Association Agreements

by Detlev Witt

1. Concept and function of association agreements

Association agreements are international treaties concluded by the European Union with third countries or international organizations on the basis of Art 217 TFEU/310 EC. Such agreements require that an association be established involving ‘reciprocal rights and obligations, common action and special procedure’. Considering these fundamental requirements, an agreement-based association—which itself is not defined more closely in the European treaties—is seen as (i) a special and privileged relationship between the Union on the one hand and one or more third countries or international organizations on the other, being characterized by (ii) a certain balance of reciprocal rights and obligations in the absence of subordination of one party to the other, (iii) the establishment of bodies with equal representation that take joint decisions on the implementation and development of the cooperation, (iv) the binding effect inter partes of such joint decisions, (v) and by a certain degree of permanence. Such a relationship, which is also referred to as ‘external association’, is, on the one hand, much closer than in the case of a classic non-preferential trade agreement on the basis of Art 207 TFEU/133 EC, but remains, on the other hand, below the level of EU membership and the rights of participation in the EU decision-making process related to it.

The general concept of external association includes a variety of different agreements which may be assigned to three categories according to their principal objective.

a) Pre-accession associations

Pre-accession associations serve to pave the way for accession to the European Community/European Union at a later date. Association agreements with this objective include: (i) association agreements with Greece (1961—the very first association agreement) and with Turkey (1963); (ii) Europe agreements with 10 central and eastern European countries (CEECs) which were accompanied by ‘accession partnerships’ for adapting these countries to the acquis communautaire (from 1991 onwards); these agreements achieved their purpose with the most recent accessions of 1 January 2007 (Romania, Bulgaria); (iii) Stabilization and association agreements with the western Balkan countries (from 2001); these agreements are, on the one hand, devoted to the political stabilization of the region and include a strong development component, while containing, on the other hand, an option for EU accession subject to the effective implementation of the agreements.

b) Development associations

Development associations are primarily aimed at economic and development aid to partner countries. Association agreements with this focal point include: (i) ‘Euro-Mediterranean Association Agreements’ concluded, from 1995 onwards, with most of the southern and eastern Mediterranean countries within the framework of the ‘Euro-Mediterranean Partnership’ established by the ‘Barcelona Process’ (replacing earlier ‘Cooperation Agreements’ concluded in the 1970s); in 2008 the partnership was re-launched as the ‘Union for the Mediterranean’ in order to intensify the strategic relationship of the EU with its southern neighbours and to foster commitment to common projects in various policy fields. (ii) Association agreements concluded, from 1963 onwards, with the African, Caribbean and Pacific Group of States (ACP States); currently including seventy nine third countries, these agreements form the largest group of associations (Yaoundé Conventions I and II, 1963 and 1969; Lomé Conventions I–IV, 1975–89; Cotonou Agreement, 2000, most recent revision 2010); the non-reciprocal trade preferences stipulated in favour of the ACP States are currently being replaced by a differentiated system of ‘Economic Partnership Agreements’ compatible with the WTO’s world trade regime. (iii) Particular association agreements with Chile and South Africa.

c) Free trade associations

Free trade associations are primarily aimed at the mutual reduction of customs duties and the gradual establishment of a free trade area between the EU and the respective third country. Among these agreements are: (i) Agreement of 1992 establishing the European Economic Area (EEA), a unique association agreement providing for a very close cooperation which builds on prior free trade agreements with the EFTA states; after the EU accession of Austria, Sweden and Finland the EEA agreement only governs relations with Norway, Liechtenstein and Iceland (which formally started accession negotiations with the EU in 2010). (ii) Association and cooperation agreements concluded with Switzerland in two rounds in 1999 and 2004 (‘Bilateral Agreements I and II’) on the liberalization of cross-border trade and movement of persons as well as on cooperation in various fields, allowing Switzerland ‘integration without accession’. (iii) Association agreement with Israel; even though it is part of the Euro-Mediterranean policy it is not counted among the development associations. (iv) A comprehensive bi-regional association agreement including political, cooperation and trade aspects is being negotiated between the EU and the MERCOSUR (since 2010).

In addition, there are further instruments allowing the EU to shape its external relations without attaining the level of cooperation connected with association agreements. These instruments include the classic non-preferential trade agreements already mentioned as well as the ‘Partnership and Cooperation Agreements’ (PCAs) with the successor states to the Soviet Union which are based on the common commercial policy (Art 207 TFEU/133 EC) and additionally on Art 212 TFEU/181a EC. The partnership agreements are seen as political counterparts to the ‘Europe Agreements’ concluded with the candidate countries of central and eastern Europe, and are likewise intended to strengthen cooperation but do not lead to EU accession. In a similar way, development cooperation can be arranged on the basis of Arts 208 ff TFEU/177 ff EC without being committed to a relationship as close as in the case of an association agreement.

The contractual, ‘external’ type of association on the basis of Art 217 TFEU/310 EC must be distinguished from the so-called ‘constitutional association’ of overseas countries and territories (OCTs) according to Arts 198 ff TFEU/182 ff EC. This type of association sui generis applies to territories that depend constitutionally on some of the Member States (Denmark, France, Netherlands, United Kingdom) but are to a certain extent vested with administrative autonomy. The chief aim of their association with the EU is to promote the economic and social development of these territories. Currently, the details of these associations are predominantly determined by way of implementing decisions taken by the European Council. The Commission has launched an initiative to move away from a classic development cooperation approach towards a new reciprocal partnership with the OCTs. A de facto connection between this unique type of association and ‘external’ association agreements lies in the fact that many formerly dependent territories or colonies became partners of the ACP association agreements after having gained independence.

2. Development trends in the law of association agreements

Over the course of time, the use of association agreements has focused on different political purposes. These changes have shaped the legal development of association agreements.

(i) Initially, contractual associations primarily aimed at the future accession of the respective associated countries. In the further course of the 1960s and 1970s, however, the development association of non-European countries came to the fore. More recently, the emphasis shifted back to associations preparing for future accession to the EU. Additionally, association agreements now serve to politically stabilize the ‘European neighbourhood’ without targeting EU membership.

(ii) Even outside the field of pre-accession associations, the coverage of association agreements has broadened by including political aims that go beyond classic foreign trade and development purposes. There is a growing tendency of association agreements towards influencing fields of general policy of the partner countries, such as the fostering of civil society.

(iii) Association agreements focusing on the development of free trade areas increasingly include competition rules and public procurement provisions; through this the European Union is able to extend its internal regime on competition and its regulatory policy to its relationship with third countries.

(iv) A strong tendency to establish associations by ‘mixed agreements’ (see 3. a) below) is likely to blur the boundaries between the competences of the Union and the Member States. This trend is being reinforced by the practice of the European Court of Justice to claim the authority to assess mixed agreements in their entirety without distinguishing between provisions based on Union competences and those based on the competences of the Member States.

(v) Association agreements have proven to be a flexible instrument which bring third countries closer to the European Union. Thus, even some agreements that initially had not targeted accession to the EU have, by opening up markets and fostering close cooperation, contributed to paving the way for the accession of former EEA countries as well as of Malta and Cyprus (which had previously been associated with the EU by free trade agreements).

3. Implementation of association agreements in detail

a) Authority to conclude agreements, procedure and legal effects

According to overwhelming, albeit not uncontested, opinion, the Union has the primary substantive competence, based on Art 217 TFEU/ 310 EC, to conclude association agreements with regard to the entire ‘communitarized’ areas of activity (this view is mainly derived from ECJ Case C-12/86 – Demirel [1987] ECR 3719 ff at 3751, para 9; see also the prior decision in ECJ Case 22/70 – Commission v Council (AETR) [1971] ECR 263 ff at 274/5, paras 16 ff, where the court also finds that the Community competence to conclude international treaties does not only originate from explicit authorization but may also result, as a necessary consequence, from other provisions assigning to the Community competences for intra-Community matters). Since association agreements regularly also involve policy areas which do not fall within the responsibility of the Union (for example development aid from the national budgets of Member States or collaboration arrangements in the fields of justice, criminal law and free movement of persons), they are concluded, with few exceptions, as so-called ‘mixed agreements’ by all Member States as well as by the Union itself. At the Union level such agreements are concluded according to the procedure specified in Art 218 TFEU/300 EC. According to this provision, the European Council governs the procedure: the Council authorizes the Commission (TEC) or the negotiator (TFEU) to open negotiations, adopts negotiating directives and concludes the agreements. Association agreements require the assent of the European Parliament (Art 218(6) (a)(i) TFEU/300(3) EC). Once having come into force according to international law, association agreements form an ‘integral part’ of Union law (ECJ Case 181/73 – Haegeman [1974] 449 ff at 460, para 5), ranking below primary EU law but prevailing over conflicting secondary legislation.

b) Institutional framework of association agreements

Though quite different in detail, association agreements share similar basic institutional structures. It is the responsibility of the governing bodies established by association agreements to ensure the implementation of the agreement in accordance with its provisions and to take the necessary decisions for this purpose. As a rule, the highest governing body is an association council, also called a stabilization and association council, EEA council, council of ministers or joint committee, depending on the agreement. The association council is set up with equal representation, usually from members of the European Council and the Commission on the one hand and from ministers of the associated countries on the other. Decisions of the association council are binding on the contracting parties. In support of the association council, an association committee (also with equal representation) is established which is in many instances authorized to establish further sub-committees. In addition, some associations provide for parliamentary assemblies or parliamentary association committees consisting of members of the European Parliament and of the parliaments of the associated countries (for example in the EEA and Cotonou Agreements as well as in stabilization and association agreements with countries of the western Balkans). In order to settle disputes over the implementation and construction of an agreement, recourse can be had in many cases to the association council which can either reach a binding decision or refer the case to an arbitration tribunal; some agreements even provide for a referral to the European Court of Justice.

c) Substantive provisions

Common to all association agreements are provisions for the removal of barriers to cross-border trade in goods. A free trade area is usually established for this purpose (in some cases also a customs union) by gradually reducing, among the contracting parties, customs duties as well as charges having equivalent effect and by abolishing quantitative restrictions. As a rule, an asymmetric method is provided for this process: customs duties for imports from the EU to associated countries are lowered more slowly than for flows of goods in the opposite direction. Standstill clauses prevent the imposition of new duties and preserve the level of trade liberalization already achieved. A number of agreements contain a ban on discrimination—as to the right of establishment and the provision of services—against persons and companies of the participating countries on the basis of their national origin. Such provisions are directly applicable if they lay down a clear, precise and unconditional obligation which is not subject, as regards its execution or effect, to the adoption of any other measure and which is legally complete in itself (see the clear, precise and unconditional ban on the introduction of new restrictions of the freedom of establishment in ECJ Case C-37/98 – Savas [2000] ECR I-2946 ff at 2962 ff, paras 46 ff; in contrast, no direct application of a clause concerning the free movement of workers which is basically programmatic and does not contain a sufficiently precise regulation, in ECJ Case 12/86 – Demirel [1987] ECR 3719 ff at 3753/3754, paras 23 ff; see also 3. d) below).

Apart from this largely similar basic inventory, association agreements contain diverging provisions depending on the objectives of the respective agreement. Development associations place an emphasis on provisions governing financial and technical cooperation, and they sometimes even include detailed descriptions of particular aid programmes. In contrast, the more recent pre-accession associations tend to incorporate in detail EU law from all areas of activity in order bring the candidate country’s national legal system in line with the acquis communautaire as completely as possible even before actual accession. Though not explicitly aimed at a later accession of the participating countries but, instead, at the establishment of a free trade area, the EEA Agreement holds a special rank in terms of close compliance with EU law: not only does it almost literally incorporate a large part of primary EU law (such as fundamental freedoms and competition rules), it also adopts an abundance of individual pieces of secondary legislation which must be observed in the implementation of the agreement. Furthermore, the provisions of the agreement, insofar as they are basically identical to those in the founding treaties of the EEC and the ECSC as well as to the secondary legislation based thereon, are to be construed in accordance with the decisions rendered by the European Court of Justice prior to the signing of the agreement.

A vertical comparison over time of association agreements with similar objectives shows that the scope and intensity of the regulations have steadily and noticeably increased, regardless of the type of association. On the one hand, the EU presently uses association agreements to pursue a large number of general policy aims which have been incorporated into the agreements, such as: the sustainability of economic development; the strengthening of democracy, human rights, stability and civil society; environmental and consumer protection; promoting a continuing political dialogue; the encouragement of good governance; the fight against money laundering, drug abuse and terrorism; or the promotion of regional cooperation among the associated countries. On the other hand, more recent association agreements show a far more detailed specification of the measures to be taken in the course of the association process as compared to former agreements. A horizontal comparison of recent association agreements with differing objectives shows that, whereas all of them touch upon more or less the same areas of regulation, they differ in the intensity of the legally binding effect among the parties: a provision constituting a fully formulated and binding obligation within a pre-accession agreement would, for example in the context of a development association like the Cotonou Agreement, merely amount to a description of general goals and to an assurance of the willingness to engage in a dialogue and to provide support.

d) Competition rules in particular

The competition rules incorporated into association agreements are of particular relevance for private law relationships. The cartel ban (prohibition of restrictive agreements and exemptions), the prohibition of abuse of a dominant position, merger control, and state aid law, as laid down in EU law, contribute to keeping the European internal market open to competition in order to enable market participants to exercise their economic freedom of action through the use of private law instruments. By incorporating these internal competition rules into international agreements, the EU seeks to protect trade relations with third countries against distortions of competition. The effectiveness of these provisions depends, inter alia, on whether they are directly applicable so that individual market participants would be able to invoke them and to allege their violation in court. The European Court of Justice has determined that, unless explicitly otherwise stipulated, an individual provision in an association agreement is directly applicable when, having regard to its wording and the purpose and nature of the agreement itself, it contains a clear and precise obligation which is not subject in its implementation or effects to the adoption of any subsequent measure (ECJ Case 12/86 – Demirel [1987] ECR 3719 ff at 3752, para 14; see also ECJ Case 104/81 – Kupferberg [1982] 3641 ff at 3663 ff, paras 17 ff).

In practice, association agreements consider competition rules in a variety of ways. (i) Early agreements such as the first development associations with the ACP States (see eg Yaoundé I and Lomé I) and the association agreement with Turkey of 1963 do not mention competition rules. Here, the question of direct applicability does not arise. (ii) As regards the ACP agreements, the shaping of competition rules has remained rather weak to date. In the Cotonou Agreement (Art 45), the contracting parties, though recognizing the importance of effective and sound competition policies, only commit themselves to implementing national and regional competition rules and policies with due consideration to the different levels of development and economic needs of each ACP country, and to cooperate on the formulation and support of an effective legal framework of competition rules. Here again, no directly applicable competition rules exist. (iii) The association agreement with Chile, also characterized as development association, follows a different path (Arts 172 ff) since Chile had already established national competition rules and a competition authority when the agreement was concluded. For this reason, the agreement does not formulate substantive provisions of its own; instead, the prevention of competitive distortions is merely included in a catalogue of objectives whereas the agreement coordinates the activities of the European Commission and the Chilean competition authority through the exchange of information, consultations and the coordination of enforcement measures. (iv) In the context of the Euro-Mediterranean Partnership, for example the association agreement concluded with Egypt in 2001 declares anticompetitive agreements and concerted practices between undertakings, as well as the abuse of a dominant position, incompatible with the association agreement insofar as they may affect trade between the EU and Egypt (Art 34(1)). At the same time, however, the agreement requires the association council to adopt the necessary rules for the implementation of the provisions just mentioned. For this clause alone, the direct application of the competition rules is ruled out until the adoption of implementing provisions. As to the prohibition of distorting state aid, the association agreement provides for the applicability of the WTO rules on subsidies until the full implementation of the competition rules of the agreement. (v) The stabilization and association agreement concluded with Croatia in 2001, targeting eventual accession, contains substantive competition rules identical to those contained in the EU-Egypt Agreement (Art 70). Additionally, they include the contracting parties’ commitment to entrust an independent public body with the powers necessary for the full application of these rules. Furthermore, if either party to the agreement considers that a particular practice is incompatible with the competition rules, it retains the right to take appropriate measures after consultation within the stabilization and association council. In light of these provisions it seems doubtful that the competition rules will be regarded as directly applicable under the above-mentioned standards of the European Court of Justice. (vi) The EEA Agreement contains detailed competition rules modelled upon EU law (Arts 53 ff). Furthermore, the agreement refers to an abundance of secondary EU legislation which must be taken into account in construing its provisions. This might indicate that the conditions the European Court of Justice set forth in the Demirel decision have been met. However, besides arguments to the contrary originating, for example from the shaping of the agreement, the direct applicability of the competition rules has not yet been tested in court.

4. Projects and future developments

The further development of association agreements depends, inter alia, upon how the future enlargement of the EU develops and the extent to which the association of partner countries will be used as an alternative to full membership in the EU. One approach could be to further strengthen and expand the European neighbourhood policy. The Commission has submitted plans to establish a ‘strong European neighbourhood policy’ (COM(2007) 774 of 05/12/2007) which are aimed at closer economic and financial cooperation, gradual facilitation of mobility, reduction of regional conflicts, sectoral reforms and modernization, participation in EU programmes and the strengthening of civil society (see also the Joint Communication of the High Representative of The European Union For Foreign Affairs And Security Policy and the Commission on ‘a new response to a changing neighbourhood’ (COM (2011) 303 of 25/05/2011). While seeking close relations with neighbouring countries, the European neighbourhood policy remains, in principle, separate from the question of EU membership and does not pre-empt the future development of the relations between the EU and its partner countries. It is for these reasons that the European neighbourhood policy could be a domain suitable for an extended application of association agreements.

Literature

Roger A Fischer, Das Assoziationsrecht der Europäischen Gemeinschaften (1994); Thérèse Blanchet, Risto Piipponen and Maria Westman-Clément, The Agreement on the European Economic Area (EEA)—A Guide to the Free Movement of Goods and Competition Rules (1994); Erik Evtimov, Rechtsprobleme der Assoziierung der Mittel- und Osteuropäischen Länder und der Voraussetzungen für ihren Beitritt zur Europäischen Union (1999); Marie-France Christophe-Tchakaloff (ed), Le concept d’association dans les accords passés par la Communauté (1999); Peter G Xuereb (ed), The European Union and the Mediterranean (2004); Panos Koutrakos, EU International Relations Law (2006); Bettina Mech, EWR und europäische Integration (2007); Daniel Thürer, Rolf H Weber, Wolfgang Portmann and Andreas Kellerhals (eds), Bilaterale Verträge I & II Schweiz-EU (2007); Rass Holdgaard, External Relations Law of the European Community—Legal Reasoning and Legal Discourses (2008); Piet Eeckhout, EU External Relations Law (2nd edn, 2011).