Opening up services: the Ukraine DCFTA
In theory, the EU–Ukraine DCFTA offers internal market treatment in four key service sectors only – postal and courier services, electronic communications (e.g. telecommunications and digital), financial services and international maritime transport – subject to two conditions.
First, Ukraine must ‘dynamically’ incorporate the relevant parts of the current and future EU acquis into domestic law, a process that must be certified by the EU–Ukraine Trade Committee, which is composed of senior officials from both parties.
Second, where there is a dispute on alignment (known as ‘approximation’ in EU parlance) with European regulations, or on an interpretation of EU law, the arbitration panel that oversees the agreement must request adjudication by the Court of Justice of the European Union (CJEU), whose rulings are legally binding (a process known as a ‘preliminary reference’).
In theory, the EU–Ukraine DCFTA offers internal market treatment in four key service sectors only – postal and courier services, electronic communications, financial services and international maritime transport
Despite the onerous obligations on Ukraine, the level of access to these four liberalized services markets is precarious. For example, the EU and some member states have put in place 46 restrictions on Ukrainian access to EU financial markets because the joint Trade Committee has not certified sufficient progress on regulatory harmonization. Moreover, the EU can unilaterally withdraw market access if it is deemed to threaten the ‘integrity and stability’ of its system.
Access to public procurement markets
Ukraine and the EU will enjoy full participation in each other’s public procurement markets – referring to the acquisition of goods, services and infrastructure by a state authority – once Ukraine implements the relevant parts of the EU acquis in the future and subject to the jurisprudence of the CJEU in the event of a dispute being brought before the arbitration panel.
Right of establishment
Establishment refers to the legal entitlement for either enterprises (‘legal persons’) or individuals (‘natural persons’) to pursue commercial activities in another country. An enterprise can exercise this right by setting up or acquiring branches or representative offices, while an individual can do so as a sole proprietor or via a partnership or company.
The EU views liberalizing the right of establishment as a necessary component of unshackling the trade in services, particularly in sectors in which trade and investment are increasingly inseparable.
Again, the Ukraine agreement presents a useful example. It provides for ‘national treatment’ and ‘most favoured nation’ (MFN) treatment for establishment. This means that one party must accord the other party’s ‘established’ enterprises treatment no less favourable than that accorded to its own ‘established’ enterprises or to any third-country ‘established’ enterprises, whichever is the better.
Ukraine and the EU have circumscribed the applicability of the twin principles by creating a ‘negative’ list of reservations. As a result, any service sectors not ‘reserved’ by either party will be open to external competition. Ukraine identified 24 service-sector reservations; the EU opted for 105 reservations Union-wide and at member-state level.