Private Regulation and Enforcement in the EU

Finding the Right Balance from a Citizen's Perspective

Madeleine de Cock Buning, Linda Senden, Madeleine de Cock Buning, Linda Senden

• Publisher: Hart Publishing
• Year: 2020
• Print ISBN: 9781509919529
• eBook ISBN: 9781509919536
• Edition: 1
• Topic: Law
• Subtopic: International Law
• Index: Law

Globalisation and technological innovation have been fuelling the need for increasing levels of trust in private actors, such as companies or special interest groups, to regulate and enforce significant aspects of people's daily lives: from environmental and social protection to the areas of food safety, advertising and financial markets. This book investigates the trust vested in private actors from the perspective of European citizens. It answers the question of whether private actors live up to citizens' expectations or whether more should be done as to the safeguarding of citizens' interests. Several cross-cutting studies explore how private regulation and enforcement are embedded in EU law. The book offers an innovative approach to private regulation and enforcement by focusing on the specific EU context which, unlike the national and transnational ones, has not yet been widely explored. This context merits a stand-alone analysis because of the unique normative framework of the EU, as a particular polity itself but also in relation to its Member States. With an overall analysis of the main aspects of private regulation and enforcement across different policy fields of the EU, the book adds a missing tile to the mosaic of public–private governance studies.

1

Introduction: EU Private Regulation and Enforcement – Mapping its Contextual, Conceptual, Constitutional and Citizens’ Dimensions

MADELEINE DE COCK BUNING AND LINDA SENDEN

Regulations are indispensable for the proper functioning of economies and the society. They create the ‘rules of the game’ for citizens, business, governments and civil society. They underpin markets, protect the rights and safety of citizens and ensure the delivery of public goods and services. The objective of regulatory policy is to ensure that regulations and regulatory frameworks work effectively in the public interest.¹

1.Introduction

In the early 1990s, Majone described the EU as a ‘regulatory state’, underscoring thereby the importance of law and regulation as the mechanisms for realising the EU’s policy objectives. As other forms of economic and social intervention, including macroeconomic, budgetary and redistribution mechanisms, were not available to the EU in its original form, the law, and regulation in a wider sense, could indeed develop as a prominent steering mechanism from the beginning of the European integration process.² The role of law and regulation gained a further impetus within the framework of the internal market programme and, later on, from the various Treaty amendments which brought more policy areas within the sphere of influence of the EU. Regulation of markets, industries and services thus occurs in many EU policy domains as well as at multiple levels, these increasingly being not only of a public but also of a private nature. In the EU context, the regulatory potential of private actors increasingly emerges in areas such as product safety and sustainability, food hygiene, advertising, e-commerce, internet and media services, financial markets, social policy and environmental protection. These private regimes range from codes of conduct to voluntary commitments and also include industry and contractual agreements, framework agreements, autonomous agreements, standards, guidelines, guides, charters, good practices, etc.³ As such, private regulation and enforcement have become part and parcel of the EU’s instrumental toolbox and are part of this vision of the EU as a regulatory state.⁴ However we prefer to conceive of it as a ‘regulatory space’, as this better expresses the fact that regulatory – and also enforcement – authority is not confined to the state but is also diffused and shared between public and private actors.

This book focuses on the incremental relevance of private regulation and enforcement within this regulatory space, both within the general EU policy context as well as in specific EU policy areas, by putting the following question centre stage:

What role do private actors play in the regulation and enforcement of EU-wide problems and how, from a citizen’s perspective, can the protection of public interests and EU core values be best ensured in European private regulation and enforcement?

By taking this question as its lead, the book seeks to identify and exemplify the public–private dynamics that are at play in various EU policy contexts and the different constitutional challenges that private regulation and enforcement raise for citizens affected by such regimes. Mapping, scoping and addressing the challenges for citizens’ interests involved in private regulation is especially relevant in an era where EU citizens feel already less represented in EU democratic processes,⁵ let alone their potential disconnect to private regulation that only rarely involves (indirect) representation of their interests. In fact one could perceive Article 11(1) of the Treaty on European Union (TEU) to already reflect this insight: ‘The institutions shall, by appropriate means, give citizens and representative associations the opportunity to make known and publicly exchange their views in all areas of Union action.’ Finding where citizens’ trust and best interests are at stake in private regulation and exploring ways for their improvement could strongly contribute to a citizens’ reconnect to (at least) private regulation.

This is in the best interest of EU society as a whole, as well as its market(s). To that end, this volume combines both perspectives. It does so by taking a twofold – ie horizontal and sectoral – approach, presenting first of all a number of horizontal studies as to the general boundaries that ensue from EU law for the use of private regulation and enforcement, and, secondly, a number of vertical case studies focusing on specific EU policy domains or issues. Such boundaries relate to those principles determining the existence and exercise of EU powers, fundamental rights, internal market law, competition law rules and general requirements ensuing from the rule of law, in particular democratic legitimacy.

In this introductory chapter, we will explain the central research focus in more depth and lay the analytical foundations for the other contributions in this volume. We will first discuss the drivers behind and proclaimed benefits of the use of private regulation and enforcement as well as considering the risks involved that warrant attention from a citizen’s perspective (section 2). Then we will establish the conceptual frame by discussing the key notions of ‘private’, ‘regulation’ and ‘enforcement’ (section 3). Next, we zoom in on the specific EU context and how private regulation and enforcement fits in with the EU’s Better Regulation policy and why the EU context deserves particular, stand-alone attention (section 4). The section after that will then explain the citizen’s perspective of the research focus in more detail, elaborating on the importance and meaning of trust in and credibility of private regulatory and enforcement regimes in order to be successful and meet the citizen’s expectations and also on the principles that come into play to contribute to this. These constitute important benchmarks for the assessment and possibly better future framing of private regulatory and enforcement regimes in the EU (section 5). The chapter will close with a more detailed explanation of the approach of the case studies (section 6).

2.Proclaimed Benefits and Potential Risks

Private regulation has been recognised as a social fact, with the capacity to perform important social functions⁶ and to solve certain collective problems.⁷ It is often seen as a crucial element of regulatory reform and policy design programmes and better/smart regulation policies, advocated for instance by the OECD⁸ but also by the EU institutions, as we will see in section 4. This warrants a closer consideration of why this is the case and of what the actual justifications are for the use of private regulation and enforcement, as well as the proclaimed benefits of such use:⁹

•private actors are considered as being well placed to provide fast and effective solutions to certain problems by bringing knowledge, expertise and information into the regulatory process;¹⁰

•they allow not only for decision-making that is better fitted to practical realities, local circumstances and own business values and ethics,¹¹ but also for a faster response and upgrading, especially in areas of high technological innovation;

•they are involved in the norm-setting process of the parties which are to apply the set rules and possibly also those for whom protection is devised, thus enhancing the level of responsiveness and potential to enhance compliance and therewith overall effectiveness;¹²

•they can provide in a transnational context for a certain – higher – level of protection (such as consumer, health and safety, environmental, social and data protection), which traditional international and national public law arrangements appear incapable of providing;¹³

•they can enhance consumer confidence and rights and improve the image of business;¹⁴

•they bring resources to and impose costs of regulation on private actors/industry themselves and are thereby more cost-efficient for governments;¹⁵

•they incentivise better and cheaper means to tackle the risks involved with these regulatory regimes.¹⁶

Private actors can thus potentially make important contributions to the realisation of socioeconomic goals by engaging in private regulation and enforcement.¹⁷ Private regulatory and enforcement regimes, however, not only create challenges as to how to actually ensure their effectiveness but they also bear other important risks. Such risks arise in particular from the perspective of their (democratic) legitimacy and accountability because of the possibly binding effects which such regimes may have for third parties, the lack of an electoral mandate supporting such regimes and of self-interests that may prevail over public interests in their design.¹⁸ Factors inducing or contributing to the prevalence of self-interest and to the failure of private regimes have been recognised to be:

•the risk of regulatory capture by the regime members, especially in monopolistic markets where there is little regulatory competition;¹⁹

•favouritism, an insufficient sense of responsibility and a lack of integrity on the part of the actors involved, which can fail to ensure the interests of those not represented in the norm-setting process;²⁰

•a lack of transparency and accessibility and information asymmetries between stakeholders;

•a lack of inclusiveness and of participation by relevant stakeholders;

•a lack of other mechanisms for ensuring checks and balances;

•a lack of effective monitoring and enforcement mechanisms so as to ensure compliance with the set rules,²¹ ineffectiveness in achieving compliance creates distrust, and a loss of public confidence in the self-regulatory entities and in self-regulation itself;²²

•the – lack of – strength of instruments and level of market coverage;²³

•the problem of free riders and of costs of the regime.²⁴

Practice shows how things may go wrong, the banking sector illustrating the negative consequences that private regulation can have when public interests are not sufficiently taken into account. The lack of integrity, accountability, and checks and balances regarding private regulatory and enforcement regimes concerning financial reporting obligations and derivatives rules for banks, both at the global and European level, have all contributed to opaque, fragmented markets and market failure.²⁵ This has contributed to severe financial crises, affecting the trust of stakeholders and citizens in the economic system as well as in the integrity of banks, financial institutions, governments and the EU. There are, however, other examples of specific private regulatory regimes that have shown themselves to be deficient, such ...

Table of contents

• Cover
• Title Page
• Preface
• Contents
• 1. Introduction: EU Private Regulation and Enforcement – Mapping its Contextual, Conceptual, Constitutional and Citizens’ Dimensions
• PART I: POLICY DOMAINS
• PART II: CROSS-CUTTING ISSUES
• Index
• Copyright Page