On 12 December 2023, the EU, Andorra and San Marino concluded negotiations on an association agreement (“AA”). In the press conference to announce this event, EU Commission Vice-President Maros Sefcovic has said that this agreement goes further than the EEA Agreement (“EEA plus”). In this short blogpost we will briefly scrutinize the merits of this claim. This can, however, only be a provisional assessment as final texts of the AA are not yet available.
Author: Georges Baur, Liechtenstein Institute
Basic Facts
First let’s have a look at the basic features of the AA: Besides the two countries’ access to the EU’s internal market being “comparable to that enjoyed by Norway, Iceland and Liechtenstein in application of the Agreement on the European Economic Area”, the agreed text contains the following key elements:
Looking at the structure of the agreement, it is evident that the EEA Agreement served as a blueprint. However, different from the EEA, Andorra and San Marino are not joined as one party. The AA contains the general rules for both, including annexes and Protocols. In addition, there are country-specific annexes. Hence, there are two relationships: One between the EU and Andorra and one between the EU and San Marino. And the two countries don’t mutually grant rights and obligations. The agreements are purely bilateral.
As for Iceland, Liechtenstein and Norway through the EEA Agreement, the AA will provide for the participation of these two countries to a homogenous extended internal market under equal conditions of competition and respect of the same rules.
At the same time, the Association Agreement will establish a framework to develop and promote dialogue and cooperation in areas of common interest, such as research and development, education, social policy, the environment, consumer protection, culture or regional cooperation.
As the Commission points out, financial services will be included. Access to the internal market in this area will be progressive and will depend on a successful audit of the robustness of the associated States' regulatory and supervisory frameworks. Compliance with the anti-money laundering acquis will be a pre-condition, and the European Supervisory Authorities will play a central role in the auditing process. This is a rather new approach which reflects the increased focus on financial market supervision at a European level. It is most likely that the EU will apply the same conditions on financial services markets access to the new candidates for EU membership.
Institutions and adaptations
The AA shall also establish a coherent, effective, and efficient institutional framework, including the consistent interpretation and application of the Agreement in line with the case-law of the European Court of Justice (ECJ). The supervision will essentially be exercised by the EU Commission and the jurisdiction by the ECJ. Andorran and Sammarinese courts will be allowed to submit cases for preliminary reference to the ECJ. Finally, there is a dispute settlement mechanism with the European Court of Justice as the ultimate arbiter for disputes on the interpretation and application of the Agreement. So far, this is rather standard as could be expected.
As the Commission points out, the Association Agreement will consider the particular situation of Andorra and San Marino as well as their specificities arising from their relations of proximity with their neighbouring EU Member States, their geography, their size and their relatively small populations. This will be reflected in a number of adaptations as well as in several transitional periods for the implementation and application of parts of the EU acquis. In many ways these are similar to those Liechtenstein enjoyed and partially still enjoys, on some occasions they even go beyond what was negotiated with Liechtenstein at the time.
“EEA plus”?
Have the three EEA EFTA States now been overtaken by Andorra and San Marino in terms of their access to the EU’s internal market? We don’t think so. The term "EEA plus" has – in our view - its origins in a strongly EU-centred view and therefore relates to their aim to become an ever closer union, an aim that also translates into their association agreements. The question is rather whether "EEA plus" means an objective improvement in the context of this agreement.
Andorra and San Marino have "more" than is contained in the EEA Agreement in that, in addition to the 22 EEA annexes, they have three more, namely on customs, agriculture and trade. However, since Andorra and San Marino are linked to the EU by a customs union, they cannot regulate these areas autonomously. In addition, the two countries have a currency treaty with the EU, so they use the euro and can mint euro coins.
Another argument in favour of an "EEA plus" from the EU's point of view may be that there is no "two-pillar structure" regarding these two states, i.e. the Commission and the ECJ are directly responsible without an Andorran or San Marino member being represented in either institution. From an EU perspective this certainly is an easier structure compared to the EEA, as it does in no way encroach upon the autonomy of the EU’s legal order.
The two countries have then been granted long transitional periods with regard to the movement of persons and can - a major concession by the EU – for instance continue to require immigrants to submit extracts from their criminal records. Furthermore, given their small geographical size, they enjoy the same privilege to impose restrictions to the freedom of establishment as Liechtenstein.
From a Liechtenstein point of view, these elements may lead to an even closer relationship compared to the EEA, but it is another question whether this would currently also be in Liechtenstein's interest – or Island’s and Norway’s for that matter. In any case, the two-pillar structure, despite all the problems it entails, is more "sovereignty-friendly" as there is an EFTA surveillance authority and the EFTA Court of Justice where Liechtenstein is, like Iceland and Norway, represented by a member that has been appointed by these states.
Furthermore, as regards Liechtenstein, there currently is, among other treaties, the customs union with Switzerland. To our knowledge there are no political wishes to change this. Furthermore, all EFTA States are Schengen members. That is not (yet) the case with Andorra and San Marino.
Financial Services
Let’s briefly revert to financial services. The Protocol on Financial Services is not really a concession either, because it rather expresses the mistrust of larger neighbouring states towards the smaller ones that they (can) operate effective supervision. Furthermore, it should not be forgotten that Liechtenstein, together with Iceland and Norway, has had 30 years to develop the financial services sector and follow the changes step by step, as have all EU member states participating in the single market. Andorra and San Marino, on the other hand, must adopt the entire financial services acquis as it currently exists. They will be given ten years to do so and they will do so under the close supervision of the European Supervisory Authorities for Financial Services.
It seems noteworthy that the Commission expressly mentions that Financial Services are included in the areas Andorra and San Marino will have access to when participating in the internal market. In our view – “cherry-picking” goes both ways, i.e., you can’t ask of countries that are offered a participation in the internal market that they will have to accept the entirety of the acquis, and all four freedoms, and at the same time refuse to allow participation in all elements of the acquis. This was an idea of one of the big EU member states. Having a “staggered approach” and transitional periods, as it could be negotiated, is, however, a different thing altogether. Given the nowadays complex and overarching legislation in the field of financial services, such an approach seems rather sensible.
Conclusion
So why is the EU saying that the agreement goes further than the EEA? Technically speaking, this is not wrong, and the new AA also incorporates developments from the last 30 years. E.g., there were no agencies when the EEA came into force. Finally, however, the citizens of Andorra and San Marino must also be told what the advantages of such an AA are as there will be a referendum in Andorra in the first semester of 2025. Any argument that is even remotely positive will have to be put forward, because there is opposition to the agreement. For Andorra and San Marino, the agreement indeed represents a major step towards integration. It is the platform on which these two small countries that do not have an industry comparable to that of Liechtenstein will be able to build one. That will help them to create an economic base for future generations.
Author
Dr. Georges Baur, Head of Research Law, Liechtenstein Institute, Gamprin-Bendern, Liechtenstein
How to cite
Baur, Georges (2024): The Association Agreement between the EU and Andorra and San Marino – “EEA plus”? Blog. EFTA-Studies.org.