"The reciprocal agreement means that the ICAO licence holder does not have to take the 7 JAA examinations because he is not converting the licence from his ICAO one to a CAA/JAA licence he is making his ICAO licence "compliant" with the requirements of the CAA/JAA."
Sorry, this is not true, no convertion is takinmg place!
Art 21 of the UK ANO entitles the holder of any ICAO licence to fly a UK registered aircraft in the UK. There is no reciprocal agreement other than acceptance of the fundamental ICAO principal that a PPL shall be recognised by all ICAO States. In the UK this is enacted in law by Art 21. The additional exams have no revlevance whatsoever, because the privileges of Art 21 apply wether you have taken them or not. It has nothing to do with the JAA or JARs.
So far as using the privileges in another State, that is subject to the laws of that State; there is no big brother JAA State making arrangements or granting International privileges. As it is, the UK is one of the few States that actually take the ICAO agreement at face value; the majority includiung the US require a validation of the ICAO licence. The "JAR compliant ICAO" licence is a figment of someones imagination!
If it is issued by an ICAO State in accordance with Annex 10, it is ICAO compliant; end of story.