Legal regulations may sometimes be scary. They a priori provoke aversion, generating enormous compliance costs. Rules are often duplicate or even contradictory. Public regulation is beyond control in certain areas, with the available capacity of companies or the current technology being unable to ensure full compliance with all norms. Regulations are often inadequate to the risks against which they should protect, disregarding those of greater significance.
We have extensive experience with all of this. The British “Locomotive Act” dated 1861 required “locomotives” (mechanically propelled vehicles) to be operated by two persons and not to exceed the speed limit of 10 mph. More-stringent criteria were introduced by the Red Flag Act in 1865, requiring a third person to carry a red flag at least 60 yards ahead of an approaching vehicle as a warning (the act also reduced the maximum speed to 4 mph). The Act was abolished three years later.
A great many similar episodes can be found in the history of regulations. Does it mean that the new business was not supposed be regulated by the state at that time? Regulation was certainly necessary but the state should have better understood the coming technology. This error is frequently repeated at the present time, with the difference that the emergence of new technologies has accelerated at an unprecedented pace, resulting in a growing gap between the need for regulation and its existing state.
Traditional regulation is becoming outdated and public administration – we all – are on the verge of regulatory revolution. We must collaborate to find new, faster and safer forms of business regulation that will not hinder innovations, effectively regulating new risks while internalising new externalities.
First, it is necessary to revise the current regulations – by means of tools, fortunately. Deloitte conducted a data and text analysis of the 2017 US Code of Federal Regulations, having identified 18,000 Sections of 217,000 with a similar wording. Such “exercises” enable an effective elimination of duplicates and conflicts in the rule of law that may be further clarified by parallel transitions to regulatory templates, as attempted by the Czech Chamber of Commerce in respect of the Legal electronic system.
Nevertheless, a sole revision of the existing regulations will be insufficient. We need to start employing tools of adaptive regulations with the use of new technology as well as psychological and sociological insight, predictive analytics and crowdsourcing to identify presumable violation of legislation and to understand the need for regulatory changes, and chatbots to explain statutory duties to users for the limited capacity of officials to be saved for more demanding activities. It is necessary to involve regulatory experience more quickly. We need to use regulatory labs and incubators to test new products, services and business models in a regulated environment without complying with all of the existing regulation or with the use of new one.
We need innovations, which pose an increased burden on officials, to be used for ensuring more-efficient public administration. Regulators can work more effectively while promoting innovations and protecting constitutional rights and freedoms.
I am looking forward to the debate next year stirred up by the 10th annual Act of the Year survey as well as to the regulatory revolution we are entering just now.
The article is part of dReport – December 2018, Legal news.
Seminars, webcasts, business breakfasts and other events organized by Deloitte.
