a New Neighbourhood Policy of the European Union

© Springer International Publishing Switzerland 2015
Christoph Herrmann, Bruno Simma and Rudolf Streinz (eds.)Trade Policy between Law, Diplomacy and ScholarshipEuropean Yearbook of International Economic Law10.1007/978-3-319-15690-3_16

Towards a New Neighbourhood Policy of the European Union

Thomas Cottier  and Gabriela Wermelinger 

Department of Economic Law IEW, World Trade Institute, University of Bern, Hallerstrasse 6, 3012 Berne, Switzerland



Thomas Cottier (Corresponding author)


Gabriela Wermelinger

Four Circles of European Integration

Horst Krenzler was one of the towering architects of the European Economic Area (EEA) Agreement. When, at the end of the 1980s, the European Communities focused on internal deepening and integration, the EEA offered European Free Trade Association (EFTA) countries wider participation in the internal market, while staying outside in terms of European Union (EU) membership—for the time being. The EEA Agreement was construed to be a comfortable waiting room for EFTA members postponed in joining the Union.1 For the first time, an association agreement developed a sophisticated institutional architecture going beyond mixed committees and entailing rules on monitoring and judicial dispute settlement. Austria, Finland and Sweden subsequently joined the Union in 1995, while Norway, Iceland and Liechtenstein opted to stay with the EEA. Switzerland, in a landmark referendum in December 1992, failed to join the EEA and subsequently embarked on a complicated trail of bilateral agreements. This effort eventually, and by 2004, largely substituted for the EEA, albeit not in an identical manner and with substantial differences, in particular in terms of institutional design.

The rejection of the EEA at the Swiss ballot came as a strong disappointment to the EU and EFTA Members, as Switzerland had placed a strong emphasis on negotiating an appropriate institutional framework for the EEA. The agreement broke new ground. A two-pillar model was implemented upon renegotiation, following a critical review by the European Court of Justice (ECJ).2 The model installed the EFTA Court and the EFTA surveillance authority (ESA).3 The European Court of Justice assumes responsibility for complaints of one of the Parties originating from unresolved disputes in the EEA council (an avenue never used). More importantly, the Commission and the Court are responsible for monitoring the implementation of the EEA Agreement within Member States of the Union. Vice versa, and in parallel, oversight and adjudication of cases arising in EFTA countries are submitted to the ESA4 and the EFTA Court5 established under the EFTA Court Agreement.6 Both avenues became important in securing the rule of law and in the implementation of the Agreement in relation to Norway, Iceland and Liechtenstein, and the EU Members, and vice versa. They both provide for preliminary rulings and thus open the system not only to complaints by the Commission and the ESA, but also to private actors and thus domestic courts. The EEA is thus subject to the main driving forces of integration by law in the European realm. In deploying their functions, the Commission and the EFTA Surveillance Authority developed close cooperation. The European Court of Justice and the EFTA Court engaged in a judicial dialogue. While the EFTA court was frequently inspired by precedents of the ECJ, the latter also has been regularly informed by judgments of the EFTA Court.7 While legal developments relating to the internal market are led by the European Court of Justice, the two courts engaged in what may properly be called a judicial dialogue in the European context.8

The two-pillar approach, thanks to the farsightedness of Horst Krenzler and his colleagues, developed into a successful model for what today may be called the third circle of European integration—the EEA—next to the Monetary Union and the internal market of Member States, which constitute the first and second circles of European integration. The EEA amounts to the closest form of what one would expect to be at the heart of the neighbourhood policy of the European Union. Norway, Iceland and Liechtenstein, in subsequent years, benefitted from legal stability and security in their relations to the Union. Switzerland, on the other hand, until the present day, has not found an appropriate institutional framework beyond traditional modes of mixed committees. It goes without saying that the model based upon the 1972 EFTA EEC Free Trade Agreements no longer is able to live up to the legal and dynamic complexities of the acquis communautaire retained in bilateral agreements for both parties. Today, new agreements will depend on finding an appropriate framework for what may be called the fourth circle of integration, following the EEA Agreement as the third circle of European integration.9

The fourth circle of integration thus entails states with which the Union has entered a special and close economic relationship under association agreements without, however, fully applying the EEA Agreement thereto. This circle entails Switzerland, but also other countries in Europe not being members of the EU or the EEA. We think of the European microstates located within Member States, in particular Andorra, San Marino, Monaco and Vatican City. Moreover, we think of neighbouring countries to the East, in particular Ukraine, Belarus, Moldova, Georgia, and the States within the Mediterranean, in particular Morocco, Tunisia, Libya, Egypt, Israel, Palestine and Syria, Albania, Serbia, Bosnia Herzegovina and Kosovo. As there are no defined geographical boundaries of Europe and European neighbourhood, developments may incorporate further states into the neighbourhood policy, in particular Turkey and possibly Russia and the customs unions with Belarus and Kazakhstan. The fourth circle of integration will vary over time, demarcating these relations from trade and free trade agreements with countries of other continents and the Members of the WTO, in what could be called a fifth and sixth circle of integration—no longer European in nature.

The fourth circle cannot be defined ex ante and for good, but should be able to be dealt with under Article 8 of the Treaty on European Union (TEU). We briefly review the current European Neighbourhood Policy (ENP) under this provision, and ask to what extent it could be combined with EFTA–EEA structures in defining a new and more comprehensive Neighbourhood Policy of the European Union, encompassing all the current and potential countries belonging to the fourth circle of integration.

The European Neighbourhood Policy in Light of Article 8 TEU


The fall and collapse of the Soviet Union and empire, and the fall of the Berlin wall, amounted to a major challenge for European integration. At the time, a diverse landscape of newly independent states in wider Europe and ever-changing borders and neighbours, of post-communist countries, still fragile political systems, frequent corruption and organised crime, low living standards, and low human rights standards contrasted with stable democratic states with high living standards. This spectrum required a neighbourhood policy which was able to pay due respect to diverging levels of political and social economic development, and able to offer a range of different perspectives on further integration. Threats to security caused by regional conflicts, terrorism, organised crime, environmental hazards or potential state failures facilitated an increasing and common interest in creating stability and security outside the first two circles of integration (the Monetary Union and the internal market) and the EEA Agreement with EFTA States.10 The European Neighbourhood Policy is based on the structure of partnership and cooperation agreements.11 It was particularly developed as a result of the enlargement of the EU to Central and Eastern European and two Mediterranean states in 2004, resulting in new borders and new neighbours.12 It was enacted to politically and economically deepen the relationship between neighbours to the Union outside the first three circles of European integration. The European Neighbourhood, in practice however, not only includes immediate neighbours but also embraces the neighbours of the neighbours.

The EU’s main interest in the policy lies in securing peace, security and a friendly environment of shared values and prosperity along its borders.13 This is particularly important with regard to the limited absorption capacity of the EU. The new ENP therefore seeks to create an area of prosperity, stability and security for the enlarged EU and its neighbours.14

An Open Normative Framework

The European Neighbourhood Policy was constitutionalised in Article 8 TEU by the Lisbon Treaty, thus providing the legal basis for a special relationship between the EU and its neighbours. Relations of the EU to neighbouring countries greatly vary and reflect a philosophy of variable geometry which, to a much lesser extent, can also be found within the EU.15 Yet, not all of these relations are framed under the Neighbourhood Policy of Article 8 TEU, despite its broadly worded text:

Article 8 of the TEU

The Union shall develop a special relationship with neighbouring countries, aiming to establish an area of prosperity and good neighbourliness, founded on the values of the Union and characterised by close and peaceful relations based on cooperation.

For the purposes of paragraph 1, the Union may conclude specific agreements with the countries concerned. These agreements may contain reciprocal rights and obligations as well as the possibility of undertaking activities jointly. Their implementation shall be the subject of periodic consultation.

The wording is based on Article 217 of the Treaty on the Functioning of the European Union, dealing with the relationship between the EU and neighbouring countries through association agreements.16 Paragraph 117 of Article 8 TEU describes the goal of the ENP, while paragraph 218 lists the instruments of the ENP. The exact procedural requirements, however, remain undefined in the provision and disputed.

Article 8 addresses a close and special relationship between the EU and neighbouring countries, yet without perspective of immediate or medium-term membership. It entails the principles of differentiation and conditionality. A privileged relationship is envisaged to build upon a commitment to share the values of the Union and to deepen political alliance and economic integration. It is thus conditioned to a legal, social, economic and political approximation of neighbours to EU law and values as outlined in Article 2 of the TEU. The ENP partner states are offered an incentive of developing the opportunity to be given full market access, including its four freedoms (free movement of goods, services, persons and capital), and to receive short-term financial assistance and visa facilitations. Thus, the ENP aims at offering an incentive to access the internal market mainly in exchange for efforts towards more stability and security, democracy, the rule of law, respect for human rights and a market-oriented economy conditioned by sharing common interests and the Union’s values. The ENP emphasises the need to further strengthen existing regional and sub-regional cooperation and to develop new cooperation agreements. In order to achieve these goals individual Action Plans are developed and sub-committees established to monitor the progress made. Progress is tracked in progress reports.19

The wording of Article 8 of the TEU, as outlined above, implies a proximity in terms of substance, yet the terms Neighbourhood and Europe remain largely undefined. From an historical context, one would expect that relations with Switzerland or a number of European microstates fully surrounded by territories of the Member States would be at the heart of neighbourhood policy of the Union enshrined in Article 8 TEU. Instead, The ENP was specifically created in 2003 to particularly distinguish between an enlargement of the Union and special relations with neighbours without a membership opportunity in the near future as the defining feature.20 Neither EFTA-Members (Norway, Iceland or Liechtenstein, nor Switzerland)21 nor microstates like Andorra, San Marino and the Vatican were considered to be part of the neighbourhood policies conducted under the provision of Article 8 TEU.22 The same holds true for Switzerland. Instead, the provision was applied to depict relations with a wider circle of countries in the wider neighbourhood, in particular to the East, but also within the Mediterranean basin.23 Before joining the EU in 200424 and 2007,25 the new Member States leading to the enlargement to 27, belonged to this group. Today, it entails actual and potential relations with Ukraine, Moldova, Belarus, Serbia and Kosovo, Albania, Georgia, Armenia, Azerbaijan and Bosnia-Herzegovina, as well as Algeria, Egypt, Israel, Jordan, Syria, Palestine, Lebanon, Libya, Tunisia and Morocco. Relations with these countries operate under a wide range of different agreements and institutional arrangements. The agreements all are based upon the precepts of EU law, extending those beyond borders, but continue to vary in accordance with different economic constellations and needs in place. They show comparable institutional arrangements in terms of monitoring and further developing the agreements by means of joint bodies. Dispute settlement often is modelled after the WTO dispute settlement mechanism,26 providing for ad hoc panels, but stopping short of permanent institutions, let alone courts and the instrument of preliminary rulings.

Since neighbourhood policy under Article 8 TEU does not include the third and fourth circles of integration, but is rather limited to a wider and further range of relations in a greatly varying manner, it does not come as a surprise that Article 8 has remained without much guidance and normative influence. EFTA countries cannot rely upon it in shaping special relations with the EU, and other countries cannot extract particular guarantees. They remain largely exposed to the vagaries of foreign policy. The difference for the rest of the world, shaped on the basis of other agreements, such as Economic Partnership Agreements or proper Free Trade Agreements is difficult to tell. It is difficult to distinguish the level of integration in the fifth and sixth circles from that which existed prior to neighbourhood policies, and from neighbourhood-independent WTO rights and obligations under GATT,27 GATS,28 TRIPS,29 and related special agreements and understandings, respectively.30

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