Chapter 5. The development of new regulations in Slovenia

This chapter reviews the processes for developing new regulations in Slovenia, with special attention to forward planning and trends; administrative procedures and legal quality; ex ante impact assessment; and considering alternatives to regulation.

This section reviews how current processes for making legislation and subordinate regulations support the application of core principles of good regulation. It describes and evaluates systematic capacities to generate high-quality regulation, and to ensure that both processes and decisions are transparent to the public.

Legislative process in Slovenia

According to the Article 88 of the Constitution of the Republic of Slovenia, laws can be proposed by the government, member(s) of the parliament or by at least five thousand voters, although the bulk of laws are proposed by the government. In total, the government proposed 81.4% of laws and amendments during the 2011 to 2014 parliamentary session and was 89.5% in 2016.

The preparation of Government Bills usually starts after it is included in the annual work programme of the Government. The preparations are carried out in a digital information system – known as the IPP-system (IT supported drafting of legislation) – which includes all documents that are related to a Bill. The IPP system has been in operation since April 2010.

The procedure can be divided into three phases, namely the preparation of material within the ministry or government department, the procedure within the Government and procedure in the National Assembly.

Laws are adopted in accordance with the procedure laid down by the Rules of Procedure of the Government and The National Assembly of Slovenia.

In accordance the Rules of Procedure of the National Assembly, a draft law submitted to the National Assembly must contain the title of the law, an introduction, the text of the articles, and a statement of reasons.

Introducing a new regulation to the National Assembly also requires several different elements; otherwise the regulation cannot be tabled, including:

an evaluation of the state of affairs and reasons for adopting the law
the goals, principles, and main solutions of the draft law
an estimation of the financial implications of the draft law regarding the state budget and other public finance resources
a statement that the resources for the implementation of the law are provided in the state budget, if the draft law anticipates the use of budgetary resources in a period for which the state budget has already been adopted
a presentation of similar regulations in other legal systems and of the harmonisation of the proposed regulation with the law of the European Union
an assessment of the consequences in individual fields, namely:
- an assessment of the administrative consequences
- an environmental impact assessment, including spatial and protection aspects
- an assessment of the consequences for the economy
- an assessment of the consequences in the field of social affairs
- an assessment of the consequences regarding development planning documents, and
- an assessment of the consequences in other fields
a presentation of the participation of the public in the preparation of the draft law
a statement as to which representatives of the proposer will participate in the work of the National Assembly and its working bodies (Part 1, V, 6).

Trends in new regulation

It is difficult to say if a country produces too many new laws and regulations. Different institutional and legal frameworks can require a country to pass more or fewer laws. Furthermore, different social and economic circumstances make it necessary for countries to legislate more or less. In Slovenia, however, businesses have pointed out that the volume of legislation every year is a significant irritant for them relative to other EU member states.

On average, approximately 115 new laws are adopted by the National Assembly every year. There are three common procedure types for adopting laws, not including constitutional amendments and ratifications (National Assembly).

Regular procedure with three readings of a law: the first reading – held at a plenary session in the form of a general debate only on request of ten deputies – and the second and third readings; in specific cases, the second and third readings may be held at the same session
Shortened procedure: to discuss minor amendments to a law, the expiration of a law or individual provisions, minor harmonisations with other laws or the EU law, or amendments relating to procedures before the Constitutional Court or a decision thereof;
Urgent procedure: where so required in the interests of the security or defence of the state, or in order to eliminate the consequences of natural disasters, or to prevent consequences regarding the functioning of the state that would be difficult to remedy. Such procedure can only be proposed by the Government.

The urgent procedure is meant to be used in case of emergency, such as a natural disaster or serious threat to Slovenians, but the National Assembly continues to favour its use. In fact, more laws were adopted under an urgent procedure than a regular procedure during the 2011-14 parliamentary period. The National Assembly is increasingly opting to use the urgent procedure. From 2009 to 2011, a similar number of laws were passed by the National Assembly, but the National Assembly used the regular procedure more often than either the shortened or urgent procedure, despite the economic recession that began in 2009.

According to the Ministry of Public Administration, a number of reasons are given for using a shortened procedure. The most common reasons for the use of a shortened procedure is because the regulation only proposes minor amendments to a law, which is determined by The College of the President of the National Assembly.

In addition to the number of new regulations, the National Assembly proposes and adopts well over one thousand amendments to proposed regulations per year. Amendments presented in the National Assembly range from minor wording changes to changes with potentially significant impacts on policy. Each proposed amendment should be presented with a reason for the amendment and the proposed impact, according to Article 129 of the Rules of Procedure of the National Assembly of Slovenia, but they are descriptive in nature and have limited analytical elements.

The regulation process is quite fast in Slovenia and has even been described as a “law factory” according to experts in Slovenia (Voermans). A number of authors have noted that the entire process under a normal procedure from a draft regulation to approval normally only lasts for a few months. The procedure can be as a little as one week for regulations passed under an urgent procedure. In a number of interviews and during the Q&A period of the workshops in Slovenia, many experts and interviewees reported to the OECD and Voermans that they believed the high-speed with which regulation is passed in Slovenia often leads to a need for more amendments to fix errors.

Article 154 of the Rules of Procedure of the National Assembly may encourage the extremely rapid development of law. If parliament does not pass a bill during the parliamentary period, the bill in effect dies and must be completely restarted during the subsequent period, contributing to the significant political pressure to act quickly on political priorities (Voermans).

Procedures for new regulation in Slovenia

Forward planning

The Government work programme lists the proposals for laws and other acts which the Government will submit to the National Assembly. It is published on the internet – on the website of the Government – based on what information ministries and other regulators enter into the Register f Legal Acts in Force (RLAF).

The RLAF contains data on proposed regulations that ministries are preparing, including:

the title and the unified identification code of the regulation
the publication of the regulation in the Official Journal of the Republic of Slovenia
the basis for the adoption or issue of the regulation
regulations adopted or issued on the basis of this regulation
the effect of this regulation on other regulations
the effect of another regulation on this regulation
the bodies adopting or issuing the regulation and/or implementing it
the date of the regulation being adopted, the date of its entry into force and the date of its application
data on the EU legal acts the regulation is being harmonised with and links to internet publications of the EU bodies regarding EU legal acts
data on the compliance of the regulation with the acquis
data on the notification of the regulation
data on infringement procedures
any other data regarding this regulation.

The General Secretariat draws up a proposal of the work programme on the basis of data entered in RLAF and submit it to the government for discussion prior to the beginning of the year for which it is adopted. The Government Work Programme is an extensive document containing a list of proposed laws and other acts that the Government will submit to the National Assembly. The Programme sets out the procedures and the deadlines for deliberation by the Government and for debate and adoption by the National Assembly.

The General Secretariat publishes instructions for the preparation of the work programme. It is also responsible for preparation of the programme and also for ensuring that the programme is adopted in good time.

The General Secretariat proposes amendments to the work programme quarterly and enters the adopted modifications to the work programme on the basis of RLAF.

The Government decides on modifications to the work programme relating to legally non-binding instruments and instruments of ratification normally at the end of the first half of the year on the basis of reasoned proposals by ministries and government agencies.

There is no overall priority list or plan for legislative proposals. Legislative priorities come from a variety of documents. For example, the government often defines priority areas for the year as well as achievements from the previous year. Priorities are also set through a variety of strategic documents, such as the coalition agreement and long-term and short-term sectoral strategies. In 2013 Slovenia also introduced the Single document to reduce regulatory burdens, which does set priorities on which policy areas should be improved. These measures are often proposed by economic associations, citizens and civil society. The Single document (later renamed to the Single set of measures) contains a definition of measures, commitments, and proposals for solutions to improve Slovenia’s regulatory environment (see Chapter 6 for more on Slovenia’s other ex post evaluation efforts).

Box 5.1. Threshold Tests for RIA in OECD Countries

Canada applies RIA to all subordinate regulations, but employs a Triage System to decide the extent of the analysis. The development of a Triage Statement (low, medium, high impact) early in the development of the regulatory proposal determines whether the proposal will require a full or expedited RIA. Also, when there is an immediate and serious risk to the health and safety of Canadians, their security, the environment, or the economy, the Triage Statement may be omitted and an expedited RIA process may be allowed.

Mexico operates a quantitative test to decide whether to require a RIA for draft primary and subordinate regulation. Regulators and line ministries must demonstrate zero compliance costs in order to be exempt of RIA. Otherwise, a RIA must be carried out.

For ordinary RIAs comes a second test – qualitative and quantitative – what Mexico calls a “calculator for impact differentiation”, where as a result of a 10 questions checklist, the regulation can be subject to a High Impact RIA or a Moderate Impact RIA, where the latter contains less details in the analysis.

The United States operates a quantitative test to decide to apply RIA for subordinate regulation. Executive Order 12866 requires a full RIA for economically significant regulations. The threshold for “economically significant” regulations (which are a subset of all “significant” regulations) is set out in Section 3(f)(1) of Executive Order 12866: “Have an annual effect on the economy of USD 100 million or more or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities”.

Source: OECD (2015a), OECD Regulatory Policy Outlook 2015, OECD Publishing, Paris, https://doi.org/10.1787/9789264238770-en.

Public communication and plain language drafting

Stakeholders are informed on planned amendments of the primary laws through normative work program of the Government, published on the website of the Government for the next two years.1

All adopted regulations are published on the websites of the line ministries, irrespective of their nature (primary laws and subordinate regulations). Draft laws and subordinate regulations that are in the preparatory phase are published on the ministry's website and on the eDemocracy portal.

The primary source of all regulations in the Republic of Slovenia is the PIS RS (Legal Information System of the Republic of Slovenia), that provides access to the online version of the Government Gazette of the Republic of Slovenia, all primary and secondary legislation (see Figure 5.2 for details.)

In accordance with the Official Journal of the Republic of Slovenia Act,2 the Official Gazette of the Republic of Slovenia is the official bulletin, where all governmental regulations and other acts are published.

With the intention of formulating high quality regulations, the Government Office for Legislation in 2004 issued Nomotehnične smernice, Podlage za izdelavo pravnih predpisov (Legal drafting guidelines, The basis for the creation of legal regulations).3 In the 11 chapters of this publication there are guidelines on the internal structure and constituent elements of a regulation, on linguistic expression, on the definition of obligations and exceptions, on legal terminology, referencing within regulations, consolidated texts, including recommendations for “plain language” drafting.

Administrative procedures

When regulations are drafted within the line ministries, the process is carried out in accordance with the Rules of Procedure of the Government of the Republic of Slovenia, first adopted in 2001, and the Resolution on Legislative Regulation, adopted in 2009.

The Rules of Procedure of the Government of the Republic of Slovenia govern the requirements for new legislative proposals, including requirements for impact analysis, inter-ministerial co-ordination and public consultation.

The Rules on Legislative Regulation set out the core principles and objectives of Slovenia’s regulatory policy when preparing and adopting rules. The directives of the non-binding Resolution on Legislative Regulation were implemented with the adoption of the Amendments to the Rules of Procedure of the Government of the Republic of Slovenia and Instruction No. 10 for Implementing the Provisions of the Rules of Procedure of the Government of the Republic of Slovenia in 2010. Every proposal must include:

analysis of the current state in the area concerned, major issues or problems results of monitoring the implementation of a regulation in force
the goals, principles, and main solutions of the draft law
assessment of financial consequences of the proposed law for the national budget and other public funds
description of arrangements in other legal systems
an assessment of the consequences in individual fields, namely:
- an assessment of the administrative consequences
- an environmental impact assessment, including spatial and protection aspects
- an assessment of the consequences for the economy
- an assessment of the consequences in the field of social affairs
- an assessment of the consequences regarding development planning documents, and
- an assessment of the consequences in other fields
a presentation of the participation of the public in the preparation of the draft law
Planned activities for implementation of the adopted regulation (presentation of the adopted law to target groups and general public; monitoring the implementation of the adopted regulation).

Legal quality

The Government Office of Legislation (GoL) examines the legal quality of proposals and gives an opinion. The GoL will also carry out comparative studies of other countries and international organisations and perform other functions related to legal drafting.

Regulators drafting proposals should consult the GoL at several stages of the development process. First, regulators should get an opinion on legal quality with them during the first inter-ministerial co-ordination phase, but before the proposal is submitted to the government.

The GoL should be consulted again after the proposal is submitted to the Secretariat-General and the Secretariat-general has approved publication of the material, if it is in conformity with the Rules of Procedure.

If the GoL gives a negative advice at either stage, the ministry is required to amend the Bill and the GoL must once again, within five working days, give advice on the Bill in question. In this case, a new consultation period is initiated.

Ex ante analysis of regulations in Slovenia

Requirements for RIA

Slovenia formally introduced regulatory impact assessment to its legal regime in 2006 with an amendment to the Rules of Procedure of the Government. According to the Rules of Procedure, regulatory impact analysis (RIA) is a requirement for all proposed regulations submitted to government. The first RIA is made public when the regulator posts the draft proposal on the eDemocracy portal. If a draft regulation is changed during the consultation process, this consequently leads to a change in the impact assessment.

In 2013 the Rules of Procedure of the National Assembly were amended in a way, that all draft laws proposed by the Government (except draft law proposed for adoption by the urgent legislative procedure) have to include assessment in the areas of:

administrative consequences,
the environment,
the economy,
social affairs,
the consequences regarding development planning documents,
and an assessment of the consequences in other fields.

If a draft law does not contain the required elements, the President of the National Assembly calls upon the proposer to supplement the draft law. If the proposer fails to supplement the draft law within 15 days from being called upon to do so by the President of the National Assembly, it is deemed that the draft law has not been tabled.

Slovenia scored near the about average on the Indicators of Regulatory Policy and Governance, because most of the requirements are in place for RIA but oversight continues to lag.

As a result of the limited oversight, regulators have generally not completed detailed impact analysis which often comes with very little quantification. Most proposals submitted in 2011, 2013, and 2015 either had no analysis or simply stated “no consequences/implications are foreseen”. Nevertheless, RIAs did show some improvement over time. Regulators started to more frequently include a short descriptive analysis of impacts on the economy and administrative burdens. Nevertheless, less than 10% of proposals quantified the effects on the economy and only about 15% include impacts on administrative procedures. Regarding the quantification of the effects on the economy, significant progress was made in 2015, when the SME test was introduced. Its use was made mandatory for all primary laws planned for adoption by regular or shortened procedure from the beginning of 2016.

Institutional framework

Oversight and co-ordination on regulatory impact assessment is relatively limited in Slovenia. The duties to provide some quality check on the impacts are split across ministries and ultimately the Secretariat-General only checks to see if a RIA was conducted, but it lacks a unit or human resources to check the quality of the RIA. Line ministries review impacts in their area of expertise through the inter-ministerial co-ordination process.

The Ministry of Public Administration supervises on administrative burdens and regulatory costs
The Ministry of the Economic Development and Technology supervises the impacts on the economy, with special emphasis on the quality of SME tests conducted by the
The Ministry of Finance supervises the fiscal impacts of proposals
The Ministry of the Environment and Spatial Planning supervises the impacts on the environment
The Ministry of Labour, Family, Social Affairs and Equal Opportunities supervises the impacts on the field of social affairs
Government Office of Legislation checks that the draft law conforms to legal quality and language drafting standards
Secretariat-General of Slovenia checks that a regulatory impact assessment has been completed, but does not check the quality of the assessment.

More information on the institutional setup for developing regulations in Slovenia may be found in Chapter 3.

Methodological guidance and training

The current guidance for RIA in Slovenia has instructions on how to identify issues and alternatives to regulation. However, the guide does not include a section on how to quantify benefits of regulation,4 although it does suggest that regulators quantify benefits when possible.

Methodology and guidance

The Handbook on Impact Analysis serves as the primary guide to analysing proposals for new regulation. The Handbook was issued along with other changes to the Rules of Procedure of the Government of Slovenia in 2011.

The guidance includes instructions on seven different stages of the policy cycle, namely:

Assessment of the situation
Problem definition (overview of the policy options (list of topics will be addressed) and identification of areas which need to be provided)
The establishment of a target
The development of alternative solutions
Impact assessment of alternative solutions in different areas
A comparison on the basis of the assessment of alternative solutions
The decision on the measures (implementation plan)

In addition, the Handbook of IA covers how to undertake consultation with outside stakeholders and with other ministries. It also includes sources for data and information that may useful during policy development and a questionnaire to help guide policy makers on different types of possible impacts by social area.

Policy makers will also find formulas for how to measure administrative costs. The Government of the Republic of Slovenia also adopted the methodology for measuring compliance costs in October 2013,5 following the example of SCM methodology and other international approaches to quantification of compliance costs, such as German Guidelines on the Identification and Presentation of Compliance Costs in Legislative Proposals by the Federal Government. These formulas are now embedded into the SME Test to make performing the calculations easier for line ministries.

Box 5.2. International experience on guidance to carry out RIA

In Australia, the Victorian Guide to Regulation provides a framework for the design and assessment of government regulation. The Victorian Competition and Efficiency Commission (VCEC) provides a good example of methodological guidance to prepare RIA. The Commission meets the departments preparing RIA early in the process of policy development and at key moments. It also offers regular and free training workshops for policy officers who prepare RIA to provide them with an introduction to the process and equip them to prepare high quality analyses (i.e., cost-benefit analysis). The VCEC may debate the quality of problem definition, data, analysis, and alternatives examined, but does not take policy positions. It may also provide lists of consultants to support departments in preparing RIA, but does not endorse any provider. Finally, the VCEC has developed guiding materials on cost effectiveness, cost recovery, costing methodologies, the suggested value of a statistical life, and consultation practices, among other topics.

In Canada, the Cabinet Directive on Streamlining Regulation (CDSR), published in 2007, has introduced a life-cycle approach to regulatory management and a number of new processes, co-ordination, and analytical requirements. It applies to all departments and agencies involved in the federal regulatory process. Government officials are responsible for abiding by the CDSR at all stages of the regulatory life cycle, i.e., development, implementation, evaluation, and review. The CDSR has marked a fundamental change in approach to federal regulation. It stresses that regulations are only one of several policy instruments available to government and that they may not always be the most effective option. When a public policy issue arises and it is determined that government intervention is required, regulatory organisations must assess the effectiveness and appropriateness of both regulatory and non-regulatory instruments before proceeding. Regulations must be viewed not in isolation but rather as part of a mix of complementary instruments that work together to address a public policy issue. They should be chosen only after the full range of instruments has been analysed.

Recognising that it may take a number of years for regulatory organisations to fully develop the internal capacity to meet these requirements, the Treasury Board of Canada Secretariat has created the Centre of Regulatory Expertise (CORE) to assist in this endeavour. CORE provides expert advice and services to help departments build their internal capacity to develop sound, evidence-based regulatory proposals. CORE experts offer the following guidance:

Analytical services to support regulatory development work, especially in areas of risk assessment, cost-benefit analysis, performance measurement, and evaluation plans;
Coaching and advisory services to assess progress in regulatory development and provide ongoing feedback and advice;
Workshops and presentations on one or more aspects of regulatory development, tailored to your team's needs; and
Peer review to critique and provide feedback on completed analyses before finalising a regulatory submission.

CORE also collaborates with the Community of Federal Regulators and the Canada School of Public Service (CSPS) to develop and promote best practices and learning opportunities for federal regulators. For example, a core curriculum of regulatory training has been developed by CSPS to provide participants with a basic understanding of the federal regulatory process, the regulatory life-cycle approach, and the changes occurring under the CDSR.

Source: Victorian Competition and Efficiency Commission (2015), www.vcec.vic.gov.au and Treasury Board of Canada Secretariat’s website www.tbs-sct.gc.ca (both accessed 1 March 2016).

Box 5.3. New tools for developing regulation in Slovenia: The SME Test and MOPED

In June 2016 Slovenia introduced an SME test to estimate regulatory costs to businesses, supported by the use of a database of costs, such as wages, to make it easier for regulators to perform the calculations. The application is a part of a modular environment of the Government for legislation designed for drafting regulations.

The Modular Environment for the Preparation of Electronic Documents (MOPED) is currently in the implementation phase. It will simplify the preparation of all documents, required in the legislative process. Within MOPED, all stages of the legislative process will be standardised, forming an integrated legislative cycle. It will combine different modules all based on the same information and applied the same standards, which will allow regulators to enter, store and manipulate data. The central part of the application will completely replace the existing Register of Regulations Slovenia (RPS), which over the years has become overloaded. The old RPS system is also not as transparent or user-friendly.

The Office for Legislation developed a system with its own staff. The layout of certain modules was developed in co-operation with other authorities, particularly the Ministry of Public Administration and the Secretariat-General. The Office for Legislation plans to make the use of MOPED mandatory for all ministries by 2017.

One of the first modules within MOPED is the SME test, which has been available since June 2016. It is available not only to those drafting regulations, but also to the interested members of the public. It is based on the Standard Cost Model (SCM) methodology and linked to the public records, so users don‘t need to obtain information on individual parameters required for the calculation of costs (e.g. population, business counts). Interested stakeholders will be able to access the SME test directly, or through a link published with a draft regulation on the eDemocracy and conduct their own, alternative analysis, and then send it to the regulatory drafter. It is expected that the public will be able to use the calculator from October 2017.

The Ministry of Economic Development and Technology supervises the quality of SME tests conducted by the ministries in the process of inter-ministerial co-ordination.

Source: Responses to the Slovenia Regulatory Policy Review Questionnaire.

Since 2015, the Ministry of Public Administration has taken steps to further build capacity for regulators to quantify impacts. In the first half of 2016, the Ministry of Public Administration carried out extensive training of civil servants regarding the SME test, which measures administrative burdens on SMEs. Training continued in October and November 2016 for another 100 new civil servants with a focus on those public servants who will participate in drafting laws and in 2016 and 2017. In 2017, the SME training module will become a permanent module at the Administrative Academy.

There are, however, no current plans for permanent training sessions in how to conduct impact assessment, evaluate alternatives to regulation, or perform risk management.

Public consultation

The proposer of the draft legislation decides on how long to set the consultation period. Under the Rules of Procedure, the online consultation period should last between 30 and 60 days, but often consultation periods are often much less than that.

In practice, some ministries indicated that they use a combination of online tools, experts, and working groups to inform the development of regulation, although public consultation is quite strongly focused on the use of ICT tools like the eDemocracy portal. The Ministry of Agriculture, Forestry and Food, for example, used a collection of tools while deciding on the best option for the new Agriculture Land Act (see Box 5.4). See Chapter 4 for me detail on public consultation during the development of regulation.

Box 5.4. Stakeholder engagement during the development of amendments to the Agricultural Land Act in Slovenia

The Ministry of Agriculture, Forestry and Food started preparing amendments to the Agricultural Land Act in the part referring to land operations, especially in the field of irrigation. The first meetings were held in spring 2015, in which representatives of the competent inspectorate, experts (faculty and institutes), and later the Chamber of Agriculture and Forestry of Slovenia, took part. The scenarios of proposed changes were identified in three directions:

Maintain the existing division of irrigation systems and the existing charges.
Deregulation of the area of irrigation and independent cost sharing among users.
The new division of irrigation systems and charging costs based on the actual use of the irrigation system and water and energy consumption.

All proposed concepts were presented to chambers and other relevant institutions. The selected model (the last among listed above) went out to public consultation through e-Democracy portal, to which other ministries were also invited. Based on consensus between the responses obtained, the interdepartmental coordination followed, under which other ministries commented on the chosen concept and its realisation in particular. After the final coordination between government departments and with the public, the amendments to the Act in question were published.

The expert review, which was prepared in February 2017, gives three possible models of legal regulation of the field of agricultural land policy. The first model supporting the development of family farms. The second model supports the development of viable holdings (both family farms and legal entities). Finally, the third model gives equal status of all agricultural holdings in Slovenia. Each model presents proposals for solutions to the agricultural land transactions, their leasing, protected farms and the management of state-owned land.

Public debate on the proposed models took place from 24. 2. 2017 to 31. 7. 2017. In the public debate, the public had the opportunity to express its views, which of the proposed models would best suit Slovenian agricultural land policies, as well as submit any other comments and proposals on the model chosen. During the public consultation period, the Ministry also organised 5 regional seminars.

Based on the results of the public debate, the Ministry will prepare starting points for the amendments to the Agricultural Land Act in the parts referring to the agricultural land transactions, leasing of agricultural land and area of protected farms.

Source: Provided by the Ministry of Public Administration.

Considering alternatives to regulation in Slovenia

Often governments consider “command-and-control” instruments like regulation, before thoroughly considering alternatives to regulation that could deliver on the government’s policy objectives with a lower cost to society. Regulations are particularly politically appealing because they make it clear that the government is doing something, even if the prosed regulation does not actually solve the issue. The increased use of social media makes the effects of government regulations more apparent, but also may reinforce governments desire to solve issues with a regulation that is a clear.

Box 5.5. Alternative to regulation: A selection of non-regulatory options

Hepburn (2002) presents a number of non-regulatory options are available to governments. These approaches are more flexible, less prescriptive forms of traditional regulation. The aim is to minimise some of the major shortcomings of traditional regulation: Examples include performance-based and incentive regulation discussed in this section, as well as:

Co-regulation and self-regulation: Co-regulation usually involves the industry or professions developing and administering its own rules but with government providing legislative backing to enable the arrangements to be enforced. Self-regulation is generally characterised by the industry (or profession etc.) formulating rules and codes of conduct, for which the industry itself is responsible for enforcing
Incentive and market based instruments: Incentive-based approaches include the use of taxes, subsidies, etc. to change the incentives faced by economic agents to ensure that they correspond more closely with society’s objectives. Market-based approaches include tradable permits
Information approaches: Education and persuasion can be used to achieve the community’s objectives. Strategies which attempt to address perceived problems by providing more information, or changing the distribution of information can improve market functioning by enabling people to make better informed decisions.

Source: Hepburn, G. (2002), “Alternatives to Traditional Regulation”, OECD, Paris, www.oecd.org/gov/regulatory-policy/42245468.pdf (accessed 13 October 2017).

In Slovenia, the Resolution on Legislative Regulation underlines a need to identify methods, alternatives (with presentation of advantages and disadvantages), tools and mechanisms, as well as levels and decision-making processes. However, there is no data on the use of provisions in practice, no guidelines available, and no training.

Box 5.6. Exploring the use of alternatives to regulation in OECD countries

The first response by governments to a perceived policy issue is often to regulate, but it may be appropriate to ask whether traditional regulation is the best possible course of action. In many situations there may be a range of options other than traditional “command and control” regulation available. The alternatives to traditional regulation fall into three main categories: market-based instruments, self-regulation and co-regulation approaches, and information and education schemes. OECD countries are increasingly experimenting with the use of alternatives to regulation, mainly in association with the use of RIA.

In Australia, the Best Practice Regulation Handbook requires that the Regulatory Impact Statement (RIS) include consideration of a range of regulatory and non-regulatory alternatives. The handbook promotes the early consideration of alternatives when examining the need for regulation. It provides guidance and identifies the strengths and weaknesses of a range of alternative approaches, including examples of where they could be applied. There is no preference expressed for a particular regulatory approach, the appropriate solution should be identified based on the features of the policy problem and deliver the greatest net benefit compared to other possible options. In all cases where new regulation is being considered, self-regulation is required to be examined in a RIS. The training for departments provided by the Office of Best Practice Regulation includes discussion of the range of alternative instruments and their application.

In Germany, the Joint Rules of Procedure of the federal ministries stipulate that draft regulations must be accompanied by an explanatory memorandum, which among others must establish:

whether there are other possible alternatives to regulation
whether the identified policy objective can be performed by private parties; and
the considerations that led to the rejection of non-regulatory options.

An annex to the Joint Rules provides a checklist for identifying opportunities for self-regulation:

What kind of regulation arrangement is appropriate to address the problem? Is self-regulation sufficient? What structures or procedures should the State provide to enable self-regulation? Would it be possible for the State to make self-regulation mandatory?

Provided the task can be carried out by non-governmental or private bodies: how is it ensured that the non-governmental service companies will provide their services for the common good (nation-wide coverage, etc.)? What regulatory measures and bodies does this require? How is reassignment of tasks to governmental institutions ensured in the case of bad performance?

Can the problem be solved in co-operation with private bodies? What requirements for the legal design of such co-operative relationships should be imposed? What practical design is suitable and necessary to enable or support such co-operative relationships in organisational terms?

If it seems that the problem can only be solved adequately on the basis of a programme or other target-oriented basis: what minimum content of regulation is required by the rule of law (i.e. stipulations on competence, aims, procedures, etc.).

In Canada, the Cabinet Directive on Regulatory Management supports the adoption of performance-based regulation, where appropriate.

Under the Radiation Emitting Devices Regulations (C.R.C., c. 1370), microwave oven components and shields must be constructed in a manner that does not allow the leakage of emissions in excess of limits prescribed elsewhere in the Regulations. The Regulations do not prescribe specific material or design to be used to achieve such outcomes, only the outcome itself. This allows regulated parties to choose their own materials and design to meet the performance requirements of the emissions limit.

In the United States, Executive Order 12866 requires agencies to identify and assess alternative forms of regulation and, to the extent feasible, specify performance objectives, rather than specifying the behaviour or manner of compliance that regulated entities must adopt.

The Transport Airplane Fuel Tank Flammability Reduction (73 FR 42444) rule requires operators and manufacturers of transport category airplanes to take steps that should greatly reduce the chances of a catastrophic fuel tank explosion. The final rule does not direct the adoption of specific inerting technology either by manufacturers or operators, but establishes a performance-based set of requirements that set acceptable flammability exposure values in tanks most prone to explosion or require the installation of an ignition mitigation means in an affected fuel tank.

Source: OECD (2005), Alternatives to Traditional Regulation, OECD Publishing; OECD (2010c), Better Regulation in Europe: Germany 2010, OECD Publishing, doi: 10.1787/9789264085886-en; Government of Australia (2010), Best Practice Regulation Handbook, Canberra. And OECD (2015), OECD Indicators of Regulatory Policy and Governance (iREG), www.oecd.org/gov/regulatory-policy/indicators-regulatory-policy-and-governance.htm.

Performance-based regulation

Performance-based regulation is a softer way to change the behaviour of markets that is not as restrictive as traditional command-and-control regulation. It imposes obligations stated in terms of outcomes to be achieved or avoided, giving regulated entities flexibility to determine the means to achieve the mandated or prohibited outcomes (OECD, 2015a). For example, an air pollution regulation that establishes an emissions limit that a regulated entity must not exceed is performance-based, as the entity may choose how it will reduce emissions to meet that limit. On the other hand, an air pollution regulation that mandates that a regulated entity install a specific pollution control device is not performance-based, as the entity has no choice but to install that specific device.

Benefits and challenges of using performance standards

By leaving the means of achieving the required outcome to the discretion of the regulated entity, performance standards allow firms to choose more effective or lower cost processes, promote innovation and facilitate harmonisation needed for international trade (Coglianese, 2017). Adoption of performance-based regulation can also simplify and clarify regulations, since they only require determining underlying objectives in terms of standards rather than detailed, prescriptive procedures (OECD, 2002).

The design of performance-based regulations can be associated with costs since regulators are required to specify the desired outcomes. Verification of compliance is likely to be more difficult and can result in increased administrative and monitoring costs due to the range of different compliance strategies that performance standards allow for. Similarly, they require the dissemination of sufficient operational guidance to ensure compliance by providing adequate understanding and knowledge of the requirements. Performance-based regulations can be a burden to small businesses in particular since they delegate the responsibility to develop appropriate compliance strategies to the regulated entity (OECD, 2002).

The effectiveness of performance standards depends on the ability of regulators to reliably measure or test performance (Coglianese, Nash and Olmstead, 2003). In cases where actual performance cannot be evaluated and verified, for instance in rare or catastrophic events, implementation of performance standards proves difficult (Coglianese, Nash and Olmstead, 2003). Access to reliable and appropriate information about performance is crucial to effectively measure outcomes and can be obtained more easily in scenarios where performance can be measured directly, for example when testing exhaust emissions of motorised vehicles. Thus, performance standards should be based on measurable events rather than on predictions.

As a result, policy makers need to systematically look into the question of when performance-based regulations are likely to contribute to the achievement of the desired policy outcome and if there is sufficient information available to measure performance. Moreover, they have to ensure that those regulated understand the objectives and standards set out in the regulation and are therefore able to develop and implement compliance strategies (OECD, 2002).

The state of play of performance-based regulation in Slovenia

The Resolution on Legislative Regulation requires agencies to conduct an impact assessment of regulations that should take into account the alternatives of regulation. However, at this stage, Slovenia does not apply performance-based regulation. There are no guidelines and training on performance-based regulation available.

Assessment and recommendations

Regulators in Slovenia are required to write RIAs for draft legislation, but there is limited evidence that they actually inform and improve policy in Slovenia. RIAs are often conducted late – after a preferred option has been identified – and there is limited oversight of the analytical quality.

As a result of the limited analysis, regulators often do not consider alternatives, such as performance-based regulation or non-regulatory options.

The Government should consolidate and build capacity for the oversight of regulatory impact assessment. A lack of centralised oversight and control of the RIA process has resulted in a “checkbox” process that creates work for regulators, but does not always inform policy. Additionally, a patchwork of oversight form several different ministries limits a big-picture view of the quality of the regulatory impact assessments.

Slovenia should centralise oversight for the RIA and stakeholder engagement into a single unit in the centre-of-government. Furthermore, it should ensure that this unit has the necessary expertise to analyse the quality of legislative proposals. This unit could also provide advice and guidance on regulatory policy tools during the development of regulations, such as providing assistance with the use of the SME test and on methodological challenges of measuring impacts.

During the early stages, the Government should implement a prioritisation system for regulatory impact analysis. Regulatory analysis is time consuming and resource intensive. Therefore, it only makes sense to have a full-fledged RIA for proposals that are likely to have a high impact on Slovenians. Prioritising which proposals should be subject to a full RIA could be done at the proposal stage, e.g. when the development of the regulation is added to the Government work programme.

Given that the General Secretariat approves the Government work programme, it would make sense that it has the authority to determine which regulations require a more thorough RIA. Slovenia could draw on the experience of a number of countries that have threshold tests to determine which regulations require a more thorough analysis (see Box 5.1 above).

A standard methodology, training and guidance for quantifying costs and benefits should be made available to line ministries developing regulations. Slovenia currently publishes a handbook on conducting regulatory impact analysis, but as the MPA’s own analysis shows the quantification of costs and benefits remains quite weak. There is currently no training or guidance on how exactly to measure costs and benefits, although the SME test does provide a tool for regulators to measure compliance costs to businesses. The Slovenian government could produce comprehensive guidance on different methods for valuing costs and benefits (see Box 5.2) and also make modules in their school of public service available for regulators.

The Government could facilitate and co-ordinate access to statistics and other useful information, especially between line ministries and the Statistics Office. Access to data and statistics is central to the development of regulation. Data can help identify where problems exist as well as inform regulators about the potential costs and benefits of certain proposals. Knowing the state-of-play and trends in indicators related to the policy is critical in defining a policy’s potential impacts. The government of Slovenia could expand the role of the Statistical office to help further its Better Regulation agenda. For example, the Statistical Office could provide guidance and training on statistics available for regulators to analyse the current situation, the ex ante impact of regulations or to develop indicators (see Chapter 7 for more indicators).

The SME Test should become embedded into the RIA process. The SME test will help regulators measure compliance costs to business by making the process of estimating impacts more efficient. Ensuring that the SME test becomes embedded in the regulatory making process will greatly help regulators identify proposals that might overburden businesses in Slovenia. The government should continue to develop capacity to use the tool properly and provide feedback to ministries on whether they have used the tool correctly. Ideally, the suggested unit in charge of oversight of RIA in general would also provide guidance and oversight of the use of the /SME test.

Considering alternatives to regulation should become standard practice during the development of regulation. Regulation is often not the most efficient tool to solving policy issues, so it is important that when regulators are first investigating problems and their causes, they should be encouraged to consider alternatives to regulation before drafting a regulation. Slovenia could provide training and guidance on how to consider alternatives to regulation and to track if alternatives to regulation are actually considered during the development of regulation.

Bibliography

Coglianese, C. (2017), “The Limits of Performance Based Regulation”, University of Michigan Journal of Law Reform, Vol. 50/3, pp. 525-536, http://repository.law.umich.edu/mjlr/vol50/iss3/1.

Coglianese, C., J. Nash and T. Olmstead (2003), “Performance-Based Regulation: Prospects and Limitations in Health, Safety, and Environmental Protection, Administrative Law Review, Vol. 55/4, pp. 705-729, www.jstor.org/stable/40712156.

Gajšek V., Z. čule, U. Starc (2016), “Guidelines for the SME Test”, Republic of Slovenia, Version 0.1., April.

OECD (2015a), OECD Regulatory Policy Outlook 2015, OECD Publishing, Paris. https://doi.org/10.1787/9789264238770-en.

OECD (2015b), OECD Indicators of Regulatory Policy and Governance (iREG), www.oecd.org/gov/regulatory-policy/indicators-regulatory-policy-and-governance.htm.

OECD (2012), Recommendation of the Council on Regulatory Policy and Governance, OECD Publishing, Paris, www.oecd.org/gov/regulatory-policy/2012-recommendation.htm.

OECD (2002), Regulatory Policies in OECD Countries: From Interventionism to Regulatory Governance, OECD Publishing, Paris, https://doi.org/10.1787/9789264177437-en.

Republic of Slovenia National Assembly (2014), “Report on National Assembly’s Work in the Parliamentary Term 2011-2014”, Public Relations Office, Ljubljana, Šubičeva 4.

Voermans, W.J.M. and H.M. ten Napel (2012), “Legislative Processes in Transition: Comparative Study of the Legislative Processes in EU Countries”, Leiden Law School Research Paper, 13 December, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2188870 (accessed December 2017).

Notes

← 1. www.vlada.si/delo_vlade/program_dela_vlade/.

← 2. www.pisrs.si/Pis.web/pregledPredpisa?id=ZAKO470.

← 3. www.svz.gov.si/fileadmin/svz.gov.si/pageuploads/Dokumenti/Nomotehnicne_smer.pdf

← 4. The current guidance document is the Manual for the Implementation of the Environmental Impact Assessment Legislation and Policies.

← 5. www.stopbirokraciji.si/fileadmin/user_upload/mju/boljsi_predpisi/publikacije/emms4112013_1.pdf.

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