The delayed effects of EU citizenship

Paul Fogo is a senior attorney at the Warsaw office of Miller, Canfield, Paddock & Stone.

"Citizenship of the Union is hereby established. Every person holding the nationality of a Member State shall be a citizen of the Union."

- Art. 19, European Union Treaty

Great! But what exactly does citizenship in the EU mean? How will the average Pole benefit? And even more importantly, when? At the time of accession? Or perhaps later?

Now that the Treaty of Accession (the Treaty) has been signed, we can read for ourselves the "terms and conditions" of membership - all 5,000 pages.

The Treaty confers many rights and obligations on new member states, in addition to their citizens. Many of these rights and obligations, however, will not take effect on the date of accession, but rather will be implemented only upon the expiration of different derogation periods.

What is a derogation period? Basically, a derogation period provides for the gradual implementation of various provisions of the acquis communautaire, the body of European Union law, over a period of time, and in many cases several years. Pursuant to Art. 10 of the Treaty, "the application of the original treaties and acts adopted by institutions shall, as a transitional measure, be subject to the derogations provided for in this Act." Both sides, Poland and the current member states, negotiated different derogation periods, depending on which interests each was trying to protect.

Benefits and obligations

Now, let's examine the expected benefits and obligations of EU citizenship, and the effect, if any, that these derogation periods will have on the country and its citizens.

"Every citizen of the Union shall have the right to move and reside freely within the territory of the Member States..." (Art. 18 of the Treaty). No derogation period. This benefit will take effect immediately upon accession. Poles will be able to travel and reside throughout the EU. However, Poles may still be required to obtain residency permits and identity cards in order to legally reside in another member state.

"Every citizen of the Union residing in another Member State shall have the right to vote and stand as a candidate at municipal elections ... under the same conditions as nationals of that State" (Art. 19 of the Treaty). No derogation period. This benefit will take effect immediately upon accession, subject to satisfying certain residency requirements. For instance, in order to stand for local office, a candidate may have to first reside in the area for a period of six to 12 months, if such a requirement is similarly imposed upon local citizens. The same will apply to nationals from other EU member states running for office here.

"The freedom of movement of workers shall be secured within the Community" (Art. 39 of the Treaty). Different derogation periods apply, depending on the member state and sector of industry. In general, each member state may "regulate access to their labor markets by Polish nationals for a period of two years following accession" (Annex XII to the Treaty). These restrictions may be extended up to seven years, depending on the level of unemployment in a given member state. The United Kingdom has announced that it will not impose restrictions on Polish workers. Long live the Queen!

As a condition of Poland's accession, Germany and Austria have reserved the right to impose open-ended derogation periods, that is with no time limits, on Polish workers and companies engaged in certain protected industries. Specifically, Germany may impose open-ended derogation periods on Polish workers and companies engaged in the construction and industrial cleaning sectors "in order to address serious disturbances in these sensitive sectors" (Annex XII to the Treaty). Austria's right to impose derogation periods on Polish workers and companies is the most expansive, including horticulture, construction, home nursing, industrial cleaning, manufacturing of prefabricated metal structures, stonecutting and finishing and security services. Poland reserves the right to impose retaliatory derogation periods.

"The internal market shall comprise an area without internal frontiers in which the free movement of goods ... is ensured" (Art. 14 of the Treaty). Different derogation periods apply, depending on the product. Let's take a look at medical devices produced in Poland as an example. On the one hand, Annex XII to the Treaty allows for the continued validity of certificates issued by the Institute of Medicines for domestic medical devices until the end of 2005. However, the same annex also enables member states to "prevent putting on their markets Polish medical devices as long as they are not in conformity" with EU standards.

In our favor

All of these derogation periods appear to be in favor of the EU at the expense of Poland. Didn't the country negotiate any derogation periods in its favor? Yes, several, including the areas of competition, agriculture, environmental protection and taxes.

"Aid granted by a Member State in any form whatsoever which distorts or threatens competition ... insofar as it affects trade between Member States is incompatible with the common market" (Art. 85 of the Treaty). With the future of its special economic zones at stake, the country negotiated derogation periods in favor of the enterprises that have invested in these depressed areas, by which "Poland may apply corporate tax exemptions granted before Jan. 1, 2001" to small enterprises until Dec. 31, 2011 and to medium-sized enterprises until Dec. 31, 2010.

The second set of derogation periods negotiated in favor of the country involves agriculture, including, for example, the production of milk and beef. "Requirements relating to the fat content of milk shall not apply to milk produced in Poland for a period of five years from the date of accession" (Annex XII of the Treaty). This derogation period, designed to soften the impact of new regulations on our milk producers, applies unfortunately only to milk sold here. Milk exported to other member states must satisfy the new requirements. With respect to beef, the country has negotiated a derogation period until the end of 2006 before having to implement the premium schemes for suckler cows, pursuant to Regulation (EC) No. 1254/1999. I have no idea what a suckler cow is. The derogation period also refers to the artificial insemination of bulls. I hope no explanation is necessary.

With respect to the environment, Poland has negotiated several derogation periods in an effort to delay the cost of implementing these regulations. For instance, Directive 91/271/EEC requires member states to achieve certain thresholds in treating urban wastewater. Pursuant to Annex XII, the country will not have to fully comply with these thresholds until Dec. 31, 2015. Similarly, specific power plants here have won derogation periods through Dec. 31, 2017, regarding the discharge of contaminants into the atmosphere. Landfills too will be exempt from parts of Directive 1999/31/EC regarding water and land contamination until July 1, 2012.

And finally the derogation period for taxes. Sorry, but all of us still need to file our tax returns by the end of April. Income taxes are not subject to any derogation periods. However, the nation has won certain derogation periods for different categories of VAT. By way of derogation from Directive 77/388/EEC, the country may apply VAT at the rate of 7% against "the supply of services ... for construction, renovation and alteration of housing" until Dec. 31, 2007, after which the rate will increase to 22%.

And for those of you who like to cook at home, you'll be happy to know that the reduced VAT rate of 3% will still apply to "plants and ingredients normally intended for use in preparation of foodstuffs" until April 30, 2008. Now, if only my wife would learn to cook...