The better regulation strategy of the European Commission

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In April 2021, the European Commission published its Communication on better regulation, after having postponed publication in 2020 and early 2021. A few days before the release of this much- awaited Communication, Claudio Radaelli published an STG Policy Paper to provide a map to navigate the communication. Claudio was also one of the two external commentators on the Annual Report of the Regulatory Scrutiny Board at the RSB conference on 6 May 2021.  The conference, by invitation only, provided yet another opportunity to comment on the strategy of the Commission in the domain of regulatory reform and regulatory oversight. Here we provide an abridged version of Claudio’s STG Policy Paper.

To begin with...

Since the mid 2010s, the Commission identified the planning principles of closing the policy cycle and ‘evaluate first’ – that is, not planning new legislation without prior appraisal of the existing rules. The Commission invested in systematic (as opposed to episodic) retrospective review of regulations and enhanced consultation across the different stages of EU law-making. The institutional custodian of the quality of the strategy was and still is the Regulatory Scrutiny Board (RSB), staffed partly by independent experts and partly by high-level Commission officers – all of them working full-time for the board.

In 2019, the OECD published a report, ranking the Commission number 1 or in the top positions across the whole (then) EU-28 on most better regulation dimensions. Thus, recent history and data suggest that the Commission had reasons to be relatively confident with the results achieved by its strategy. This is not to justify complacency or to ignore controversies on the political goals of better regulation and the quality of impact assessments. But the perception of the state of play inside the Berlaymont was positive when the new Commission chaired by Ursula von der Leyen was appointed.

What happened then

One of the first acts of von der Leyden’s Commissioners was to confirm their faith in better regulation – not surprisingly, given that the architect of the 2015 reform, Frans Timmermans, is executive vice-president in the current Commission. The proof of this confidence in the strategy is the inclusion of better regulation in the working methods of the Commission. In terms of specific content, the Commission’s working methods include the presence of a mechanism of regulatory offsetting called one- in-one-out. This offsetting principle affirms that any regulation introducing new burdens should relieve business and citizens of an equivalent burden existing in EU-level legislation in the same policy area. The Commission in the past resisted the idea of regulatory targets. To accept one-in-one-out was a way to accommodate the preferences of governments that had been instrumental in delivering support for von der Leyen – without accepting an explicit de-regulation target such as the business impact target.

Be that as it may, when this Commission started to work on the Communication, the officers were expecting a period of smooth incremental changes in the better regulation strategy, with emphasis on controlling regulatory costs via one-in-one- out. In January 2020, the mandate of the RSB was extended to include ‘foresight’ to align its mission with the tasks of the Commissioner in charge of better regulation, Maroš Šefčovič.

Better regulation could have been used to test the assumptions of the high-level strategies for change.

In a way, the arrival of foresight on the RSB in January 2020 scene was a premonition of (really big) things to happen. With the Covid-19 pandemic, the EU institutions were parachuted into a brave new world. And these days the EU is dealing with political priorities for a green, digital, sustainable recovery.

Better regulation in the world of recovery and resiliency

Although context and policy paradigms have changed, better regulation principles have not disappeared. And actually they were under-utilized. The digital single market and the green deal have been presented as political priorities, rather than coming out of empirical applications of better regulation principles. Better regulation could have been used to test the assumptions of the high-level strategies for change. Here are some examples. Are we persuaded that small and medium enterprises will be at the forefront of the recovery because they produce innovation? In terms of better regulation thinking, this is an assumption to be tested. If instead this is a goal, better regulation would clarify the intervention logic and appraise options that can put small and medium enterprises in a leading position. The Commission argues that the EU must reach the goal of 25%of agricultural land dedicated to organic farming. Good, but how will the costs and benefits of this commitment fall on different categories of firms and sectors? Yet again, better regulation can provide some structured pathways to answer this question.

Another problem is that after Covid-19, the suspension of the stability and growth pact, the green deal and the arrival of the recovery and resiliency facility, it is difficult to accept that one-in-one-out can be the compass of better regulation. This can’t be the major innovation that the European economy and citizens want from ‘better law-making’. It is a narrow priority when compared with the political priorities of the moment. All the political priorities of the EU institutions are geared towards delivering welfare. They are net benefits oriented. Offsetting burdens with one-in-one out is acceptable if you think that the main problem is one of administrative obligations and costs. If you instead direct better regulation towards net benefits, the role of one-in-one-out has to be majorly discounted.

This brings us closer to the tools. Here we see the necessity to re-tool the tools like impact assessment and evaluation.

Retool the tools

If there is paradigmatic change at the level of sustainability, then issues of climate, gender, human dignity, social inclusion should be fully integrated and mainstreamed in regulatory evaluations and impact assessment of new policy proposals. Actually, the Commission said it will go as far as to embrace a principle of ‘do no significant harm’ as key test in the practice of impact assessment. Apart from the fact that this is limited to climate and the environment, and not to the whole range of SDGs, citizens expect the Commission to do more than ‘no harm’ to sustainable development. They expect positive contributions on all the SDGs as key tests of the quality of the regulatory proposals.

Finally, recovery and resiliency require innovation. The Commission should be explicit on regulation as lever for innovation – a kind of ‘regulating for innovation’ commitment. The RSB is now bound to review the foresight dimension, but more attention should be dedicated explicitly to innovation. How exactly will innovation be captured in the practice of impact assessment, evaluation and the RSB oversight? Will the Commission go as far as to define clearly and in explicit ways what it considers to be future-proof, socially-responsible innovation? Will it embrace the belief that radical innovation is better than incremental innovation – and if so, on the basis of what evidence?

Joining forces

Not everything can be controlled by strategic guidance in the form of a Communication

For example, much as the EU institutions may be persuaded by the benefits of regulatory flexibility, any form of regulatory flexibility will be carried out in a legal context that differs between civil law and common law countries.

Joining forces

Not everything can be controlled by strategic guidance in the form of a Communication. For example, much as the EU institutions may be persuaded by the benefits of regulatory flexibility, any form of regulatory flexibility will be carried out in a legal context that differs between civil law and common law countries. If ‘something goes wrong’ with sandboxes (and regulatory flexibility in general), with what legal lenses will the courts judge accountability? Dublin is not Luxembourg. Civil law standards seem less suitable than common law reasoning in handling the accountability issues raised by regulatory flexibility.

There are many reasons to cast watchful eyes on better regulation. Now that the Communication is published, we should keep the attention high on how it is received by the other EU institutions, and more fundamentally on its implementation and delivery – not only in Brussels, but also in the member states. Indeed, if the Communication is all about guidance, what will matter in the end will be the multi-level practice of better regulation. On this, the Communication is entirely correct in its title: joining forces. That means joining forces between the Commission and the other two institutions responsible for the final pieces of legislation, that is the EP and the Council. And joining forces between the EU institutions and the 27 member states that transpose and implement EU policies.