Current Inconsistencies and Future Chances

The principle of 'mutual recognition ' is almost universally acclaimed for removing barriers to trade (e.g., within the EU), for enabling regulatory competition, and for preserving scope for regulatory autonomy instead of em-barking on a path to harmonisation and centralisation. Through the analysis of the application of 'mutual recogni-tion ' within the EU (by using economic theories of legal federalism and regulatory competition), we show that this principle leads to a number of serious inconsistencies and problems, which question its suitability as a con-flict of law rule that leads to 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 reshuffling of regula-tory powers between different jurisdictional levels. It leads either back to the country of destination principle, to a free (internal) market for regulations, or to harmonisation and centralisation. In particular, the European ex-periences suggest that the introduction of a regime of 'mutual recognition ' seems to be primarily another path to convergence and harmonisation instead of being an instrument that preserves decentralised regulatory powers or even regulatory competition