RappoRt # 18 Liechtenstein and the EEA: the Europeanization of a (very) small state Christian Frommelt & Sieglinde Gstöhl Europautredningen Utvalget for utredning av Norges avtaler med EU 2 Christian Frommelt & Sieglinde Gstöhl Europautredningen EuropautredningenOm rappOrten UtvalgetRapporten for utredning er av Norgesskrevet avtaler på med oppdrag EU for Europautredningen. Innholdet i rapporten er forfatternes ansvar. Rapportene er å betrakte som et innspill til utredningen og reflekterer ikke Europautredningens synspunkter. © Utvalget for utredning av Norges avtaler med EU, september 2011 Ved bruk av materiale fra denne publikasjonen, skal Europautredningen oppgis som kilde. ISBN 978-82-93145-34-9 (trykt) • ISBN 978-82-93145-35-6 (nett) Layout: Gladesigner (gladesigner.no) Europautredningen Christian Frommelt & Sieglinde Gstöhl 3 Om fOrfatterNE Christian frommelt Christian Frommelt is Researcher at the Liechtenstein-Institut in Bendern, Liechtenstein, and PhD candidate in political science at the Swiss Federal Institute of Technology (ETH) in Zürich, Switzerland. Sieglinde Gstöhl Sieglinde Gstöhl is Professor and Director of EU International Relations and Diplomacy Studies at the College of Europe in Bruges, Belgium. She is a member of the Scientific Council of the Liechtenstein-Institut. 4 Christian Frommelt & Sieglinde Gstöhl Europautredningen Content List of tables ........................................................................................................................................5 1. Introduction .....................................................................................................................................7 1.1 The Alpine three ............................................................................................................................... 7 1.2 Regional cooperation with Switzerland ........................................................................................... 8 1.3 Liechtenstein’s political system ....................................................................................................... 9 1.4 Literature review .............................................................................................................................. 9 1.5 Aim of the report............................................................................................................................. 11 2. a short history of Liechtenstein’s relations with the eU ................................................................12 2.1 Liechtenstein’s foreign policy ......................................................................................................... 12 2.2 EFTA 1960 and 1991 ........................................................................................................................ 13 2.3 EEA 1992 and 1995 ......................................................................................................................... 13 2.4 Sectoral agreements ...................................................................................................................... 15 2.5 Schengen/Dublin association 2011 ................................................................................................ 16 3. the europeanization of Liechtenstein: status quo .........................................................................16 3.1 Europeanization of Liechtenstein’s economy................................................................................. 17 3.1.1 Pros and cons of EEA membership ...................................................................................... 17 3.1.2 EEA and customs union with Switzerland ............................................................................ 18 3.2 Europeanization of the society ....................................................................................................... 19 3.2.1 Participation in EU programmes .......................................................................................... 19 3.2.2 Europeanization of domestic actors ..................................................................................... 20 3.3 Europeanization of the legal order ................................................................................................. 21 3.3.1 Europeanization of Liechtenstein’s legislation ..................................................................... 21 3.3.2 Comparison with other EEA states ....................................................................................... 22 3.3.3 Europeanization of the jurisdiction ....................................................................................... 23 3.4 Europeanization of Parliament’s work ........................................................................................... 25 3.4.1 Parliamentary involvement in European politics ................................................................. 25 3.4.2 Parliamentary control in Liechtenstein ................................................................................ 27 3.5 Europeanization of the national administration............................................................................. 28 3.5.1 Liechtenstein’s participation in the decision-shaping process ............................................ 30 3.5.2 Bureaucratization and politicization ..................................................................................... 31 4. Domestic and external political challenges ...................................................................................32 4.1 The financial services sector .......................................................................................................... 32 4.1.1 Liechtenstein’s financial centre and the EEA ....................................................................... 32 4.1.2 Combating money laundering .............................................................................................. 33 4.1.3 EEA payment services vs. currency union with Switzerland ................................................ 35 4.2 Free movement of persons ............................................................................................................ 36 4.2.1 Liechtenstein’s «special solution» ....................................................................................... 36 4.2.2 Implementation into national law ......................................................................................... 36 4.2.3 Recent debate on easing the restrictions ............................................................................. 37 4.3 Further implementation challenges .............................................................................................. 38 4.3.1 Case handling of the EFTA Surveillance Authority ............................................................... 39 4.3.2 Liechtenstein’s derogations in the EEA ................................................................................ 41 4.3.3 The principle of parallel marketability ................................................................................. 41 4.3.4 Additional Agreement to the Swiss-EU Agreement on Agriculture ..................................... 42 4.4 Further derogations due to Liechtenstein’s close relations with Switzerland .............................. 43 4.4.1 Derogations due to the small size ........................................................................................ 44 4.4.2 Statistical overview ............................................................................................................... 45 4.5 Delays due to linkage politics......................................................................................................... 46 4.5.1 Historical legacy and Eastern enlargement ......................................................................... 46 4.5.2 Schengen/Dublin association and tax cooperation .............................................................. 46 5. future perspectives .......................................................................................................................47 5.1 The absence of a Europe debate in Liechtenstein ......................................................................... 47 5.1.1 Deepening and broadening the EEA ..................................................................................... 48 5.1.2 Widening the EEA .................................................................................................................. 50 5.1.3 Replacing the EEA ................................................................................................................. 52 5.1.4 The EU’s (lack of a) strategy towards very small states ...................................................... 53 5.1.5 Partial vs. full EU membership? ........................................................................................... 54 6. Conclusions ...................................................................................................................................55 7. references .....................................................................................................................................56 8. annex .............................................................................................................................................64 Europautredningen Christian Frommelt & Sieglinde Gstöhl 5 List of tables Table 1: CORDA FP7 country profiles (June 2011) Table 2: Liechtenstein Law Gazettes