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					Mutual Recognition on Trial

         The long road to services liberalisation

              Prof. Kalypso Nicolaidis
                  University of Oxford
A false alternative:
Staying at home … being at home abroad?
Vs. Unfair competition?
The on-going completion
of the European Single Market


              Single European Act                     ?
              And “Europe 1992”

1957   1967                1986     1992   2005
National treatment, Harmonization
and Mutual recognition
                National    Harmonisation   Mutual
 Single rule?   treatment                   recognition

 From           No          Yes             No
 From firm      No          Yes             Yes
 view point

 Within         Yes         Yes             No
 Jurisdiction                               Regulatory
Two core Fallacies
   The fallacy of functional equivalence: Mutual
    recognition and harmonisation are alternatives :
       no, distinguish between whop controls and underlying
       Harmonisation: prerequisite at the most!

   The fallacy of the illegitimate export of norms from
    goods to services: Home country control is “new” for

   Instead…
1986-2006: Α recurrent pattern
                                                         Free movement
   2. Supranational track                               Pure Home

       Assertion of principle:
       Cockfield White Paper--------Bolkenstein draft
   1. Judicial track                                           u
       Test/recognition of equivalence                         s
       Rule of reason                                          e
   3. Political track                                          r
       1992 programme----------EP amdts

Change? Court? Boldness of Commission                         Protection
                                                              Pure Host
Political actors?
1980s to 2000s: Changing frames
in the era of politicization
   1) Mobilizing fears: Europeanisation as globalisation
       From free to fair trade: conditional free movement
           Comparative advantage -> social dumping (delocalisation)
           SD at a distance -> face to face social dumping (movement of people)
       Enlargement as internal globalisation and the MR threshold
       BUT:
           Europe “With a human face” High standards – race to the top- trust
           “Mutuality”- “legitimate differences”

   2) Bringing ideology back in
       1980s and the single market: Free trade vs protection (duplication)
       To: 2000s neo-liberalism vs European social model
           Social resistance to disembeddedness of global market-
           A political test for the left– the drift theory and the Constitution
       BUT
           Protection vs solidarity
           libre echange vs liberalism
    “Country of origin” is dead….
-   CoO vs MR: A semantic difference? Yes pure mutual recognition as an outcome
-   But

 the country of origin principle works like a rule of conflict of law: Unconditional
  transfer from host to home country control

 In contrast MR is a process : Recognition is conditional obligation : in so far as its
  application would give rise to an unjustified restriction of free trade.

 Constrained home to constrained host country control (“necessity test”)

 freedom to provide services and the meaning of non discrimination

 God’s eye view (single control even if home) rather than transfer of sovereignty

…..Long live managed mutual
Playing with tradeoffs…
 Free movement                                   AUTOMATICITY
 Pure Home control                               OF ACCESS

               1. Radical
               B olkenstein

                                       EX-ANTE                       EX-POST
               3. Taimed Commission.   CONDITIONS
               Council new members
               2. Revisionist

  Pure Host Control
The attributes of Managed Mutual Recognition in the 1990s
                          Products           Professional services              Financial services
 1.     Automaticity      Additional test   Eligibility(professional          Notification   by home
 (residual host country   and approval       training and competence)           state
        control)                             Compensatory requirements         Proof of licensing

                                                                                Additional spot checks

 2.   Scope of access                        Right  to practice vs title              entry vs on-going

                                             Scope of permissible activities   supervision
                                             Cross border supply vs            Type of activities

                                             establishement                     Consumer type

                                             Temporary vs permanent

 3. EX-ANTE conditions    Equivalence       Equivalence  of professional      Equivalence   of
                          MR   of           standards; accreditation           prudential standards
                          accreditation      procedures                         Equivalence of

                          Confidence                                           authorization and
                          building                                              licensing procedures

 4. EX-POST guarantees Safeguards; Mutual monitoring; collaboration and accountability; safeg
     (Alternatives to   reversibility
  host country control)
From the Bolkenstein directive…. to the
Gebhart directive
     Automaticity of access (how much residual country control?):
1. Bolkenstein: automatic authorisation except for “declaration prealable”; exception: ground of
     public order, public health, and public safety; Posted workers: easing of some restrictions
     (papers for local controls in the host country; obligation to appoint a national
     representative). Ambiguities: internet provided; above 1 year; local recruitment

-2. EP: “freedom to provide services” instead of country of origin
    -    A) Administrative simplification for authorisation: EU-wide point of contact
    -    B) Freedom to provide services subject to rule of reason/ Mandatory requirements:
         public policy, public security, public health, environment; restrictions: non-
         discriminatory, necessary and proportionate.
    -    Safeguards on internet trade; Facilitations for posted workers deleted.

3. Commission:
     - single point of contact as administrative burden --subsidiarity => administrative
     cooperation between member states; keep mutual evaluation scheme
     - Requirements of authorisation stay subject to to statement of reasons (but non
     duplication means “taking into account” not home country)
     - Tacit authorization stays in with exceptions
From the Bolkenstein directive…. to the
Gebhart directive

-1.Bolkenstein: services of a general economic interest are covered; health services are
included as well as social services and the service public.
-Exclusion of the field of labour law and social security law

-2.EP exemption:
          - SECTORS: health, public transport, social, and security services, temporary
workers (Zeitarbeit), gambling and lotteries, postal services, electricity, gas, water, waste,
audiovisual services, electronic communication, financial and legal services.
          - Services of General Economic Interest

            - no derogation for lawyers and notaries; professions connected with the exercise
of official authority narrowly construed as “activities” (direct and specific participation in the
exercise of official authority, not whole profession)

           - Definition of services of General Economic Interest
From the Bolkenstein draft…. to
the Gebhardt directive
   Ex-post safeguards/guarantees

           mutual monitoring and adaptation ; Mutual assistance between national authorities;
            Availability of redress, information point and transparency requirements; insurance
            obligations; authorization schemes
           1. Bolkenstein: obligation of national authorities to cooperate with each other
            (host-country authorities to obtain information from home-country authorities as
            to the legality of companies posting workers)

           2. . EP: mutual evaluation scheme; information from home country.
           3. Commission: mutual evaluation scheme evaluated on host state obligations

   Harmonisation/ Convergence
       1. Bolkenstein: none
       2. EP Art icle16: Commission consideratino of the need to propose harmonisation measures
Services Directive : Ex-post Dynamics

      Judicial track
           Automaticity on judicial track: principles of necessity and proportionality;
           Commission and ECJ as watchdogs
           Judicial recognition?

      Political track
           Greater automaticity of access as a function ex-post safeguards : the issue of
           Automaticity/less host coutrol as a function Harmonisation/convergence: harder
           for services (qualification; cross sector)
           Scope expansion as a function of ex-ante and ex-post conditions
            Flanking measures: The globalisation fund

  Changing our political (economy) culture
           from homogeneity to recognition of differences: Acceptable differences and
          acceptable deference
          From pure vs managed MR (functional equivalence)
                from ex-ante vs ex-post conditions/scope vs effectiveness
               from Blind trust to Binding trust and the ties that bind
Managed Mutual Recognition:
the politically correct alternative!