I. Introduction
Free movement of goods is one of the four fundamental freedoms in the European Union (EU) and is vital for European competitiveness. It is the most developed fundamental freedom within the Single Market and is ensured through the prohibition of restrictions on intra-EU trade, the harmonisation of legislation and the principle of mutual recognition.Footnote 1
The EU institutions may justifiably claim real success in enhancing trade in goods. Today, trade in goods generates around 25% of EU gross domestic product (GDP) and represents 75% of intra-EU trade.Footnote 2 However, behind these headline figures, the record is different regarding non-harmonised products and aspects of products falling outside the scope of harmonised legislation. Despite 80% of regulatory barriers in the Single Market for goods having been eliminated or in some other way addressed, important barriers still remain.Footnote 3
In the area of harmonised goods, EU product legislation under the “New Approach”Footnote 4 is limited to the adoption of the essential requirements with which products put on the market must conform. To demonstrate compliance with these requirements, manufacturers may voluntarily use European standards created by the European Standardization Organizations. When formally recognised by the Commission, these standards become “harmonised standards”.Footnote 5 Harmonised standards are powerful tools in support of European policies for product market integration. When economic operators make use of these harmonised standards, they benefit from a presumption of conformity, allowing them to sell their products easily in the Single Market.Footnote 6
In the absence of harmonisation, Member States remain “at liberty” to adopt national technical rules. However, they have to recognise and give effect to national technical rules or standards of other Member States. Ever since the decision of the European Court of Justice (ECJ) in Cassis de Dijon embedding the principle of mutual recognition into Articles 34Footnote 7 and 36Footnote 8 of the Treaty on the Functioning of the European Union (TFEU), goods lawfully produced in one Member State should be granted unrestricted access to any other Member State’s market, even when those goods were manufactured in accordance with different technical rules.Footnote 9 However, a Member State may still derogate from this principle by refusing market access to products lawfully produced and marketed in another Member State on the basis of Article 36 or by mandatory requirements (such as the protection of the environmentFootnote 10 or the defence of the consumerFootnote 11), subject to the test of proportionality.Footnote 12
In the best of worlds, the strategy to make mutual recognition a tool to deal with the non-tariff barriers in order to increase intra-EU trade seems suitable, since it respects national diversity and avoids harmonisation and centralisation. Partially and non-harmonised products would have unrestricted access to other Member States except when duly justified. The outcome would include more choices for consumers at lower prices and more opportunities for companies, especially micro-enterprises and small- and medium-sized enterprises (SMEs) who are the primary players in the field.Footnote 13
Unfortunately, the principle gave way to reality as the application of the principle of mutual recognition on the basis of the provisions of the Treaty and of the decision in Cassis de Dijon proved challenging in practice without any secondary legislation to make it work. The secondary legislation can be divided in ex-ante and ex-post stages. The ex-ante stage is Directive 2015/1535,Footnote 14 which obliges Member States to give prior notice to the Commission when they draft a new technical rule.Footnote 15 The ex-post stage – Regulation 2019/515 (“the Regulation”), which repealed Regulation 764/2008 – intends to make sure that all Member States observe the principle of mutual recognition in individual cases in relation to goods that are subject to Article 34 TFEU and that are lawfully marketed in another Member State.
Notwithstanding the liberal interpretation by the ECJ of the notion of the “prohibition of measures having an effect equivalent to quantitative restrictions”Footnote 16 and the secondary legislation that has been introduced to put flesh and substance on the concept of mutual recognition, how far do barriers to trade in the non-harmonized area continue to exist? In examining that, this paper highlights the relevance of mutual recognition in the Single Market (Section II). Then, it offers a brief abstract of the lack of trust between Member States (Section III) and the now-repealed Regulation 764/2008’s regime (Section IV), followed by an overview of the new Regulation (Section V). It then examines the Regulation’s innovations as regards the scope of mutual recognition (Section V.1.a) and the application of mutual recognition (Section V.1.b) through (i) the mutual recognition declaration, (ii) the new assessment of goods and (iii) the temporary suspension of market access and the new problem-solving procedure. Finally, the main points are summarised in the conclusion (Section VI).
II. Relevance of mutual recognition in the single market
In general terms, economic operators recognise the importance of the principle of mutual recognition, but are not satisfied by its implementation across the EU.Footnote 17 Non-harmonised products represent 18% of the value of intra-EU exports.Footnote 18
Mutual recognition is a necessary complement to harmonised standards for product market integration. Relying solely on harmonised standards in the free movement of goods is not feasible.Footnote 19 Firstly, these standards do not exist in certain sectors (eg food supplementsFootnote 20). Secondly, European standards are harmonised through a time-consuming process.Footnote 21 Mutual recognition can achieve similar results to harmonisation with the advantage of not triggering the transaction costs that occur with harmonisation when businesses need to comply with new harmonised standards.Footnote 22 This is particularly important for SMEs, who are primary players in the non-harmonised area.
Furthermore, mutual recognition plays a central role in supporting innovation when economic actors want to sell their products outside their Member State.Footnote 23 For new innovative products, there are no European standards and businesses need to rely on national rules or standards. In 2016, four in ten EU companies have introduced new or significantly improved products.Footnote 24
The success of the mutual recognition of the non-harmonised goods regime depends upon the level of trust between Member States. Whereas harmonisation at the European level requires centralization and is a costly process, mutual recognition “simply” requires the importing (host) Member State to recognise the national rules of the exporting Member State. Everyone in principle wins: on the one hand, Member States avoid the costs of ex-ante harmonisation, and their autonomy to regulate their own national goods remains ensured. On the other hand, businesses avoid the costs of having to adapt their products to meet the national rules of the importing or host Member State.
III. Mutual lack of trust
Products lawfully manufactured or marketed in one Member State should in principle move freely within the Single Market except under exceptional circumstances. The practical implementation of the principle demonstrated the opposite effect.Footnote 25 Member States tend to apply their national rules or require additional tests and certifications for products entering the market.
The mutual recognition principle is not as simple as it may appear. Two aspects of it explain its potential weaknesses.
Firstly, as was highlighted by Maduro, mutual recognition is “not simply a rule allocating regulatory competences among states”,Footnote 26 it is also a form of governance.Footnote 27 Mutual recognition entails regulatory competition between Member States. Maduro states that “mutual recognition does not determine the final regulatory outcome but sets in motion a process of regulatory competition that is governed by a particular form of market (composed of both economic and political transactions). It is to this market that mutual recognition entrusts regulatory competition and it is this market that is a mode of governance”.Footnote 28 Beyond the debate on whether this competition is a race to the bottom, what is important to observe here is that national rules compete with each other regardless of the final outcome.
Secondly, with mutual recognition, host Member States on their own territory do not have control over the rules applied on imported goods from other home Member States. Therefore, as Schmidt notes, “regulation falls exclusively under the responsibility of the home state”.Footnote 29 The control is in the hands of the home Member State and “implies a horizontal transfer of sovereignty”Footnote 30 from the host Member State as to what products can be sold on its market. This point is particularly important because it implies two things. First, the host Member State strongly relies on how seriously home Member States regulate their own markets. In other words, a Member State has to trust the others enough because it no longer has control over the production and marketing of goods that are imported into the host Member State. Second, it also means that, despite different regulatory cultures, host Member States have to recognise different levels of risk regulation by home Member States.
Still, the mutual recognition principle is not a rigid concept. The derogations in Article 36 TFEU and the ECJ’s case law leave some control to host Member States. The reason behind these derogations can be explained by the fact that the mutual recognition principle is not to be applied blindly. The Treaty allows national measures to derogate from the mutual recognition principle if these measures serve important interests recognised by the EU as valuable (ie the protection of health).Footnote 31 Moreover, since Cassis de Dijon made “significant inroads into states’ competence to regulate products traded on their territory”,Footnote 32 the mandatory requirements were the states’ compensation.
In a context where each Member State’s rules compete with each other and where the home Member States are not in control of imported products’ rules, mutual recognition therefore strongly depends on the level trust among Member States.
IV. The failure of Regulation 764/2008
Regulation (EC) 764/2008 introduced procedural guarantees to allow, on the one hand, businesses to rely on mutual recognition and, on the other hand, Member States to deny mutual recognition in compliance with the proportionality principle.Footnote 33
The regulation from 2008, however, failed to achieve its aim. Businesses considered that the tools put in place were useful and necessary, but this did not help them to enter new markets in practice.Footnote 34 Studies showed that mutual recognition was highly problematic for specific categories of goods such as precious metals, foodstuffs, food additives and food supplements, construction products, fertilisers, automobile spare parts and spring water.Footnote 35 The impact assessment accompanying the proposal for the 2019 Regulation highlighted the suboptimal use of mutual recognition, which in the end resulted in additional costs to businesses and prevented them from taking advantage of the benefits that mutual recognition was meant to bring.Footnote 36 The assessment shed light on several issues leading to this failure, such as the “unclear scope regarding the products covered; the difficulties in demonstrating that the product was lawfully marketed in a given Member State; national administrations favoring their own rules; difficulties with challenging authorities’ decisions; and insufficient communication among all actors, including inside and among national administrations, as well as with the Commission, national contact points and companies”.Footnote 37
All of these reasons led to the adoption of the Regulation, whose aim is to bring about changes with the objective of achieving genuine free movement for partially and non-harmonised products.
V. Regulation 2019/515 (“the Regulation”)
The Commission in its “Goods package”Footnote 38 intended to boost the principle of mutual recognition and to simplify the procedures to be followed by businesses and public administrations,Footnote 39 with the aim of the package being to upgrade the Single Market, thus allowing “more opportunities for people and businesses”.Footnote 40 Four specific policy objectives were taken into account to that effect: increasing awareness of mutual recognition; increasing legal certainty for businesses and national authorities on when the principle applies; increasing legal certainty for businesses and national authorities about the application of mutual recognition; and enhancing communication, cooperation and trust among national authorities.Footnote 41
Will these ambitious policy objectives be achieved in a context characterised by a lack of trust? In light of the failure of Regulation 764/2008, will the innovations made in the Regulation be likely to improve legal certainty as regards mutual recognition?
1. The Regulation’s innovations
a. Increasing legal certainty as regards the scope of mutual recognition
Clarifying the scope of mutual recognition was widely and strongly supported by all stakeholdersFootnote 42 and is necessary for its workability. Therefore, the Regulation clarifies the kinds of products that fall within its scope and the areas where measures restricting or denying market access are allowed even under the mutual recognition principle. Yet, crucially, there is no list of actual products falling under the scope of the Regulation. Whilst the Regulation’s scope is undoubtedly clearer than Regulation 764/2008,Footnote 43 it will remain difficult for businesses and national authorities to know in practice which specific products fall within the Regulation without any other guidance, especially for the non-harmonised aspects of harmonised goods.
The Regulation now expressly mentions that it covers not only non-harmonised products, but also aspects of products that are not harmonised at the EU level.Footnote 44 Moreover, the Regulation applies to administrative decisions that have been taken or are to be taken by a competent authority of a Member State of destination in relation to any such goods that are lawfully marketed in another Member State. In order to solve the confusion made with regards to prior authorisation procedures,Footnote 45 Article 2 paragraph 4 clearly states that these procedures do not constitute a national technical rule, but that “a decision to refuse prior authorization based on a national technical rule shall be considered to be an administrative decision” to which the Regulation applies.
Under Regulation 764/2008, the Commission had to draw up a “product list”Footnote 46 and keep up to date a non-exhaustive list of products that are not subject to EU harmonisation legislation.Footnote 47 That list – necessary for applying the principle in practice – is not reliable, since it has not been regularly updated and has not given any information on partially harmonised products.Footnote 48 No provision regarding this list is clearly a shortcoming of the Regulation. The product list is only briefly mentioned in the recitalsFootnote 49 that the Commission will assess the feasibility and benefits of further developing an indicative product list. Should there not be a legal obligation upon the Commission to update the list every six months instead? Without such a list, it is likely that the clarifications regarding the Regulation’s scope will only partially address the legal uncertainty businesses and national authorities face on a daily basis as regards the scope of mutual recognition.
b. Increasing legal certainty as regards the application of mutual recognition and its reliability
i. Mutual Recognition Declaration
An external evaluation on the working of mutual recognition highlighted the hurdles faced by businesses when they needed to prove that their product was already on sale elsewhere in the EU in order to enjoy the benefits of mutual recognition.Footnote 50 In the food contact materials sector, which has an approximate annual turnover of €100 billion in the EU, requirements of national authorities for mutual recognition diverge significantly. For the same product, not only are requirements on declarations of conformity and supporting documents different, but additional certifications are sometimes also needed. This diversity of requirements is challenging for businesses that want to sell their products in another Member State, because it is difficult for them to know what to provide to national authorities.Footnote 51 In other sectors, the Commission showed that the evidence that the national authorities required ranges from a simple invoice to a Member State’s declaration certifying that the product has been lawfully marketed.Footnote 52
This is where Article 4 of the Regulation should be of real help, as it is intended to simplify the procedures for businesses regarding the product having been lawfully marketed, or at least to a greater degree than existed in the past. Article 4 provides for a Mutual Recognition Declaration (MRD) containing all of the information necessary to carry out the assessment on whether or not the product is allowed on the market of the host Member State.Footnote 53 The MRD should provide for businesses a presumption that the products can be exported to the host Member State. The MRD is inspired by a similar declaration of compliance for harmonised products – namely, the EU Declaration of Conformity.Footnote 54
An MRD is a declaration of compliance with the technical rules of the Member State where the product is being lawfully marketed (ie the home Member State). It is up to the producer in the home Member State whether or not to use the MRD to demonstrate to the competent authorities of the Member State of destination that the goods have been lawfully marketed in another Member State.Footnote 55 Producers must follow the structure set out by the Regulation in its annexes.Footnote 56 They must draw up their declaration in one of the Union’s official languages and translate it if the Member State of destination requests it.Footnote 57 Alternatively, where the producer is only able to provide the information on the lawfulness of the marketing of the goods in the declaration, the latter may be drawn up by the importer or by the distributor.Footnote 58 Moreover, economic operators are responsible for the content and accuracy of the information that they provide.Footnote 59 The declaration must be kept up to date at all times.Footnote 60 Finally, they have the possibility of making their declaration available online.Footnote 61
Another apparent advantage of the MRD is that it is a “single standardized document”Footnote 62 replacing countless documents demanded by national authorities and that differ between Member States, leaving businesses uncertain about what documents they needed to provide.Footnote 63 The MRD should, in principle, therefore help economic operators to prove that a product is being lawfully marketed in the host Member State.
But the MRD raises a number of issues that may not lead to its intended benefits being realised.
It is true that by choosing a voluntary-based system, the Regulation avoids a mandatory-based legislation, which could become a heavy burden on businesses in practice.Footnote 64 However, the MRD and Article 4 only work positively for business if both businesses and the national authorities are fully aware of the functioning of the mutual recognition framework, and this is unlikely to be the case.
The MRD is unlikely to work properly because its success strongly relies on future awareness-raising policies. Since there is still an important lack of awareness among the business community and national authorities regarding the mutual recognition system and how it functions in practice, the effectiveness of Article 4 is undermined.
In fact, it seems that only large companies exporting to other Member States seem to have an idea of what the mutual recognition principle is, while SMEs often do not.Footnote 65 This is problematic since around 87% of the enterprises operating within the non-harmonised sectors are micro-enterprises (ie with fewer than nine employees) and around 11% are SMEs.Footnote 66 Furthermore, most businesses, regardless of their size, are used to checking the national requirements of the host Member State and adapting their products accordingly before entering a market and do not consider whether the mutual recognition principle might apply.Footnote 67 If businesses do not understand the principle of mutual recognition, it is not surprising that they do not use the facility offered by the MRD and Article 4.
Most national authorities, of course, assume that they know and understand the principle of mutual recognition and how it works, and they need to have that understanding, as they are the recipients of the MRDs. However, Product Contact PointsFootnote 68 disagree on the level of awareness of national authorities. They highlighted that several sectors remain problematic due to the lack of awareness by national authorities, with national authorities at regional and local levels being significantly less familiar with the principle of mutual recognition.Footnote 69
The question stemming from these facts is the following: how will the national authorities deal with the MRD? Although the question cannot be answered today, the lack of knowledge from competent authorities (especially the regional and local ones) might seriously undermine the objective of Article 4.
Moreover, it is likely that SMEs will not provide an MRD, since many of them do not know and understand the mutual recognition principle.Footnote 70 Where an MRD is not provided, national authorities can insist upon the provision of all of the documentation and information they deem necessary.Footnote 71 Ex-post evaluation of Regulation 764/2008 has shown that national authorities often deny market access, although businesses may be relying legitimately on mutual recognition.Footnote 72 There is a strong risk that national administrations will keep asking for unnecessary documents when an MRD is not provided. This is particularly true in some specific sectors where the lack of trust is very strong (eg fertilisers, where most Member States express a strong reluctance to accept mutual recognition due to environmental and human health concerns).Footnote 73 The risk of illegitimate or disproportionate administrative decisions remains unresolved when a business does not use the MRD.
In light of the above reasons, it is likely that Article 4 will unleash its full potential only when all stakeholders become aware of what mutual recognition really means. It should also be noted that awareness-raising policies must particularly focus on SMEs and on regional and local authorities. If they do not, the provision might benefit only large companies.
ii. Assessment of goods and temporary suspension of market access
Article 5 of the Regulation lays down the new procedure to be followed by national authorities when assessing whether goods lawfully marketed in another Member State can be marketed on their territory on the basis of mutual recognition. The procedure is of strategic importance since national administrations need to follow its every step. The procedure would also eliminate existing hurdles faced by businesses. In the food supplements sector, especially when it comes to food enrichers such as vitamins, economic operators often complain about having their products denied based on public safety issues without transparency.Footnote 74 To businesses, national authorities tend to focus on national legislation when deciding, without taking into account other Member States’ certifications or proofs of the fact that the product is already lawfully marketed in another Member State.Footnote 75
When a national authority intends to assess goods subject to the Regulation, it must contact the economic operator without delay,Footnote 76 and also inform that person or entity of the possibility of providing an MRD.Footnote 77 The provision gives businesses the right to make the goods available on the market in the Member State of destination, even while the competent authority carries out the assessment of the product.Footnote 78 The economic operator also has the right to submit comments as part of the assessment process.Footnote 79 The competent authority’s room for manoeuvre in its assessment is therefore determined by whether or not the MRD is provided.Footnote 80 The competent authorities in Member States of destination must take into account any test reports or certificates issued by a conformity assessment body that have been provided by an economic operator.Footnote 81 Moreover, the provision requires the national authorities to give a detailed and reasoned decision, including some mandatory information.Footnote 82 Finally, the administrative decision regarding the assessment of the goods must specify the remedies available under the national law of the Member State of destination if approval is refused and the time limits for bringing such proceedings with a reference to SOLVIT.Footnote 83
Article 5 has two great potential benefits for businesses. First, it allows businesses to start selling their products while the competent authority carries out the assessment on their products, with suspension of that right only being allowed in certain limited circumstances (as set out in Article 5(3) and Article 6 – see below).
However, this right to sell during the assessment period is itself limited by the two further provisions in the Regulation.
First, Article 5(3) provides that businesses cannot rely upon the provision where the assessment is carried out in the framework of a prior authorisation procedure.Footnote 84 Despite the fact that businesses ranked these procedures second as obstacles to effective mutual recognition,Footnote 85 the legal uncertainty surrounding prior authorisation procedures will remain unchanged. Member States may use these procedures to delay the approvals of products that are due to enter the market. The main consequence of this is that SMEs with products of low added value (such as fertilisers) will end up not entering the market.Footnote 86
Second, Article 5(3) also provides that the right to market goods during the assessment period may be suspended under the conditions set out in Article 6.
Article 6 provides the temporary suspension of goods lawfully marketed in another Member State. Goods may only be ordered if “(a) under normal or reasonably foreseeable conditions of use, the goods pose a serious risk to safety or health of persons or to the environment, including one where the effects are not immediate, which requires rapid intervention by the competent authority; or (b) the making available of the goods, or of goods of that type, on the market in that Member State is generally prohibited in that Member State on grounds of public morality or public security”.Footnote 87
However, Article 6(2) provides that a temporary suspension under Article 6(1) can only be imposed on the basis of a detailed technical or scientific justification demonstrating why the product poses such serious risk – thus harking back to the Court of Justice’s well-established case law regarding the use of derogations to the free movement of goods.Footnote 88 Although Article 6 has not been applied yet, there is nevertheless the risk that host Member States will abuse this provision in order to prevent a business from selling its product during the assessment process. National administrations must also, of course, comply with the principle of proportionality and therefore the principle of good administration stemming from it. Even so, the Court of Justice’s recent case law shows that it is not yet fully respected by all Member States in all sectors.Footnote 89 How national administrations will apply the power given to them to suspend temporarily the marketing of goods on their territory therefore remains uncertain.
Article 5(3), read in conjunction with Articles 6(1) and (2), is a careful balancing act between the interests of business and the free movement of goods and the duties of Members States to be able to protect the State and citizens against certain risks. It does this on the one hand by taking away the power of the host Member State to control the marketing of goods during the assessment phase, but on the other then partially restoring that power by permitting a temporary power of suspension in certain limited circumstances and subject to proper evidential proof of the need for a suspension. Meanwhile, what remains unchanged is the level of trust among Member States. Thus, in this context of a lack of trust where host Member States have their influence greatly reduced in decision-making, it is very likely that Article 6 will end up misused and prevent businesses from selling their products while the assessment is carried out by competent authorities.
The possible need for having resort to the national courts to ensure the right to market goods during the assessment period is perhaps underlined by the widespread disregard of the Member States of their obligation (also under Article 6(2) of the Regulation) to notify the Commission of any temporary suspension; only a few Member States – in fact, almost exclusively Portugal – communicated their administrative decisions to deny market access in the past under Regulation 764/2008.Footnote 90 It is not clear why the position should change in the future under the Regulation, as there is no effective sanction when a Member State does not notify. A powerful incentive could be drawn from what is done in the ex-ante stage under Directive 2015/1535. If a national provision is not notified under the Directive as required by the legislation, the national provision can be declared inapplicable by national courts.Footnote 91 The drawback to this kind of court-based system is that it is a costly and lengthy process for businesses, with the optimum solution for business being, of course, that non-notification leads automatically to the inapplicability of the national measure – here, to the decision of the national authority denying the right to put the product on the market.
In light of the above observations regarding Article 6, it is legitimate to doubt its smooth application by Member States. It is likely that Member States will misuse the provision, especially in problematic sectorsFootnote 92 where the lack of trust between competent authorities is high,Footnote 93 therefore preventing businesses from enjoying their rights provided in Article 5. In a context permeated with such a lack of trust, it is hard – if not impossible – to bring legal certainty.
The second achievement concerns the procedural guarantees within Article 5 paragraphs 10 and 11 ensuring that Member States use their right to deny mutual recognition in light of the proportionality principle, thus bringing more legal certainty. The Regulation incorporates the Court of Justice’s well-established case law regarding the use of derogations on the free movement of goodsFootnote 94 by requiring a detailed technical or scientific justification.
But is the internal logic of the Regulation structured such that the burden of proof lies on the national authority to show that there are legitimate public interest grounds to justify the application of its national technical rules and accordingly deny access to the market?
Although Article 5(4)(a) of the Regulation lays down what a competent authority may do in its assessment when there is an MRD, the effective burden of proof depends on the interpretation by national authorities of the key provision “together with supporting evidence necessary to verify the information contained”Footnote 95 in the MRD. There is a risk that national authorities will ask for excessive information and documents that unlawfully delay market access. Whilst the Regulation requires the national authorities to provide the reasons and evidence relied upon by it to deny a product access to the market,Footnote 96 in practice, the national authority might shift the burden of proof through the way they run the assessment process to businesses in effect having to demonstrate that their products are not dangerous, especially in light of the technical and scientific evidence that the national authority itself has and may wish to rely upon, as to which see Article 5(11)(c) (and in such a way that it limits their ability to challenge the decision of the national authorities, considering the time and resources needed, as was the case under Regulation 764/2008Footnote 97). This potential risk may, of course, be mitigated by the new guidance on the concept of “lawfully marketed”,Footnote 98 combined with awareness-raising policies.
The second reason is that there is a risk that companies will continue to comply with national requirements even though they could benefit from mutual recognition by challenging illegitimate or disproportionate administrative decisions. Despite the need under Articles 5(10) and (11) of the Regulation for the national authorities to fully reason their decisions, which will assist businesses in challenging them, legal challenges to an administrative decision are inevitably daunting. They require the business to enter into a time-consuming and costly exercise and with the outcome often being far from certain.Footnote 99 Moreover, businesses may fear that challenges may affect the way that the national authorities will decide on other cases concerning their products. Somewhat ironically, therefore, while the provisions in the Regulation were intended to make challenges easier, this cannot be achieved in many cases without changes to the appeal system itself. As a result, businesses have either adapted their products to meet the national standards – the reverse of mutual recognition – or have abandoned entering the market and benefitting from the mutual recognition that these provisions were intended to facilitate.Footnote 100
iii. New problem-solving procedure (SOLVITFootnote 101)
Recognising the unwillingness of businesses to challenge administrative decisions through the normal court procedure, the Regulation has put in place a “new” and non-judicial procedure for challenging administrative decisions denying market access.Footnote 102 The procedure has two steps. First, a business may challenge a national decision in an informal way through the existing network of SOLVIT. The Commission during this step may, upon request, informally assist SOLVIT with the necessary technical expertise. Second, when no solution is found between the economic operator, the national authority and SOLVIT, the latter may request the Commission to give an opinion on the case.Footnote 103 The Commission has 45 working days to issue its opinion.Footnote 104
This new procedure seems at first to answer the needs of economic operators.Footnote 105 In following the SOLVIT route, they would avoid the costs usually related to court proceedings (SOLVIT is free of charge), reduce significantly the costs linked to adapting their products to meet the host market rules and perhaps obtain quicker access to the host market, thereby also avoiding lost opportunities.Footnote 106 This would seem especially useful for SMEs in the non-harmonised sectors, since they do not have the resources to go to court. Moreover, the Commission’s opinion “would be a powerful deterrent”Footnote 107 to national authorities when they unlawfully deny market access.
But SOLVIT has its limitations, exemplified by its very low usage (only five cases relating to mutual recognition in 2016Footnote 108). The Commission itself has observed that “demonstrating that a particular national restrictive measure is unjustified would require technical expertise and formal powers that SOLVIT centers do not enjoy nowadays”.Footnote 109 So why has the Commission based its new non-judicial procedure for challenging national decisions on a pre-existing network that has not proved to be an effective solution in the past and that seems to have such a fundamental flaw in it through not having the necessary technical expertise and powers to discharge its functions and provide a proper remedy, even if only on an “advisory” basis to businesses? Indeed, the Commission does not express optimism about the future of SOLVIT, as it speaks of SOLVIT still having “limitations in offering efficient remedies for challenging unjustified decisions denying market access. Furthermore, without providing for the Commission technical assistance and further involvement for the goods cases, it is not expected that SOLVIT will produce better results for these cases as compared to the current situation”.Footnote 110
VI. Conclusion
There is a paradox in “mutual recognition” that Maduro has described as “the greater the initial degree of policy or systemic divergence, the greater the likelihood that mutual recognition will face resistance and the greater the justification to impose on a state the recognition of the other’s policies. The paradox is that it is also where divergence is greater that mutual recognition is more needed as an instrument for economic and political integration”.Footnote 111
With the Regulation, the EU legislator has tried to overcome Regulation 764/2008’s failure and enhance mutual recognition’s framework. While the scope of products covered has been improved and the procedure for businesses to prove that a product was lawfully marketed has been simplified, the key to achieving real mutual recognition is unwinding “the policy and systemic divergences” between Member States referred to by Maduro. This would be more of a cultural change by trusting the national standards of other Member States than one resolved by legislative means.
Until that occurs, host Member States will keep trying to retain control over goods in their territory and derogations from the Treaties and the Regulation will not be used correctly. Member States can have reasonable doubts regarding certain products, but this does not mean they can use derogations to mutual recognition because they do not share the same regulatory culture. One of the Regulation’s aims is to discipline Member States in their recourses to mutual recognition’s derogations, but it might not be strong enough to make host Member States refrain from doing so.
