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GENERAL INTRODUCTION
 

 

 

 

 

The significance of the harmonisation of legislation of the associated countries of Central and Eastern Europe (ACCEE) with the legislation of the European Community (EC) was already underlined by the European Council in Copenhagen (21-22 July 1993). The approximation of the Bulgarian legislation with that of the EC is one of the fundamental tasks of the strategy for the preparation of the countries of Central and Eastern Europe to join the Union, adopted at the meeting of the European Council in Essen on 9-10 December 1994. The conclusions made at the European Council in Essen underscore the fact that in order to be ready to participate in the internal market from the moment of its association, the ACCEE should make their legislation compatible with that of the EC, i.e. to develop a system of laws and normative acts, standards and methods of certification compatible with those of the European Union.

The approximation of legislation is a basic obligation under the Europe Agreement (EA). By virtue of Art. 69 and Art. 70 of the EA which entered into force on the 1 February 1995 our country is obliged to make all efforts to ensure that its legislation will be gradually made compatible with that of the EC. Art. 70 specifies the areas for approximation of laws, including rules of competition, customs law, company law, bank law, protection of workers at the workplace, environment protection, protection of intellectual property, consumer protection, technical rules and standards.

The harmonisation of our legislation with that of the EC is not only a treaty obligation but it is also an economic imperative. As a short-term objective the compatibility of the Bulgarian legislation with that of the EC is a substantial factor which helps attract investment from the EU, facilitates access to the markets of the EU and guarantees equitable and mutually profitable trade. In the long-term, the approximation of laws is a necessary condition for the future integration of Bulgaria with the EU. Obviously this is a long and complicated process which should embrace not only the present EC legislation but also its future development (an often used comparison is aiming at a moving target). The harmonisation of legislation is also a prerequisite for the establishment of a common market after the expansion of the EU, without which such expansion would not be possible. Because the establishment of a common market after the expansion means a successful integration of the ACCEE to the so-called internal market of the EU, it is evident that the harmonisation includes first of all approximation of our legislation to that of the EC.

Certainly the approximation of legislation is not a sufficient condition for the successful integration of Bulgaria with the common market of the EU. The European Council in Essen emphasised that a reasonable macro-economic policy would be of decisive importance for the success of the economic reforms and the realisation of the integration strategy. Such a policy, oriented towards the gradual levelling with the requirements of the internal market of the EU, would enhance the competitiveness of the Bulgarian economy and may shorten the transition period, thus contributing to the attainment of macro-economic stability. The immediate requirement for the realisation of this process, however, is finding an adequate sequence and an adequate rate of the approximation of the legislation of Bulgaria to that of the EC. This will help ensure that the process contributes to the acceleration of the economic reform. In other words, the most urgent task is to set the priority areas of approximation, the stages of approximation and specific time-tables and periods. Obviously the process of approximation of laws will have stages. It will not and cannot end with the integration of Bulgaria as a full member of the EU. Many of the present members of the Union continue to harmonise their legislation in certain areas. It is important to identify what should be implemented prior to the integration in order to protect our economy, after all obstacles are done away with, against the strong competition which exists within the internal market.

In this sense the approximation of our legislation to that of the EC goes further than the accomplishment of the reforms necessary for the creation and functioning of a market economy. The aim of the legislation approximation process is to facilitate the integration of our economy with the developed industrial economies of theEU member states. That is why it is necessary not only to adopt normative acts but also to organise institutions and mechanisms for their application. Therefore, the approximation process of Bulgarian laws to those of the EC includes the building of relevant structures and mechanisms for the application of these laws. The successful accomplishment of the legal and judicial reform is also part of this process. Without the necessary institutional changes the adoption of the legislation of the internal market of the Union would remain just a process of a formal reproduction of norms which will not ensure attainment of the necessary economic effect.

The building of mechanisms for the Bulgarian legislation approximation to that of the EC, the setting of priorities and rates of approximation and the accomplishment of the process of approximation demand a clear answer to a number of questions including the following:

-to what extent the existing laws and normative acts (possibly divided into economic areas) are compatible with EC legislation;

-what are the priorities with respect to the future norm-creating activity aimed at approximation of our legislation to that of the EC;

-what organisation and infrastructure should we build in order to accomplish the approximation of our legislation with that of the EC;

-what technical and financial assistance will be necessary from the European Commission.

A fundamental prerequisite for answering these questions is knowledge of the legal principles on which the internal market of the European Union functions. As was already mentioned, integration with the EU would be impossible without integration with the internal market. The internal market of the EU is defined by Art. 7a of the Treaty Establishing the European Economic Community (further called the Treaty - in its current version as amended by the Treaty on European Union) as space without inner frontiers, in which the freedom of movement of goods, people, services and capital is ensured. The basic characteristics of the internal market is guaranteed free and active competition is within its boundary. The internal market functions on the basis of the following legal principles contained in the treaty:

- discrimination between the member states of the EU and between their citizens on grounds of their nationality is forbidden (Art. 6);

- freedom of movement and choice of residence within the Community (Art. 8a);

- elimination of customs duties and charges with an equivalent effect in the economic exchange between the member states (Art. 9-12);

- elimination of quantitative restrictions and measures with equivalent effect on trade with goods, as well as establishing conditions for exceptions (Art. 30-36)

- ban on discrimination with respect to state monopolies (Art. 37);

- freedom of movement of workers (Art. 48-51);

- freedom of movement and freedom of establishment of self- employed persons (Art. 52-57) and firms and companies (Art. 58);

- freedom of supply of services (Art. 59-66);

- elimination of restrictions on the free movement of capital (Art.73b);

- ensuring of fair competition (Art. 85, 86 and 90);

- strict conditions for rendering assistance to companies on behalf of the state (Art. 92)

- ban on discrimination in the field of taxation (Art.95)

In addition to the principle of the Treaty there are the principles formulated by the decisions of the Court of Justice which are interpretive. A characteristic example is the principle of reciprocity/mutual recognition, formulated by the decision of the Court, known as "Cassis of Dijon" in 1979. According to this principle each good, which is circulating free in the market of one member-state shall be allowed to circulate in the markets of other member states. On this basis freedom of circulation of all goods and services is guaranteed within the Community. The decisions of the Court of Justice include interpretations of important terms of the Treaty as measures having an "equivalent effect" of quantitative restrictions (Art. 30) as well as the conditions for imposing of restrictions on the freedoms. As a result of the adoption and application of these principles to the functioning of the internal market natural, technical, taxation and customs barriers have been abolished.

Certainly the building of an internal market is a complex and difficult process. It cannot be regulated only on the principles formulated by the Treaty and the decisions of the Court of Justice. The functioning of the internal market is subject to various and detailed rules adopted by the Community bodies - the so called "secondary legislation." When differences of legislation of the member states are too big and, as a result the principle of freedom of movement cannot apply directly, there arises the necessity of legislation adopted by the Community bodies. The adoption of such normative acts is demanded in areas where rules and practices of the member states differ so much that they hinder the exercise of enumerated freedoms. Such areas are, for instance, health protection, labour protection, consumer protection, safeguard of the public trust in the financial sector, and guarantees of high level qualification of certain professions, etc. The adoption of "secondary legislation" is necessary to ensure equal conditions for economic activity, thereby guaranteeing fair competition. This means for instance, the necessity to regulate expenses imposed by governments on the economic activity, including measures for environment protection, consumer protection measures, measures in the social field etc. Such regulation process pursues two objectives. First, requirements for economic activity are equalised thereby opening possibilities for the abolition of frontiers and allowing the functioning of the common market. Second, equalising the requirements and of the standards inevitably leads to the introduction of greater protections in the field of protection of health, the environment, the consumer, etc.

The secondary legislation of the Community has different forms. By virtue of the Treaty the greater part of the legislation of the Community referring to the functioning of the internal market is adopted in the form of directives. The directives are mandatory for the member states with regard to result, leaving to the states the adoption of the necessary measures to ensure the accomplishments of these results. They require that the national bodies adopt rules (or amendment of the existing ones) in accordance with the aims set in the directive (sometimes within a prescribed period of time). In other words, the state has the choice of form and method of implementation of the directive. The directives can be short and can simply show the result and the time limit for its attainment, but often they are quite detailed and leave little space for the national legislation. Nevertheless, the directives set the objectives and formulate the conditions, while the national legislation can incorporate and fulfil these aims in a different manner. Such an approach ensures to the greatest possible degree the preservation of the traditional national peculiarities. In cases where the member states do not adopt, within the prescribed period the necessary measures for the fulfilment of a certain directive or the adopted measures are incomplete or inadequate, natural and legal persons can invoke directly the directive, provided its formulations are sufficiently clear. According to the decisions of the Court of Justice the member states bear responsibility, including damages to individuals suffered as a result of non-implementation of a directive within a certain period.

The regulations are Community acts which are applied directly by the member states. They can have mandatory force for each subject of legislation and acquire the state of applicability for the whole territory of the EU at the time of adoption by the Council or the Commission. The regulations by their legal consequences are practically national legal norms which by the decisions of the Court of Justice have priority over all remaining norms of the national legislation. This refers not only to the regulations, but also to the legislation of the EC in general. It has priority over the national legislation, the constitution included. This principle is formulated in the decision of the Court of Justice in the case Costa vr. Enel of 1964. The principle of direct effect of the EC norms refers not only to the regulations but to EC legislation in general. As far back as 1963 in its decision in the case Van Gend en Loos the Court of Justice decided that the clear, precise and unconditional provisions of the Treaty create rights for individuals too, i.e. for natural and legal persons and these rights shall be recognised and defended by national legislation.

The decisions are individual acts - they have mandatory legal power for the addressee. The latter may be both a member state or a natural or legal person.

Apart from the decisions described above decisions of the Court of Justice are considered as acts of the Community bodies. They have a mandatory nature for the parties of the case and in different cases parties may be member states, Community bodies, natural and legal persons. In addition, the Court of Justice interprets EC legislation on cases considered by a national court of a member state. Therefore with regard to EC legislation the Court of Justice stands above national legislation. Both the Supreme Court and the Constitutional Court must take into account the decisions of the Court of Justice.

Free movement of goods. The greatest part of the secondary legislation refers to production and marketing of goods. These acts regulate fields where the differences between the member states are so great that they have an "equivalent effect" of customs and quantitative restrictions - the so called technical obstacles to trade. In some cases detailed regulations are adopted which replace national regulations and standards. This is particularly important for such goods as foodstuffs, drugs, automobiles, etc. In other cases general requirements are adopted while the detailed regulation is left to national legislation.

On the basis of this regulation, derived from the principles of the Treaty and the principle of mutual recognition, each producer and importer has the necessary guarantees that he can sell his goods everywhere in the EU without violating the local regulations. Therefore, a state which participates in the internal market must not only set up conditions for the production of goods complying with the standards of the Community, but also must guarantee that all goods in its market comply with these standards. An additional requirement is that the state must guarantee the free movement of goods produced elsewhere in the Community.

Free movement of services. Another very big part of the secondary legislation refers to the conditions for the supply of services. The adoption of acts by the Community is caused by the same reason - differences between the member states quite often are too great and they cannot guarantee the practical implementation of the freedom of supply of services. The most essential part of the legislation in this area concerns the financial services sector. Another purpose of the secondary legislation in the field of services is to open markets which have traditionally been dominated by national monopolies like telecommunications, certain transport sectors, energy, etc.

Free movement of people. The secondary legislation of the Community based on the principle of free movement and the right to choose a residence (Art. 8a of the Treaty) is divided into two parts. To the first part refer acts of the Community which ensure harmonic development of the labour market and fair competition, and to the second acts which define the conditions of access of citizens from one member state to another. The second part is considerably more extensive and regulates such questions as residents' permits and permanent stay, entry rights, conditions and restrictions of extradition, family allowances and assistance, etc. Part of the acts of the Community which refer to the free movement of people are closely connected with the freedom of supply of services. The regulations and standards of the Community gradually replace the national standards concerning exercising of a profession by architects, physicians, lawyers, etc. The additional regulations for the free movement of people are necessary in order to guarantee that movement within the Community does not affect the right of the worker to social security, medical assistance, education, etc.

According to Art. 56 of the Treaty legal persons enjoy the same treatment as natural persons concerning free movement. The legislation of the Community eliminates certain substantial differences in the national legal systems concerning establishment, registration and functioning of legal persons. Still full "freedom of movement" of the legal persons remains to be reached particularly with respect to trans-frontier mergers and acquisitions and the transfer of a seat from one member state to another.

Free movement of capital. This freedom is a "late" acquisition of the Community. Up until the end of 1993 this principle was formulated very cautiously (Art. 67-73) in the Treaty, Art. 73 providing a safety mechanism in case of disruption of the balance of the financial market. Thanks to the secondary legislation the restrictions on the freedom of movement of capital which the member -states had the right to impose were gradually dropped. In 1994 new articles were introduced in the Treaty (Art. 73b-73g) which considerably reduced the possibilities of imposing restrictions on this freedom and which are rarely applied.

Competition. Fair and just competition is of exclusive importance for the functioning of the internal market of the Community. That is why the legislation of the Community has created a system of norms which regulate competition and safeguards it from distortion. The behaviour of the states and the individuals is regulated in four basic areas:

1. In an environment with no state barriers to free trade, individuals could conclude different sorts of agreements curtailing competition, for instance division of markets, or abuse their monopolistic position. This naturally could lead to the disruption of the principles of free trade and competition.

2. The internal market sets new requirements for legal persons and they often unite in "strategic unions" by mergers or acquisitions. This is not unlawful in itself, but the processes should be regulated in such a manner that the new structures do not interfere with free competition.

3. In opening their frontiers, governments are often tempted (or are compelled) to render state aids to their own undertakings in order to protect their production from the rising competition. When state aids are oriented toward assistance in common goals such as research and development, scientific research, environment protection, reaching a balanced regional development, etc., it can be attractive. If the achievement of such positive effects is not within the power of the respective legal person, the latter can request assistance from the state. Other forms of state aids are, however, not allowed as it is thought that they hinder fair competition.

4. The activities of monopolies are strictly regulated. State monopolies, state undertakings and the undertakings supplying services to the society create a serious risk for free competition. When the existence of the natural monopolist is inevitable, the "distortion" of the market should be restricted to the level necessary for ensuring the interest of society.

Bulgaria has undertaken important obligations under the EA in the mentioned areas. The most fundamental of these, having direct bearing on the approximation of legislation are the following:

1. In the field of competition. According to Art. 64, par. 3 of EA, Bulgaria assumed the responsibility to adopt measures for the implementation of the provisions of the EA in the field of competition protection within three years of the entry into force of the agreement.

2. In the field of the protection of intellectual property. By virtue of Art. 67 of the EA Bulgaria assumes the responsibility of improving the protection of intellectual property by assuring within five years of the entry into force of the agreement a level of protection corresponding to that of the EU including the appropriate means and mechanisms of enforcement.

3. In the field of company law there is a general obligation for approximation. According to Art. 62 of the EA within five years of the entry into force of the agreement Bulgaria is obliged to adopt measures aimed at the creation of conditions for the further gradual application of the regulations of the Community with regard to movement of capital.

The monitoring of the implementation of obligations under the EA will be carried out by bodies established for this purpose: an Association Council, an Association Committee and sub-committees in the respective fields including a special sub-committee on the approximation of legislation. These bodies have the authority to monitor the process of harmonisation of legislation, to define priorities and to control their implementation, to make recommendations to the respective Bulgarian institutions.

Within the EU, the European Commission is authorised to monitor the enforcement of the Community legislation, while disputes are settled by the Court of Justice. In practice, however, in most cases the Community legislation, irrespective of whether it is directly applicable or is incorporated in the national legislation of the member states, is applied by the relevant administrative or judiciary mechanisms at national level. After the integration of Bulgaria to the EU the Bulgarian administrative and judiciary bodies will be obliged to apply the legislation of the Community. Failure to fulfil these obligations may bring about sanctions from the Commission and the Court of Justice. That is why the process of harmonisation of our legislation with that of the EC is a basic element in our preparation to fulfil our obligations ensuing from the necessity to apply the legislation of the EC.


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