective, and explain whet her this time-frame is reasonable? 
 Article 38 establishes the absence of discrimina tion for workers of Czech Republic and of the 
EU’s Member States who are legally employed in the territory of the other Contracting Party. Article 
45 covers the right of establishment for Czech comp anies and nationals in the EU’s Members States 
(paragraph 1) and for EU’s Member States companie s and nationals in Czech Republic (paragraph 2). 
Article 53 covers the key personnel of companies of Czech Republic and of EU’s Members States 
which are established in the other Contracting Pa rty. Article 56 covers the supply of services by 
Community or Czech Republic companies who are estab lished in a Party other than that of the person 
for whom the services are intended, which is to be realised progressively during the transitional 
period.  
4. Please identify all provisions in the agreement  that allow for discrimination, in the sense 
of Article XVII, between or among the parties, in  each of the sectors identified in response to 
Question 2, and provide an estimate of the volume of trade affected.  What plans do the parties 
have to eliminate this discrimination? 
 As it is specified in the reply to question 2, tran sport is the only substantial exclusion, and that 
only from one single aspect of the agreement (establish ment only). It is therefore difficult to estimate 
the volume of trade covered except to say that almost all trade in services would fall under the provisions of the agreement. 
 
5. Please identify all sectors or subsectors with in which the agreement, in respect of any 
Member outside the agreement, raises the level of  barriers to trade in services compared to the 
level applicable prior to such an agreement, a nd explain how the overall level of barriers within 
the respective sectors or subsectors has not been raised. 
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  The Agreement does not raise the level of barriers to trade in services neither on an overall 
level nor at sectoral level, but, on the opposite, has increased the possibilities for third countries to 
provide services to the Contracting Parties.   
6. Article 70 states that the approximation of laws will be extended to, inter alia , banking 
law, company accounts and standards, financia l services, technical rules and standards, and 
transport. 
 (a) How will the parties to the agreement ensure that such approximation does not 
result in de facto restrictions on services provided by third-party suppliers? 
 
 (b) Will third-party suppliers be given an opportunity to provide services affected 
by such laws? 
  (c) In what manner will the parti es to the agreement publish such laws? 
  The approximation of law will be applicable, w ithout discrimination, within the territory of 
the EU and Czech Republic. The publication will be  done in accordance with the procedures existing 
in each Contracting Party.  
2. Rules of origin 
 
7. With regard to Article 55, how do the pa rties define Czech Republic or Community 
“control” of a company? 
 The interpretation of the provisions of the EC  Treaty and of the Europe Agreements are the 
competence of the European Court of Justice and of the dispute settlement procedures of the Europe Agreements respectively. In this respect, there h as been a number of instances where the European 
Court of Justice has adopted jurisprudence on the basis of Community law, where a similar concept 
exists. In particular, this notion has been addressed by the European Court of Justice in its decision of 
July 1995 in the case of Swissair/Sabena (OJ No L 239,  7.10.1995, p. 19), where it stated that “the 
effective control requirement is complied with if Me mber States and/or nationals of Member States 
have, either individually or acting together with other Member States or nationals of Member States, 
the ultimate decision-making po wer in the management”. 
 
8. With regard to Article 49 of the agreement, what criteria are used to determine whether 
a firm’s operation possesses “..a real and continuous link with the economy of one of the Member States or Czech Republic ...”? 
 The requirement for "a real and continuous link" is designed solely to prevent the abuse of the 
Agreements through the creation of a so called "lette r box" operation in one of the parties in order to 
circumvent controls imposed by the other on access by  foreign nationals and companies to its market.  
The phrase "a real and continuous link" is the equivalent of the langua ge "substantive business 
operations" in GATS Article V.6.  Under the EC definition of this phrase, initially used in the 
"General Programme" of 15 January 1962, it is ex pressly excluded that a real and continuous link 
should depend on the nationality of the partners, of  the members of the management or supervisory 
bodies, or of the persons holding the capital. 
 
9. Please explain the requirements by which a serv ice supplier of another Member that is a 
juridical person constituted under the laws of a pa rty to the agreement is entitled to treatment 
granted under the agreement, if that service suppl ier engages in substantive business operations 
in the territory of the parties to the agreement. WT/REG139/2 
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  The juridical person of another Member that is  a juridical person constituted under the laws of 
a party to the agreement is entitled to treatment gran ted under the agreement on the basis of       
Article 49.  
3. Standards/Recognition 
 
10. How will the parties ensure that mutual rec ognition agreements will not result in de 
facto restrictions on professionals from other countries? 
 The situation with regard to the treatment accorded to other WTO Members will not change 
as a result of mutual recognition agreements between the Contracting Parties. 
 
 
III. GENERAL PROVISIONS OF THE AGREEMENT 
1. Exceptions and reservations 
 
11. Article 54(2) of the Europe Agreement stat es that provisions on establishment (found in 
Title IV, Chapter II of the agreement), “...shall no t apply to activities which in the territory of 
each party are connected, even occasionally , with the exercise of official authority.” 
 (a) Could the parties provide examples of  activities that are covered by Article 
54(2)?   
 
 (b) Do the parties to the agreement view Ar ticle 54(2) as more or less inclusive than 
the GATS’ exclusion of services provide d in the exercise of governmental 
authority? 
 
(a)  The exception provided for by Article 54(2) of  the Agreement is similar to that included in 
Article 45 of the EC Treaty, which stipulates that “the provisions of this Chapter [on right of 
establishment] shall not apply, so far as any given Member State is concerned, to activities which in 
that State are connected, even occasionally, with the exercise of official authority.” 
  This provision is similar with that of Artic le 1.3.(b) of GATS which excludes from its scope 
services “supplied in the exercise of governmental authority.” 
 
 There have been a number of instances wher e the European Court of Justice has adopted 
jurisprudence on the basis of Article 45. In these cases, the Court of Justice has taken a restrictive 
interpretation of the scope of Article 45.  
 More specifically, the Court of Justice ruled on  21 June 1974 in Case 2/74 Reyners v Belgium 
(European Court Reports, 1974, p. 631, paragraph 45 ) that the derogation provided for in Article 45 
(ex 55) must be restricted to activities which in themselves are directly a nd specifically connected 
with the exercise of official authority  and accordingly, concluded that the profession of lawyer 
(‘avocat’) in Belgium does not fall under the scope of Article 45. 
 
 The Court ruled, however, that the following activities are not covered by Article 45 : 
 
- private security undertakings and private secu rity staff in Spain (Judgement of the Court 
(Fifth Chamber) of 29 October 1998. Commission of the European Communities v Kingdom 
of Spain , Case C-114/97, European Court Reports 1998); 
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 - activity as an intermediary between supply a nd demand in employment relationship in Italy 
(Judgement of the Court (Sixth  Chamber) of 11 December 1997, Job Centre coop. arl. , Case 
C-55/96, European Court Reports 1997, page I-7119); 
 - the concession for the computerisation system fo r the Italian lottery (Judgement of the Court 
of 26 April 1994., Commission of the European Communities v Italian Republic , Case C-
272/91, European Court Reports 1994, page I-1409); 
 - the activities of approved commissioners with insurance undertakings and private provident 
associations in Belgium (Judgement of the Court (Fifth Chamber) of 13 July 1993, Adrianus 
Thijssen v Controledienst voor de verzekeringen , Case C-42/92, European Court Reports 
1993, page I-4047);  
 - the provision of business executives by personnel co nsultants in Germany (Judgement of the 
Court (Sixth Chamber) of 23 April 1991, Klaus Höfner and Fritz Elser v Macrotron GmbH , 
Case C-41/90, European Cour t Reports 1991 page I-1979); 
 - the activities of traffic accident experts in Greece (Judgement of the Court of 10 December 
1991, Commission of the European Communities v Hellenic Republic , Case C-306/89, 
European Court Reports 1991, page I-5863);  
 
- the activities concerning the design, programmi ng and operation of data-processing systems 
for the public authorities in Italy (Judgement of the Court of 5 December 1989, Commission 
of the European Communities v Italian Republic , Case C-3/88, European Court Reports 1989, 
page 4035);  
 
- the setting up of private schools in Greece (Judgement of the Court of 15 March 1988, 
Commission of the European Communities v Hellenic Republic , Case 147/86, European Court 
Reports 1988, page 1637).  
  In all these rulings the European Court of Jus tice has adopted a restrictive interpretation of 
this exception. Any activity must be evaluated on a ca se by case, as it is with regard to Article 1.3 
GATS, with regard to the specific situation existing in the country. 
 (b)  These provisions seem to be referring to simila r concepts, even if it does appears possible to 
evaluate their exact interrelation, given the absence of specific GATS jurisprudence. 
 
 
IV. OTHER 
 12. In general terms, how do the parties define the term “..a limited period of time,” as used 
in Article 45(5) and Article 51 of the agreement? 
 As it constitutes an exception, it is in tended to be applied restrictively. 
 
 
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