Laying down the law: Acting within the rules to aid growth

15th January 2015


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  • Environment agencies

Author

Colin Price

Simon Colvin says the new code and the planned duty on regulators to consider the impact of their actions on the economy change the regulatory landscape

The regulatory landscape never stands still. One aspect that has seen a lot of change last year and which will see further change in 2015 and beyond are the rules that regulators, such as the Environment Agency and Natural Resources Wales, have to abide by when exercising their regulatory functions. Businesses need to know and understand these new rules so they can make best use of the opportunities they present.

The EU and UK perspectives

At a European level, commission recommendation 2001/331/EC on minimum criteria for environmental inspections sets out a number of requirements that must be followed by environmental regulators in all member states. The recommendation is designed to create a level playing field but, as it was published in 2001, it is now quite old.

The seventh environmental action programme, agreed by EU leaders in November 2013, places significant emphasis on the need for better implementation and enforcement of existing environmental laws. This will be especially important with the potential scrapping of EU initiatives, such as the circular economy (p.8). The message at the moment is to squeeze more out of what we already have, and I expect to see the 2001 recommendation updated or replaced soon to help achieve that aim.

From a UK point of view, a new code for regulators was published last summer and a new “economic growth duty”, which is contained in the Deregulation Bill (now in parliament), is due to come into effect in April and require regulators to consider the impact of their actions on growth.

Both these developments have gone relatively unnoticed but businesses need to ensure they understand what these changes will mean for them.

Code of conduct

The Legislative and Regulatory Reform Act 2006 details a number of principles that regulators must have regard to when exercising their regulatory functions. The first code was published in 2008 but was replaced in 2014.

The updated code sets out a detailed framework within which regulators should exercise their functions. It contains six sections. These are: act in a way that supports regulated businesses to comply and grow; offer simple and straightforward ways to engage; adopt a risk-based approach to regulation; share information about compliance and risk; provide clear information, guidance and advice; and adopt a transparent approach.

Regulators must have regard to the code when developing their own policies and procedures as well as when exercising their functions. The code includes a note on monitoring, and it encourages businesses to challenge regulators who they believe are not complying. There is also the right to report any non-compliance to the Better Regulation Delivery Office (BRDO). Businesses need to use these tools when they believe they are not being treated fairly.

The code is supported by a guidance for regulators information point (GRIP), set up by the BRDO. This drills down into the code in more detail and gives examples of the types of behaviour expected of regulators. Highlights include:

  • The need for regulators, when responding to non-compliance, to clearly explain what the non-compliant activity is, provide advice and give reasons for actions taken.
  • To provide opportunities for dialogue to ensure regulators are acting proportionately and consistently.
  • To create an environment in which regulated businesses have confidence in the advice they receive and feel able to seek advice without the fear of triggering enforcement action.

Firms need to remember they are entitled to bring failings by regulators to meet the standards provided for in the code to the attention of the regulators as well as the BRDO. This should help to bring about a change in behaviour and approach on the part of the regulator.

The growth duty

The planned duty will be another powerful tool in the armoury of the business community in their dealings with the environmental regulators. As stated, it provides that regulators must have regard to the promotion of economic growth when exercising their regulatory functions. It has been much criticised by environmental NGOs for the weight it attaches to economic growth.

The draft guidance document that has been published alongside the duty stresses that regulators must be accountable and transparent in their decision making. The guidance is clear that the duty can be used as a ground to challenge regulatory decisions. In an environmental context, this would mean it is relevant in terms of applications for environmental consents, enforcement notices and compliance assessment forms. Businesses will be able to ask regulators to explain what impact the duty had on a regulator’s decision.

It is evident that the duty and the code will have a significant role to play in the future of environmental regulation in the UK. Businesses need to understand what the code and the duty mean so they can identify the opportunities that both developments offer them.

Further information

A copy of the regulators’ code is available at lexisurl.com/iema57685, while a summary can be found at lexisurl.com/iema57687. The guidance for regulators information point is at regulatorsdevelopment.info/grip/.

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