On 27 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

(Single Market Observatory).

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 386^th 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 legislative 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 legislation 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.

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 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 subsidiarity.

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.

1.9 The Committee makes the following specific recommendations for improving the regulatory framework at the European level:

· 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 reviewing the Official Journal and making the acquis available on-line.

· 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 compliance cost of regulations.

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

2. Introduction

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 Stockholm 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 The Committee proposed a number of specific measures:

· 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 impact assessments which must accompany all draft legislation;

· the Commission to reassess its choice of the regulatory instruments to be employed;

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

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

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

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 level 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.

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.

2.3 In the drive for simplification, full use needs to be 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.

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 uncertainty 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"[2], 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[3] commented that, “Many of these have since been largely put on the backburner”. The situation remains essentially unchanged.

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”.

3.2.2.1 The Committee endorses this approach. It has repeatedly drawn attention to the need, in particular, to 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 statement 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.

3.3 The Commission has set out the following main principles of a regulatory strategy:

· legislative action only where necessary;

· broad consultations and impact analysis before any proposal;

· choose the appropriate instrument;

· speed up the legislative process;

· ensure rapid and correct transposition and effective application;

· evaluate the effects of legislation; and

· speed up the simplification and codification of existing texts.

3.3.1 The Committee wholeheartedly supports these principles 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 The Commission sees the drive to improve and simplify the regulatory environment as not just a synonym for "deregulation"; 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;

· Transparent.

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

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 commensurate 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"; 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.

3.5.1 In particular, regulation should not inhibit the development 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.

3.5.2 Effective regulation must 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.

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

3.7 It is now essential to bring about real results in the 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 membership 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.

4.2 All three forms may co-exist in the same market and it 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 supplier, 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 cooperation between all interested parties, incorporating Community rules governing agreements between the parties, where appropriate. The New Economy is characterised by rapid technological 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 alternative 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 instrument to avoid cumbersome law-making.

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

· 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, maintain 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 Market, 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-responsibility among economic and civil-society actors. To be successful they require margins for manoeuvre by Business and organised civil society, partnership with the public authorities, representative players, transparent procedures, effective implementation and stringent monitoring of their impact and follow-up, including by public authorities.

4.3.3.4 Diversified co-regulation approaches involving the socio-economic groups can make a valuable contribution to improving the working of the Single Market in facing the three-fold challenge of widening, deepening and globalisation.

4.4 Another alternative to regulation is no regulation, where the responsibility is left to the market. While this solution would not be appropriate in all cases, it is an 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.

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 is always appropriate to its objectives. To this end, the Commission intends to:

· rapidly assess any feedback indicating excessively complex 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 instruments (and systematically and rapidly publish the consolidated texts) for information purposes, whenever an amendment is made.

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 labyrinthine 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.

5.3 The Committee is concerned that, if the review of 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 principle 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.

5.4 It is not sufficient, however, 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.

6.2 An examination of the regulatory framework in Sweden is instructive. At the top, 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-government agencies, which are divided into Official regulations and 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” legislation. 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.

6.2.1 Below these major regulatory instruments are three further categories of regulation; regional government regulations, 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 There are three important conclusions to be derived from the Swedish figures:

· 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 intervention 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 Sweden, 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.

6.3.1 The Swedish experience showed that 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.

6.4 Framework legislation has been an increasingly important phenomenon in recent years. While this has demonstrated 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.

6.5 Sweden has taken measures to relieve the burden of 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. The Economic and Social Committee’s Code of Conduct

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.

7.3 The Committee agreed to draw the attention of the EU 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.

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 simplification will be the topic of discussion. Preliminary contacts have also been made with the Committee of the Regions.

7.5 The Code of Conduct observed that, while being broadly supportive of Commission initiatives for simplification, 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 Commission, the other institutions and the Member State governments, need to take more positive action in this field.

8. Some regulatory issues

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

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 predetermined limits but can be harmful if they merely shift the regulatory power from the political sphere to a lower level.

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.

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 legislation should be enacted at national level, 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 legislation on the same subject in different Member States and even within the same Member State. Subsidiarity and diversity go hand in hand.

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 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.

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.

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.

8.7.1 In its previous opinion on this subject[4], the Committee 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 meticulous 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 “consumers” 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 In addition, this body could perform some or all of the following functions:

· identifying existing legislation for inclusion in the SLIM initiative;

· setting out guidelines for the introduction of new legislation;

· 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 initiatives (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 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.

8.11 There is an extended hierarchy of legislation, which is composed as follows:

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: Regional government regulations

Municipal government regulations

Collectively-agreed regulations

Local government laws and bye-laws

Local government agency regulations

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 hierarchy 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.

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 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.

8.12 One of the reasons for the complexity of European legislation is the substantial and sometimes conflicting amendments 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 considerably from the original proposal.

9. The role of the Economic and Social Committee

9.1 In its previous opinion[5], the Committee recognised 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 preparation 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.

10. Conclusion

10.1 There are few new ideas in this opinion. The simplification 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 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.

Brussels, 29 November 2001.

The President

of the

Economic and Social Committee

The Secretary-General

of the

Economic and Social Committee

Göke Frerichs

Patrick Venturini

* *

N.B.: Appendices overleaf.

[1] OJ C 14 of 16 January 2001, p. 1

[2] COM(2001) 130 final, of 7 March 2001