Opinion of the European Economic and Social Committee on "Simplification"
Date: 2001-11-29
Institutions: European Economic and Social Committee
Subjects: EU law - national law, codification of EU law, consolidation of EU law, simplification of legislation, single market

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Opinion of the European Economic and Social Committee on ‘Simplification’

(2002/C 48/28)

On 28 February 2001, the Economic and Social Committee, acting under Rule 23(2) of its Rules of
Procedure, decided to draw up an additional opinion on ‘Simplification’.

The Section for the Single Market, Production and Consumption, which was responsible for preparing
the Committee’s work on the subject, adopted its opinion on 21 November 2001. The rapporteur was
Mr Walker.

At its 386th plenary session (meeting of 29 November 2001) the Economic and Social Committee
adopted the following opinion by 62 votes in favour, with 5 votes against and 5 abstentions.

1. Summary and recommendations

1.1.
The over-regulation of Business is primarily a national
problem but it also has a European dimension that needs to be
addressed. The EU must not only give the lead in the process
of simplification but must exhort the Member States to follow
suit. Even where legislation originates at the European level,
market surveillance is the responsibility of the Member States
and Member State administrations interpret European legislat-
ive instruments in the light of their own administrative culture;
they put a national ‘spin’ on it.

1.2.
There is a manifest need for a fundamental overhaul
of the regulatory framework within the European Union,
accompanied by a streamlining and simplification of the
existing body of legislation. Clear and simple objectives should
be adopted for this work, which needs to be carried out at
European, national and local levels and must be geared to the
achievement of real results; declarations of principle and
assurances of good intent will not suffice. The Committee
awaits with interest the publication of the report which the
Commission will present to the Laeken Council.

1.2.1.
This regulatory review must focus not just on the
future but also on the existing body of legislation and must be
orientated not only towards simplifications and improved
methods but towards quantitative reductions.

1.3.
The principle underlying the review of existing legis-
lation and the introduction of new legislation should be the
same — that, unless a clear case can be made in the public
interest for its retention or introduction, the legislation should
be abolished or not introduced. Existing legislation which it is
decided to retain should be re-written, where necessary, to
make it simpler, less ambiguous and more transparent.

Member States. This can only be brought about by originating
more legislation at the European level and ensuring a greater
degree of uniformity in its incorporation into national law
and, equally importantly, in its enforcement. Standardisation
is an essential element of simplification. The regulatory
environment should contribute to the establishment of a ‘level
playing-field’ for European businesses. As matters stand, the
transposition and implementation of Directives in the Member
States are a source of additional complexities, divergences and
delays. There is a manifest need for a parallel approach to
simplification in the Member States if the process is to succeed
at the European level.

1.5. Where possible, alternatives to regulation should be
sought before having recourse to new legislation. This might
take the form of self-regulation, co-regulation or even no
regulation. Where circumstances permit, the possibility should
be examined of moving markets that are currently regulated
towards self-regulation or co-regulation.

1.6.
Regulations must be, inter alia, accessible, relevant and
proportionate. The accessibility of the existing acquis leaves a
great deal to be desired. While there is a need for regulations
to be framed with sufficient flexibility to enable them to cope
with rapidly-changing circumstances, they must be stable over
time in order to create a climate of legislative certainty.

1.7.
Framework legislation is inherently more flexible and
gives businesses greater freedom within predetermined limits
but there is the risk that it will simply shift the regulatory
process to a lower level and create greater divergences between
the regulatory climates of different Member States. The same
dangers attach to the application of the principle of subsidi-
arity.

1.4.
In order to avoid national variations in the regulatory
framework which would create distortions of competition in
the Single Market, there must be a large degree of harmony
between the legislative instruments in force in the different

1.8.
There are frequently extended delays in the final
adoption of Commission proposals for simplified legislation
by the Council. The Committee urges the Council to cooperate
more effectively with the simplification process by adopting
Commission proposals within a shorter timescale.

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1.9.
The Committee makes the following specific rec-
ommendations for improving the regulatory framework at the
European level:

2.

Introduction

— A Regulatory Review Body should be set up to monitor
the review of existing legislation and set out the guidelines
for introducing new legislation. It should also conduct
ex-post evaluations of the effects of legislation. This body
should comprise representatives of the Commission, the
national agencies and Business.

— Specific targets should be set for achieved reductions in
the volume of legislation, e.g. to reduce the total volume
of regulations and directives by 20 % over five years.

— All new regulations, and all existing regulations which
are renewed, should be given a finite life, at the end of
which they would automatically expire unless further
renewed.

— SMEs, and particularly micro-businesses,

should be
exempted from some regulations or from certain parts of
some regulations. This exemption could be on a sliding
scale, with more comprehensive exemption for micro-
businesses employing less than ten people.

— The acquis communautaire should be streamlined by
producing a ‘core acquis’ and bringing about some
semblance of external order and rationalisation by the
introduction of a codification process on the Swedish
model.

— The accessibility of the acquis should be improved by
Journal and making the acquis

reviewing the Official
available on-line.

2.1.
This opinion is a follow-up to the Committee’s opinion
on Simplifying rules in the Single Market, which was adopted
on 19 October 2000 (1). In that opinion, the Committee
stressed the urgent need to embark on a process of simplifying
regulations in the Single Market whilst improving the quality
of their provisions, their incorporation into national law and
the freedoms and responsibilities of the civil society players.

2.1.1.
To this end, the Committee called upon the Stock-
holm European Council in the Spring of 2001 to adopt, on a
proposal from the Commission, a multi-annual simplification
plan, setting out objectives, priorities and methods and
earmarking budgets and resources for monitoring and follow-
up action. The Committee took the view that this plan should
be reassessed each year at the Spring European Council, on the
basis of a Commission report.

2.1.1.1.
measures:

The Committee proposed a number of specific

— the adoption of codes of conduct by the EU institutions
to help promote the simplification of rules, rather than
making them more complex;

— the Commission to set an example by inculcating a

culture of simplification internally;

— Member States and their administrations to adopt codes
of conduct and assist in disseminating best practice;

— improving

the
accompany all draft legislation;

impact

assessments which must

— the Commission to reassess its choice of the regulatory

instruments to be employed;

— Alternatives to regulation should be sought, wherever

possible.

— the Commission to ensure that it is actively involved in
the framing, implementation and annual review of the
simplification process;

— The ‘public-interest test’ should be applied to all legislative

proposals.

— the Commission to consult the Committee every year on
key topics which merit coverage in SLIM projects and test
panels.

— Full use should be made of advances in information
technology and communications to reduce the com-
pliance cost of regulations.

In order to make an effective contribution to the
2.1.1.2.
simplification process, the Committee itself adopted a Code of
Conduct. A copy of this is attached as Appendix 1.

— In future, impact assessments made by the Commission
on legislative proposals should include a report on their
examination of alternative, non-legislative possibilities.

(1) OJ C 14, 16.1.2001, p. 1.

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2.2.
The mandate from the Lisbon European Council also
stressed the need for action at national level. The vast majority
of the legislative burden on Business originates at national and
local level; even where legislation is introduced at the European
level, its incorporation into national law, implementation and
enforcement are functions of the Member States. The success
of
the initiative to simplify and improve the regulatory
environment therefore depends on the active commitment
of all players throughout the ‘legislative chain’;
it requires
coordinated action between the Community institutions and
the Member States.

2.2.1.
Careful attention must be paid to the interplay
between EU and national institutions; for the EU, an ability to
foresee the effects of new regulations in various national
systems is important. New regulations can have massive
repercussions at national
if they are transposed into
national law with excessive zeal, the ‘gold-plating’ effect. This
is particularly true of regulations which lay down a ‘minimum
standard’,
leaving Member States free to impose stricter
requirements at will.

level

2.2.2.
It is in the nature of things that the primary concern
should be to eliminate obsolete regulations but, if regulatory
simplification is to exert a positive impact on Business, it is
essential to work on current regulations and on procedures for
developing new ones. The former represents the bigger task
but the latter is the more important in the final analysis; both
elements must be included from the start in order to avoid
the process getting bogged-down in general discussions of
principle.

2.2.3.
The procedures for developing new regulations
should encompass the setting up of mechanisms for the ex-
post evaluation of the effects of legislation in practice.

In the drive for simplification, full use needs to be
2.3.
made of the opportunities offered by advances in information
technology and communications. In particular, the text of
legislative instruments at all levels should be freely available to
the public on open web-sites. Computers can also reduce
the burden of mechanical tasks and thereby facilitate the
compliance process but their availability should not be made
an excuse for imposing more tasks.

tainty arising from legislation which lacks clarity, conciseness,
cohesion and compatibility. Where regulation results in
increased costs for businesses, these are invariably passed on
to the consumer. Above all, it is the individual who suffers
most from this state of affairs.

2.5.
Simplification is also a Single Market issue. The lack of
harmonisation of regulatory instruments is a major handicap
to the completion of the Single Market and frequently results
in distortions of competition. While the mutual recognition
process goes some way towards offsetting this,
it cannot
produce the degree of conformity that a true Single Market
requires.

3. Progress to date

3.1.
The Committee has consistently supported the SLIM
(Simpler Legislation for the Internal Market) initiative, which it
has always regarded as a move in the right direction. It feels,
however, that something more is needed if real improvements
are to be made.

3.2.
The SLIM initiative was launched by the Commission
in May 1996 but it has to be said that progress to date has
been distinctly disappointing. In its interim report to the
Stockholm European Council on ‘Improving and Simplifying
the Regulatory Environment’ (1), the Commission adopts many
of the Committee’s recommendations, detailed above in its
proposals for future action to assist in achieving the objective
set out at the Lisbon Summit of making the EU, ‘the most
competitive and dynamic knowledge-based economy in the
world, capable of sustaining economic growth with more and
better jobs and greater social cohesion’. Since this objective
was set, little has been achieved to realise this ambition; other
priorities have supervened and the momentum generated in
the aftermath of the Lisbon Summit has been largely dissipated.

3.2.1.
In 1995, the Molitor Report set out eighteen general
recommendations. These are contained in Appendix 2. A year
ago the Committee (2) commented that, ‘Many of these have
since been largely put on the backburner’. The situation
remains essentially unchanged.

2.4.
The simplification of legislation is an issue which
impacts not only Business but all of society. The social partners,
consumers, NGOs and the other elements of organised civil
society are all adversely affected by the confusion and uncer-

(1) COM(2001) 130 final, of 7.3.2001.
(2) OJ C 14, 16.1.2001, p. 1.

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3.2.2.
As the Commission acknowledges, real progress in
improving and simplifying the regulatory environment is
essential if this goal is to be achieved. In its Report to the
Stockholm European Council, the Commission points out
that, ‘individuals and businesses, and small and medium-sized
businesses in particular, need a clear, effective and practical
regulatory environment on what is a rapidly-changing world
market’.

The Committee endorses this approach.

It has
3.2.2.1.
in particular, to
repeatedly drawn attention to the need,
ease the burden of regulation on small and medium-sized
enterprises and, especially the micro-businesses, which are the
primary source of economic growth and job creation in any
dynamic society. In a recent survey in the UK, conducted by
the Institute of Directors, a majority of micro-businesses cited
the burden of regulation as the greatest disincentive to starting
a business and the greatest handicap to expanding it.

3.2.2.2.
The Committee believes that, if the mission state-
ment of the Union, which was set out at the Lisbon Summit,
is to be fulfilled, regulation must meet its social objectives
without acting as a constraint on trade.

The Commission has set out

3.3.
principles of a regulatory strategy:

the following main

— legislative action only where necessary;

— broad consultations and impact analysis before any

proposal;

— choose the appropriate instrument;

3.4.
The Commission sees the drive to improve and simplify
the regulatory environment as not just a synonym for ‘deregu-
lation’; its aim is better regulation, not deregulation. Again, the
Committee endorses this principle but would point out that
achieving better regulation will inevitably involve reducing the
number of existing regulations without compromising any of
the necessary regulatory objectives, including those concerning
social and environmental standards or the supply of important
services to all citizens. This need not, and should not, equate
to deregulation; the effectiveness of regulation is dependent on
its quality, not on its quantity; in many ways, quantity is the
enemy of quality. Regulations should be:

— Accessible;

— Relevant;

— Unambiguous;

— Impartial;

— Necessary;

— Objective;

— Uniform;

— Simple;

— Proportionate;

— Equitable;

— Stable;

— speed up the legislative process;

— Transparent.

— ensure rapid and correct

transposition and effective

application;

They should also be mutually compatible, efficient and cost-
effective.

— evaluate the effects of legislation; and

— speed up the simplification and codification of existing

texts.

3.3.1.
The Committee wholeheartedly supports these prin-
ciples but feels that the existing mechanisms for putting them
into practice are deficient. As the Commission says,
the
strategy will have to be developed within the European Union’s
institutional framework. The Treaties offer opportunities and
impose constraints at the same time. The Commission intends
to continue to make full use of Treaty instruments and to play
its driving role, having regard to the powers available to it.

3.4.1.
Too often, the requirements of one regulation are in
conflict with the demands of another. This is particularly true
of subsidiary legislation introduced at the regional and local
levels. This can only impair the efficiency with which they
achieve their regulatory objectives. Above all, they must be
cost effective; the benefits derived must be at least commensur-
ate with the costs imposed; these costs are measured not only
in financial terms.

3.5.
In the context of the Single Market, effective regulation
must be aimed at achieving fair competition and non-
discrimination. It should ensure that citizens are protected
from fraud, misrepresentation and mismanagement; it should
also provide market operators with a ‘level playing field’;

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beyond that, regulation needs to be flexible and avoid
unnecessary intervention. Regulatory frameworks must be
sufficiently flexible to address new developments and keep
pace with rapidly-changing technologies but at the same time
they must be stable and predictable.

In particular, regulation should not inhibit the devel-
3.5.1.
opment of the market, or place European businesses or citizens
at a disadvantage in seeking to harness the full potential of the
market to create jobs and improve standards of living.

Effective regulation must

3.5.2.
involve an element of
deregulation; simplification cannot be achieved merely by
replacing old regulations with new regulations; what is needed
is a complete rethinking of the regulatory framework.

Regulatory objectives should be clearly defined in
3.6.
law. They should be designed to
Community or national
promote consumers’ interests through effective competition
and, where appropriate, to ensure universal service provision.

It is now essential to bring about real results in the
3.7.
sphere of regulatory simplification at the European, national
and local levels. The work must not be limited to declarations
of principle. A change of culture and a new regulatory climate
are needed.

3.8.
The EU’s current focus on the broadening of member-
ship makes even more urgent the need to simplify the Union’s
regulatory structure.

4. Alternative forms of regulation

4.1.

Regulation may take one of three forms:

— statutory regulation;

— co-regulation; and

— self-regulation.

All three forms may co-exist in the same market and it
4.2.
is probably more meaningful
to view co-regulation and
self-regulation as complementary approaches rather than as
alternatives to statutory regulation.

4.3.
A clear example is provided by the liberalisation of
markets that were formerly dominated by a monopoly sup-
plier, usually State-owned. In the early stages of liberalisation,
a high degree of regulation and government supervision is

often required. To an extent, this regulation is a substitute for
competition. One of the principle objectives of such regulation
should be to ensure fair and effective competition in the
marketplace and, more importantly, to promote competition,
although in doing this, steps must be taken to guarantee the
supply to all citizens of important services, as described, for
instance, in the concept of universal service for services of
general interest.

4.3.1.
Once fair and open competition has been established
between a number of independent market operators, the
consumer is protected against over-pricing, discrimination and
unfair market practices by the force of competitive pressures;
companies can only improve their market position by offering
better services, wider choice and lower prices.
In these
circumstances, greater reliance can be placed on the general
competition rules of the Treaty and the regulator can gradually
withdraw in favour of market
forces, ultimately limiting
regulation to areas where policy objectives cannot be achieved
solely by competition. This may lead to self-regulation or co-
regulation.

4.3.2.
Self-regulation is voluntary and is based on cooper-
ation between all interested parties, incorporating Community
rules governing agreements between the parties, where appro-
priate. The New Economy is characterised by rapid technologi-
cal change, swift market evolution and increasing globalisation.
In this fast-moving environment, self-regulation can be a
powerful tool. The Commission has consistently advocated
self-regulation as a flexible, efficient and cost-effective alterna-
tive to regulation in many areas. The Committee agrees with
this approach provided that certain conditions are met. Self-
regulation does not equate to self-enforcement; it must be in
conformity with, and backed by, the law; it must be founded
in a community of interest between Business and the Public; it
must be enforceable, verifiable and auditable; it must also be
effective, with clear means of recourse, particularly across
borders. Self-regulation is not a panacea (nationally-based self-
regulation may, in some instances, add barriers to the free
circulation of services and regulations imposed by business
associations can have an adverse impact on firms which are
not members of the association, particularly SMEs) but in the
right conditions it can be a useful
to avoid
cumbersome law-making.

instrument

4.3.3.
Co-regulation combines the elements of legislation,
more especially in its predictable and binding nature, with the
more flexible regime of self-regulation. It implies taking self-
regulation one step further in a cooperative approach to
governance. It limits public intervention to what is essential
and leaves Business the greatest possible choice in how to

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meet its obligations. Rather than mere co-existence of self-
regulation and regulation, it involves the sharing of responsi-
bilities between public and private partners. This has already
been used in various fields. These include:

improving the working of the Single Market in facing the
three-fold challenge of widening, deepening and globalisation.

— the ‘New Approach’, where the essential requirements are
laid down in a framework directive,
leaving market
operators to decide for themselves how best to meet their
obligations; a key factor of these essential requirements is
that they are technology neutral;

— the possibility, introduced by the Maastricht Treaty, of
using agreements between the social partners (on their
own initiative or after consultation by the Commission)
as an alternative method of regulation in fields concerned
with working conditions and access to work.

4.3.3.1.
The challenge for co-regulation is to define, main-
tain and preserve policy goals while allowing for greater
flexibility in the regulatory framework. In order to do this, it is
firstly necessary to identify areas where co-regulation will
work best. Secondly,
there is a need for comprehensive
responses; piecemeal solutions will not work. Finally, it is
necessary to move quickly; the pressures of globalisation will
not permit the adoption of a relaxed time-scale.

4.3.3.2.
A colloquium on co-regulation in the Single Mar-
ket, held in Brussels on 3 May 2001 under the auspices of the
Committee’s Single Market Observatory, concluded that the
co-regulation processes emerging in the Single Market still
differ substantially. In some areas (standard-setting, social) they
are well thought-out, structured and tested at European level;
in others (consumer affairs, environment, financial services)
they are still in the early stages, haphazard and decentralised,
despite having considerable development potential.

4.3.3.3.
Generally, these practices have the advantage of
simplifying rules, taking the strain off the legislative machinery,
speeding-up adjustment to change and fostering co-responsi-
bility among economic and civil-society actors. To be success-
ful they require margins for manoeuvre by Business and
organised civil society, partnership with the public authorities,
representative players,
effective
implementation and stringent monitoring of their impact and
follow-up, including by public authorities.

transparent procedures,

4.3.3.4.
Diversified co-regulation approaches involving the
socio-economic groups can make a valuable contribution to

4.4.
Another alternative to regulation is no regulation,
where the responsibility is left to the market. While this
is an
solution would not be appropriate in all cases,
alternative that should not be entirely overlooked. The first
question to ask in respect of any legislative proposal is, ‘Why
is any legislation necessary at all?’ This is an issue that
the Committee could address in its opinions on legislative
proposals. The same question should be applied to the
introduction of co-regulation and self-regulation systems.

it

4.5.
The impact of any regulatory regime, whether it be
statutory, co-regulatory, self-regulatory or an amalgam of
these, will be negative in terms of trade if it is not uniform and
uniformly applied. Nothing is more destructive of business
activity than a climate of legislative uncertainty.

5. Simplifying existing legislation

5.1.
The simplification and systematic updating of existing
legislation should ensure that the current corpus of legislation
the
is always appropriate to its objectives. To this end,
Commission intends to:

— rapidly assess any feedback indicating excessively com-

plex and unjustified situations;

— lay down a multi-annual plan for simplification action,
updated regularly and applying politically-binding time
scales as agreed by the various institutions;

— propose an agreement between the institutions with a
view to laying down the principles of simplification
and entering into a political commitment to speed up
legislative work to this end;

— systematically introduce a simplification element in any
periodic review of directives or regulations currently in
force;

— build on action already undertaken with regard to
codifying, recasting and consolidating existing instru-
ments (and systematically and rapidly publish the consoli-
dated texts)
for information purposes, whenever an
amendment is made.

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5.2.
The Committee approves these measures in principle
but fears that they will not be sufficient, in themselves, to
bring about the dramatic improvement in the status quo that
is so obviously needed. The current acquis communautaire
runs
to more than 80 000 pages, comprising nearly
10 000 legal instruments of nine different types, and is of
such a degree of complexity that only specially-trained and
experienced lawyers can grapple successfully with its labyrin-
thine content. This not only imposes a heavy burden on
businesses within the existing Member States but is creating
an almost insupportable situation for the candidate countries
since, in many cases, the rate of accretion of new legislation is
greater than the rate at which they are capable of transposing
the existing acquis.

General recommendations; the former are legally binding; the
latter are not but, in practice, they are accorded considerable
importance, even by the courts. In aggregate, there are some
7 000 major regulatory instruments in the above categories
comprising about 40 000 pages of text; of these, around 8 %
are linked to the EU. The rate of accretion of new and amended
legislation is running consistently at around 5 000 pages per
annum; of this, some 80 % comprises amendments to existing
legislation rather than ‘new’
In other words,
businessmen and their advisors have to absorb 5 000 pages of
new legislative requirements and ‘unlearn’ 4 000 pages of
existing legislation every year. These numbers are much higher
in some other Member States.

legislation.

The Committee is concerned that,

if the review of
5.3.
existing legislation is only to be triggered by feedback from
the marketplace, the process is likely to be haphazard and
ineffective. What is required is a thoroughgoing, root and
branch overhaul of all existing legislation. The guiding prin-
ciple of
this review should be that, unless a clear and
compelling case can be made for the retention of each
individual legislative instrument in the public interest, it should
be repealed forthwith.

It

is not sufficient, however,

5.4.
to remove obsolete
regulation. Even where legislation is clearly still required, it
does not follow that it should take the form of the present
statutes. Community legislation has evolved in a piecemeal
fashion with existing legislation being amended to adapt
to changing circumstances. This has led to multitudinous
amendments to some Directives and, each time the situation
changes, new impositions are bolted on to an already complex
structure. This has resulted in legislative instruments which are
complicated, confusing and, sometimes, contradictory.
In
many cases where Directives are not repealed it will be
necessary to carry out a fundamental rewriting in order to
restore clarity, coherence and conciseness to the legislative
structure, in which, however, the consequences of changes
to social and environmental standards must be examined
carefully.

6. The Swedish experience

6.1.
In any exercise of this sort, it is instructive to examine
best practice and Sweden is one of the Member States that has
made a systematic approach to the problem of simplifying
legislation.

the top,

An examination of the regulatory framework in Swed-
6.2.
en is instructive. At
there are Laws passed by
Parliament; these currently number slightly in excess of 1 000.
Below these, come Ordinances issued by government, of which
there are estimated to be more than 2 000 in force. Below
these, come the regulatory instruments of the central-govern-
ment agencies, which are divided into Official regulations and

6.2.1.
Below these major regulatory instruments are three
further categories of regulation; regional government regu-
lations, municipal regulations and collective agreements. The
latter are negotiated by the social partners. These subsidiary
regulations should not be overlooked nor their importance
under-estimated.

6.2.2.
from the Swedish figures:

There are three important conclusions to be derived

— the rate of accretion of new and amended legislation at

government level is around 12.5 % per annum;

— the proportion of legislation attributable to EU inter-

vention is relatively low;

— the volume of legislation increases the lower one goes in

the legislative hierarchy.

6.2.2.1.
Although these figures relate specifically to Swed-
en, it is most probable that this picture will be reflected, with
relatively minor local differences, in the other Member States.
In particular, the ratio of EU-generated legislation to domestic
regulation is likely to be similar across the board.

6.3.
Towards the end of the 1980s, Sweden embarked
upon a rationalisation of the sets of agency regulations. Special
codes of statutes, now 55 in number, were organised in the
central agencies to produce an orderly system and make the
regulations more easily accessible to the Public and Business.

showed that

The Swedish experience

6.3.1.
central
ambitions for simplification on the part of the government
and Parliament will be largely fruitless unless the agencies
themselves take an interest in the matter. Another lesson
which was learnt from this process was that a central initiative
has meagre prospects of success without leadership being
placed at the very top of the hierarchy. It also demonstrated
that it is essential to set specific targets.

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6.4.
Framework legislation has been an increasingly
important phenomenon in recent years. While this has demon-
strated clear advantages compared to the excessively-detailed
legislation of former years, particularly in the context of rapid
technological advances, it has had a downside in that it has
resulted in a proliferation of legislative instruments at a lower
level. For example, the Swedish Food Act, a modest law of
35 sections running to just six pages, has spawned more than
100 agency statutes, totalling more than 1 800 pages.

7.4.
The Committee undertook to establish dialogues with
the European economic and social players, the Committee of
the Regions and the economic and social councils in the
Member States in order to contribute to the success of the
simplification process. Such dialogues do not yet exist in any
structured format, but the Single Market Observatory intends
to initiate a series of visits to national Economic and Social
Councils in the next year, at which the question of simplifi-
cation will be the topic of discussion. Preliminary contacts
have also been made with the Committee of the Regions.

Sweden has taken measures to relieve the burden of
6.5.
regulation on SMEs by exempting, or partly exempting them
from the need to comply with certain regulations or relaxing
the degree of compliance required. Similar measures have been
taken in the United States, where they have been very effective
in encouraging entrepreneurial activity. Contrary to popular
conception, the United States is a highly-regulated society but
the Small Business Administration (SBA) has acted to reduce
the burden of regulation, particularly on the micro-businesses.

6.5.1.
This example might well be adopted on a wider basis
in Europe. Obviously, there will be some regulations from
which no exemptions can be permitted but many regulations
bear with disproportionate severity on micro-businesses and
act as a deterrent to their formation; in such cases, a degree
of relaxation could be justified without under-mining the
principles behind such legislation.

7.5.
The Code of Conduct observed that, while being
broadly supportive of Commission initiatives for simplifi-
cation, the Committee rarely proposed simplification on its
own or put forward simpler alternatives to the Commission’s
proposed line of action. Regrettably, that is still the case.

7.6.
It is clear that the Committee, as well as the Com-
mission, the other institutions and the Member State govern-
ments, need to take more positive action in this field.

8. Some regulatory issues

7. The Economic and Social Committee’s Code of

Conduct

The subject of regulatory simplification is as complex
8.1.
as the nature of the problem with which it seeks to deal and
raises a number of conflicting issues.

7.1.
The promotion of simplification was boosted by the
initiative taken by the ESC in developing and adopting a Code
of Conduct. In order that that momentum is not lost, it is
essential that the Committee focuses greater attention on the
implementation of this Code.

7.2.
One of the key elements of its Code of Conduct was to
introduce systematic monitoring of the impact assessment for
each piece of draft legislation but few of the opinions which it
has issued in the interim have focused on that issue.

The Committee agreed to draw the attention of the EU
7.3.
institutions to the possible need to steer EU rules towards an
approach based on contractual agreements, self-regulation and
co-regulation. To this end, the Committee’s Single Market
Observatory organised a colloquium in May 2001, which was
attended by representatives of five Directorates General of the
European Commission and other European institutions.

8.2.
The question of framework legislation is a case in point.
There can be no doubt that detailed and over-prescriptive
legislation is out of place in a rapidly-evolving marketplace
where the pace of technological change threatens to render
legislation obsolete almost before it is enacted. This leads to a
need for constant updating and amendment of the statutes,
which creates a climate of legislative uncertainty and frequently
results in legislative instruments that are so complex as to be
virtually incomprehensible. In this context, legislation should
be couched, as far as possible, in general terms which are
better able to adapt to new developments.

8.2.1.
However, the principle behind framework legislation
is that businesses should enjoy freedom within the limits laid
down; this principle is violated if framework legislation at the
European level is interpreted in different ways by national
legislation or framework legislation at national level is filled in
by agency or local regulations. Framework regulations are
preferable if they provide the flexibility to cope with rapid
change and give companies freedom of action within predeter-
mined limits but can be harmful
if they merely shift the
regulatory power from the political sphere to a lower level.

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8.3.
Another case in point is the question of subsidiarity. It
is widely accepted that the principle of subsidiarity should
form the basis of all regulatory efforts. Accordingly, the EU
must regulate nothing that can be regulated nationally or
resolved in some other way than by regulations; similarly,
nothing should be regulated by a Member State centrally that
can be better managed at regional or municipal level.

European Communities, where the present publication system
appears unnecessarily complicated and difficult to overview.
This should be supplemented by making the whole of the
acquis available on a special web-site, highlighting changes to
the legislation as they occur.

legislation should be enacted at national

8.3.1.
In practice, the application of this principle gives rise
to considerable difficulties for businesses and Member State
administrations alike. Where the subsidiarity principle dictates
that
this
frequently leads to substantial differences in the way in which
the legislation is framed within each Member State. The same
is true,
to an even greater extent, of regulatory powers
exercised at the local level. Thus, the principle of subsidiarity
can lead to businesses being confronted by conflicting legis-
lation on the same subject in different Member States and even
within the same Member State. Subsidiarity and diversity go
hand in hand.

level,

8.3.2.
It is arguable that the requirement for uniformity in
the Single Market should lead to the application of the
subsidiarity principle resulting in a much greater proportion
of legislation being enacted at the European level than is
presently the case. Moreover, such legislation should be framed
in such terms that it could not be substantially modified in the
process of incorporation at the national or local level. After
all, it should not be forgotten that one of the intrinsic aims of
EU legislation is to simplify things by harmonising and
unifying the fifteen different sets of rules in the Member States
in order to enable the Single Market to operate effectively.

8.4.
Another issue which is germane to this subject is that
of enforcement. Even in those, relatively few, areas where there
is conformity of legislation between Member States, there are
frequently widespread disparities in the level of enforcement.
Again, this creates distortions of competition in the Single
Market.

8.5.
One of the key elements in effective legislation is
accessibility. Businesses and other users of legislation need to
know where they stand under the law and should be able to
obtain access to the body of legislation without undue difficulty
or expense. It is an unfortunate fact that the acquis is not only
difficult to grasp but relatively inaccessible. The first problem
could be tackled by identifying a ‘core acquis’ comprising the
fundamental elements of the approximately 1 200 Directives
and Regulations issued by the Council and the 2 500 associated
directives and regulations issued by the Commission. It would
also be beneficial to initiate a process of codification similar to
that which has been carried out in Sweden. The second
problem would require a review of the Official Journal of the

8.6.
The proportionality principle is also of fundamental
importance. In the regulatory sphere, this principle requires
that no greater burdens are laid on Business than can be
genuinely justified on the basis of public interest. It should,
therefore, be an essential prerequisite of the introduction of
any piece of legislation at European, national or local level that
the proposers should be required to demonstrate clearly that it
is necessary in the public interest. The same test should be
applied in the review of existing legislation.

8.6.1.
There is a need for regulations to be relevant and
unambiguous. Unfortunately, this is not always the case at the
European level and tends to be even less so in the lower levels
of the legislative hierarchy. Regulations that are seen to be
required to meet a specific case are frequently ‘tacked on’ to
existing regulations which were not originally conceived for
that purpose. This creates instances where it is unclear, even
to experts, whether a given set of circumstances is governed
by one part of a regulation or by another part of the same
regulation, or by a different regulation or not at all. Such lack
of clarity is inimical to the interests of all the parties concerned,
Business, the Public, national administrations and European
institutions.

8.7.
The Committee believes that there is a pressing need
for a review of existing legislation and the setting out of
guidelines for the introduction of new legislation. The question
arises of how and by whom this review should be conducted.
The Swedish experience has shown that the best results are
obtained under the following conditions:

— when the agencies concerned are involved in the process;

— when leadership of the process is placed at the very top

of the political hierarchy;

— when there is active dialogue between agencies and

markets; and

— when specific targets are set.

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However, it is perhaps unrealistic to expect civil servants to be
the prime movers in the process of reducing and rationalising
legislation; their involvement is essential but the impetus must
come from another source and that source can only be political
but political leaders have many other demands on their time
and many other responsibilities to fulfil.

In its previous opinion on this subject (1), the Com-
8.7.1.
mittee drew attention to the need to make impact assessments
more independent and to enhance their quality by ensuring
adequate funding, use of the right of initiative, use of the
right methodologies and effective consultation of the socio-
economic players directly concerned. One way in which it felt
that this could be achieved would be for the Commission to
entrust the impact assessments to an external body having the
requisite qualifications and meeting the necessary criteria of
independence.

8.7.2.
The Committee believes that this should take the
form of a permanent body at European level, which could also
be charged with monitoring the simplification review process.
In order to ensure an active dialogue between agencies and
markets, the review body should contain representatives of
Business, in addition to representatives of the Commission, the
agencies and the other socio-economic players. This is a
shortcoming in the existing process. The EU has been meticu-
lous about allowing representation on drafting bodies for all
national agencies but spokesmen for the markets have been
nowhere near as well represented. Businesses are the ‘con-
sumers’ of legislation and it is as essential for them to be
directly represented on the review body as it is for the agencies.
They are, after all, best placed to assess the impact of legislation
on their activities. Ideally, this body should be replicated at
national level to perform the same function on the much
greater mass of national legislation. Obviously, it would be
desirable for close contact to exist between the European body
and its national counterparts. The national bodies could
perform the additional function of testing national laws for
their compatibility with EU legislation.

8.7.3.
the following functions:

In addition, this body could perform some or all of

— identifying existing legislation for inclusion in the SLIM

initiative;

— setting out guidelines for the introduction of new legis-

lation;

(1) OJ C 14, 16.1.2001, p. 1.

— setting targets for legislative reduction;

— codifying the acquis communautaire;

— formulating impact assessments;

— market surveillance;

— conducting ex-post evaluations of the effects of legislative

instruments in practice;

— taking over the work of the European Business Panels;

— monitoring the progress of the Business Environment

Simplification Task Force; and

— co-ordinating the various existing simplification initiat-
ives (SLIM, BEST, test panels, impact assessments).

8.8.
A measure which would greatly facilitate the work of
this body and make a major contribution to the long-term
simplification of the regulatory structure would be for all new
regulations (including existing regulations which it is decided
to retain as a result of the review process) to have a finite life,
at the end of which they would automatically expire unless
renewed (so-called ‘sunset legislation’). This would ensure that
these regulations were brought forward for review on a
systematic basis and that the rationale behind their existence
would be re-examined to establish whether there was an
ongoing justification for their retention. The period of finite
life need not be the same for all legislative instruments; some
might be introduced for a period of, say, seven years while
others, by their nature, might have a shorter life. A similar
process should be instituted at national level.

8.9.
The simplification process needs to be speeded up
dramatically in order to facilitate the enlargement of the
Union. An unnecessary burden is being imposed on the
candidate countries in their attempts to transpose the acquis
by the inordinate complexity of a large proportion of European
legislation. Furthermore, if this situation is not rectified prior
to their admission, their businesses, and particularly their
SMEs, will have to bear the burden of the additional and
unnecessary costs which are currently being imposed on their
counterparts in the Member States. These costs will weigh
more heavily on businesses in the candidate countries than on
those in the Member States by virtue of the fact that they are
operating in economies which are much less developed.

8.10.
The complexity of existing legislation also raises
issues concerning the rule of law. Ignorance of the law is no
excuse and many small businesses are in danger of being
forced to operate on the wrong side of the law because they
find it impossible to determine the nature and extent of their

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legal obligations. The complexity of the legislation has resulted
in a situation where the interpretation of the more arcane
issues involved has become the preserve of a few highly-
specialised lawyers who, because of their scarcity and expertise,
command exorbitant fees which puts their services beyond the
reach of all but the largest organisations.

allow anonymous agencies to assume regulatory powers
undermines the legitimacy and acceptability of the regulatory
process. It is also the case that the process of producing
subsidiary regulations often lacks transparency.

8.11.
is composed as follows:

There is an extended hierarchy of legislation, which

European level:

Council Regulations
Council Directives
Commission regulations
Commission directives

National level:

Transposition of EU legislation
National laws
Government ordinances

Central government
agencies:

Official regulations
General recommendations

Subsidiary legislation:

government

Regional government regulations
regu-
Municipal
lations
Collectively-agreed regulations
Local government laws and bye-
laws
Local government agency regu-
lations

In addition, there are regulations emanating from international
bodies such as the WTO and ILO and from international
agreements, both bilateral and multi-lateral.

8.11.1.
In many, if not all, Member States the volume of
regulation increases the further down in the regulatory hier-
archy one goes. Moreover, the application of regulatory powers
is frequently more severe and more inconsistent at these
lower levels. The burden of legislation, particularly for SMEs,
therefore, impacts businesses most severely at the municipal,
local and regional levels. It is exacerbated by the differences
between the Member States in business customs and practices
which, while they do not have the force of law, are nevertheless
arbitrarily applied in many instances.

One of the reasons for the complexity of European
8.12.
legislation is the substantial and sometimes conflicting amend-
ments which are made to legislative proposals in the Parliament
and the Council in an attempt to achieve consensus. While the
Committee has no solution for this problem, it would point
out that there is a correspondence between consensus and
complexity. In addition, impact assessments are carried out on
the basis of the Commission’s proposals and are not necessarily
relevant to the resulting legislation, which may differ consider-
ably from the original proposal.

9. The role of the Economic and Social Committee

In its previous opinion (1), the Committee recognised
9.1.
the important role which it, as the only assembly representing
the full range of ‘users’ of regulation, had to play in the
formulation and monitoring of a new European policy on
simplification; it called upon the Commission to enable it to
exercise this role more effectively by:

— consulting it, wherever possible, at an earlier stage in the
procedure so that the added value provided by the
Committee’s advice on simplification is not seriously
compromised;

— in particular, to consult it each year, on the occasion of
the presentation of the Commission’s annual indicative
programme of referrals to the Committee, on the prep-
aration of the report for the Spring European Council on
progress with simplification;

— to directly involve it in discussions on improving and

strengthening the impact assessment.

9.1.1.

The Committee now reiterates these requests.

9.1.1.1.
For its part, the Committee undertakes to be more
active in implementing the provisions of its own Code of
Conduct.

8.11.2.
The impact of subsidiary regulation should be
viewed not only in terms of the cost and bureaucratic burden
for Business, but also from the standpoint of democratic
legitimacy. Subsidiary regulations are often produced without
any real legal basis. The fact that parliaments and governments

(1) OJ C 14, 16.1.2001, p. 1.

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10. Conclusion

There are few new ideas in this opinion. The simplifi-
10.1.
cation process does not need new ideas; what it needs is the
effective implementation of the ideas which have already been
expounded by the Committee itself, by the Commission, by

Brussels, 29 November 2001.

the Lisbon European Council, by the Molitor Report and by
numerous other concerned bodies. While the Committee
acknowledges that it is often simple to complicate matters and
complicated to simplify them, it would observe that there is
no point
in talking about commitments if we are not
prepared to implement them and it is futile to introduce new
commitments when the existing ones are not being met.

The President

of the Economic and Social Committee

Göke FRERICHS

Opinion of the Economic and Social Committee on the ‘Proposal for a Regulation of the European
Parliament and of the Council on cross-border payments in euro’

(2002/C 48/29)

On 25 September 2001, the Council decided to consult the Economic and Social Committee, under
Article 262 of the Treaty establishing the European Community, on the above-mentioned proposal.

The Section for Economic and Monetary Union and Economic and Social Cohesion, which was
responsible for preparing the Committee’s work on the subject, adopted its opinion on 12 November
2001. The rapporteur was Mr Burani.

At its 386th plenary session of 28 and 29 November 2001 (meeting of 29 November) the Economic and
Social Committee adopted the following opinion by 38 votes to one, with two abstentions.

1.

Introduction

1.1.
The draft regulation is intended to ‘reduce bank charges
for cross-border payments in euro to a level in line with those
applying at national level ... it will at last enable individual
European consumers to become active participants in the
Internal Market, ensuring that individual consumers are able
to benefit from increased price transparency and choice.’

cross-border payments to be unacceptable, and on the other
the banks who cited economic, technical and organisational
reasons for the differences in price between domestic and
international transactions. Although it has adopted measures
of various kinds (see points 2.9 to 2.14 below), the banking
sector has been unable to respond fully to expectations: hence
the draft regulation which the Commission has drawn up to
solve the problem definitively.

1.2.
The Commission’s initiative is the final stage in a
dialogue between Commission, banks and consumers begun
more than a decade ago: on the one hand the Commission and
the consumers who judged — and still judge — the costs of

1.3.
The Committee agrees with the aim of the regulation
— that transfer costs for sums expressed in a single currency
in the countries of the European Union should be reduced to
levels which are compatible with a single market without
borders.