The legal implications of EU enlargement

The paper considers the likely implications of EU enlargement in three policy sectors – real estate investment, banking and financial services and competition policy.

Executive Summary

• The economies of Poland, Hungary and the Czech Republic are growing more dynamically than those of current member states, and they are already deeply integrated into the European economy.

• Bilateral trade has been almost completely liberalized under the Europe Agreements.

• National legislation on internal market affairs has already been approximated to EU legislation under the Europe Agreements.

• Good progress has been made in transposing the acquis but there have been delays in its enforcement; Poland in particular needs to enhance its administrative capacity.

• Cross-national differences in levels of preparedness for membership persist.

• Implementation of the acquis has been hindered by bureaucratic structures inherited from the communist regimes as well as by shortage of funds.

• Safeguard mechanisms are in place to ensure implementation of the internal market acquis even after accession.

• Procedures for company start-ups remain slow but company registration has become more efficient.

• Young lawyers and judges have been trained in EU law, which should facilitate transition.

• Low pay and status make it difficult for the civil service to recruit and retain high-quality staff.

• The court systems are being reformed in all three jurisdictions, creating short-term complications.

• Corruption is seen to be a problem but is no worse than in some current member states.

• The banking sectors in all three states believe ‘we could join the EU tomorrow’.

• Banking privatization is largely complete,

• Progress in insurance and other financial services has been slower, as has the development of equity and bond markets.

• Accession is likely to trigger merger and acquisition activities.

• Real estate investment has been one of the most contentious accession issues and long transition periods have been agreed for agricultural land.

• Acquisition of residential and industrial property is possible subject to certain technicalities. Residential and property markets anticipate a boom following EU entry, which in turn is likely to lead to a rise in prices

• Full liberalization of land markets is only a medium- or long-term prospect following accession.

• Good progress has been made in implementing the competition acquis.

• National competition authoritites are regarded as independent organizations with appropriate powers to oversee markets and sanction against anti-competitive behaviour.

• The tendency is towards EU practice of strict sanctions policies against serious anti-competitive behaviour.

• Progress on state aids has been slow and the volumes, particularly in Hungary, have been high. However, they have been aligned with EU practice since January 2003.

• Existing fiscal aids will be transformed into permissible forms that allow investors to keep their tax benefits when their current contracts expire.

• State aid continues to present a challenge for local competition authorities and real changes in enforcement can only be expected after accession.

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