EUROPEAN COMMISSION Brussels, 9.11.2016 SWD(2016) 363 final COMMISSION STAFF WORKING DOCUMENT Kosovo* 2016 Report Accompanying the document Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions 2016 Communication on EU Enlargement Policy {COM(2016) 715 final} *This designation is without prejudice to positions on status, and is in line with UNSCR 1244/1999 and the ICJ Opinion on the Kosovo declaration of independence. EN EN Table of Contents 1. INTRODUCTION ....................................................................................................... 4 1.1.Context ................................................................................................................... 4 1.2.Summary of the report ........................................................................................... 4 2. POLITICAL CRITERIA .............................................................................................. 6 2.1.Democracy ............................................................................................................. 6 2.2.Public administration reform ............................................................................... 10 2.3.Rule of law ........................................................................................................... 13 2.4.Human rights and the protection of minorities .................................................... 22 2.5.Regional issues and international obligations ...................................................... 30 3. NORMALISATION OF RELATIONS BETWEEN KOSOVO AND SERBIA ...... 32 4. ECONOMIC CRITERIA ........................................................................................... 33 4.1.The existence of a functioning market economy ................................................. 34 4.2.The capacity to cope with competitive pressure and market forces within the Union .......................................................................................................................... 39 5. EUROPEAN STANDARDS ..................................................................................... 42 5.1. Internal Market .................................................................................................... 42 5.1.1. Free movement of goods ........................................................................... 42 5.1.2. Movement of persons, services and right of establishment ...................... 44 5.1.3. Free movement of capital .......................................................................... 45 5.1.4. Customs and taxation ................................................................................ 45 5.1.5. Competition ............................................................................................... 46 5.1.6. Public procurement ................................................................................... 48 5.1.7. Intellectual property law ........................................................................... 50 5.1.8. Employment and social policies, public health policy .............................. 50 5.1.9. Education and research ............................................................................. 52 5.1.10.World Trade Organisation issues ............................................................. 54 5.2. Sectoral policies .................................................................................................. 54 5.2.1. Industry and SMEs .................................................................................... 54 5.2.2. Agriculture and fisheries ........................................................................... 54 5.2.3. Environment and climate change .............................................................. 56 5.2.4. Transport policy ........................................................................................ 58 5.2.5. Energy ....................................................................................................... 59 5.2.6. Information society and media .................................................................. 61 5.2.7. Financial control ....................................................................................... 62 5.2.8. Statistics .................................................................................................... 64 5.3. Justice, freedom and security .............................................................................. 65 5.3.1. Visa, border management, asylum and migration..................................... 66 5.3.2. Money laundering ..................................................................................... 68 5.3.3. Drugs ......................................................................................................... 68 5.3.4. Police ......................................................................................................... 69 5.3.5. Fight against organised crime ................................................................... 69 5.3.6. Fight against terrorism .............................................................................. 70 5.3.7. Judicial cooperation in civil and criminal matters .................................... 72 Annex I – Relations between the EU and Kosovo ................................................................... 73 2 Annex II – Statistical Annex .................................................................................................... 74 3 1. INTRODUCTION1 1.1. Context On 1 April 2016, the EU-Kosovo Stabilisation and Association Agreement (SAA) entered into force. This is the first contractual relationship between the EU and Kosovo, a comprehensive framework for closer political dialogue and economic relations. Kosovo has faced serious domestic challenges, which have hampered EU-related reforms in some areas. It should now focus on implementing the SAA, guided by the European Reform Agenda, to further strengthen its rule of law and reform its economy. Kosovo has delivered on wide-ranging rule of law reforms, allowing the Commission to issue a formal proposal in May 2016 to transfer Kosovo to the Schengen visa-free list. This is now in the hands of the European Parliament and Council, pending Kosovo's fulfilment of the remaining two requirements. Kosovo remains committed to the normalisation of its relations with Serbia. It has met its remaining obligations on the establishment of the Specialist Chambers and has extended the mandate of the European Union Rule of Law Mission (EULEX). 1.2. Summary of the report As concerns the political criteria, the polarisation between government and opposition continued. Normal parliamentary functioning was prevented for parts of the reporting period, including through the use of violent means by opposition members. All political parties should show responsibility and re-engage in a constructive dialogue, with parliament as the key forum for political debate. The recent return of opposition members to parliamentary activities is a welcome step. Kosovo institutions fulfilled the remaining obligations on the establishment of the Specialist Chambers and Specialist Prosecution Office to investigate allegations of international crimes committed during and after the 1999 conflict. The procedures on the bilateral agreement with the host country of the Specialist Chambers (the Netherlands) were finalised. The mandate of EULEX was extended until June 2018. The assembly completed most of the outstanding appointments to independent institutions and agencies. However, appointments were often subject to political influence. This undermines the independent functioning and effective management of these bodies. Greater efforts are needed to ensure that appointments are based on merit. There is some level of preparation in the area of public administration reform. Good progress included the adoption of a comprehensive public financial management strategy and of the law on general administrative procedures. The continued politicisation of the public administration, however, remains a serious concern. The organisation of the state administration is fragmented and does not ensure effective lines of accountability, and the overlap of responsibilities of government agencies needs to be addressed. Parliamentary oversight of government activities should increase. The recommendations of oversight institutions should be followed, to ensure improved governance and accountability. Kosovo's judicial system is at an early stage. Important positive steps have been taken during the reporting period with the adoption of amendments to the constitution and most secondary 1 This report covers the period from October 2015 to September 2016. It is based on input from a variety of sources, including contributions from the government of Kosovo, the EU Member States, European Parliament reports and information from various international and non-governmental organisations. As a rule, legislation or measures which are under preparation or awaiting parliamentary approval have not been taken into account. 4 legislation necessary to implement the 2015 justice package laws. Kosovo has also appointed most members of key institutions and continued to increase its clearance rate of cases. However, administration of justice is slow and inefficient, and there is insufficient accountability of judicial officials. The judiciary is still vulnerable to undue political influence and rule