Opinion of the Economic and Social Committee on the "Request by the European Commission for the Committee to draw up an exploratory Opinion on the Communication from the Commission — simplifying and improving the regulatory environment" (COM(2001) 726 final)
Date: 2002-03-21
Institutions: European Economic and Social Committee
Subjects: EU law, drafting of EU law, simplification of legislation

27.5.2002

EN

Official Journal of the European Communities

C 125/105

Opinion of the Economic and Social Committee on the ‘Request by the European Commission
for the Committee to draw up an exploratory Opinion on the Communication from the
Commission — simplifying and improving the regulatory environment’

(COM(2001) 726 final)

(2002/C 125/20)

On 10 January 2002, the President of the European Commission, Mr Romano Prodi, requested the
Economic and Social Committee, under Article 262 of the Treaty establishing the European Community,
to draw up an exploratory opinion on the ‘Communication from the Commission — simplifying and
improving the regulatory environment’.

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 1 March 2002. The rapporteur was
Mr Kenneth Walker.

At its 389th plenary session on 20 and 21 March 2002 (meeting of 21 March) the Economic and Social
Committee adopted the following opinion by 56 votes in favour, one vote against, with one abstention.

1.

Introduction

form of higher prices. Citizens need to be assured that they are
getting value for money. At present, that is patently not the
case.

1.1.
Regulation plays an important role in achieving the
objectives of the European Union included those embodied in
the European social model. It creates many benefits for the
Public and Business. Regulations are needed to improve public
health and safety, to protect the environment, to meet social
objectives, to ensure the universal provision of essential public
services and to safeguard consumers. They also assist in
promoting competition, establishing a ‘level playing-field’
between businesses, avoiding market distortions and creating a
climate of legislative certainty in which public administrations,
businesses and consumers can operate. Regulation also has a
role to play in reconciling the sometimes conflicting interests
of different stakeholders.

1.2. Moreover, this is only half the story; the figures quoted
above do not take account of the effect of the costs of
regulation on public administrations or the costs of economic
inefficiencies arising from poor regulation, e.g. higher prices
and lower-quality products and services resulting from reduced
competition and less innovation. On this basis, the Com-
mission has estimated that the cost to society of poor-quality
regulation could be of the order of 10 % of GDP. Small
wonder that the Commission describes an improved regulatory
environment as being,
‘a prize well worth claiming’. High
quality regulation would also assist in restoring confidence in
government and institutions in general.

However, such benefits come at a price. The latest
1.1.1.
survey of business opinion, undertaken for the European
Commission (European Commission, Internal Market Score-
board No 9, November 2001, http://europa.eu.int/comm/
internal–market) estimates that European companies could
save at least EUR 50 billion with better quality regulation. This
is equivalent to a reduction of 15 % in the compliance costs
incurred by companies. By extrapolation, that puts the total
compliance costs for Business at more than EUR 330 billion
per annum. Moreover, these estimated savings are based on
the status quo. As the Commission itself says,
‘A higher
quality regulatory environment will most likely unleash a new
economic dynamism whose benefits will undoubtedly be even
higher.’

These costs for companies represent, in effect, an
1.1.1.1.
additional burden that they are required to bear. As with any
other impost, it is inevitably passed on to the consumer in the

2. Progress to date

2.1.
The Edinburgh European Council of December 1992
made the task of simplifying and improving the regulatory
environment one of the Community’s main priorities. At the
Lisbon European Council of March 2000 the European Union
set itself the mission of becoming 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. There, and at Santa Maria de Feira
in June 2000, the important role that better regulation must
play in achieving this was clearly established. The call for a
strategy for further co-ordinated action to simplify the regulat-
ory environment was subsequently confirmed and extended
by the European Councils of Stockholm and Gothenburg.

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2.1.1.
The Lisbon Council specifically asked for the issue of
simplification, both at the European level and in Member
States, to be addressed in 2001. So far, the results of this
exercise have been disappointing. There is little evidence of
any substantive progress in the Member States and the
Commission is twelve months behind schedule. These delays
are particularly unfortunate in view of the imminence of
enlargement, the present timescale for which envisages the
admission of ten candidate countries in time for the 2004
elections to the European Parliament.

In the interval between the Edinburgh and Lisbon
2.2.
summits,
little was achieved in the way of improving the
regulatory environment. In 1995, the Molitor Report set out
eighteen general recommendations. The Committee endorses
these proposals and regrets that so little has been done in the
intervening period to implement them.

2.3.
In May 1996, the SLIM (Simpler Legislation for the
Internal Market) initiative was launched, with the objective of
identifying ways in which internal market legislation could be
simplified, but the results have been extremely limited. Its
application has been haphazard and ineffective and its impact
has been muted. One reason for this is that the Council and
the Parliament have frequently failed to follow through on
Commission proposals to amend legislative instruments. Too
often, the necessary follow-up action by the Member States
has not been implemented. A recent report on the outcome of
the fifth phase of the SLIM initiative (European Commission
Staff Working Paper, Simpler Legislation for the Internal
Market, SEC(2001) indicated that only five Member States had
taken initiatives to simplify national legislation based on the
Community Regulations/Directives reviewed during the fifth
phase and in most of these cases it had not been possible to
identify or quantify the cost savings to users. This is clear
evidence of the need to improve the methodology of post hoc
assessments.

Since the Lisbon Council

2.4.
there have been several
moves to step up the pace of simplification. The European
Economic and Social Committee issued an own-initiative
Opinion on the subject in October 2000 (1) and a follow-up
Opinion in November 2001 (2). In November 2000, a high-
level advisory group was set up by the ministers for the
national civil services to advise on all aspects of this problem;
this group delivered its report, the Mandelkern Report, in Nov-
ember 2001. In December 2001, the Commission issued a
Communication (3) to the Laeken Council on simplifying and
improving the regulatory environment.

The Communication from the Commission to the
2.5.
includes a rec-
Spring European Council
ommendation that the European Council should endorse on-
going action to finalise by June 2002 an action plan for
improving and simplifying the regulatory environment.

in Barcelona (4)

3. The Commission Communication to the Laeken

Council

4. The Mandelkern Report

5. The Economic and Social Committee’s Opinions

The Committee’s Opinion of October 2000 (4) stressed
5.1.
‘the urgent need to embark on a process of simplifying
regulations in the single market, whilst also improving the
quality of their provisions, their incorporation into national
law and the freedoms and responsibilities of the civil society
players.’

5.1.1.
It called upon the Stockholm European Council 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 monitor-
ing and follow-up action; the implementation of this plan
should be reassessed each year at the Spring European Council
on the basis of a Commission report.

5.1.2.
The Opinion proposed that this plan provide for the
adoption of codes of conduct by the EU institutions, ensuring
that they help to promote the simplification of rules rather
than making them more complex. The Commission should set
an example and Member States and their administrations
should be encouraged to adopt their own codes of conduct.
The Committee led the way by setting out its own Code of
Conduct in the opinion.

(1) OJ C 14, 16.1.2001, p. 1.
(2) OJ C 48, 21.2.2002.
(3) COM(2001) 726 final, 5.12.2001.

(4) COM(2002) 14 final.

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5.1.3.
the Com-
The Opinion also recommended that
mission should entrust the impact assessments to an external
body having the requisite qualifications and meeting the
necessary criteria of independence.

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

The Committee’s Opinion of November 2001 (1)
5.2.
developed this idea of an independent expert body to review
the regulatory process. The Opinion made the following
concrete proposals for the improvement of
the existing
regulatory environment:

— 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 pro-
ducing a ‘core acquis’ and bringing about some semblance
of external order and rationalisation by the introduction
of a codification process on the Swedish model.

5.2.1.
The Committee now reiterates these proposals and
feels that they should form the basis of a systematic and
comprehensive approach to achieving better regulation at all
levels.

The Opinion established that there is a legislative
5.3.
hierarchy of European Regulations and Directives, transposed
Community legislation in national
laws and
government ordinances, agency regulations, regional and local
regulations and collective agreements. The lower one goes in
this hierarchy, the more the volume of legislation increases, the
more its transparency diminishes, the more its accountability
declines and the greater the extent to which it becomes
complex, conflicting and arbitrary.

law, national

5.4.
The Opinion also pointed out that framework legis-
lation 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 subsidiarity.

5.5.
The Opinion argued that, ‘the simplification process
needs to be speeded up dramatically in order to facilitate the
enlargement of the Union’. The Committee would wish to
emphasise the importance of this issue. By the time that an
action plan for improving and simplifying the regulatory
environment has been finalised in June 2002, assuming that
this deadline will be met, barely two years will remain before
the planned admission of the first tranche of new Member
States.

— The accessibility of the acquis should be improved by
reviewing the Official Journal and making the acquis
available on-line.

6. General comments

— Alternatives to regulation should be sought, wherever

possible.

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

proposals.

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

(1) COM(2002) 14 final.

6.1.
The Committee agrees with the Commission that the
task of simplifying the regulatory environment requires a
multi-agency approach and close cooperation and coordi-
nation between all the actors involved at the EU and Member
State levels.

6.1.1.
Despite the commendable intention of the Com-
mission to tackle this problem effectively, the Committee
seriously doubts whether the political will exists at all levels to
enable this to be carried through with the necessary degree of
determination. The history of cooperation, or lack of
it,
between Member State administrations in other areas, such as
tax fraud, does not auger well for the success of this venture
unless it is driven by a strong unifying force.

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6.1.1.1.
The Commission is correct in saying that there is a
need to inculcate new habits and working methods and to
develop a new administrative and political culture. This will be
difficult enough at
the European level but will become
increasingly difficult as one descends through the legislative
hierarchy. In particular, the practice of some Member State
administrations permitting anonymous, and largely unac-
countable, agencies to assume regulatory powers would have
to be discouraged.

The Committee approves the Commission’s plan to
6.2.
simplify and reduce the volume of the acquis communautaire,
which is in accord with the recommendations made by the
Committee in its two Opinions. The Committee particularly
welcomes the Commission’s intention to achieve a reduction
of 25 % in the volume of the existing texts by the end of its
current mandate. It considers that a target date should be set
for completing this process by the end of the following
mandate in 2010. This should serve to improve the quality of
the texts as well as reducing their volume, a consideration
which is of equal, if not greater, importance. The Committee
also agrees with the plan to withdraw proposals which have
not been legislated on and which are no longer of topical
interest. It would welcome a similar initiative on the part of
Member States.

The Committee considers that the process of simplifi-
6.2.1.
cation requires the application of criteria on which decisions
can be based, e.g. social and environmental standards or
concerns. These criteria should be agreed by a process
involving all the relevant actors.

6.3.
The Committee welcomes the Commission’s commit-
ment to strengthen and intensify the consultation process. It
believes that this can best be done by extending the consul-
tations to as wide a constituency as possible. In particular, it
considers that procedures should be put in place to widen
the consultation process with the representatives of small
businesses and other sections of society which are currently
under-represented.
In addition to the formal consultation
process with selected interlocutors, the Commission should
invite submissions from any interested party; consultation
should, in effect, be at the option of the consultee. This process
should be carried out prior to publishing the legislative
proposal and clear deadlines should be set for the submission
of representations.

6.3.1.
The transparency of the consultation process would
be greatly enhanced if, at the time of producing the legislative
proposal, the Commission were to publish a statement of the
representations that it had received and the extent to which
they had been taken into account.

tion that it does not constitute an attempt to by-pass the
legislator’s prerogative or to evade regulation. This was also
the conclusion of a hearing on co-regulation, which the
Committee’s Single Market Observatory organised in May
2001.

6.5.
The Committee approves the Commission’s intention
to set up an internal legislative network to promote good
practice and accepts that it would be necessary to set up a
parallel inter-institutional network to monitor the legislative
its
quality of texts. The Committee feels that,
Opinions should also comment on the legislative quality of
the Commission’s proposals.

in future,

6.6.
The Committee agrees with the Commission on the
need for Member States to ensure that Community acts are
transposed into national legislation correctly and within the
set deadlines. The Commission’s Internal Market Scoreboard
(No 9, November 2001) highlights the extent to which this
is not taking place. The Committee attaches considerable
importance to improving performance in this area.

The Committee broadly endorses the recommen-

6.7.
dations of the Mandelkern Report.

7. Regulatory Impact Analysis

7.1.
The Committee notes that the Commission proposes
to undertake pre-assessments of its draft proposals in order to
determine which of them should be subjected to detailed
impact analysis. The Committee feels that there are weaknesses
in the current system of impact assessments and agrees with
the European Policy Centre (‘Regulatory Impact Analysis:
improving the quality of EU regulatory activity’, EPC, Septem-
ber 2001) that any regulatory or legislative activity by the
Commission, the Council or the European Parliament should
be the subject of Regulatory Impact Analysis (RIA).

7.2.
RIA encompasses a range of methods aimed at system-
atically assessing the negative and positive impacts of proposed
and existing regulation. It is not the same as cost-benefit
analysis nor is it a substitute for decision-making by policy-
makers or elected officials. It is based on the principles of risk
analysis but operates within a framework which recognises
that there are no ‘risk-free’ options.

The Committee agrees with the Commission that Co-
6.4.
regulation, properly applied, is a way of achieving flexibility
and greater effectiveness and accepts the Commission’s conten-

7.2.1.
RIA leaves the sovereignty of the political decision-
makers intact, whilst improving the flow of relevant infor-
mation to the regulatory policy-makers. RIA would not, in any
way, change the balance between the European institutions.

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7.3.

Conceptually, it is based on six pillars:

— Justification: the clear identification of a specific problem
and a convincing justification of the value and likely
effectiveness of regulatory intervention.

— Consultation: extensive and transparent consultation with
all stakeholders to identify the costs and benefits of
regulatory proposals.

— Analysis: a systematic, empirical analysis of costs, benefits
and alternatives that takes account of the ‘real world’
impact of regulatory strategy.

technical areas not yet covered by the provisions of the Single
Market. This should not be made a pretext for extending the
period required for transposition.

The Committee therefore agrees with the European

7.6.
Policy Centre that:

— there should be a simplified legal base for the establish-
ment of an effective future system of RIA at the level of
the European Union;

— there should be a statement of guiding principles;

— Maximising overall net benefits: a focus on achieving
regulatory solutions that maximise the overall net welfare
of all citizens and stakeholders.

— there should be a long-term vision of the future system

of RIA at the Community level.

— Consistency: the use of common, standard, practical
operating procedures that ensure consistency of analysis
throughout all parts of government.

7.7.
The Committee also approves the European Policy
Centre’s other recommendations for a short-term Action Plan.

— Accountability:

structured communication to
decision-makers of the consequences of choosing specific
regulatory goals or strategies.

clear,

7.4.
The Committee believes that many of the proposals
set out in the Commission’s Communication (1) should be
implemented in the context of establishing an integrated
decision support process based on the principles of RIA.

7.5.
The EU’s regulatory management policy is not set out
in a clear or simple way. It is embodied in the Regulatory
Policy Guidelines issued in 1996 by the President of the
European Commission. These are not mandatory and there is
currently no legal basis for undertaking RIAs at European level,
nor is there any legal requirement to undertake comprehensive
RIAs. The Committee feels that RIA should be an integral part
of the policy-making process at both EU and national level.

7.5.1.
The RIA must be designed to follow the whole
legislative process from the Commission proposal to the
Council decision (and the EP’s second reading, where appli-
cable), constantly assessing all amendments and compromises.

In principle, the competent DG should attach pre-
7.5.1.1.
assessments to all
in order that the
legislative proposals,
Committee may have the opportunity to express its opinion
on them.

7.5.2.
The Committee considers that the Member States
should also adopt RIA for their legislative procedures. Each
Member state should be required to complete an RIA whenever
it transposes an EU Directive into national law and whenever
it notifies the Commission of its intention to legislate in

(1) COM(2002) 14 final.

8. Some further regulatory issues

8.1.
Apart from any other considerations (e.g. sustainable
development, living and working conditions, etc.), regulation
is a Single Market issue. The different regulatory regimes
created in the Member States by variations in the timing and
incidence of transposing Community legislation into national
law, by national interpretations of EU legal instruments, by the
‘filling-in’ of EU framework legislation at national level and by
the existence of subsidiary legislation created by national
agencies, regional governments and local authorities, are
fragmenting the Single Market and creating serious distortions
of competition.

8.1.1.
In the context of the Single Market, there is a strong
case for a greater proportion of Community legislation to be
effected through Regulations, which require uniformity of
application in the Member States, rather than by means of
Directives, which need to be transposed into national law, with
all the delays and variations which that implies.

8.2.
There is also a need for a centralising influence, which
would help to reduce the disparities between the regulatory
regimes of the Member States. In the USA, regulation is
coordinated and supervised by the Office of Regulatory Affairs.
While this organisation is part of the White House Office of
Management & Budget and is not, therefore, independent of
the President (to whom it reports), it is independent of all
other branches of government and of the national regulatory
agencies.
It has considerable powers to intervene in the
activities of all regulatory bodies. Draft legislative proposals
have to be submitted to this office in the first instance and
deadlines are set for it to give its approval; in doing so, it can
require such amendments to the wording or substance of the
proposal as it sees fit.

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8.2.1.
At present, there is no comparable organisation
within the European regulatory framework. The Commission
has proposed the creation of an internal legislative network
and an inter-institutional network and these bodies might
undertake a similar role at European level but, given that some
90 % of legislation emanates from the Member States, it would
be necessary, in accordance with the principle of subsidiarity,
to replicate these bodies in each of the Member States. It would
also be desirable to coordinate the work of these bodies at
European and national level and this might require the creation
of a joint body comprising representatives of the networks
in the Member States, the Commission and the European
institutions.

Alternatively, a Regulatory Assessment Office, mod-
8.2.2.
elled on the Office of Regulatory Affairs in the USA, could be
set up outside the Commission. The creation of a mechanism
for establishing RIA and monitoring its application should be
a short-term priority.

Another feature of the regulatory system in the United
8.3.
States is the fact that regulatory agencies conduct ‘peer reviews’
of each other’s work. Legislative instruments issued by one
authority are submitted to the other agencies for examination
and constructive criticism. This not only serves as an additional
review process but also encourages the development of a
common approach to the formulation of legislative instru-
ments. The introduction of peer review procedures in Europe
could be expected to provide similar benefits. In addition to
the national agencies conducting peer reviews within each
Member State and the institutions conducting peer reviews at
the European level, it might be instructive for each Member
State to conduct peer reviews on the work of the other
Member States.

Consolidation is another

8.4.
issue that needs to be
addressed. Consolidation is the grouping together in a single
non-binding text of a regulatory act and its subsequent
amendments. Again, there are substantial differences between
the Member States and the European Union in the way in
which this is effected; there are also wide variations in the time
taken to produce consolidations;
in general, the timescale
appears to be too extended in most cases to meet the needs of
users of the legislation, who require a concise, coherent and
simple, but comprehensive, text as quickly as possible.

appear to have had much impact to date. An inter-institutional
agreement was recently concluded for a more structured use
of the recasting technique for legal acts and should make it
easier to apply this method, provided that there is sufficient
impetus to make it work effectively in practice.

8.5.
In addition to the principle of proportionality, it is
important that regulations should pass the test of practicality.
Legislators need to focus on the practical effects that proposed
legislation would have on the day-to-day operation of business-
es and on the daily lives of citizens. Above all, it is necessary
to be aware of the ‘Law of Unintended Consequences’.

8.6.
In this age of rapid technological development, it is
particularly important that regulations should be technology-
neutral. There is a need to ensure that competition is not
distorted by framing legislation in such a way that it favours
or discriminates against one technical process more than
another, unless it is clearly established that this can be justified
in the public interest. There is also a need to draft legislation
in terms which will prevent it from being rendered obsolete
by technological advances.

8.7.
In order for the simplification process to succeed it is
necessary that someone should ‘own’ it. Experience has shown
that, in order to overcome the forces of inertia and resistance
to change, as well as the protection of what are seen to be
national interests, there needs to be a driving force at a high
political level, dedicated to the achievement of stated objectives
within a specified timescale.

8.8.
It is important for the credibility of the simplification
process that it should be seen to deliver tangible and measur-
able benefits within a reasonable time-frame. The fact that the
process was effectively started nearly ten years ago and has
made such limited impact to date is a cause for concern. The
example of France, where a codification process has been in
place for around fifty years and has so far dealt with little
more than half of the regulations currently in force, is not
encouraging. ‘Progress’ on that scale can only serve to bring
the entire enterprise into disrepute.

8.4.1.
However, even in the relatively few instances where
this is forthcoming, consolidation has the drawback that the
text is not legally binding and cannot therefore be relied upon
by businesses or citizens wishing to know where they stand
before the law. Codification and recasting are preferable. An
inter-institutional agreement was concluded in December
1994 on setting up a fast-track method of working with regard
to the official codification of legislative texts but does not

8.9.
Simplification at the EU level is pointless without a
commensurate activity at Member State level. Nevertheless, in
order to give impetus to the project, a start must be made at
the European level without waiting for the Member States to
act; it is devoutly to be hoped that they will elect to follow suit
in short order. The success of the simplification process
depends on the closest possible co-operation and co-ordination
between the Commission and the responsible organisations in
the Member States. It also needs the political commitment and
active participation of the Member States’ Governments.

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9. Conclusions

The burden of poor legislation falls directly upon the
9.1.
citizens of Europe. The principle obstacles to making real
progress in the area of simplification and regulatory improve-
ment are the resistance to change which is inherent in any
large bureaucracy such as the European Union and the
insistence of Member States in adhering to national customs,
traditions and practices. These forces can only be overcome by
inculcating an entirely new culture at European and national
level. To do so will require a level of cooperation between
national and European institutions that has not yet been
exhibited. This, in turn, can only be achieved by a high level of
political commitment, both in the European Union and the
Member States.

9.2.
The policy of simplification must be aimed at a
high level of harmonisation and coordination between the
regulatory regimes in the Member States and the European

Union. Although the Commission is the driving force for
political change in Europe, some 90 % of legislation still
originates in the Member States. Simplification can never be a
reality unless they work together.

9.2.1.
Progress in simplification also requires the confi-
dence of citizens in the methodology and the goals of
simplification; if citizens can clearly see the advantages and
benefits, and if they are convinced that changes in regulations
are aimed at improving their living and working conditions,
they will be more inclined to view the process favourably.
This, in turn, would have a positive influence on the level of
political commitment.

9.3.
Time is not on Europe’s side in this matter. Simplifi-
cation and regulatory improvement are essential steps which
Europe must take in order to prepare itself for enlargement.
Immediate action is called for at both the European and
Member State level if anything effective is to be achieved in
this rapidly diminishing time-frame.

Brussels, 21 March 2002.

The President

of the Economic and Social Committee

Göke FRERICHS