Equivalence as Emerging Principle of EU External Relations Law

Table of Contents: 1. Introduction. – 2. The Application of the Principle of Equivalence in the Financial Services Sector. – 3. The Adequacy Assessment of Personal Data Transfers to Third Countries. – 4. Other Areas in which the Principle is Employed. – 5. The Outcomes of Applying the Equivalence Mechanism: between protectionism and unilateralism, in search of a new form of multilateralism. – 6. Identifying Traits of a General Principle of EU External Relations Law. – 7. Concluding Remarks.

Abstract: This essay examines the principle of equivalence as applied in EU external relations law. Equivalence refers to the EU’s recognition that a third country’s regulations are comparable to its own in specific sectors, facilitating permeability between legal systems and markets. The application of equivalence can lead to various outcomes, including a ‘Brussels effect’, where third countries voluntarily align their legislation with EU standards. While some perceive it as a form of unilateralism or protectionism, this essay argues that equivalence can foster international cooperation and serve as an alternative pathway to multilateralism when traditional methods are unfeasible. The essay concludes by discussing the classification of equivalence as an emerging general principle of EU external relations law. Although not explicitly mentioned in the Treaties or formally recognized by the Court of Justice, its role in governing relationships with third countries and shaping the EU’s international identity underscores its growing significance, thereby enabling the EU to safeguard its policies and values while promoting dialogue and shared solutions with third countries.

Keywords: equivalence – general principles – financial stability – data transfer – multilateralism – Brussel effect.

1.   Introduction

The principle of equivalence applied in external relations refers to the European Union’s (EU) ability to recognise that a third country has regulatory norms and standards that are comparable or sufficiently similar to those of the Union in specific sectors. The equivalence judgment, which falls under the responsibility of the Commission, consists in a unilateral assessment of whether the third country’s rules are effectively aligned with EU standards in terms of objectives and implementation, and leads to a series of effects that ultimately make the legal systems involved, as well as their respective markets, more permeable.

The idea for this paper came from reading the volume edited by Marise Cremona and Joanne Scott in 2019, titled ‘EU Law Beyond EU Borders: The Extraterritorial Reach of EU Law’.[1] In the introductory chapter, the editors observed the presence of the principle of equivalence in certain areas of the EU’s external relations and questioned its nature, concluding that it represents an ‘emerging principle of EU law’.[2] The principle was examined primarily within the financial services sector, where the equivalence decision allows service providers, established in third countries with provisions deemed equivalent to European ones, to operate in the internal market under the rules of their home country.

The two editors of the volume noted that it was an emerging general principle of law given its ability to prevent conflicts between the norms of different legal systems.[3]

In the context of scientific scholarship, the principle has primarily been examined for its capacity to prevent what is commonly referred to as ‘jurisdictional overreach’, thereby facilitating cooperation between the EU and third countries. It nevertheless appears to pursue other objectives typically associated with general principles of law governing the European Union’s external relations. Therefore, this paper aims to investigate the scope of the principle of equivalence in order to evaluate whether it can indeed be characterised as a general principle of law in the Union’s external relations, albeit still in an emerging stage. Since it is neither established in primary law nor referenced in the case law of the European Court of Justice, the most appropriate approach is to assess whether it may be regarded as an emerging principle. To this end, we will first examine the areas of external relations in which it is applicable and how it operates in practice, starting with the financial services sector, as this is where the literature has conducted more in-depth investigations (Section 2). The regulation of data transfers will also be examined, within which an assessment of the adequacy of the level of data protection in a third country is conducted (Section 3), as well as the additional sectors in which the principle under review operates (Section 4). These findings will then serve as a basis for assessing the effects of applying the principle of equivalence in external relations (Section 5). This analysis will help determine whether the principle could now be classified as a general principle of law typical of the Union's external relations (Section 6).

Before delving into the investigation, it is important to clarify certain preliminary issues in order to avoid potential misunderstandings. First, it is essential to note that the principle of equivalence can operate on two different levels: the ‘country level’, which occurs when the EU recognises the adequacy of a third country's regulatory standards; and the ‘firm level’, which applies when the adequacy judgment is made regarding a specific entity, such as a company or an individual service provider, allowing them to engage in conduct that would otherwise be prohibited.[4] Given the objective of this study – which focuses on how the Union operates in its relations with other States –, we will only consider adequacy decisions that function at the ‘country level’.

Moreover, although it may appear similar to the well-known principle of mutual recognition – a core principle of the Union’s internal law – the principle of equivalence applies in a different context and under different conditions. As will be seen, it operates in the sphere of external relations, applies unilaterally rather than reciprocally, and requires ongoing monitoring of the third country’s legislation. In addition, it is worth noting that it consists of a unilateral declaration by the European Commission in the absence of a bilateral agreement and therefore does not apply to third countries with which the Union has concluded agreements introducing elements of mutual recognition.

Moreover, to avoid any ambiguity, it is important to specify that the principle of equivalence discussed in this contribution should not be confused with the similarly named principle applied within the EU, rather than in external relations. The principle of equivalence within the EU legal framework – already recognised by the Court of Justice as a general principle of law – indicates that, in the absence of specific European legislation, the protection of rights granted to individuals under EU law cannot be less favourable than that provided by similar rights recognised at the national level.[5]

2.   The application of the principle of equivalence in the financial services sector 

After the financial crisis of 2007–2009, the EU found in the principle of equivalence its strategy to preserve financial stability within its borders. Starting in 2009, the Union adopted various regulatory instruments that stipulate that foreign service providers wishing to operate within the EU, or do business with European counterparts, must comply with EU legislation, unless the rules of the third country are considered equivalent to those of the Union. This means that if the third country does not align its internal regulations to be equivalent to those in the Union, service providers based in that third country who intend to offer services in the Union, or to counterparts located in the Union,[6] or in some cases even to European citizens outside the Union, will incur additional costs to meet European standards.[7]

The equivalence mechanism can be found in the following sets of rules: the Regulation on Credit Rating Agencies (CRAs) adopted in 2009;[8] the Directive on Alternative Investment Fund Managers (AIFMs) in 2011;[9] the Regulation on OTC derivatives, adopted in 2012, known as the EMIR Regulation;[10] the revised Markets in Financial Instruments Directive (MiFID II),[11] and the Regulation on Markets in Financial Instruments (MIFIR), both adopted in 2014.[12]

The aforementioned instruments assign the European Commission the task of deciding whether to recognise a given third country as ‘equivalent’. This decision, which is based on a prior technical opinion from the European Security and Markets Authority (ESMA), is adopted unilaterally and at the Commission’s discretion. Through this decision, the Commission certifies that the legislation of the third country meets the criteria established in the Union’s legislation.

For a third country to obtain recognition of equivalence, it must have a binding regulatory regime in place, as well as a supervision system that ensures compliance with the rules.[13] Therefore, countries that rely on soft law or delegate regulation to the financial operators themselves will not be able to achieve any recognition. In evaluating the two aforementioned requirements, the Commission does not insist that the third country must have the same rules as those in the Union. The assessment is based on an ‘outcome-based process’, which means that what is required is for the rules and supervision system of the third country to achieve results comparable to those of EU legislation.[14] Indeed, the Union’s regulations on this matter refer to ‘substantial result’ or ‘comparable level’.

It is important to note that equivalence does not apply to the entire financial sector of a third country, but only to specific activities. In fact, a third country can be subject to multiple equivalence decisions.[15]

Compliance with equivalence must be continuously monitored. To obtain recognition, third countries are required to conclude a Memorandum of Understanding with ESMA outlining cooperation mechanisms in supervision;[16] this monitoring is crucial for identifying potential changes that could jeopardise European financial stability before it is too late. ESMA, along with the competent national authorities of each Member State, is responsible for overseeing compliance with the established conditions.[17] However, it is important to note that there is no associated enforcement power: ESMA cannot carry out direct interventions, conduct inspections, or demand access to documents, nor can it impose penalties on entities that fail to comply with the established rules. Similarly, if national authorities do not follow through on their commitments outlined in the Memorandum of Understanding, European institutions would have no means to impose sanctions; the Memorandum is not an international treaty and does not create any legal obligations. In such cases, the only option would be to revoke the recognition of equivalence.

The analysis conducted by the European Commission regarding the content of a third country's regulations and the existing monitoring system is certainly a discretionary assessment. The Commission does not always require the same standards for everyone; for certain countries, it appears to adopt a more rigorous evaluation, while for others it takes a seemingly softer approach.[18] For instance, in the assessment of equivalence for Central Counterparties (CCPs) under the EMIR Regulation, the evaluation carried out for the United States of America (USA) was more stringent compared to that for Singapore, which also had legislation inspired by the USA model.[19] This difference is justified by the fact that the Commission, when assessing the impact that the entry of services from a specific third country may have on the Union’s financial stability, has the possibility to apply the principle of proportionality. The higher the risk – certainly, the potential of the USA services market far exceeds that of the Asian city-state – the greater the guarantees that the Commission will require. Moreover, the possibility of applying the principle of proportionality is only provided for in the MIFIR Regulation and not in the other legislation, which likely explains why the Commission does not always implement it. However, it is a tool available to the Commission, which can be used to secure stronger commitments from countries less inclined to meet European demands.

It should also be noted that the extent of the discretion granted to the Commission in financial matters is limited by the principle of most-favoured nation treatment. Under the General Agreement on Trade in Services (GATS), WTO Member States must treat financial service providers equally, regardless of their jurisdiction of origin. The principle of the most-favoured nation treatment can only be exempted based on a ‘prudential carve-out’. According to Article 2(a) of the Annex on Financial Services of GATS, States may exclude the application of the most-favoured nation rule in order to implement ‘measures for prudential purposes’ to protect the integrity and stability of the financial system. Thus, the equivalence regime is permissible only if it serves prudential objectives. This has two main consequences: on the one hand, the Commission cannot discriminate between States when deciding on equivalence; on the other hand, it must make its decisions based on prudential criteria.[20]

The regime is characterised by significant flexibility. The Commission not only enjoys considerable discretion in determining whether to consider a third country for equivalence and whether it merits recognition, but it is also fully sovereign in deciding to revoke or not renew a previous equivalence decision. This can occur either because ESMA, through its monitoring activities, reports any setbacks from the third country or deficiencies in supervisory cooperation, or autonomously by the Commission, which is not required to justify its reasons. Although this has happened rarely, at least in one instance the decision to withdraw the equivalence regime demonstrates how its extreme flexibility can be used for purposes beyond just financial stability: in 2019, the Commission decided not to renew the equivalence regime for Swiss exchanges. This decision was perceived as a retaliation against Switzerland, whose federal Parliament had chosen not to ratify the common framework agreement.[21]

Equivalence decisions have a limited duration. This strategy is employed by the Commission not only to concretely assess the effects that liberalisation is having on the internal market but also to encourage a steady cooperative attitude from the third country.

It should also be noted that the third country has no right to appeal the decision to revoke equivalence and does not have any legal means to contest the lack of its recognition.

Recognition of equivalence often occurs on a reciprocal basis. Reciprocity is a mandatory condition only under the MIFIR and EMIR Regulations, but it is relatively common for the Union to allow third-country financial service providers to enter the internal market when those countries also permit entry for European providers. When equivalence recognition is based on reciprocity, the principle in question resembles the principle of mutual recognition.[22] However, it is important to note that these are significantly different: the principle of mutual recognition allows for the acceptance of different norms without further checks, while the principle of equivalence, in addition to requiring the alignment of national regulations, also involves ongoing monitoring.

3.   The Adequacy Assessment of Personal Data Transfers to Third Countries

The principle of equivalence plays a central role in the regime for the transfer of personal data. Established by the General Data Protection Regulation (GDPR), adopted in 2016 – and previously by the Directive 95/46/EC – this principle allows the transfer of personal data outside the EU only to countries that provide an ‘adequate’ level of protection comparable to that of the EU.[23]Although in this sector the rules do not use the term ‘equivalence’ but rather that of ‘adequacy’, it is still a question of evaluating compliance with certain standards by third countries.

According to Article 45 of the GDPR, the Commission makes the evaluation and can adopt an implementing act that certifies the adequacy; this allows data transfers without requiring any additional specific authorisations. As stated in Recital 167 of the GDPR, the implementing act is adopted following the procedure established in the Regulation (EU) 182/2011 on the exercise of the implementing powers of the Commission.[24] This means that the act can only be adopted with the prior favourable opinion of a dedicated committee composed of representatives of the Member States.[25]

The effects of the adequacy decisions are significant: they allow companies to transfer personal data from the EU to these countries without the need for additional contractual safeguards, thus greatly simplifying data flows for commercial activities while simultaneously protecting the privacy rights of European citizens.

The GDPR specifies the parameters that the Commission must consider when assessing the adequacy of data processing in a given third country. First, it must verify the existence of rules protecting personal data and any regulations on the transfer of data to other third countries. The assessment of these elements must take place within the broader context of evaluating compliance with the rule of law, human rights, and fundamental freedoms within which data protection is located (Article 45(2)(a)). Particular attention must be paid to the effective availability of administrative and judicial remedies for individuals whose data have been transferred. These assessments should also take into account the international commitments undertaken by the third country, particularly with respect to its participation in multilateral or regional data protection frameworks (Article 45(2)(c)). Furthermore, the Commission is also required to verify the existence of independent supervisory authorities for data protection that are capable of effectively carrying out their tasks and equipped with enforcement powers (Article 45(2)(b)). Therefore, the adequacy mechanism aims to safeguard the fundamental rights of EU citizens by ensuring that personal data are processed in accordance with European standards even beyond the borders of the Union.

After issuing its adequacy decision, the Commission must continuously monitor the developments of the relevant parameters in the third country, conducting a periodic review at least every four years (Article 45(3) and (4)). If, as a result of this monitoring, it finds that the level of protection has decreased, it may decide, as appropriate, to revoke, suspend, or amend the previous decision (Article 45(5)).

In assessing the aforementioned parameters, the Commission conducts negotiations with the third country. This not only allows for the collection of the necessary information but also enables the identification of areas where the third country should improve in order to obtain the adequacy decision. This process of reviewing the legislation and practices of the third country – similar to the assessment conducted in the financial sector, as mentioned in the previous paragraph – is also carried out in close cooperation with the relevant authorities of the third country. It should also be noted that the GDPR specifies that any decision to revoke or suspend an adequacy decision must be followed by consultations with the third country to address the situation that led to such a decision (Article 45(6)). In this case as well – just as with the revocation of equivalence decisions in the financial sector – the third country has no legal remedy to challenge the decision that revokes, amends, or suspends the recognition of adequacy.

Over the years, the Commission has adopted adequacy decisions for some (not many) countries,[26] including Andorra,[27]Argentina,[28] Canada (for certain sectors),[29] Israel,[30] Japan,[31] New Zealand,[32] Republic of Korea,[33] Switzerland,[34]the United Kingdom,[35] the United States of America,[36] and Uruguay,[37] recognising that their regulatory frameworks offer a level of protection comparable to that of the EU.[38] From a comparison of the decisions taken so far, it seems that the Commission exercises a certain flexibility and applies varying degrees of rigor in the adequacy assessment process, potentially influenced by political factors, the scale of data processing, and the specific circumstances of each third country.[39] This is particularly true with regard to the United States of America, as the adequacy decisions adopted by the Commission concerning this country were undoubtedly influenced by economic considerations, leading the Commission to settle for guarantees that were not always stringent. The current decision concerning the United States of America, the so-called Data Privacy Framework, adopted by the Commission in 2023,[40] was preceded by two different adequacy decisions, both of which were later annulled by the Court of Justice of the European Union. The first, known as Safe Harbor, adopted by the Commission in 2000, was declared invalid by the Schrems judgment;[41] the second, the Privacy Shield of 2016, was invalidated by the Schrems II judgment.[42] The Court considered that the two adequacy decisions were not in line with Articles 7, 8, and 47 of the Charter of Fundamental Rights of the European Union. In these rulings, the Court focused on the concept of adequacy, being significantly more demanding than the Commission had been: on the one hand, it stated that it is not possible to require a third country to ensure a level of protection identical to that guaranteed within the legal system of the European Union, but on the other hand, it also established that the third country must effectively ensure ‘a level of protection of fundamental rights and freedoms that is essentially equivalent to that guaranteed within the European Union.[43] For the Court, therefore, equivalence must be assessed not only with regard to the level of data protection, but also in relation to the protection of fundamental rights that could be limited due to unlawful data processing. Consequently, while in the past the Commission had greater discretion in assessing the adequacy of data protection in third countries, now – due to the intervention of the Court of Justice and the more detailed guidelines provided by the GDPR – that discretion is more limited.

As observed, the assessment of data protection adequacy closely resembles the equivalence assessment applied to financial services, particularly concerning monitoring and cooperation with third countries. However, in the context of data transfers, the Commission's discretion is more limited, likely because fundamental rights are at stake.

4.   Other Areas in which the Principle is Employed

Since the purpose of this study is to determine whether the principle of equivalence can be regarded as a general principle of law in external relations, it is essential to analyse the extent of its use and the reasons behind this application. The principle in question is applied across various sectors to achieve multiple objectives, including the protection of specific human rights, the promotion of health, environmental safeguarding, and the facilitation of trade in goods and services. Without claiming to be exhaustive, this section will provide a few examples of the sectors in which the principle is applied, highlighting the objectives of its implementation. Although detailing its practical operation is interesting, it is unnecessary for the purposes of this study.

The mechanism of the principle of equivalence is often employed in legislation concerning the importation of products that may impact human health, animal health, or plant protection. For example, Regulation (EC) 178/2002 on the general principles and requirements of food law states, in Article 11, that food and feed imported into the EU must comply with the relevant provisions of European food law or with ‘conditions recognized as at least equivalent’.[44] The responsibility for verifying equivalence was assigned to the Commission under Regulation (EU) 625/2017, which requires the Commission to assess whether a third country intending to export animals or goods to the EU complies with a series of sanitary and phytosanitary control requirements.[45] To carry out this task, the Commission has developed a specific implementing regulation that establishes lists of third countries from which certain animals and goods intended for human consumption may enter the Union.[46]

Regarding environmental protection, the principle of equivalence can be found, albeit with different formulations, in various regulatory instruments. The mechanism in question is established in Regulation (EU) 2016/2031, which sets out a series of protective measures against harmful plant organisms.[47] This Regulation prohibits the importation of plants, plant products, and other items from third countries that could negatively affect the flora in Europe. However, in certain situations, the Commission can authorise such imports if the third country provides a level of phytosanitary protection equivalent to that established in the Regulation.[48]

A similar framework is set out by Directive 2008/101/EC, which includes air transport in the EU greenhouse gas emissions trading system.[49] Flights departing from a third country and destined for EU territory may be exempt from the requirement to surrender greenhouse gas emission allowances if the Commission determines that the country has implemented measures equivalent to those applicable in Europe for reducing the impact of air pollution on climate change.[50]

Although formulated differently, the principle is also found in Regulation (EC) 1005/2008 aimed at preventing, combating, and discouraging illegal fishing.[51] This Regulation states that competent authorities must refuse the importation of fishery products if the catch certificate has been issued by a non-cooperating third country.[52] It is the responsibility of the Commission to identify the third countries it considers non-cooperating, and then the Council must deliberate, by qualified majority, on the list.[53] The Regulation establishes a specific and detailed procedure to ensure that the third country aligns with the requirements and complies through the Commission's intervention. In this case, unlike the Regulations mentioned above, European institutions do not certify the equivalence of the regulations of the third country but instead confirm any non-compliance. Therefore, while in the earlier sectors the entry of goods or services is prohibited unless certified as equivalent by the Commission, the importation of fishery products is permitted unless the Commission deems it inadequate.[54]

5.   The outcomes of applying the equivalence mechanism: between protectionism and unilateralism, in search of a new form of multilateralism

The application of the principle of equivalence requires that the third country aligns its legislation with European standards or, at the very least, significantly approaches them. It is important to note that the new regulations introduced by the third country to meet the European Commission’s requirements often apply not only to operators seeking access to the Union’s internal market or exporting goods to it but also to those continuing to operate within the country itself.

Scholars who have examined the application of the principle of equivalence in the financial services sector have often questioned its impact. Some argue that it functions as an instrument for extending the European model of financial services regulation, as if the Union had decided to abandon the multilateralism that has long characterised it in favour of a unilateral approach. According to this view, the European Union seeks to position itself as the reference point for regulatory relations with third countries.[55] Conversely, others interpret the new rules as excessively protectionist, suggesting that the Union aims to create a ‘Fortress Europe’ that prevents the entry of external service providers.[56] These interpretations are somewhat forced when examining the rationale behind the adoption of these instruments. The post-crisis legislation aimed to protect the Union from external financial instability without compromising its competitiveness. It is, in fact, the result of a compromise between more protectionist positions, represented by countries like France and Germany, and those more oriented towards market expansion, like the United Kingdom.[57] In a Staff Working Document, the European Commission clarified that the objectives of equivalence decisions were as follows: financial stability, investor protection, the promotion of regulatory convergence around international standards, and the establishment of supervisory cooperation.[58]

Therefore, the goal was not to create a ‘Fortress Europe’; the mechanism aims to facilitate the access of external operators,[59]although it can have protectionist effects.[60] At the same time, there was no intention to adopt an expansionist approach. However, in practice, the system can generate what the literature refers to as the ‘Brussels effect’, where a third country voluntarily adjusts its legislation to maintain access to the EU market.[61] In the literature, several cases of third countries that have modified their regulations to align with the requests of European authorities are noted.[62] The same effect has been observed in relation to data transfers, as countries negotiating with the Commission for a possible adequacy decision have introduced improved legislation on personal data protection.

Both accusations of expansionism and protectionism have been leveled at data transfer regulation.[63] Here too, these accusations may be considered excessive given the motivations behind the adoption of this regulation. The GDPR’s primary objective is undoubtedly the protection of personal data, but it does not overlook commercial needs, as is clear from recital 101 of the GDPR: ‘Flows of personal data to and from countries outside the Union and international organisations are necessary for the expansion of international trade and international cooperation’.[64]

It is undeniable that the application of the principle of equivalence ultimately allows the EU to extend its regulatory influence globally. Equally undeniable, however, is the fact that the principle of equivalence also fosters international cooperation and promotes greater legal integration. It is important to remember that while equivalence decisions are unilateral, they are adopted within a framework of cooperation between the EU and the authorities of the third country.[65]

Therefore, the principle of equivalence does not imply a unilateral approach. Instead, its application encourages the voluntary alignment of third countries with European standards, rather than imposing rules. In many of the areas in which it is applied this principle is also characterised by a degree of flexibility, as it aims for harmonisation rather than for uniformity of norms; and is based on an assessment of the impact that services and products from third countries may have on the internal market, thus adhering to a principle of proportionality. 

The principle of equivalence, rather than promoting a unilateral approach, actually prevents it. It is precisely the absence of this principle that risks leading to unilateralism: without an equivalence assessment, a service provider or exporter of goods to the EU would be required to fully comply with EU legislation, just as an operator processing data in a third country would need to fully adhere to the provisions of the GDPR.[66] This could have a potentially negative impact on international trade. 

An additional advantage of relying on adequacy assessments rather than a unilateral approach concerns the issue of applicable norms in the event of a dispute before a court in a third country. The unilateral method contributes to the phenomenon known as ‘regulatory overreach’, which occurs when regulations have a broad extraterritorial scope but are difficult to enforce.[67] The equivalence mechanism helps mitigate this risk.

The principle of equivalence seems closer to multilateralism and bilateralism than to unilateralism. If multilateralism is understood as the pursuit of shared solutions to common problems, as outlined in Article 21(1) of the Treaty of the European Union (TEU), the principle of equivalence can be rightly associated with this concept. It is important to note that in the financial sector – though the same can be said for data protection – the quintessential multilateral solution, namely the conclusion of a treaty, has not been possible. The G20 itself has excluded the possibility of pursuing international regulation. Therefore, it is reasonable to assert that the reliance on the principle of equivalence represents a departure from traditional multilateral approaches when the latter is unfeasible.[68] It stems from the attempt to find alternative ways to resolve common issues and it can thus be considered a new avenue for multilateralism.

6.   Identifying traits of a general principle of EU external relations law

The principle of equivalence is not mentioned in the Treaties, nor has it ever been recognised by the Court of Justice as a general principle of law. When the Court has acknowledged the existence of a general principle of law, it has often based its rulings on the principle’s ability to further one of the objectives of the European Union.[69] It is understood that, thus far, this has only occurred for general principles applicable within the Union’s internal legal framework. In contrast, regarding external action, the Court has not yet relied on the objectives of this action to establish the existence of a general principle, as those objectives tend to be more generic than those of internal action.[70] Indeed, in the realm of external relations, rather than setting precise objectives, the Treaties define areas of action in which the Union can operate, and the Court has not carved out a role for itself in determining the boundaries of these powers.[71] Therefore, while it can be argued that the principle of equivalence serves as a tool for achieving the objectives of external action – particularly to ‘promote an international system based on stronger multilateral cooperation and good global governance’ (Article 21(2)(h) TEU) – this is likely insufficient for it to be elevated to the status of a general principle of law in the EU’s external relations.

In the context of external relations, the identification of general principles of law has instead been guided by different considerations: the ability of a principle to govern relationships among the actors of EU law in external relations (which includes not only the EU institutions but also Member States and third countries), establishing their prerogatives; and its propensity to shape the Union’s identity as an actor in international relations.[72] The former are referred to by authoritative literature as ‘relational principles’, while the latter are defined as ‘systemic principles’.[73] The principle of equivalence is believed to possess characteristics of both categories. Indeed, it regulates relationships between EU institutions and between the EU and third countries – a trait it shares with relational principles – while also defining the Union’s role as an autonomous and unified international actor, similar to systemic principles.[74]

General principles of law are often an expression of the values pursued by the European Union; this is the case, for example,[75]with respect for the rule of law and transparency.[76] Some of them, however, do not necessarily reflect a value in the strict sense but function as instruments to ensure the coherence and effectiveness of the legal system. This category includes, for example, the principle of consistent and harmonious interpretation.[77] The principle of equivalence could be placed within this group, as it does not correspond to any particular value, but rather allows the Union to pursue its objectives and, above all, to maintain coherence with other legal systems.[78] Indeed, the principle may also foster the development of common regulatory standards beyond the Union.

The equivalence mechanism performs functions typically associated with general principles of law in external relations. First and foremost, it enables the Union to protect the policies it has developed, along with their underlying values. Take, for example, EU legislation on financial services. Its objective is to safeguard financial stability by allowing only those services that meet certain adequacy standards to enter the Union, while also promoting the free movement of services. Without the equivalence mechanism, only two possible scenarios would arise. The first involves the exclusive imposition of European rules on foreign service providers, which would protect financial stability but at the expense of competitiveness stemming from the free movement of services. The second scenario, by contrast, would not require foreign operators to comply with European legislation, thereby promoting competitiveness but risking a compromise to stability. In both cases, at least one of the objectives of financial services legislation would be undermined.

A similar line of reasoning applies to the regulation governing the entry of food and feed from third countries into the Union, which is permitted only if equivalent conditions in terms of product safety and health controls are guaranteed. Without the equivalence mechanism, only two alternative solutions would be conceivable. The first would entail the exclusive imposition of European rules on those wishing to import goods – an approach that would safeguard human and animal health but hinder free trade and its associated benefits. The second, by contrast, would involve setting very low entry standards (or even none at all) to promote free trade, which would, however, compromise the objectives of human and animal health.

A similar argument applies to all the other sectors where the equivalence mechanism has been implemented. These considerations demonstrate that relying on the principle of equivalence is the most effective way to safeguard the policies the EU has developed in these sectors, the objectives it pursues through them, and the underlying values.

One of the functions typically performed by general principles of law in external relations is, as mentioned earlier, to strengthen the Union’s role as an international actor. As demonstrated in the previous paragraph, the principle of equivalence also shows an inclination to facilitate dialogue between the Union and third countries, aiming to find shared solutions while respecting the values and interests of the Union. It is the Commission that assesses the guarantees provided by the third country’s legislation and negotiates any necessary adjustments. Furthermore, it is the Commission that monitors compliance with the established terms and may revoke the equivalence decision if necessary. The centralisation of the equivalence assessment process within the executive body of the Union establishes it as the sole European interlocutor.

7.   Concluding remarks

The principle of equivalence proves to be a valuable tool through which the European Union manages its relations with third countries. It facilitates an effective dialogue with these countries aimed to find shared solutions that promote trade while ensuring that the objectives of European legislation are not compromised. In this way, the Union does not merely impose its own rules but encourages third countries to reform their regulations to achieve standards that are considered comparable to European ones. In an era characterised by increasing interconnection and global interdependence, the Union’s ability to establish equivalent standards represents not only an opportunity to strengthen trade, but also to promote shared values. This is particularly important in sectors where the Union’s policies have a direct impact on human rights, human health, environment, and financial stability.

Through the equivalence mechanism, the European Commission not only acts as the guardian of European legislation but also plays an active role in the global standard-setting process. The Commission is responsible for assessing the adequacy of the norms adopted by third countries, not only to safeguard European interests but also to reinforce the Union’s image as a responsible and proactive actor on the international stage. This cooperative dynamic marks a significant shift from a purely unilateral approach and positions the EU as a leader in promoting effective multilateralism. In a global context where pragmatic and adaptive approaches are increasingly necessary, it can be argued that the principle of equivalence marks an evolution of traditional multilateralism.

Although the principle of equivalence is neither explicitly mentioned in the European Treaties nor classified by the Court of Justice as a general principle of law, its functions and the context in which it operates clearly underscore its significance. In particular, the principle of equivalence exhibits the typical characteristics of a general principle of law in the Union's external relations, as it governs the relationships between the Union and third countries, establishing prerogatives, and helps define the Union’s identity as an international actor. The principle of equivalence can indeed be regarded as an emerging general principle of the Union’s external relations law.