Home Country Control - New Approach As The Basis For Home Country Control

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 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.