Op-Ed: “Better Regulation: Upgrading and Going Geopolitical” by Anne-Lise Sibony and Fabrizio Esposito
Regulating is the EU’s core business. Inevitably, however, businesses and states people alike tend to blame the EU for over-regulation or absurd requirements. The European Commission has long taken this criticism to heart and, early on in 2002, launched the first ‘fitness’ initiative. From then on, every new legislative proposal had to be accompanied by an ex-ante impact assessment. Retrospective evaluation was introduced in 2005. From the outset, the emphasis was clearly on cutting red tape. Unsurprisingly, it emerged that focusing single-mindedly on cost reduction was not an optimal strategy: less administrative costs do not automatically mean better regulation. This realisation took shape in 2012 and led to the REFIT programme, which developed an EU brand of cost-benefit analysis. Entire areas (rather than single pieces of legislation) would be reviewed in turn, with the balance of benefits and costs in mind. The Better Regulation agenda gained more prominence in the Juncker Commission, which had a First Vice President in charge of Better Regulation. In 2015, the Commission published an extensive package of new measures to improve and strengthen its Better Regulation policy and, in 2017, the Better Regulation Toolbox codified good practices for those conducting both ex-ante and ex-post evaluation. Evaluation of evaluations was also introduced: impact assessments are subject to validation by the Regulatory Scrutiny Board, which enjoys a degree of independence though it is part of the Commission.
In the recent Communication Better Regulation: Joining Forces to Make Better Laws, the Commission draws operative conclusions from the 2019 stock-taking exercise of the REFIT programme. From a technical standpoint, the new Communication outlines an upgrade rather than a major overhaul in how the impact of legislation will be appraised. The real change lies in what impact will be looked at. The focus broadens from the economic impacts in Europe to the geopolitical dimension of EU action. In line with the priorities of the Von der Leyen Commission, new questions will now be asked: is the legislation green enough? Is it in line with an inclusive digital transition? Does it contribute to the UN Sustainable Development Goals (SDGs)?
Better Regulation as Team Work
Each iteration of the Better Regulation framework seeks to ameliorate the shortcomings of the previous one. An enduring defect is that the Commission is the main player in the Better Regulation game and this can ruin its efforts. Even if the Commission had the most perfect ex ante evaluation methodology, the resulting immaculate impact assessment accompanying a legislative proposal would not be much help if, subsequently, changes to the proposal introduced during the legislative discussion were not themselves subject to a similar forward-looking analysis. The Commission does not claim perfection (it is content to mention the OECD’s praise), but it is apparent from the Communication that it feels lonely in its efforts to craft new EU measures with care and detailed attention to benefits and costs. Indeed, the title of the Communication ‘Joining forces to make better laws’ reads like a call to the European Parliament and the Council to step up interinstitutional cooperation in this area. What the Commission has in mind goes above and beyond the 2016 Interinstitutional Agreement on Better Law Making, which leaves a lot of discretion to the co-legislators. They are to carry out impact assessments in relation to their substantial amendments to the Commission’s proposal only if they deem it ‘appropriate and necessary’. If one had any doubt about the non-committal nature of the text, it is specified that it is for each institution to determine what counts as a ‘substantial’ amendment.
The Commission has no power to constrain the Council or the European Parliament to embrace evidence-based policy making and its frustration with the co-legislators’ amendment practices is both understandable and palpable. ‘The co-legislators often introduce amendments through which legislation contains unclear requirements’, it laments (p. 17). The Commission’s strategy seems to be twofold. First, it keeps trying to talk the Council or the European Parliament into joining and insists that ‘Better regulation is a shared objective and responsibility of all EU institutions’ (p. 2). Yet, it is a fact that neither the European Parliament nor the Council has equipped themselves with the bureaucratic infrastructure needed to conduct impact assessments. The Commission probably thinks it is not its role to offer capacity building, but it announces that it ‘will reach out to the European Parliament and the Council to set up a common evidence register, the Joint Legislative Portal’ (p. 7). This initiative is presented under the heading of transparency. The declared aim is to allow anyone that is interested to have easy access to all the evidence that supports law making. This transparency is in itself a commendable move and can indeed empower stakeholders to scrutinise legislative work helpfully. It will also make the absence of evidence supporting certain legislative amendments more salient. Whether the increased visibility of ‘zero evidence’ will be sufficient to name and shame the co-legislators remains to be seen, however.
Importantly, the Commission looks also at the national level, where it hopes to find collaboration to collect the evidence needed to evaluate the fitness for purpose of EU measures in practice. Politely, the Commission ‘would ask Member States to provide [it] with feedback on [its] estimates of the benefits and costs associated with specific pieces of legislation after they have implemented them’ (p. 3). This request is accompanied by a pledge to be vigilant about monitoring and review clauses in legislative proposals (p. 17). Following an opinion of the Court of Auditors, the Commission undertakes to clearly state what type of review is to be conducted. It also notes the need to allow for enough practical experience to accumulate before conducting an evaluation and not set unrealistically close deadlines. Here again, the Commission calls on the co-legislators to act as team players.
Old Priority in New Clothes
Cutting the red tape has been the mantra of the Better Regulation initiative from the outset and has remained a key preoccupation ever since. The recent Communication has a similar flavour: six out of 22 pages are devoted to reducing the regulatory burden. In this regard, a new motto is introduced: ‘One In, One Out’. The new principle is that, for every legislative proposal, the Commission will seek to offset new burdens by reducing existing burdens in the same policy area by an equivalent amount. The inspiration for this change seems to come from the OECD. Good practices developed at national level have shown that this offsetting approach helps focus legislators’ attention on the practicalities of implementing new laws. Possibly the Commission is hoping it will work with the co-legislators as well.
Technically, the innovation seems relatively minor. The Commission pledges to pay greater attention to cumulative costs for individuals and businesses in a given policy area (p. 8). Yet, nothing in the existing toolbox seems to have prevented evaluators from considering cumulative costs already, nor does this shortcoming appear to be a major finding of the 2019 stock-taking exercise.
In practice, the innovation lies in how evidence of compliance costs will be gathered. Crowdsourcing is an apt way to collect information on compliance costs. To invite and facilitate input from businesses, citizens and the non-profit sector, the Commission plans to use the Have Your Say platform. In addition, it has set up the Fit for Future Platform to receive advice from governments and stakeholders on ways to ensure that EU legislation is easy to comply with, efficient and fit for the future. This ‘platformisation’ of pre- and post- legislative practices is a good thing as it fittingly reduces the cost of participation. It has the potential to make cost evaluations more accurate. Rationally, companies tend to overstate compliance costs and do not currently feel a strong need to document their claims regarding implementation costs. Making their claims easily accessible may invite scrutiny on their estimates and thus improve the accuracy of the cost-benefit analysis. It is also reassuring to see that qualitative evidence remains welcome.
New Priorities: Better Regulation Goes Geopolitical
The political priorities of the Von der Leyen Commission underpin the broader scope of legislative evaluation in the Communication. In particular, the Commission ‘mainstreams’ the twin transition (green and digital) in all legislative evaluations. This means embedding the ‘do no significant harm’ principle and a ‘digital by design’ approach in Better Regulation. On the latter point, there is little elaboration. The former, instead, is articulated in a convincing list of elements that will be added to consultations, evaluations, and assessments. How this mainstreaming will be specified in the next version of the Better Regulation Toolbox will matter immensely.
The same is true of the new preoccupation for the external effects of EU regulation. The Commission wants to improve its understanding of impacts of EU legislation ‘within and outside the EU’ (p. 2). This includes both the consideration of the UN Sustainable Development Goals and the impact of the extraterritorial reach of EU Regulation. Scholars interested in the Brussels Effect will want to stay tuned.
Opening legislative evaluation to a broader range of social and geopolitical considerations is the most innovative part of the Communication. This broadening will be challenging to implement and we can expect that getting the methodology right for doing so will take many iterations. One can only praise the Commission for taking the UN SDGs seriously in its legislative activities, but also stress that this does not only concern extraterritorial effects of EU laws. Poverty also exists in the EU. In this regard, it is worth recalling that the UN Special Rapporteur on extreme poverty and human rights recently paid a visit to the European Union and concluded that it was ill-equipped to deal with poverty (see his Findings and recommendations). A meaningful new frontier for the Better Regulation Initiative is, therefore, to also mainstream the question ‘what is the impact of this legislation on the poorest among us?’.
Anne-Lise Sibony, Professor of EU Law at UCLouvain (Louvain-La-Neuve), Ronald Coase Professor at TILEC (Tilburg).
Fabrizio Esposito, Associate Professor at Nova University (Lisbon).