Mutual Recognition Revisited: Misunderstandings, Inconsistencies, and a Suggested Reinterpretation

19 Pages Posted: 18 Jul 2008

See all articles by Wolfgang Kerber

Wolfgang Kerber

University of Marburg - School of Business & Economics

Abstract

The principle of mutual recognition is almost universally acclaimed for removing barriers to trade, for enabling regulatory competition, and for preserving scope for regulatory autonomy instead of embarking on a path to harmonisation and centralisation. By using economic theories of legal federalism and regulatory competition, this paper shows that mutual recognition leads to a number of inconsistencies, which question its suitability as a conflict of law rule that guarantees a stable allocation of regulatory powers within a two-level system of regulations. Mutual recognition should be understood more as a dynamic principle, which triggers a reallocation of regulatory powers between different jurisdictional levels. It leads either back to the country of destination principle, to a free market for regulations, or to harmonisation. The European experience suggests that a regime of mutual recognition is primarily another path to convergence and harmonisation, instead of being an instrument that preserves decentralised regulatory powers or even regulatory competition. The welfare gains from achieving market integration should be balanced against the welfare losses of an inefficient allocation of regulatory powers.

Suggested Citation

Kerber, Wolfgang, Mutual Recognition Revisited: Misunderstandings, Inconsistencies, and a Suggested Reinterpretation. Kyklos, Vol. 61, Issue 3, pp. 447-465, August 2008. Available at SSRN: https://ssrn.com/abstract=1162421 or http://dx.doi.org/10.1111/j.1467-6435.2008.00412.x

Wolfgang Kerber (Contact Author)

University of Marburg - School of Business & Economics ( email )

Am Plan 2
Marburg, D-35037
Germany
+49 6421 2823921 (Phone)

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