Home country control
Home Country Control (also Country of Origin rule) 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 word
New Approach as the basis for Home Country Control
The 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 banking 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 2000 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.