The legal implications of EU enlargement: Hungary, Poland and the Czech Republic

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 authorities 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.