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Legal Updates / 07.10.2021

The European Commission employs a new procedure to remove obstacles to the free movement of goods

The Commission has, on 30 September 2021, adopted the first opinion in a new problem-solving procedure that aims to improve the free movement of goods within the EU. According to the opinion, national authorities incorrectly refused a company’s application to sell food supplements that were lawfully marketed in another Member State. The new procedure facilitates a cost-efficient way to challenge unfounded restrictions imposed by Member States.

Principle of mutual recognition

If product specifications are not harmonized within the EU, the Member States are free to set national rules that lay down requirements to be met by various products. However, the principle of mutual recognition requires that a good that is lawfully marketed in one Member State should not be prohibited in another Member State. The principle of mutual recognition prevails national technical requirements relating, for example to designation, form, size, weight, composition, presentation, labelling or packaging. Only, if a national authority can prove the existence of an overriding reason of public interest, such as protection of health or public security, it may restrict market access. Furthermore, the requirements set forth in the national legislation must be necessary and proportionate i.e., they must not go beyond what is strictly necessary for the objectives pursued.

Even if the principle of mutual recognition has been established by the Court of Justice of the European Union decades ago, many problems still exist in its application. According to an evaluation ordered by the Commission in 2014, the companies and administrative authorities are not aware of the proper application of the principle resulting in lack of legal certainty and administrative cooperation.

Therefore, the majority of businesses wishing to sell products in another Member State check the applicable rules in that Member State, and, if these rules prevent them from selling the product, they don’t rely on the principle of mutual recognition but most of them adapt the product to those rules. Alternatively, businesses may simply renounce entering a new market.

The denial of mutual recognition may cause significant cost to the businesses. For example, according to an impact assessment of the Commission, the need to adapt the products to the applicable national rules when mutual recognition is either denied or not used for penetrating the market are estimated to be between 1000 and 150 000 euros per product and per market.

New problem-solving procedure

In order to facilitate better application of the principle of mutual recognition, a new procedure was introduced in Regulation (EU) 2019/515 of the European Parliament and of the Council on the mutual recognition of goods lawfully marketed in another Member State.

The producer of goods may, as a first step, draw up a mutual recognition declaration in order to demonstrate to the competent authorities of the Member State of destination that the goods are lawfully marketed in another Member State. If the authority rejects the market access the company can start so-called SOLVIT procedure where the central administrations of the company’s home state and the destination Member State are involved in order to settle the dispute.

The SOLVIT network itself is not a new invention but its role has been strengthened and, more importantly, the Commission has now a formal role in the procedure as it can give an opinion on the case at request of either country involved in the case. The involvement of the Commission grants a company strong support when dealing with national authorities. Furthermore, the procedure is lighter and swifter compared to a formal infringement procedure, not least to the Commission which has now a practical tool to handle more market access cases than before.

The target time for the handling of a SOLVIT case is three months and a request for the Commission’s opinion lengthens the procedure by nine weeks to five or six months. However, complex cases can take significantly more time.

Conclusion

The new procedure is clearly a step forward and makes It easier for businesses to take advantage of the European internal market. The first case handled in the new procedure concerned export of food supplement from Greece to Bulgaria. However, food industry is just one sector among the others where restrictions arise.

When a company encounters difficulties in exporting goods to another Member State, it is worth finding out whether an illegal restriction to the free movement exists. If the answer is in the affirmative, the new procedure offers an obvious way forward. There are good reasons to believe that the national authorities are more willing to apply the principle of mutual recognition now when the Commission is involved in the procedure and clarifies the rules in its opinion.

 

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