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04 March 2018

EU Law Analysis: What “mutual recognition” really entails: analysis of the Prime Minister's Mansion House Brexit policy speech

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Oxford Professor Stephen Weatherill assesses May’s aspiration to promote “mutual recognition” as a means to manage the future economic partnership she envisages between the EU and the UK.

[...]Much of what passes for “negotiation” on the UK side since the despatch of the Article 50 letter of withdrawal in March 2017 has involved a desire to retain the benefits of EU membership while shrugging off the status and responsibilities of membership. But when Mrs May appeals for “a comprehensive system of mutual recognition” she is going still further. She is not asking for something that applies within the EU. She is asking for something that even EU Member States do not expect of each other. A “comprehensive system of mutual recognition” is notfound within the EU. Mrs May is asking that the UK be treated better than a Member State of the EU.
Mutual recognition in primary EU law is most prominently found in the area of free movement of goods, persons and services, but it is not absolute mutual recognition. Instead it is conditional or non-absolute mutual recognition. That means that where something is good enough for the market of one Member State, it is to be treated as good enough for the market of all the other Member States – unless the target (or host) State can show a good reason why it should be entitled to rely on its stricter standards to exclude something that is acceptable elsewhere in the EU. The reservation unless is structurally crucial in the law of the EU’s internal market. A State is not inevitably obliged to open up its market to a product or service which does not conform with local laws. It may appeal to its tougher standards of health protection, its more assiduous concern for consumer protection or its particular fastidiousness in the area of environmental protection – and it will need to be judged, ultimately by a Court, whether the State has a strong enough justification of this type to place obstructions in the way of the impulse towards market integration. National rules, practices and standards that impede inter-state trade are in this way routinely put to the test.
Protectionism and reliance on anachronistic rules that have no place in an integrated European market will fail the test and such objectionable rules must then be disapplied. But there is room for sincerely and well-targeted measures to pass the test, and to remain in force as non-tariff barriers to trade which serve an interest that is shown to rank higher than trade liberalisation. This is plain from the Treaty on the Functioning of the European Union, which does not impose an unconditional rule of freed cross-border trade, and it is embedded too in the Court’s famous elaboration of the basic Treaty norms governing free movement, its Cassis de Dijon principle, which equally imposes only a conditional or non-absolute requirement of mutual recognition in the EU internal market.
So primary EU law imposes something less than the “comprehensive system of mutual recognition” to which Mrs May aspires. If she imagines that the EU will agree automatically to admit UK goods and services into its internal market simply because those goods and services comply with UK law, then she is imagining a model which is not even available within the EU. And it is utterly unrealistic to imagine it will be on offer to a third country.
Mutual recognition also deserves assessment at the level of EU secondary legislation – the vast number of measures, most of them Directives but some of them Regulations, which provide the legislative platform on which is built the EU’s internal market. The EU’s Treaty rules on free movement combine with the legislative acquis on harmonisation within the internal market and on the regulation of particular sectors to produce a dense and intricate network of rules which reflect the liberalisation of markets within the EU but also the regulation of those markets by the EU.
But there is no “comprehensive system of mutual recognition” here – at least not in the shallow description offered by Mrs May. The point of these rules is to establish EU rules, which are then implemented at national level. This generates a common system apt to release the advantages of an integrated trading space that transcends the limits of national political boundaries. On this model Member States regulate in order to achieve the same agreed common purposes – they do not show mutual recognition of each other’s different choices and techniques. Across the whole wide sweep of EU rule-making there is a common core of agreed EU standards, which all participants must meet. Moreover, the application of those rules is secured within tightly defined institutional and constitutional constraints. The EU is not simply a system of rules, it is a system too that involves the oversight of the Commission, the place of sector-specific agencies, the authority of the Court of Justice and the everyday involvement of national courts and administrative agencies. Rules – but also supervision, administrative co-operation, interpretation and enforcement too.
There is, of course, detailed sectoral variation, both in the particular intensity and shape of the rules adopted by the EU and in the scope permitted for State action even in areas where the EU has intervened. But the general picture is plain. Whether one is looking at the authorisation of medicines or the prohibition of unfair common commercial practices, the regulation of professional qualifications or the administration of the European Arrest Warrant, working time or environmental impact assessment, the model is visibly similar – there is a common foundation of EU rules on which all the Member States rely, and this is supported by a dense institutional network. This is not unconditional mutual recognition of difference. It is managed mutual recognition of carefully circumscribed difference.
It is remote from Mrs May’s “comprehensive system of mutual recognition”.
To be fair, awareness of this background is not wholly absent from Mrs May’s speech. She speaks of commitments that UK and EU regulatory standards would remain “substantially similar in the future”; she adds that the UK might “remain part of EU agencies such as those that are critical for the chemicals, medicines and aerospace industries”. This jars with the frustratingly glib slogan earlier in the speech according to which Mrs May claims that “the referendum … was a vote to take control of our borders, laws and money”, but it might be generously interpreted as an admission that taking back control will require a more sophisticated appreciation of the virtue of multilateral action than the remorselessly unilateral tone of much of the case for Brexit has been hitherto willing to concede. And indeed the speech was reported, perhaps with the impetus of a little behind-the-scenes spin, as mapping a route to a more realistic relationship with the EU than some go-it-alone Brexiters have urged – “May tells Eurospectics to face facts”, proclaimed the lead story on the front page of the Financial Times the day after the speech.
More realistic, perhaps – but the problem with the speech was that it was not realistic enough.
In part this is because of the persisting contagion of cherry-picking, but the deeper problem of a speech which includes an aspiration to a “comprehensive system of mutual recognition” is that this completely neglects the very nature of the EU. The EU is a rules-plus system. It is based on common rules but also common institutions and common constitutional principles. It is far more intricate than Mrs May allows.
Mrs May accepts “the need for binding commitments – for example, we may choose to commit some areas of our regulations like state aid and competition to remaining in step with the EU’s”. Elsewhere she is softer in her promises. The UK will need to make a “strong commitment” that its regulatory standards will remain as high as the EU’s. (Here too the media was evidently briefed on the gap between “binding” and “strong” commitments). In the matter of workers’ rights or the environment, “the EU should be confident that we will not engage in a race to the bottom in the standards and protections we set”.
But this is not good enough to generate the trust that constitutes the necessary underpinning of frictionless trade in the internal market! The EU’s model of mutual recognition demands much more, both in the binding character of the rules and in the supporting institutional and constitutional architecture. Failure to accept this necessary starting-point leads Mrs May to embrace unrealistic expectations. On services, she says that “given that UK qualifications are already recognised across the EU and vice versa – it would make sense to continue to recognise each other’s qualifications in the future.” In the matter of transfrontier broadcasting she aspires to “creative options … including mutual recognition”. On financial services “our goal should be to establish the ability to access each other’s markets, based on the UK and EU maintaining the same regulatory outcomes over time”. But the EU’s approach to mutual recognition goes far deeper than mere possession of the same rules.
Everything that Mrs May says – about agencies and regulators, about data protection and energy co-operation, about Euratom and transport, about judicial co-operation and science, and so on - assumes a UK that enjoys a high degree of independence from the EU’s rules and especially from its institutions, yet is able to dip in here and there as an associate member according to specially crafted arrangements. But although EU is built on rules and it is built on trust, it is also built on institutional and constitutional frameworks that underpin those rules and verify that trust is warranted. This is what the Commission has lately taken to describing as the EU’s “ecosystem”.
This is what the EU is determined to defend; this is what the UK has chosen to quit. Mrs May’s speech does not come close to recognising, still less to explaining, the magnitude of the changes that are looming in consequence. Her speech asserts that the UK “will not accept the rights of Canada and the obligations of Norway”, the shabby politician’s trick of rejecting a suggestion that absolutely no one has advanced, but she is perilously close to asking for the obligations of Canada and the rights of Norway.
One of the relatively few concrete observations in Mrs May’s speech which looks beyond mutual recognition of rules also to acknowledge the institutional consequences concerns financial services. She notes “the highly regulated nature of financial services, and our shared desire to manage financial stability risks” and so accepts that “we would need a collaborative, objective framework that is reciprocal, mutually agreed, and permanent and therefore reliable for businesses.” Quite so! And this invites the exasperated retort – but that is exactly what you have right now! How illuminating that when, directly after the speech, Mrs May was asked by a journalist whether Brexit is “worth it”, she laughed nervously and said “we won’t think again on Brexit”, and studiously avoided the question. “A collaborative, objective framework that is reciprocal, mutually agreed, and permanent and therefore reliable for businesses” is what the EU delivers. Appeal to the language of “mutual recognition” conceals the density and the intensity of the obligations that are required to generate trade integration on the truly deep and special scale that the EU’s internal market has achieved. Mrs May has belatedly embarked on a journey which accepts that leaving the EU entails difficult choices and unavoidable harm, but she has a long distance to travel yet to come fully to terms with the consequences.

© EU Law Analysis

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