On the 30th of July 2021, the OECD published the Best Practice Principles on International Regulatory Co-operation.
Such report was prepared by the OECD Public Governance Directorate (GOV) under the leadership of Elsa Pilichowski, Public Governance Director, and Nick Malyshev, Head of the Regulatory Policy Division.
The Regulatory Policy Committee approved it at its 24th session on the 21st of April 2021, and it is part of the series of “best practice principles”, by the OECD Regulatory Policy Committee.
The document preface represents as the 2008 financial crisis and the recent pandemic required multilateral co-operation efforts. Seemingly, challenges as climate change, transboundary pollution, digitalisation and financial market instability can not be faced by governments alone.
As evidences of an increasingly interconnected world, the report highlights as
1. we buy goods and services that come from all over the world;
2. it is potentially normal to not live in the same place for all our lives, and it is easy to travel around the world, and
3. we use information that comes from many different places thanks to digitalisation.
However, the OECD displays that traditional jurisdictional boundaries still constrain institutional frameworks and regulatory processes, and there is no condition to properly recognise the global relevance of the crucial issues that humanity needs to address.
Indeed, the document highlights as the OECD Best Practice Principles on IRC aim to support policymakers and civil servants in adapting regulatory frameworks (promoting their quality and resilience) to the interconnected reality.
On the matter, it is expressed as International Regulatory Co-operation (IRC) is about promoting the interoperability of legal and regulatory frameworks, and it could be defined as covering “Any agreement or organisational arrangement, formal or informal, between countries to promote some form of co-operation in the design, monitoring or ex-post management of regulation”.
The document states as such a broad definition comes with several implications. As IRC also includes non-binding agreements and voluntary approaches, includes the downstream side of implementation, enforcement, and ex-post regulation, and does not minimise the importance of unilateral action.
The report also lists a selected country definitions of IRC.
The work of the OECD focuses on collecting evidence and support rulemaking, in face of a lack of data concerning benefits and costs of IRC.
The results allowed the OCED to define three primary outcomes that IRC may deliver:
1. Regulatory effectiveness – “In a context where domestic regulatory frameworks are limited in their reach, IRC may allow addressing challenges beyond a single regulator’s jurisdiction, at the (supra-national) level where they may occur” – see here.
2. Economic efficiency – “IRC may limit the undue frictions policymaker personal flows that policy makers and regulators may generate when developing and enforcing laws and regulations without considering the international environment” – see here.
3. Administrative efficiency – “IRC may help countries pull intelligence and resources together for issues that may be addressed domestically but may benefit from international intelligence” – see here.
Moreover, the research made by the OECD suggests critical areas in which IRC should be necessary:
1. areas that are essentially science-driven, based on irrefutable facts;
2. areas involving global goods or services with issues of intrinsic cross-border nature and not to be solved by individual governments, such as global warming, air pollution, banking and finance, pandemics, and so on;
3. areas for which there is a strong incentive to co-operate (trade, international investment or financial markets) or where countries can benefit from sharing information (health and safety domains); and where the disincentives to co-operate are limited or can be managed (e.g., the possibility of free riding, i.e. that some countries derive the benefits without incurring the cost of co-operating for example).
The principles are described as being intentionally ambitious and it is expressed as few countries meet them at the moment.
The document lists a summary of the best practice principles, copied below:
Establishing the IRC strategy and its governance
- Develop a whole of government IRC policy / strategy
- Establish a co-ordination mechanism in government on IRC activities to centralise relevant information on IRC practices and activities and to build a consensus and common language
- Enable an IRC conducive framework – i.e. raise awareness of IRC, build on existing platforms for co-operation, reduce anti-IRC biases and build in incentives for policy makers and regulators
Embedding IRC throughout the domestic rulemaking
- Gather and rely on international knowledge and expertise
- Consider existing international instruments when developing regulation and document the rationale for departing from them
- Assess impacts beyond borders
- Engage actively with foreign stakeholders
- Embed consistency with international instruments as a key principle driving the review process in ex post evaluation and stock reviews
- Assess ex ante the co-operation needs to ensure appropriate enforcement and streamline “recognisable” procedures
Co-operating internationally (bilaterally, plurilaterally and multilaterally)
- Co-operate with other countries to promote the development and diffusion of good practices and innovations in regulatory policy and governance
- Contribute to international fora which support regulatory co-operation
- Use mutual recognition in combination with international instruments
- Align IRC expectations across various policy instruments, including in trade agreements
It is possible to read here the whole chapter concerning the description of the principles.
The OECD Secretary-General, Mathias Cormann, highlighted as such work confirms the organisation’s dedication to supporting governments in managing the global commons and promoting multilateralism.
Other key experts have also shared their views.
On the relevance of IRC, Stephan Naundorf (Chair of OECD Regulatory Policy Committee) displayed as “Challenges to our societies like the Covid-19 pandemic, like the climate change and many others demonstrate clearly that no regulator sits on an island. Whatever we do, all of those challenges are cross-border challenges. Single action of single countries won’t provide solutions to these challenges”.
On the importance of the best practice principles, Céline Kauffman (Former Deputy Head of the Regulatory Policy Division) expressed as “It is extremely difficult to establish the cooperation framework while fighting the crisis. If there is a silver line in the current crisis, it is the awareness that the international regulatory co-operation framework needs to be established in time of peace as part of the future resilience of regulatory frameworks. The OECD’s BPPs are the first international tool in support of IRC.”
The development of the Best Practice Principles on International Regulatory Co-operation is a milestone and it could be of first-rate importance for Countries to be more aware and prepared to face transboundary issues and actions.
Luca Megale is a PhD Student at LUMSA University of Rome
and tutor of the European Master in Law and Economics - EMLE (Rome term).