Embedding Regulatory Policy in Law and Practice

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1 GettyImages Embedding Regulatory Policy in Law and Practice Methods, Procedures and Organization for better regulation

2 Federal Constitutional Court requirements for drafting legislation Rationality (derived from the principle of rule of law, Art. 20(3), Basic Law) Transparency of procedure and results (derived from the principle of democracy, Art. 20(1) & (2), and the right of public access, Art. 42(1) first sentence, Basic Law) The principle that legislation must be based on (present) realities Legislation must be developed in a transparent and suitable manner. (legislators may choose methods at their own discretion provided these are suitable and fit for purpose.) Methods and stages of calculation must be disclosed and clear. Results must be subjected to constant review and revised as necessary. ( Make arrangements to ensure that altered economic circumstances, such as price or consumption tax increases, can be responded to quickly ) Source: Brenner, Zeitschrift für Gesetzgebung 2011, 394 ff.

3 How laws are made at the national level Trigger (e.g. a coalition agreement or current event) Initial consideration in the relevant ministry (draft bill), ministerial approval Possible consultation with federal state and local interests Ministry draft of bill prepared with input from states & experts & in accordance with the ministries Joint Rules of Procedure Bundesrat (federal council representing states) Cabinet decision Further consultation with states and associations, if approp. Liaison with ministries & National Regulatory Control Council Agreement within lead ministry, ministerial approval 1st, 2nd, 3rd reading in the Bundestag (federal parliament) Bundesrat Federal Government Signature by Federal President Promulgation in the Federal Law Gazette 3

4 How EU rules are made Commission s annual/ 5-year policy strategy Commission s annual legislative and work programmes/roadmaps Consultation as appropriate Impact assessment from Commission Report from the Impact Assessment Board Poss. impact assessment from Parliament & Council Read in Parl. & discussed in Council (working parties) Submitted to Parliament & Council Commissioners decision; proposal for a legislative act Coordination among directorates-general Legislative act rejected/approved by Parliament & Council Where necessary (directives), transposed into national law Involvement of German Government & Bundestag* *in accordance with the Act on Cooperation between the Federal Government and the German Bundestag in Matters concerning the European Union and the Act on Cooperation between the Federation and the Länder in Matters concerning the European Union 4

5 Better Regulation in the federal ministries Joint Rules of Procedure (sections 40 to 45) Bills to include draft text, explanatory memorandum, cover page with summary and National Regulatory Control Council opinion Correct and comprehensible language, reflecting gender equality: Editorial Office of the Society for the German Language European Commission to be notified of bill before submission to the Cabinet Explanatory memorandum covers 37 requirements, in particular purpose and necessity, facts and findings, alternatives, e.g. self-regulation of private parties, monitoring vs authorisation procedures, state-level regulation, comprehensive reflection on regulatory impact (economic, social and environmental effects, sustainability, compliance costs, etc.) entry into force and duration, etc. Manuals + seminars on legal drafting; computer templates & databases

6 Audit focal points of Federal Ministries when they are consulted by the Lead Ministry BMI BMJ BMF BMFSFJ BMU BMWi BMAS BMELV also to be involved: compatibility with basic law, Administration, egovernment, data protection, sport compatibility with basic law, compliance with formal requirements, comprehensibilty effects on public households gender issues, well being of children conservation of nature, sustainability, nuclear safety, energy issues SME issues, industry issues, energy issues, EU law labor market, safety at work, social security, issues of handicapped consumer protection Federal Performance Commissioner (branch of Federal Audit Office) Regional governments, umbrella organisations of municipalities, civil society, businesses Regulatory Control Council Federal Chancellery decides on readiness for cabinet decisions

7 The Federal Government Programme for Bureaucracy Reduction and Better Regulation Based on Cabinet decisions 25 April 2006, 27 January 2010, 4 June 2014 Key elements Compliance costs (including administrative costs) to be identified, quantified and set out by Federal Government in all legislative proposals Quality of information in legislative proposals assured due to - binding standardised methodology (starting point: single case) - advice and fact checking from independent Regulatory Control Council - support and cooperation of the Federal Statistical Office Existing burdens reduced by agreeing targets and simplifying procedures, if possible across the board rather than in specific areas, simplifying projects Process steered by the state secretaries Committee on Bureaucracy Reduction and the Minister of State to the Federal Chancellor (Federal Government Coordinator for Bureaucracy Reduction and Better Regulation Frequent perception survey on complexity of life events for citizens and businesses, biannually done and published by Federal Statistical Office

8 Taxonomy of regulatory costs according to OECD-guidance Source: 8

9 Federal ministries calculate compliance costs Planned regulation / norm (e.g. law, decree, ordinance) Requirement 1 (individual regulation) for individuals, businesses and/or public authorities Requirement Vorgabe 2 2 Vorgabe Requirements 3 bis n 3 to n If necessary, bundle requirements (into processes) / build case groups etc. Tariff* Time Material costs (if nec. pro rata) Number of norm addressees ** Frequency per year** etc. Costs (per case) Number of cases (per year) etc. costs (per case) x number of cases = annual compliance costs of a requirement / process etc. compliance costs of requirements / processes 1 to n = compliance cost of the regulation (per year) * tariff not applicable to private individuals ** if required for determining the number of cases 9

10 Working together to achieve Better Regulation Bundestag reviews (on request) (section 4(3) NKRG*) reports (section 6(2) NKRG) Bundesrat reports (section 7 NKRG) Federal Government supports work on bills and simplification schemes (section 8 NKRG) National Regulatory Control Council reviews, checks methods and advises Coordinator and State Secretaries Committee supported by the Better Regulation Unit Federal Ministries prepare bills and explanatory memoranda set out compliance costs (including admin costs), check alternatives, perform other functions under the Joint Rules of Procedure, work on simplification projects Federal Statistical Office - helps estimate costs - evaluates data - runs databases - develops methodology inform and participate States, local authorities, associations, employers, trade unions & research institutes * NKRG: Act Establishing the National Regulatory Control Council 10

11 The Independent Regulatory Control Council Ten members nominated by the Federal Government - Experts and scientists with experience in legislative matters within state or social institutions as well as knowledge of economic matters - However, members may when appointed and one year before not belong to a legislative body or to a federal public authority or state authority, or have a permanent service with such bodies or authorities Appointed by Federal President for five year term (differs from election term) Bound only by the mandate conferred by the RCC Act RCC is treated like a ministry in the interministerial coordination according to the Joint Rules of Procedures of the Federal Ministries RCC examines each legal proposal of any ministry, whether information on compliance costs and other parts of the explanatory memorandum are comprehensive and comply with the required methodology when Federal Government drafts a proposal: RCC statement is attached to the cabinet draft and is passed to Parliament and the Bundesrat (legislative representation of state governments): the RCC statement becomes public 11

12 The Regulatory Control Council s mandate The RCC has the task of supporting the Federal Government in implemen-ting its measures in the field of bureaucracy reduction and better regulation. In particular, it examines the description of the compliance costs of new regulations for citizens, the business sector and public administration in terms of comprehensibility and correct methodology, (sec 1 RCC Act) Furthermore the RCC is entitled according to the RCC Act also to examine the methodologically appropriate implementation and comprehensibility of the - comprehensible presentation of the intention of and need for the regulation, - consideration of other possible solutions, - consideration regarding the time of entry into force, time limits, and evaluation, - considerations of simplifications of law and administration, - the extent to which, in the case of the implementation of a directive or other statutory instrument of the European Union, further-reaching regulations are put in place. (sec 4 RCC Act) But: The examination by the National Regulatory Control Council shall not cover the intended purposes and aims of regulations. (sec 1 RCC Act) 12

13 Focus points of coalition treaty 2013 Key success criteria of coalition: Quality of life and effectiveness of politics Development of a system of reports and indices focused on the quality of life in Germany and Europe, action plan on good living Legal obligations have to be simple, comprehensible and effective Impact analysis prior to decision on new rules, evaluation post decision Citizens to be involved more intensely in preperation of politics and rules New regulations to be tested in practice prior to decision, if feasible Compliance costs on citizens and businesses to be cut noticeably via joint projects of Federal Government, Regulatory Control Council, Regional Governments and municipalities Call for initiatives for business friendly execution of law Cut off compliance costs, especially in the are of burdens of proof Effective control on regulations and clear reduction goals also at EU level No gold plating on EU law 13

14 Structure of the cover page of regulatory proposals: summary of max. 2 pages A. Problem and objective B. Solution C. Alternatives D. Budgetary expenditure excluding compliance costs (broken down by federal, state and local authority level) E. Compliance costs [Section 2 of the Act Establishing the National Regulatory Control Council; the Guidelines on Compliance Costs in Legislative Proposals of the Federal Government shall apply.] E.1 Compliance costs for private individuals E.2 Compliance costs for businesses, including administrative costs arising from information obligations [Section 2(2) of the Act Establishing the National Regulatory Control Council] E.3 Compliance costs for public authorities (broken down by federal and state including local authority level) F. Other costs [primarily other costs for businesses, costs for social security systems, impact on individual prices and the price level, in particular on the consumer price index] 14

15 Cover page with summary, section E (fictitious example) E.1 Compliance costs for private individuals Private individuals will be subject to an additional time burden of 200,000 hours per year (30 minutes per case). Furthermore, the financial costs will amount to 2.5 million annually. E.2 Compliance costs for businesses The proposed legislation will cancel three information obligations without replacement, which translates into annual savings of 3 million in administrative costs. In terms of overall compliance costs, around 20 million per year will be saved on a sustained basis, and there will be a one-off cost of 33 million. E.3 Compliance costs for public authorities Public authorities can expect additional compliance costs of 3 million annually. An additional 4 million per year will be required at federal level, while 1 million per year will be saved at the state level. Further to this, the one-off changeover costs will come to around 1.5 million. 15

16 Cover page with summary, section E (fictitious example): An alternative representation E. Compliance costs E.1 Compliance costs for private individuals Change to time burden per year (in hours): +200,000 Change to financial costs per year (in 000): One-off time burden (in hours): - One-off financial costs (in '000): - E.2 Compliance costs for businesses Change to compliance costs per year (in '000): -20,000 of which administrative costs arising from information obligations (in '000): One-off compliance costs (in '000): +33,000 E.3 Compliance costs for public authorities Change to compliance costs per year (in '000): of which at the federal level (in '000): of which at the state level (in '000): One-off compliance costs (in '000):

17 Transparency to avoid unnecessary costs Example: Act Establishing a Market Transparency Body Purpose of the Act - To improve transparency about fuel pricing so that violations of cartel law can be effectively combated Control Council check: compliance costs & alternatives - Draft bill contained no estimate of costs. - National Regulatory Control Council opinion called for calculation to be added Estimate of costs improved basis for decision-making - Compliance costs for petrol stations would be 85 million (85% of which would be caused by the obligation to provide quantitative as well as pricing data). Compliance costs reduced during parliamentary procedure - Exclude quantitative data costs avoided: 70 million 17

18 Contact Federal Chancellery Better Regulation Unit Willy-Brandt-Str. 1 D Berlin GERMANY Stephan Naundorf buerokratieabbau@bk.bund.de Tel Absender Titel Seite 18

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