Balancing ethics, tech and enforcement for better regulation in Europe

The European Union is faced with numerous challenges, ranging from the green transition to the digitalisation of our societies and the strengthening of European strategic autonomy. To tackle these core issues, it seems that a consensus is emerging that new approaches to law-making and regulation are needed. These range from the macro to micro-level and are the essential building blocks to deal with future challenges of regulation in an increasingly interlinked, fast moving and highly innovative environment.

Set against this backdrop, a star-studded line-up of speakers and panelists addressed the topic Better Regulation – Defining a Progressive Approach, during a conference jointly organised by the European Justice Forum and FIPRA International for the second year running.

Maroš Šefčovič, Vice-President for Interinstitutional Relations and Foresight, European Commission, said at the event: “We form stronger relationships with stakeholders, building trust and engagement, and using ethical principles to create better European legislation. I would want everyone to make the most of our online portal Have Your Say. We use the same approach of communication and cooperation with the Member States when it comes to our enforcement strategy. The result is that 90% of infringement cases are solved without the need to go to court”.

Several important questions were raised during the course of the discussions such as:

• What levers do governments have to change the organization culture of international companies?
• Do incentives work and where should they stop?

Speakers agreed there was a need for building common ground for ethical business practice, focusing on outcomes and driving transparency and trust.

“The basic idea is to say let’s regulate through ethical culture, rather than through deterrence. Let’s have a problem-solving approach, rather than the linear approach of identifying breaches,” said Christopher Hodges, Professor of Justice Systems, Centre for Socio-Legal Studies at the University of Oxford.

“When you have a business and regulator committed to ethical business practices, the relationship between the two is ethical business regulation. Then, we need lots of regulators and businesses involved to maximize effectiveness,” Hodges stated.

Ben Alcott, International Director at the UK Civil Aviation Authority, said it was vital to maintain and build further trust with existing and new players whilst avoiding regulatory capture. “We need to be able to regulate the future, not just today. Our approach is based on organizational performance and not just reactions to business risks. We design oversight relative to companies’ performance in managing risks. In this way, we support delivery of best regulation principles,” he said.

When looking at a new approach of regulation there may be a number of possible applications, including in the regulation of the digital space. The panel emphasized the need to use data effectively, as data collection is crucial for capturing disputes early on, in a flexible and adaptive manner. Another idea to consider is setting up a cross-border – even global – regulatory architecture.

Regarding the macro level, Matt Vicker, Chief Executive and Chief Ombudsman at Ombudsman Services in the UK, said: “Too often, the micro is viewed with suspicion by regulators. Through better data, clearer channels and access to redress, we get a better understanding of the micro that helps the macro level. I find that many of the problems we face today are less about poor intent by firms and more to do with the challenge of execution.”  

Nowadays, according to Bruno Roche, Founder and Director of Economics of Mutuality, on average, only 15% of the value created by businesses is captured by traditional accounting systems. This not only signals a duty to reorganise accounting systems to better report responsible corporate behavior, it also represents a real opportunity for businesses to understand how they can create more value in society.

Ultimately, better regulation is not a technical debate — it’s about culture, ethics and values, pointed out Veronica Gaffey, Chair of the Regulatory Scrutiny Board (RSB) at the European Commission.

“We have to make sure that evaluations, impact assessments and the regulations themselves are proportionate. For me, the most important thing is that we have clarity and narrative so that we can communicate to citizens what we want to do and why,” said Gaffey.

Robert Madelin, Chairman & Chief Strategist, FIPRA International, highlighted that by integrating culture, ethics and trust issues into decision making, we empower local regulators to adjust to local realities. “It must be framed such that businesses are incentivized, rewarded and encouraged to be accountable through data and be transparent to the rest of us in Europe. Indicators and metrics for non-financial impacts need to become better understood and respected. And audit processes must be fit for purpose.”

Moya Stevenson, Chair of European Justice Forum, called for a holistic approach covering the entire process from dispute identification, out-of-court dispute resolution, up to in-court dispute settlement or judgment. “The goal is to ensure that the legal system in Europe protects both consumers and businesses alike, and that those with a legitimate grievance can have access to justice and attain actual delivery of justice,” said Stevenson.

The challenge remains to design the necessary processes and frameworks. This is where we, the European Justice Forum, commit ourselves to further support and implement a trustful dialogue in the future.