Home country control
Encyclopedia
Home Country Control is the rule of EU law, specifically of Single Market
law, that determines which laws will apply to goods or services that cross the border of Member States. EU law requires that the goods or services produced legally in one Member States should be allowed unhindered access to markets of other Member States. The latter are not allowed to apply their laws except in specific circumstances. When they are allowed to do so, this will be under a specifically developed test called General Good Test.
The provision underlying the four freedoms
(and therefore also the Home Country Control) is the prohibition of discrimination based on nationality: Article 12(ex 6) of the EC Treaty. Over the course of years, this policy evolved to include prohibition on some behaviors that were non-discriminatory, based on the fact that their implementation created obstacles to trade between states. In the sphere of goods, what these “non-discriminatory” obstacles were and how they were to be removed was clarified in Cassis (C-120/78, [1979] ECR 649) and Keck (Joined Cases C-267 and 268/91, 1993 [ECR] I-6097) cases of the Court of Justice. In services, this was done in Säger (C-76/90, [1991] ECR I-4221), and in establishment in Gebhard (C-55/94, [1995] ECR I-4165). The power of these cases lies in making the products and services legally made in one state (Home State) available in other state (Host State), where the latter is only exceptionally able to apply its law to the said good or service. In other words, once a good or a service gains a “passport” in its Home State, it can be freely exported into any other Member State.
and was based on prohibition of non-discriminatory obstacles to trade.
The first part, minimum harmonization, aims to unify the absolute minimum of necessary standards. This would, in turn enable mutual recognition of laws, where the bulk of legal control takes place in the country of origin (Home State) and the country of destination acknowledges the former's regulatory power. This was considered practical, as control would be exercised at first port of call and, since the minimum of mutual standards would exist, there would be no danger of reducing the stringency to the standards of the least developed state.
For example, a bank
ing service is part of wider efforts to harmonize financial services
. A French bank is able to open a branch in the United Kingdom
and all prudential supervision is conducted in France
. The consolidated Directive on the business of credit institutions from 2000http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32000L0012:EN:NOT represents the minimum of harmonized EC law. Britain (Host State) is obliged to recognize the fact that France only, as the country of origin (Home State) is entitled to conduct prudential supervision. Thus, there is only one control, in the Home State, and dual-burden of control in both states, which makes the service less competitive, disappears. The only option for Britain to apply its law to this banking service is to justify it under the General Good test.
Single market
A single market is a type of trade bloc which is composed of a free trade area with common policies on product regulation, and freedom of movement of the factors of production and of enterprise and services. The goal is that the movement of capital, labour, goods, and services between the members...
law, that determines which laws will apply to goods or services that cross the border of Member States. EU law requires that the goods or services produced legally in one Member States should be allowed unhindered access to markets of other Member States. The latter are not allowed to apply their laws except in specific circumstances. When they are allowed to do so, this will be under a specifically developed test called General Good Test.
The provision underlying the four freedoms
Four Freedoms
The Four Freedoms were goals articulated by US President Franklin D. Roosevelt on January 6, 1941. In an address known as the Four Freedoms speech , he proposed four fundamental freedoms that people "everywhere in the world" ought to enjoy:# Freedom of speech and expression# Freedom of worship#...
(and therefore also the Home Country Control) is the prohibition of discrimination based on nationality: Article 12(ex 6) of the EC Treaty. Over the course of years, this policy evolved to include prohibition on some behaviors that were non-discriminatory, based on the fact that their implementation created obstacles to trade between states. In the sphere of goods, what these “non-discriminatory” obstacles were and how they were to be removed was clarified in Cassis (C-120/78, [1979] ECR 649) and Keck (Joined Cases C-267 and 268/91, 1993 [ECR] I-6097) cases of the Court of Justice. In services, this was done in Säger (C-76/90, [1991] ECR I-4221), and in establishment in Gebhard (C-55/94, [1995] ECR I-4165). The power of these cases lies in making the products and services legally made in one state (Home State) available in other state (Host State), where the latter is only exceptionally able to apply its law to the said good or service. In other words, once a good or a service gains a “passport” in its Home State, it can be freely exported into any other Member State.
New Approach as the basis for Home Country Control
The New Approach consists of three important elements:- minimum harmonization
- mutual recognition of rules
- home country control
and was based on prohibition of non-discriminatory obstacles to trade.
The first part, minimum harmonization, aims to unify the absolute minimum of necessary standards. This would, in turn enable mutual recognition of laws, where the bulk of legal control takes place in the country of origin (Home State) and the country of destination acknowledges the former's regulatory power. This was considered practical, as control would be exercised at first port of call and, since the minimum of mutual standards would exist, there would be no danger of reducing the stringency to the standards of the least developed state.
For example, a bank
Bank
A bank is a financial institution that serves as a financial intermediary. The term "bank" may refer to one of several related types of entities:...
ing service is part of wider efforts to harmonize financial services
Financial services
Financial services refer to services provided by the finance industry. The finance industry encompasses a broad range of organizations that deal with the management of money. Among these organizations are credit unions, banks, credit card companies, insurance companies, consumer finance companies,...
. A French bank is able to open a branch in the United Kingdom
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
and all prudential supervision is conducted in France
France
The French Republic , The French Republic , The French Republic , (commonly known as France , is a unitary semi-presidential republic in Western Europe with several overseas territories and islands located on other continents and in the Indian, Pacific, and Atlantic oceans. Metropolitan France...
. The consolidated Directive on the business of credit institutions from 2000http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32000L0012:EN:NOT represents the minimum of harmonized EC law. Britain (Host State) is obliged to recognize the fact that France only, as the country of origin (Home State) is entitled to conduct prudential supervision. Thus, there is only one control, in the Home State, and dual-burden of control in both states, which makes the service less competitive, disappears. The only option for Britain to apply its law to this banking service is to justify it under the General Good test.