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Who’s Who After 1 July 2013: What State-owned Companies in Croatia Should Know about the EU Accession

Zagreb, June 20, 2013 - After the relaunch of the Croatian EU Business Council (CEUBC) in Zagreb in April 2013, Natko Vlahovic, CEUBC Co-Founder and Executive Director, organised and moderated the first CEUBC event – a roundtable titled “Who’s Who After 1 July 2013: What State-owned Companies in Croatia Should Know about the EU Accession.” The roundtable guest presenters included: H.E. Paul Vandoren, EU Ambassador to Croatia, Ms. Olgica Spevec, Croatian Competition Agency Council President, Mr. Zvonimir Savic, Deputy Director of the Croatian Chamber of Commerce EU Centre, andMs. Maja Kust, Ministry of Economy for Public Procurement.  The roundtable discussion was held in the European Union Information Centre in Zagreb and attended by executives of state-owned companies in Croatia.  The roundtable was also attended by officials and ambassadors from the diplomatic corps in Croatia.  The discussion was organised as a working group meeting closed to the media, which led to a frank and construction dialogue.

 b2ap3_thumbnail_DSC_0437-1024x683-2.jpgCommunicating with the European Commission

During the dialogue, Vlahovic posed the question of why Croatian companies are reluctant to directly communicate with the European Commission (EC), which led Ambassador Vandoren to elaborate on the subject.  State-owned companies that have not yet developed a strategy or have unclear expectations of the European Union should use the information provided by business councils, chambers of commerce et. Al, in order to become aware of how EU legislation affects their business sectors.  Companies should also communicate with the Commission’s Directorate Generals (DGs). In that respect, the important prerequisite is that a particular legislation has an influence over an entire business to which a company belongs.

Vandoren explained that the three most important DGs for businesses are: the Internal Market and Services DG, the Competition DG and the Enterprise and Industry DG. Companies should directly contact and communicate with the Commission’s services whenever it is appropriate and useful. Companies should not omit communication with Croatian authorities. However, after 1 July, companies must broaden their business strategies to include legislation and policies in both Croatia and Brussels.

Competition Protection 

During Vandoren’s confirmation that companies need to be proactive towards communicating with the EC, he also addressed the need for companies to adhere to EU competition protection standards and regulations.  He cautioned that companies that are caught violating the Commission’s rules of competition will be subject to proceedings in front of the European Court of Justice (ECJ), which are time consuming and costly (i.e. infringement proceedings.) Companies will be more productive if they allocate time and resources towards developing market strategies that abide by EU standards. Therefore, it is highly recommended that companies and institutions take the European Commission’s request for clarifications very seriously.

Ms. Olgica Spevec explained the Croatian Competition Agency’s (AZTN) role after Croatia’s membership in the EU and also elaborated on the issue of competition protection.  The jurisdiction of the Croatian Competition Agency (AZTN), European Commission and relevant regulatory agencies of other member states will change. The AZTN will have to submit reports to the European Commission and other member states within the European Competition Network on its measures related the enforcement of Articles 101 and 102. The AZTN will be required to conduct consultations with the Commission within a period of 30 days before it makes a final decision on a certain case.

The Commission will be the authority deciding whether it should take over a certain case of infringement of EU competition rules from the member state’s regulatory agency. Usually the Commission initiates proceedings against large monopolies (e.g. in the area of postal services, energy, telecommunications, etc.)  The fines for violations of competition rules vary from 0.1% to 10% of the company’s economic output.

EC Regulates State Aid – Croatian Airlines Case

Given that the regulation of state aid is transferred to the EC after Croatia’s EU membership, Spevec also emphasised this issue.  The EC implements ex ante control and initiates proceedings only in the ”biggest” cases of infringement of state aid that directly influences intra-state trade relations. In other cases, the AZTN will monitor state aid and issue a non-binding opinion; the EC has the final ‘say’ (ex post control, if it decides to intervene) in approving a specific state aid. The same rules apply to grant receivers (EU funds) and enterprises that provide services of general economic interest (GEI.) When questioned about Croatia Airlines (CA), Spevec said that the AZTN did not accept its initial restructuring plan due to the lack of its financial sustainability. However, CA revised its original restructuring plan and sent it to the AZTN on Wednesday (19 June 2013); the final decision on approval will in this case come from the agency on the week of the 24th of June; the AZTN will not prolong its decision and transfer the case to the EC.

EU Funding

Most EU-related discussions in Croatia is inevitably steered towards EU funding and Croatia’s ability to absorb the approximately €10 billion of allocated EU cohesion and structural funding through 2020.  Vandoren addressed the need to simplify Croatia’s investment climate and stated “It is absolutely necessary for the Croatian government to eliminate obstacles to FDI. He expressed hope that the proposed legislation on the strategic investment partnership is compatible with the EU acquis, and will be adopted as soon as possible. This is necessary for creating an investment-friendly environment that could produce better economic results and increase the country’s GDP.”

Savic, EU funding expert in Croatia, explained that there are five EU funds –  European Structural and Investment Funds – ESIF” – to which Croatia will have access: the cohesion funds (€2.7 billion for the period of 2014-2020), European Regional Development Fund (€3.9 billion, ibidem), European Social Fund (€1.5 billion), European Maritime and Fisheries Fund (insignificant amount), European Agricultural Fund for Rural Development (€2 billion). Each member state must have an operational program that defines its strategic priorities for investment in certain sectors of the economy. Croatia is in the process of drafting its operational programs for 2014-2020. The programs must finished by the end of 2013. By then, Croatia has to define its priorities per sectors and the final beneficiaries of the above-mentioned programs. After an operational program is finished and sent to the Commission for approval, there is no going back. Therefore, the companies that want to be eligible for EU funds should act immediately and influence the relevant ministries and public institutions. This is the only way in which their business strategy can be included as part of the operational program.

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