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1 E U R O P E A N E C O N O M I C A R E A J O I N T C O M M I T T E E Annual Report of the EEA Joint Committee 2016 The Functioning of the EEA Agreement (Article 94(4)) 24 April Annexes Ref General overview 1. The main part of this report provides an overview of the work of the EEA Joint Committee in Annex I contains a review of the activities of the Subcommittees under the EEA Joint Committee, Annex II contains an overview of the state of decision making in 2016, and Annex III presents a list of EEA Joint Committee Decisions (JCDs) adopted in The EEA Joint Committee met eight times in 2016 and adopted 250 decisions incorporating 405 legal acts, including: Decision 53/2016 on allowing the use of the radio spectrum for equipment using ultra-wideband technology in a harmonised manner, Decision 66/2016 with regard to movement of pet animals, Decision 92/2016 on net neutrality and roaming on public mobile communications networks, Decision 97/2016 on the public procurement legislative framework, Decision No 155/2016 on the quality of water intended for human consumption, Decision No 194/2016 on online dispute resolution and alternative dispute resolution for consumer disputes, Decision Nos 198/ /2016 on incorporating the regulations establishing the European Financial Supervisory Authorities (consisting of the European Banking Authority, the European Insurance and Occupational Pensions Authority and the European Securities and Markets Authority and the European Systemic Risk Board), the Directive on Alternative Investment Fund Managers, the Regulation on Short Selling, the Regulation on Credit Rating Agencies, and the Regulation on European Market Infrastructure. 3. The European Commission provided information to the EEA Joint Committee on: Notifications from Greece regarding the revision of protective measures notified under Article 43 of the EEA Agreement, The Transatlantic Trade and Investment Partnership (TTIP). 4. The EEA EFTA States provided information to the EEA Joint Committee on:

2 - 2 - Ref Notifications from Iceland regarding the revision of protective measures notified under Article 43 of the EEA Agreement. 5. The biannual Internal Market Scoreboard, published by the EFTA Surveillance Authority (ESA) in January 2017 and reflecting the state of play on 30 November 2016, shows that the average transposition deficit of the EEA EFTA States increased from 1.1% in the previous Scoreboard to 1.2%. The deficit increased from 2.0% to 2.2% for Iceland, from 0.1% to 0.4% for Norway, and decreased from 1.1% to 0.9% for Liechtenstein. From 2009, ESA used the interim target of 1% set by the European Council in 2007 as a benchmark, and is now looking towards a benchmark of 0.5% in line with the European Commission s Single Market Act proposed in April Incorporation of acquis into the EEA Agreement 6. In 2016, 405 legal acts were incorporated into the EEA Agreement. This is a decrease of 19.3% compared to 2015, when 483 legal acts were incorporated. In 2016, 515 legal acts were identified by the EFTA side as possibly being EEA relevant, which is an increase of 3.4% compared to 2015, when 498 legal acts were identified as possibly being EEA relevant. 7. On 9 November 2016, when the monitoring list was run for the last time in 2016, there were 522 legal acts awaiting incorporation where the compliance date in the EU had passed, compared to 435 acts in November This represents an increase of 20%. 8. On 31 December 2016, the number of JCDs awaiting the fulfilment of constitutional requirements for more than six months stood at fifteen, compared to six on 31 December On 31 December 2016 the number of linked JCDs, where the entry into force depended on the entry into force of other JCDs that had already been or would be adopted, has decreased to 13, compared to 17 on 31 December In total, 174 legal acts adopted by the EU in 2016 were incorporated into the EEA Agreement in the same year, compared to 217 legal acts in EEA EFTA participation in EU agencies and programmes 10. The EEA EFTA States participated in 14 EU programmes and 18 agencies, of which 13 were regulatory agencies and five executive agencies. Decision shaping 11. The EEA EFTA States submitted EEA EFTA Comments on the following subjects: Possible action addressing the challenges of work-life balance faced by working parents and care-givers, The proposal on common rules in the field of civil aviation and establishing a European Union Aviation Safety Agency, The use of the MHz frequency band in the Union,

3 - 3 - Ref The proposal on introducing a Services Passport, Geo-blocking and other forms of discrimination based on customers' nationality, place of residence or place of establishment within the internal market The review of the EU s macro-prudential policy framework, Improving the notification procedure for national legislation in the field of services, The regulatory framework for construction products, Cooperation between national authorities responsible for the enforcement of consumer protection laws, The evaluation of the market surveillance provisions of Regulation (EC) No 765/2008 and on actions to enhance enforcement and compliance in the Single Market for goods Contracts for the supply of digital content and for online and other distance sales of goods 12. The EU provided oral and/ or written reactions to these EEA EFTA Comments in meetings of the EEA Joint Subcommittees. Status of outstanding issues 13. The discussions on the following issues have not yet been concluded (further information is found in Annex I): The Directive on the Deposit Guarantee Schemes, The Third Package for the Internal Energy Market, The remaining part of the 2009 TELECOM package including the Regulation establishing the Body of European Regulators for Electronic Communications (BEREC), The Third Postal Directive, The Marine Strategy Framework Directive, The Offshore Safety Directive, Directive on the assessment and management of flood risks, The Regulation on Medicinal Products for Paediatric Use, The EU legal acts in the area of organic production. 14. The EEA Joint Committee has reiterated its determination to work towards the rapid conclusion of these issues. Advisory bodies under the EEA 15. The EEA Consultative Committee held its annual meeting in Vaduz, Liechtenstein on May The Committee adopted resolutions and reports on: Better regulation to support businesses and protect workers in the EEA, Labour mobility in the EEA. 16. The EEA Joint Parliamentary Committee held a meeting in Vaduz, Liechtenstein on May 2016, where it adopted resolutions and reports on: The Collaborative Economy,

4 - 4 - Ref The Single Market Strategy for Goods and Services. 17. The EEA Joint Parliamentary Committee also held a meeting in Strasbourg, France on 15 December 2016, where it adopted a resolution and report on: The Annual Report of the EEA Joint Committee on the Functioning of the EEA Agreement in The reports and resolutions were subsequently forwarded to the EEA Joint Committee and the EEA Council. EEA Financial Mechanism 18. The Agreement on the EEA Financial Mechanism for the period, with a total commitment of 1.548,1 million euro, was ratified by Iceland, Liechtenstein and Norway, and has been applied provisionally as of 1 August The Agreement on the Norwegian Financial Mechanism for the period, with a total commitment of 1.253,7 million euro, was ratified by Norway, and has been applied provisionally as of 1 July Memoranda of Understanding on the EEA Grants were signed with Romania, Slovakia and Bulgaria in For the period , million euro has been set aside under the EEA Financial Mechanism and an additional million euro under the Norwegian Financial Mechanism. Programmes and projects under both Mechanisms may be implemented until Article 19 Trade in agricultural products 21. Article 19 of the EEA Agreement foresees inter alia reviews of conditions of trade in agricultural products at two-yearly intervals. Negotiations with Iceland on further liberalisation of trade in agricultural products under Article 19, which were launched in 2012, were concluded on the negotiators' level on 17 September In 2016 the respective parties made progress regarding their internal procedures for the adoption of the Agreement. Negotiations between the EU and Norway under Article 19 were launched on 3 February 2015.

5 E U R O P E A N E C O N O M I C A R E A J O I N T C O M M I T T E E ACTIVITIES OF JOINT SUBCOMMITTEES IN 2016 FREE MOVEMENT OF GOODS General 1. In 2016, 272 legal acts in the areas covered by Subcommittee I were incorporated into the EEA Agreement. Veterinary, feedingstuffs and phytosanitary matters legal acts were incorporated in the veterinary field legal acts were subject to simplified procedure. Instead of being incorporated into the EEA Agreement by adoption of a JCD, the procedure requires that the EEA EFTA States take equivalent measures simultaneously with the EU Member States. The EEA EFTA States are therefore invited to implement and apply the measures adopted by the EU in the same manner and within the same deadlines as those applicable to the EU Member States. These legal acts are taken note of by the EEA Joint Committee. Technical regulations, standards, testing and certification legal acts were incorporated into the EEA Agreement, of which most related to foodstuffs, dangerous substances and medicinal products. 5. With regard to the legislation on organic production, further discussions took place on the labelling of organic products as well as the EEA EFTA States requests for adaptations to certain requirements due to special structural, geographical and climatic factors. As these adaptations were not accepted by the EU side, the EEA EFTA States reviewed their respective requests for adaptations. In the interests of moving the incorporation process forward, Norway decided in October 2016 to withdraw all requests for substantive adaptations to the legislation on Organic production. 6. In the field of Medicinal Products, an agreement between the EEA EFTA States and the EU side was reached on the adaptation texts in the draft JCD incorporating the Paediatrics Regulation. A revised draft JCD was sent to the EU side in October By the end of 2016 both Parties reached agreement on the technical level on the draft JCD. 7. The Expert Group on Medicinal Products and Medical Devices held its first meeting since It intends to continue meeting regularly to enhance cooperation

6 - 2 - and facilitate discussions when problematic issues arise. Discussions on the rules of import/export of drug precursors were discussed at Expert Group level. Public procurement 8. The JCD incorporating the Public Procurement Reform was adopted in April 2016 and the three Directives entered into force under the EEA Agreement on 1 January Energy 9. The EEA EFTA States and the Commission agreed on the drafting of the JCD incorporating the Third Energy Market Package. 10. The Working Group on Energy Matters continued discussions both internally and with the Commission about energy efficiency. Informal working documents with regard to the incorporation of the recast Energy Performance of Buildings Directive 2010/31/EU were sent to DG Energy for informal consultation. The Working Group had further internal discussions about the incorporation of the Energy Efficiency Directive 2012/12/EU. 11. The EEA EFTA experts followed closely and discussed with DG Energy all developments related to the Energy Union. Intellectual property rights 12. Discussions on the incorporation of Regulation 469/2009 (as part of the Paediatrics package ) was finalised and a draft JCD was submitted to the EU side in October By the end of 2016, the Parties reached agreement on the working level on the text of the draft JCD. The file was ready for establishing of the EU position by the Council of the EU and consecutive adoption both expected in Discussions on the incorporation of the Directive on Collective Management of Copyright continued, with Iceland considering the need for adaptations. The Working Group on IPR discussed the potential adaptations to the Trademark Directive and the Trade Secrets Directive and the drafting of the JCDs was initiated. 14. The Commission set out proposals on the modernisation of the EU copyright system, several of which are EEA relevant. The Working Group began its assessment of the proposals and will continue to follow the procedure ahead closely. 15. The EEA EFTA States followed the ongoing affairs of the EU Observatory on enforcement of IPR in 2016 and participated in its fifth plenary meeting, as well as in a public stakeholder meeting in Rotterdam. FREE MOVEMENT OF CAPITAL AND SERVICES 16. In 2016, 78 legal acts in the areas covered by Subcommittee II were incorporated into the EEA Agreement.

7 - 3 - Financial services and company law 17. Nine draft Joint Committee Decisions (JCDs) encompassing 31 EU acts of the first ESAs package were adopted by the EEA Joint Committee on 30 September They entered into force on 1 October 2016, with the exception of Decisions 204/2016 (Short Selling and Credit Default Swaps (CDS)) and 206/2016 (EMIR). Decision 204/2016 entered into force on once the constitutional requirements under Article 103 EEA, were fulfilled by Norway. Electronic communication, audiovisual services, information society and data protection 18. In total, seven new legal acts were incorporated in this field, five in the telecommunication services, one on data protection and one falling under Protocol 31. This included two EP/Council act; Regulation 2015/2120 on net neutrality (TSM), Regulation and Decision 2015/2240 establishing a programme the ISA2 programme. The other incorporated legal acts concerned the harmonisation of MHz frequency band, weighted average of maximum mobile termination rates and the notification of personal data breaches. 19. Discussions continued on the incorporation of the Telecom Package, in particular on modalities of EEA EFTA participation in the Body of European Regulators for Electronic Communications (BEREC), which commenced its activities in the EU in January Following discussions with the European Commission and the EEAS, a revised draft JCD was sent to the EU side on 9 May The draft proposes modalities of participation of the EFTA States in BEREC, as well as a framework for decision-making in the EFTA pillar as regards opinions and processes that affect and involves the EEA EFTA States. In addition, a draft Joint Declaration to the JCD on the participation of EFTA States in the context of the revision of the BEREC Regulation has been prepared. 20. In the field of data protection, there was progress in the discussions regarding the incorporation of the General Data Protection Regulation (EU) 2016/679 (GDPR) into the EEA Agreement. However, a draft JCD is still to be prepared as national positions have not yet been finalised in every EFTA State. Discussions were also ongoing as regards the incorporation of the Commission Decision regarding the adequacy offered by the EU-U.S. Privacy Shield framework, in particular with respect to the participation of Data Protection Authorities (DPAs) of the EFTA States to the ad hoc bodies that are established by EU DPAs to administer the operation of the framework. By virtue of point 5e(b) of Annex XI EEA, the EFTA States are already under the obligation to apply these adequacy measures on the basis of the Commission Decision, even before it is incorporated into the EEA Agreement. Postal services 21. The Third Postal Services Directive 2008/6/EC still awaits incorporation into the EEA Agreement as Iceland has yet to approve the draft JCD. A decision was taken in 2016 to add Decision 2010/C 2017/7 on the establishment of the European Regulators Group for Postal Services to the draft JCD.

8 - 4 - Transport 22. In the field of transport, 29 legal acts were incorporated, including legislation laying down detailed measures for the implementation of the common basic standards on aviation security, on common procedures and specifications necessary for the interconnection of electronic registers of driver cards, on safety rules and standards for passenger ships and on the technical specification for interoperability relating to the subsystem telematics applications for passenger services of the trans-european rail system. 23. An informal agreement was reached between Liechtenstein and the EEAS on adaptations to Directive 2012/34/EU establishing a single European railway area. 24. Directive 2011/76/EU on the charging of heavy goods vehicles for the use of certain infrastructures was incorporated into the EEA Agreement on 2 December 2016 after lengthy discussions. 25. The Directive 2009/15/EC on common rules and standards for ship inspection and survey organisations and for the relevant activities of maritime administrations, which is linked to the Regulation (EC) No 391/2009 on common rules and standards for ship inspection and survey organizations, was not incorporated into the EEA Agreement in The position of the EFTA side concerning incorporation of this act was not finalised. 26. JCD No 122/2016 incorporating Regulation (EU) No 165/2014 on tachographs in road transport was adopted on 3 June It did not enter into force in 2016 due to the need for fulfilment of constitutional requirements the deadline of which expired on 3 December FREE MOVEMENT OF PERSONS 27. EEA EFTA States lifted constitutional requirements for Directive 2014/54/EU on measures facilitating the exercise of rights conferred on workers in the context of freedom of movement for workers, hence allowing the Joint Committee Decision to enter into force. 28. EEA EFTA States in 2016 also prepared for incorporation of Regulation (EU) 2016/589 revising the European network of employment services (EURES). The draft JCD was however not submitted to the EU side in HORIZONTAL AND FLANKING POLICIES 29. In 2016, 55 legal acts were incorporated into the EEA Agreement in the areas covered by Subcommittee IV. Budgetary matters 30. The 2016 proportionality factor was 2.76%, compared to 2.97%, in Through the budgetary procedure, it was agreed that 28 EEA EFTA national experts would be seconded to the various directorates within the European Commission that

9 - 5 - deal with joint EU programmes and activities. Furthermore, efforts were made to coordinate the participation of the EEA EFTA States in the new programmes established under the MFF In 2016, the EEA EFTA States participated and contributed to the following programmes: Connecting Europe Facility (ICT Part) Competitiveness of Enterprises and Small and Medium-sized Enterprises (COSME) Creative Europe Employment and Social Innovation Erasmus+ European Statistical Programme Horizon 2020 Rights, Equality and Citizenship Union Civil Protection Mechanism Consumer Programme Copernicus Galileo Health Programme Interoperability solutions for European public administrations, businesses and citizens (ISA 2 ) Environment 31. In the field of environment, 39 legal acts were incorporated into the EEA Agreement, including the Regulation (EU) 2015/757 on monitoring, reporting and verification of carbon dioxide emissions from maritime transport, several Commission Decisions establishing or prolonging the validity of the ecological criteria for the award of the EU Ecolabel, and all Commission Decisions recognising voluntary schemes for biofuels adopted under the Renewable Energy and Fuel Quality Directives. 32. The JCD No 100/2016 containing Commission Implementing Decision (EU) 2015/2119 establishing best available techniques (BAT) conclusions under the Industrial Emissions Directive for the production of wood-based panels was adopted on 29 April This JCD did not enter into force in 2016 due to the need for fulfilment of constitutional requirements by Iceland. 33. The JCD No 215/2016 containing Regulation (EU) 2015/757 on monitoring, reporting and verification of carbon dioxide emissions from maritime transport was adopted on 28 October This JCD did not enter into force in 2016, due to the need for fulfilment of constitutional requirements by Iceland. 34. Good progress was made in view of incorporating the Regulations on carbon dioxide emissions from new passenger cars and new light commercial vehicles. In November 2016 Parties have reached agreement on the working level on the text of the draft JCD. The EU position should be established by the Council of the EU in The EEA EFTA States and the Commission reached a common understanding on how to aggregate and auction the EEA EFTA States emission allowances under the Emissions Trading System, and agreed on a timeline for implementing the agreed upon

10 - 6 - solution. 36. Experts are discussing draft JCDs for Regulation (EU) no 1257/2013 on ship recycling and Regulation (EU) No 517/2014 on fluorinated greenhouse gases. Statistics acts were incorporated in the field of statistics, notably Commission Regulation (EU) No 1209/2014 establishing a new statistical classification of products by activity (CPA) and Commission Implementing Regulation (EU) 2015/459 specifying the technical characteristics of the 2016 ad hoc module on young people on the labour market. 38. At the same time nine legal acts become obsolete and therefore they were deleted from the EEA Agreement. Health and safety at work and labour law 39. One legal act in the field of health and safety at work and labour law, the Decision (EU) 2016/344 on establishing a European Platform to enhance cooperation in tackling undeclared work, was incorporated in LEGAL AND INSTITUTIONAL MATTERS 40. No meeting of the Joint Subcommittee V took place in 2016 (the internal EFTA Subcommittee V had five meetings in 2016).