The principle of mutual recognition within the EU Internal Market

Different national product requirements are one of the main obstacles to the free movement of goods in the EU. While obstructions such as customs duty and import taxes have now been more or less eradicated in the EU, a number of other obstacles remain. The most common are the diverse requirements placed on exported and imported products, such as size, composition, labelling, etc.

Each country imposes a myriad of demands on products for the purposes of consumer protection or environmental protection. If a product is marketed in just one Member State, it needs to comply only with local technical standards. However, as soon as a product is distributed in other countries it could run into difficulties. Product requirements differ from state to state and it probably goes without saying that adapting a product to all the diverse standards in the different countries would be at best costly, and at worse so challenging (e.g. administratively) that entrepreneurs may be deterred from expanding into a particular market entirely. Knowing about these problems and how to tackle them should therefore be an important element in the strategy of Czech companies considering the import or export of products.

 

Two possible solutions: harmonization and mutual recognition

The EU has been grappling with the differences in national law on product requirements and the related problems for many years and over time two possible solutions have evolved. The first is the harmonization of the national legislation in place in EU Member States for individual types of products. This means that Member States have agreed on a compromise version of requirements placed on individual products. These common standards are then applied identically in all EU Member States. On one hand, this method guarantees the free movement of products in the Union market and on the other it guarantees a high degree of protection (it is used particularly for potentially dangerous or complicated products). Technical requirements (e.g. for automobiles, toys and electrical appliances) are currently being harmonized.

Although the harmonization of technical requirements removes obstacles to the free movement of goods once the common requirements are in place, hammering out the necessary compromises among the Member States can often be a very protracted process. Moreover, harmonization does not cover all types of products on the market. Therefore, in addition to the harmonization of technical requirements, the principle of mutual recognition is also applied.

The principle of mutual recognition is applied to products which are not harmonized at the European level. It is thus the second pillar of the free movement of goods on the Union market.

The basic starting point of the principle of mutual recognition is the following idea: if goods are okay for the consumers of one Member State (i.e. they conform to local requirements) then they must be good for the consumers of other Member States and therefore they may be sold there too. In other words, Member States acknowledge that even if products are manufactured in accordance with regulations, standards or procedures other than their own, these other norms guarantee a comparable level of safety and hence cannot be denied access to their market.  In addition to the Member States of the EU the principle of mutual recognition is also applied to Member States of the European Economic Area (i.e. the EU Member States plus Norway, Liechtenstein and Iceland) and to Turkey.

However, every principle has exceptions. Member States may in certain cases restrict the free movement of individual products based on ‘overriding requirements in the public interest’. These include the protection of health, the environment, culture, industrial property etc. The burden of proof in these cases rests with the authority of the Member State concerned. It must prove that the measures applied are genuinely essential and that they restrict the free movement of goods as little as possible. In that case the Member State may require that the product in question is also subject to its technical rules and where appropriate may decide to withdraw or recall of those products from the market or prohibit its sale.

As the principle of mutual recognition was not being properly applied by Member States, the decision was made to draw up Regulation 764/2008 which regulates this issue.

However, based on the review which was carried out in recent years it became obvious  that the application of the principle of mutual recognition was still not  fully functional and that many businesses and national authorities were not sufficiently aware of this principle. It was difficult for companies and responsible authorities to assess whether mutual recognition can be applied to a certain product or not. Furthermore, businesses and national authorities had difficulty proving that a product had been lawfully placed on the market in respective Member States. In addition, national authorities often tended to favour their own rules (as they are well acquainted with their cultural and historical background) and insisted on their own application, ignoring the principle of mutual recognition. There was also no simple procedure for companies to challenge the decisions that impeded market access. This also led to considerable legal uncertainty.

Therefore, it was decided to draft a new legislation to replace the old one, which is how Regulation (EU) 2019/515 of the European Parliament and of the Council on the mutual recognition of goods lawfully marketed in another Member State came to be adopted and Regulation (EC) No 764/2008, i.e. Mutual Recognition Regulation was repealed. This new regulation entered into force on 19 April 2020 and aims to help strengthen legal certainty for businesses, to speed up and improve the effectiveness of the assessment of goods by national authorities and to prevent discrimination or hidden restrictions in the internal market.

 

Assessment of goods

The new regulation contains the detailed procedure concerning the assessment of goods.

In case the competent authority intends to assess goods (Article 5) in order to ascertain whether those goods or goods of that type were lawfully marketed in another Member State. In such an instance, it must immediately contact the relevant economic operator informing him that he is intending to commence the assessment procedure in order to find out whether the legitimate public interests covered by the applicable national technical rule of the Member State of destination are adequately protected.

The competent authority shall contact the economic operator concerned without delay, indicating the goods which are subject to that assessment and specifying the applicable national technical rule or prior authorisation procedure. It shall also inform the economic operator about the possibility of supplying a mutual recognition declaration in accordance with Article 4 for the purposes of that assessment. Mutual recognition declarations help economic operators prove that the relevant goods were placed on the market in a respective Member State in accordance with its applicable legislation.

If a mutual recognition declaration is supplied to a competent authority of the Member State of destination then for the purposes of the assessment of goods this document is accepted as evidence to demonstrate that the goods are lawfully marketed in another Member State.

If a mutual recognition declaration is not supplied, then the competent authority may request the economic operators concerned to provide documentation and information that is necessary for that assessment. The economic operator shall be allowed at least 15 working days to submit the documents and supporting information.

In carrying out the assessment, the competent authority shall take due account of the contents of test reports or certificates issued by a conformity assessment body that have been provided by any economic operator as part of the assessment.

When the competent authority takes an administrative decision with respect to the goods that it has assessed, it shall notify the administrative decision without delay to the economic operator. It shall also notify the administrative decision to the Commission and to the other Member States no later than 20 working days after it took the decision via the Information and Communication System for Market Surveillance (ICSMS).

The administrative decision according to the Article 5 par. 10 shall set out the reasons for the decision in a manner that is sufficiently detailed and reasoned to facilitate an assessment of its compatibility with the principle of mutual recognition and with the requirements of this Regulation.  The requirements which must be included in the administrative decision are set in Article 5, par. 11 of the Regulation.

 

These obligations were already contained in Regulation 764/2008.

The following information shall be included in the administrative decision:

• the national technical rule on which the administrative decision is based
• the legitimate public interest grounds justifying the application of the national technical rule on which the administrative decision is based
• the technical or scientific evidence that the competent authority of the Member State of destination considered, including (where applicable) any relevant changes in the state of the art that have occurred since the national technical rule came into force
• summary of the arguments that are relevant for the assessment put forward by the economic operator concerned
• the evidence demonstrating that the administrative decision is appropriate for the purpose of achieving the objective pursued and that the administrative decision does not go beyond what is necessary in order to attain said objective
• remedies available under the national law of the Member State of destination and the time limits applicable to those remedies
• reference to the possibility for economic operators to use SOLVIT and the procedure under Article 8.

The administrative decision referred to shall not take effect before it has been notified to the economic operator. The competent authority bears the burden of proof. It will therefore be on those authorities to demonstrate that the level of protection of the legitimate public interest in the Member State of origin is insufficient and that the product must comply with the rules of the Member State of destination. This significantly reduces legal uncertainty for entrepreneurs.

Until the economic operator receives the administrative decision to restrict or prohibit access to the market for the goods in question, he may place those goods on the market in a Member State. However, during the assessment it is possible to temporarily suspend their supply to the market (Article 6). In such case, the notification to the economic operator shall be made immediately.