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representatives

    Programme: IPA 2007

    Partner country: Croatia

    Area of Cooperation: Internal market and trade

    TWINNING FICHE

    Title of the Project: Implementing Croatian Competition and state aid policies

    Twinning budget: ? 1,000.000

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    TWINNING PROJECT FICHE

1. Basic information

1.1 Programme: IPA 2007

1.2 Twinning Number: HR 07 IB FI 03

1.3 Title: Implementing Croatian Competition and state aid policies

1.4 Sector: Internal market, competition

1.5 Beneficiary country: Croatia

    2. Objectives

2.1. Overall objective(s):

    Enhance the competition environment and state aid policy through continuous support to Croatian competition authorities and its partners on the basis of EC rules and best practices.

2.2 Project purpose:

    Provide Croatian Competition Agency (CCA) and other stakeholders in competition and state aid systems with sufficient capacity for efficient implementation of competition and state aid policies.

    2.3 Contribution to the Accession Partnership/ Stabilisation and Association Agreement/

     National Programme for Integration of the Republic of Croatia into the EU (NPIEU)

    Activities under this project will be follow-up to the results of the PHARE 2005 project. They will provide CCA and other stakeholders with sufficient capacity for efficient implementation of new competition regime established through the new Competition Act, as well as

    implementation of state aid law and policy.

    With a view to the future EU membership, this twinning project should have impact on the readiness of all relevant Croatian institutions to fully implement competition and state aid rules in accordance with the acquis. To that end, beside the CCA the project will reach out to the

    Croatian Competition Agency, judiciary and sectoral regulators.

    Firstly, through the new competition regime the Agency shall be empowered to impose fines to the undertakings breaching the Competition Act and for those who cooperate in cartel cases, immunity or reduction of fines will be possible. These competences, which are in place in all similar bodies in the EU countries, will be completely new for the Agency and the transfer of knowledge from a twinning agency will be of crucial importance in that respect. Secondly, according to the new Competition Act one court shall be responsible for deciding on the legality of Agency’s decisions and fines defined therein. Since the competition law is a relatively new area in which no court has been specialized so far, this project will be the first one to target a specialized court instead of many courts which in the end would not deal with competition cases, as it was the case in the previous projects.

    And thirdly, the new Credit Institutions Act stipulates that the competence over competition

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    issues in banking sector shall be given to the CCA upon the accession to the EU. In that context this project will significantly contribute to the exchange of expertise in this area between the National Bank and the CCA and thus prepare the CCA for its future role upon the accession to the EU.

    In the area of state aid, where the competence over state aid issues shall be passed to the European Commission upon Croatian accession to the EU, internships and cooperation between the EC and the CCA shall be further reinforced with the assistance of this project. The envisaged activities shall address the issue of insufficient capacity of the Agency for solving the most complex cases in the area of state aid, which has been repeated on several occasions in both Croatian and EU strategic documents.

3. Description

3.1 Background and justification:

    Pursuant to the obligations under the Stabilisation and Association Agreement (SAA) between the European Union and the Republic of Croatia from 13 December 2004, as well as membership obligations in the WTO, competition policy including antitrust and state aid is one of the priorities for the Government of the Republic of Croatia.

    The application and enforcement of the Competition Act and State Aid Act is entrusted to the Croatian Competition Agency (CCA, the Agency). The Agency performs its tasks assigned to it by the acts and reports to the Croatian Parliament. Its activities are managed by the Competition Council and the President of the Council, who are appointed by the Parliament for a period of five years. The Council, which consists of five members, is the managing body of the Agency, while the President represents and speaks for the Agency and manages its activities. As of July 2008, the Agency employs 50 persons.

    The European Partnership adopted along with the signature of the SAA highlights the following medium-term priorities: “Reinforce the antitrust and state aid authority and build up a credible

    enforcement record. Substantially improve transparency in the field of state aid; develop training on competition law and policy at all levels of administration and judiciary.”

    Furthermore, European Commission’s Progress Reports for 2005, 2006 and 2007 raise the need to further strengthen the capacity of CCA, which entails necessary legislative changes ensuring the fulfilment of SAA obligations in this area.

    The National Programme for the Accession of the Republic of Croatia into the EU 2008

    (NPAEU) is the sixth annual programme of the Croatian Government, which contains activities to be undertaken on its way towards EU integration. The legislative obligation arising from the NPAEU 2008 for the CCA is the delivery of the amendments to the Competition Act in order to render the competition system more efficient and prepare it for the integration into the EU. The implementing measures defined for the CCA for this year refer to the area of state aid (dealing with issues such as shipbuilding and steel industries, as well as fiscal aid, together with the MELE and other stakeholders) and continuous strengthening of administrative capacities in both competition and state aid areas (with the assistance of the PHARE project).

    EU accession negotiations in the chapter 8 of the acquis (“Competition”) have not yet been

    opened. The main pending issue for opening the chapter is the situation in the Croatian shipbuilding. The precondition for opening chapter 8 is restructuring of the shipbuilding industry.

    Benchmarks (steel industry, alignment of fiscal aid and transparency in the area of automotive parts and textile industries) have been fulfilled. The only remaining benchmark is in the area of

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shipbuilding. Namely, the shipbuilding industry has to undergo privatization process, after which

    the Agency will resume its temporarily terminated proceedings on the assessment of individual

    restructuring plans of Croatian shipyards. The Croatian Government has made a proposal

    regarding the restructuring of the Croatian shipyards which was sent to Brussels. At present the

    Government is still awaiting the EC’s reply on the proposal.

This project is to build upon the results of the current PHARE 2005 project which comprises

    both competencies of the Agency, competition and state aid. Twinning component is being

    implemented since April 2007 with Germany as a twinning partner. In the competition part, main

    emphasis is on the drafting of the amendments to the Competition Act, as well as new bylaws

    which will be needed as implementing legislation arising from the changed Competition Act.

    Training on the implementation of the new Act will be needed within IPA project. In the state

    aid part of the project main activities are focused on on-the-job consultancy, primarily related to

    the most complex cases which are dealing with the issues arising from the SAA obligations and

    EU accession negotiation benchmarks. Further awareness raising is needed in this area, both on

    central and regional levels.

    After several separate projects in the fields of competition and state aid respectively, PHARE

    project was the first one to encompass the Agency as a whole. The IPA project should build

    upon its results and strengthen the capacity of the Agency, as well as other stakeholders in the

    competition and state aid systems, implement new competition regime and state aid rules. The

    project consists of twinning and service component which will be implemented in parallel. It is

    envisaged that the Service component starts in September 2009.

    With a view to the future EU membership, the twinning project should have an impact on the

    readiness of all relevant Croatian institutions to fully implement competition and state aid rules

    in accordance with the acquis. To that end, beside the CCA the project will reach out to the

    judiciary and sectoral regulators.

3.2 Linked activities:

Project Project Title Beneficiary Start Date Allocation Main Results

    End Date (EUR) CARDS Support to the CCA March 2003 650,000.00 Assistance in legal drafting,

    Development of CCA and external staff 2001 December Competition Policy in trained, IT equipment 2005 Croatia in line with supplied

    the EU Standards and

    Practice

    TA(technical

    assistance), SU

    (supply)

    CARDS Support to the CCA March 2004 190,000.00 Basis created for the

    Croatian State Aid subsequent twinning and 2002 November System - facility supply 2004

    Support to the CCA June 2005 1,200,000.00 CCA and external capacity

    Croatian State Aid raised, public awareness April 2007 raised, state aid control System TW, SU

    system set up and database

    created CARDS Further strengthening CCA November 450,000.00 CCA and government staff

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Project Project Title Beneficiary Start Date Allocation Main Results

    End Date (EUR)

    of the Croatian trained, public awareness 2003 2005

    Competition Agency raised February and implementation 2007 of competition law

    and policy TA

    CARDS Support to the CCA March 2007 190,000.00 CCA assisted in assessing

    Process of individual restructuring facility December Restructuring the plans of Croatian shipyards 2007 Shipbuilding Industry

    in Croatia - TA

    CARDS Improving MELE Ongoing 1,500,000.00 To generally improve the

    information to the since awareness of the business 2004

    Croatian business September community in key legislative

    community 2007 fields PHARE Strengthening of CCA Ongoing 1,900,000 Assistance in legal drafting,

    capacity to manage since April training of CCA staff and 2005

    and enforce the EU other stakeholders, on-the-2007

    competition and state job consultancy

    aid policies TW,

    SU

    PHARE Croatian Maritime Ministry of the December 200,000.00 To improve policy making

    Sector: State Aid and Sea, Transport 2007 June and policy implementation 2005

    and capacity of Croatian Market Access 2008

    Infrastructure; maritime administration

    CCA

    Provide the stakeholders in IPA Implementing CCA Envisaged 1,000,000.00 competition and state aid Croatian competition start date - 2007 systems with sufficient and state aid policies September capacity for efficient - TA 2009 implementation of

    competition and state aid

    policies.

CARDS projects

    Anti-trust

    1. The process of strengthening the CCA’s administrative capacity, especially the education of

    staff in the area of competition, as well as other officials enforcing the relevant legislation was

    already partly covered by CARDS 2001, “Support to the Development of Competition Policy in

    Croatia in line with the EU Standards and Practice” (?650,000.00), the first EU technical

    assistance project implemented in the CCA. The project’s three components (legal approximation, institutional capacity building and training, public and governmental awareness

    raising) were implemented and in 2005 the project was continued through training seminars for

    CCA staff and external stakeholders. Implementation was completed at the end of 2005.

    Under the 2001 project CCA also benefited from the supply of IT equipment, including hardware

    and creation of a new website. For the purpose of successful implementation of the supply CCA

    employed an IT person to administer the IT system.

    2. The implementation of the CARDS 2003 project ”Further strengthening of the Croatian

    Competition Agency and implementation of competition law and policy” (? 450,000.00)

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comprised two components. One referred to the implementation and enforcement of competition

    legal framework within the government and private sector and the other to institutional and

    administrative capacity building of the CCA. It continued to build upon the training component

    of the CARDS 2001 project, proceeding with the training activities of the CCA staff as well as

    with the training of external stakeholders (government and private sector representatives).

    Implementation was completed in February 2007.

    State aid

    1. There was a short-term technical assistance project preparing the ground for the twinning

    CARDS 2002 project in the area of state aid (?190,000.00), which was completed in November

    2004. This project was the first project in the CCA in the field of state aid. The project carried

    out the activities in the area of legal harmonisation, IT support system and training.

    2. Twinning project CARDS 2002 was implemented from June 2005 until April 2007. It was

    envisaged to use the results and outputs of the above mentioned project as a basis for achieving

    its objectives. The consulting countries under the project were Germany and Slovenia. The

    objective of the project was to provide support to the CCA regarding the commitments

    undertaken pursuant to the Stabilization and Association Agreement. Given that, it was directed

    to:

    - capacity building of the CCA (through legislative review and drafting; update of the

    Training Needs Analysis and provision of training for CCA staff; internships; institutional

    assessment; development of guidelines and notification requirements and advice on

    ongoing cases),

    - setting up the state aid control system (through categorisation and methodology; process of

    alignment, amendment and elaboration of state aid schemes and annual reporting), - raising awareness and understanding state aid advocacy (through analysis of training needs

    for external target groups in the government and training; implementation strategy for the

    state aid objectives and support in practical state aid advocacy). 3. Separate subproject was state aid supply project (?400,000.00) aimed at the establishment of a

    comprehensive state aid data base in Croatia (CROSADS - Croatian State Aid Database System).

    The contracted local IT company procured the necessary hardware and developed software

    application for the database in close cooperation with the CCA and ECD.

    4. CARDS facility project (?190,000.00), implemented between March and December 2007

    aimed at giving assistance to the CCA in assessing restructuring plans of Croatian shipyards, so

    as to be able to fulfil a benchmark imposed by the EU for the opening of negotiation chapter on

    competition.

    5. The most recent project is PHARE 2005 project, where the main beneficiary was Ministry of

    the Sea, Transport and Infrastructure and co-beneficiary was the CCA. It was implemented until

    June 2008.

    Current project PHARE 2005 comprises both competencies of the Agency, competition and state

    aid. Twinning component is being implemented since April 2007 with Germany as a twinning

    partner. In the competition part, main emphasis is on the drafting of the amendments to the

    Competition Act, as well as new bylaws which will be needed as implementing legislation

    arising from the changed Competition Act. Trainings are being held for the CCA staff, judiciary

    (both at central and regional levels) and other stakeholders (business community, lawyers). In

    the state aid part of the project main activities are focused on on-the-job consultancy, primarily

    related to the most complex cases which are dealing with the issues arising from the SAA

    obligations and EU accession negotiation benchmarks. In both competition and state aid there

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have been two study visits to relevant German authorities. Implementation of the twinning is to

    be completed in February 2009.

    Supply component of the project was completed in November 2008. The lots comprised the

    supply of hardware (IT equipment, IP telephony) and the creation of the document management

    system for the whole of the Agency, which is compatible with the CROSADS system previously

    created for the State Aid Sector of the Agency within the CARDS 2002 project.

    Finally, also to be mentioned is CARDS 2004 project (within the Ministry of Economy, Labour

    and Entrepreneurship) titled “Information to the Croatian Business Community”. The project

    aims to strengthen the capacity for policy makers and business organisations to identify, analyse

    and communicate future impact of key regulatory areas for business in Croatia. The project also

    aims to generally improve the awareness of the business community in key legislative fields such

    as: public procurement, environment, standards for agriculture and industrial products, consumer

    protection, competition policy, state aid and intellectual property rights. The Agency is actively

    involved in the project.

3.3 Results:

The results to be achieved by the project are as follows.

1. Capacity of CCA, judges and sectoral regulators strengthened

1.1. Improved capacity in handling anti-trust and state aid cases

    (indicator: at least 30 members of CCA staff trained on anti-trust and state aid during 21

    month of the implementation of activities; strong enforcement record on substantial anti-trust

    and state aid cases)

1.2. Improved capacity of court system in handling competition cases

    (at least 20 relevant judges trained on anti-trust during 21 month of the implementation of

    activities; enforcement record of relevant court(s) strengthened through decisions on the

    legality of CCA’s decisions and on the fine reviews)

    1.3. Improved capacity of relevant institutions in handling competition cases in telecom and

    banking sectors

    (at least 20 staff of relevant institutions trained on handling anti-trust cases in telecom and

    banking sectors during 21 month of the implementation of activities; quality decisions on

    anti-trust cases in relevant sectors, in which the application of relevant competition rules is

    ensured)

It is expected that after 21 month of the implementation of activities relevant stakeholders (CCA,

    judiciary and sectoral regulators) will be trained so as to achieve sufficient level of capacity for

    efficient implementation of new competition regime and state aid law and policy.

3.4 Activities:

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    Component 1 Training of CCA

Result of this component is the improved capacity in handling anti-trust and state aid cases. This

    result is to be achieved through the following activities:

1.1. Training of CCA staff in the institutions of European Communities and its Member

    States:

    - one internship in European Commission with approximate duration of 3 months is

    planned for 2 CCA representatives (one person in charge of competition and one

    person in charge of state aid are foreseen to participate)

    - up to four study trips (“shadowing”) with planned duration of 2 weeks each, for 4

    CCA representatives in selected Member State's institutions are envisaged In this activity, twinning partner will during two years of the duration of the contract in

    cooperation with the representatives of the European Commission organize an internship for

    CCA representatives (one representative from state aid field and one representative from anti-

    trust field are foreseen to participate). Selection of CCA representatives will be done by

    DGCOMP, based on CVs proposed by the CCA. Preparatory activities should not consume more

    than a month.

    Similarly, planned 2-week study trips will we organized in cooperation with relevant agency

    from an EU Member State for 1 CCA representative per study trip. These study trips will take

    place twice in the first year of the project and twice in the second year, equally divided among

    anti-trust and state aid staff.

1.2. On-the-job training at CCA in anti-trust and state aid

    - consultancy on ongoing cases In this activity, on-the-job training will be delivered for CCA staff, in anti-trust and state aid

    issues separately. This will include consulting case handlers, directors or Council members on

    ongoing cases selected by CCA. Where possible, emphasis should be put on comparison with the

    experience in similar cases in the twinning partner’s country. This consultancy shall be

    summarized in written document in sufficient detail so as to allow the CCA to use it later on (e.g.

    when deciding on a particular case in Council sessions). In order to facilitate this, draft materials,

    decisions or similar documents, needed to get an insight into a particular case, shall be ensured

    by the beneficiary institution.

Component 2 - Training of judges on anti-trust issues

Result of this component is the improved capacity of court system in handling competition cases.

    This result is to be achieved through the following activity:

    2.1. Holding of 12 seminars at Judicial Academy and 1 study trip to relevant EC institutions During one year of the duration of the contract 12 seminars on competition issues will be

    delivered for judges, in cooperation with the Judicial Academy in Zagreb (project partner). It is

    expected that various experts cover different topics, as an introduction to competition law. Upon

    the completion of the course, selected judges will together with the representative of the

    twinning partner visit relevant EC institutions.

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Component 3 - Training of relevant institutions on anti-trust in telecom and banking sectors

    Result of this component is the improved capacity of relevant institutions in handling competition cases in telecom and banking sectors. This result is to be achieved through the following activity:

    3.1. Holding of 8 seminars in relevant institutions Here the twinning partner should ensure the participation of relevant experts who would cover

    four seminars on each of the two sectors. By the time the project will be implemented, it is

    expected that amendments to the telecom and credit-institutions laws will be brought, which

    would ensure the unique application of the Competition Act in all the sectors, telecom and

    banking being the only ones where this is not the case for the time being.

    In order to measure the success of the project activities, for the target groups (judges and sectoral regulators) a survey will be carried out to measure the knowledge of anti-trust and state aid, at the beginning and at the end of activities.

    Two visibility events will be organized in the course of the implementation of the project; Kick-off meeting at the start of the implementation and the Final meeting at the end of the

    implementation of the project activities.

3.5 Means / Input from the MS Partner Administration:

3.5.1 Profile and tasks of the Project Leader

Profile of the Project Leader

Project leader shall be a senior official of the Member State responsible for managing the

    twinning project.

? university degree in law, economics or business/management;

    ? 5 years of working experience in the area of Competition policies (anti trust or state aid) ? background in drafting and implementing strategies, policies and regulations; ? knowledge of EU project rules and procedures;

    ? fluent written and spoken English.

Task of the Project Leader

? Overall management and coordination of the project in cooperation with RTA, RTA

    counterpart and Croatian Project Leader

    ? Coordination of MS experts’ work and availability

    ? Directing the implementation of the project in order to ensure that all planned activities and

    tasks will be leading towards the achievement of the projects results and the overall objectives ? Monitoring project implementation and proposing/undertaking corrective management

    actions if required;

    ? Supporting study visits

    ? Ensuring financial management, including budget monitoring and accounting

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3.5.2 Profile and tasks of the Resident Twining Adviser

Profile of the Resident Twining Adviser

RTA shall be a senior official of the Member State, with the following profile:

    ? University degree in management, public/business administration, law or economics

    ? 5 years experience in the field of competition policy (anti trust)

    ? Sufficient understanding of the state aid policy field to be able to actively support

    the achievements of the project results

    ? Experience in project management

    ? Excellent communication skills, with fluency in written and spoken English

    language, including excellent report-writing English language

    ? Computer literate

    ? Previous experience with EU twinning projects on competition would be an

    advantage

    Tasks of the Resident Twining Adviser

? transfer of knowledge on the Competition and State Aid

    ? assisting in the on-the-job training through consultancy in the most complex cases in

    competition and state aid areas ? day-to-day management of the project in cooperation with the BC PL and RTA counterpart;

    ? coordination of the work of STEs ? planning the project activities with the Agency’s PIU and holding regular meetings with the

    PIU in order to discuss current activities and possible problems;

    ? supporting the short-term experts in preparation of training activities in all three components,

    as well as the internship and study visits;

    ? networking with institutions relevant in this project in Croatia (Judicial Academy and the

    relevant court to be trained; The Croatian Post and Electronic Communications Agency

    (HAKOM); Croatian National Bank; state aid providers) and abroad (relevant MS

    institutions which will host the study trips, European Commission DGCOMP);

Duration of the Resident Twinning Adviser secondment: 21 months

    3.5.3 Profile and tasks of the short-term experts

Profile of the Short-term experts

    ? University-level degree in a relevant subject (law or economics) or equivalent work

    experience.

    ? 5 years relevant work experience including competition, legal drafting, institutional

    capacity building, public awareness matters

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