Brexit, the UK Internal Market Bill and devolution (Part 2 – Mutual recognition)

This is the second in a four-part series on the UK Internal Market Bill. See Part 1 for the introduction to the series.

The Bill establishes a mutual recognition principle, the effect of which would be that goods that satisfy the regulatory requirements of the part of the UK in which they are produced (or into which they are imported) can also be sold in any other part of the UK.

This principle covers outright prohibitions on the sale of goods and conditions that, if not complied with, result in a prohibition on sale. The types of regulatory activity covered by the mutual recognition principle include requirements relating to:

• the characteristics of the goods themselves, such as their nature, composition or quality;
• their presentation, including descriptions, packaging and labelling;
• aspects of their production, such as the materials of which, method by which or place at which they were produced (including the rearing of animals or growing of plants);
• the identification or tracing of an animal;
• the inspection, assessment, registration, certification, approval or authorisation of the goods;
• documentation or information concerning the goods; and
• anything else that must or must not be done to (or in relation to) the goods before they can be sold.

The list can be varied by the Secretary of State, after consulting the devolved authorities.

There are limited exceptions to the mutual recognition principle, including:

• legislation reasonably necessary to prevent or reduce the movement of a pest or disease, or of unsafe food or feed;
• certain regulations relating to chemicals and pesticides;
• certain rules on the movement of fertilisers;
• controls on the composition, content marking, labelling and packaging of fertilisers and animal feed, as long as they can be justified by reference to the health or safety of humans, animals or plants, or to the environment; and
• taxes, rates, duties etc

The UK Government amended the Bill in the Commons to make clear that the mutual recognition principle will also not apply to "manner of sale" requirements, meaning a statutory requirement governing the circumstances or manner in which goods are sold. The Bill gives the examples of where, when, by whom or to whom goods are sold, and the price or other terms on which they may be sold. The exception to that carve-out is that a measure that is worded as a manner of sale requirement but appears to be an attempt to circumvent the mutual recognition principle will not escape the principle. The illustration given in the Bill is an "unusually restrictive condition such that it would be impossible to comply with the condition and have a practical chance of selling the goods".

The exclusion of manner of sale requirements will have been prompted at least in part by the argument over whether the mutual recognition principle would mean that Scotland's minimum alcohol pricing regime could not have been introduced under the Bill. That argument was based on the claim that the mutual recognition principle would mean that goods would have to be capable of sale in Scotland at the same price as in England. That was a debatable contention, as it would depend on price being treated as an inherent part of the characteristic or presentation of a product in the same way as its packaging, ingredients and composition. Regardless, the Government's amendments to the Bill have now made clear that price regulation is covered by non-discrimination (which we will cover in Part 3 of this series) rather than mutual recognition.

The following hypothetical examples illustrate how the principle might apply to goods.

1. The Scottish Parliament passes an Act that requires all prepacked 'energy drinks' products (e.g. containing more than 30mg of caffeine per 100ml) to display a "high caffeine" warning on their packaging. This requirement relates to the presentation of goods so would be covered by the mutual recognition principle. If there is no equivalent requirement in England, then energy drinks produced in England or imported into England from outside the UK could be sold in Scotland without displaying the high-caffeine warning. Given that the vast majority of energy drinks will be produced outside Scotland, the principle would make the Act of the Scottish Parliament unenforceable against that majority of products.
2. By contrast, if the Scottish Parliament instead legislated to make sales of energy drinks to under-16s illegal, that would be a 'manner of sale' requirement (governing to whom the products may be sold), and so would not be within the scope of the mutual recognition principle.
3. The UK Government makes an order prohibiting the sale in England of alcoholic drinks with an ABV of over 50% (we are assuming for the sake of the example that an Act of Parliament already gives the Government that discretion). As this requirement relates to the characteristics of goods, it is within the scope of the mutual recognition principle. If an equivalent requirement is not in place in Scotland, then Scottish-produced alcohol with a higher ABV (which would include a number of Scotch whiskies) could still be sold in England. In addition, alcohol producers from outside the UK who shipped products with more than 50% ABV into Scotland could similarly move their products on to England and sell them there. However, the restriction would still apply to drinks produced in England.

These examples illustrate the difficulty any one part of the UK would have in unilaterally imposing and enforcing requirements covered by the mutual recognition principle. To have real effect, such requirements would need to be agreed and implemented on a UK-wide basis.

The Bill also establishes a mutual recognition principle for services, and for professional qualifications and regulation. Accordingly, a business or professional that is authorised to provide services in one part of the UK should under this principle be able to provide them throughout the UK without requiring additional permissions, authorisations or accreditations. There are a number of exceptions to this principle however so differential regulations would still be possible in areas including the provision of healthcare services, legal services and social services.

Read all the articles in this series: Part 1, Part 3, Part 4