Recipe for disaster: a pro-business Scrutiny Board to prevent laws that hurt corporate profit

Since 2002, the Commission has been looking for ways to make EU legislation more business friendly across the board, be it in the name of “competitiveness” or the fight against so-called “red tape”. Now, a shocking leaked document shows Vice President Timmermans is taking that endeavour to a whole new level. A new bureaucratic body is to have considerable power to stop the Commission from tabling proposals that don’t adhere to a set of business-friendly principles. Furthermore, the Commission wants to be able to pull an “emergency brake” if its proposals are significantly changed in the “wrong” direction by either the Council or the European Parliament – could be laws improving working conditions, could be environmental regulation. The leaked document is entitled “Better regulation for better results – An EU agenda”, ostensibly to be released later in May.

Surprised? Shocked? Then try adding the so-called “Regulatory Cooperation” planned under the trade agreement negotiated between the EU and the US (TTIP) and figure out the consequences. The two together would significantly strengthen the hand of US corporations seeking ways to drive down EU standards.

Better regulation?

From the language used, the intentions of the Commission sound quite sympathetic: “Better regulation,” they say, is about “simplifying the legal framework and reducing regulatory burdens across the single market”, about “the delivery of decisive and effective action on the challenges that Europe is facing today”, and about setting out to  “avoid any undue burden. Sensible, realistic rules that do their job to meet our common objectives: no more, no less.” What could possibly the problem?
The problem lies in the true intentions of this “Better regulation" agenda. As revealed in a report from Corporate Europe Observatory and Friends of the Earth Europe, the Commission is in fact creating a mechanism to prevent rules that, while they make sense when judged from an environmental or social point of view, may annoy some business sectors. Cutting through the spin, this is basically an agenda to help business groupings get rid of rules they don’t like, and prevent new rules from emerging that in order to for example, improve health, social conditions or promote a sustainable course, could cost businesses the bottom line.  “Cutting red tape” or “reduce the administrative burden” are the most common slogans. In reality the result is the buildup of a set of bureaucratic procedures to steer EU rulemaking in a pro-business direction. Rather ironic, then, that in the name of cutting red tape the European Commission is proposing a new layer of bureaucracy. It seems bureaucracy is not their real target: EU regulations that might annoy businesses are.

Scrutiny Board exerts pro-business bureaucratic rule

It was clear from the beginning that the Juncker Commission would step up this deregulatory effort, and the first move of its President was to have the work of the Commission coordinated by five Vice Presidents, with one in particular in the drivers’ seat: the Commissioner for Better Regulation, Dutchman Frans Timmermans. He has the privilege to veto regulations he feels will go against the Better Regulation agenda, in itself a groundbreaking change of procedure in the Commission.
The leaked document covers the next steps in this process.  In it, Vice President Timmermans suggests a new “Regulatory Scrutiny Board” should be given the authority to stop any proposal that would run counter to a set of business -friendly principles. These assessments do include assessments of social and environmental impact, but other concerns than those of business interests tend to take the back seat. These documents are becoming crude cost-benefit exercises, and at the moment there is lots of lobbying to make them even worse. That’s why this sentence in the document is so scary: “ Impact assessments will require a positive opinion from the Board before the associated policy proposal is considered by the Commission.” While the document has few details on the kind of judgment, the Board is to do, the fact that it is to have the power to block further progress, is a big step. Particularly when taking the context into account: an initiative focused on deregulation to please business.
Such a board is not a new invention, but while the existing "Impact Assessment Board" (IAB) already has considerable political clout, in principle, the Commission can decide to take a proposal forward, even if judged negatively by the IAB. This new approach takes it to a different level, with a relatively autonomous board – non-elected and unaccountable - making crucial decisions on behalf of all citizens of EU member states.

The pro-business emergency brake

In a similar fashion, the leaked document proposes a very far-reaching measure that will allow the Commission to demand the legislative process be stopped if its original proposal is altered in a way that changes or disturbs the calculations in the impact assessment significantly. In the words of the leaked document, “each institution has the right to call for an independent panel to carry out an assessment of these factors following any substantive amendment to the Commission proposal.”
What would this mean in practice? Imagine if the European Parliament agreed with the Council on a compromise that would introduce more ambitious social or environmental goals to a law proposed by the Commission, for instance if a proposal that would ban a few “endocrine disruptors” due to a damaging effect to children would be extended to cover more substances. Such a scenario would then allow the Commission to pull the brake and call for an independent investigation. This would enable any business lobby coalition to regroup and focus on a particular outcome of the assessment, it could slower the procedure substantially, and possibly change the upcoming law to its original, less ambitious form.

Transparency, participation?

It is striking how much the leaked document goes on about public consultation and transparency. “Lighten the Load – Have Your Say” reads the appealing slogan, depicting an ostensibly new style of open governance from the Commission, where business and citizens are to be able to comment again and again on a proposal at almost every stage of the decision process, starting from the very first inception of an idea.
Should this not make groups fighting for transparency fall off their chairs, and get up cheering the surprise move? In fact, the appeal to 'have your say' will be to the benefit of business only, not citizens. This is borne out by the fact that, for example, already in 2014, a proposed law that would have improved information on and participation in environmental policies was scrapped as a consequence of the very same Better Regulation programme that is now claiming to enhance openness and transparency. In addition, the Commission is pushing for the adoption of new rules on "trade secrets" that would bar the public from getting information should it involve private companies – which it will in most cases.
It looks like a paradox, but there are clear indications that the invitation to “Lighten your load – Have your say” is a message to big business, not to society at large. For example, there has been intense business lobbying pressure for these moves. European and US businesses, and US lobby groups, such as the Business Coalition for Transatlantic Trade, Coalition of Services Industries, and the American Chemistry Council have been pushing for this particular version of "transparency" for a very long time.

TTIP, impact assessments and Better Regulation

This deregulatory push is also clearly related to TTIP, where both businesses and the US government have asked for more "transparency" and "stakeholder participation" in the EU at the very early stages of the legislative process, in fact well before a proposal is even presented to decision-making bodies.
While the new “Better Regulation” proposal of the Commission surely is an outcome of pro-big business leanings of the Juncker Commission, it will also serve as a way of meeting demands of the US government at the TTIP negotiation table. The leaked proposal fits very well with the schemes under development at the TTIP negotiations called “regulatory cooperation”, which are procedures intended to make regulation converge between the EU and the US, and in the current document on Better Regulation, demands of the US government are met.
That goes for transparency as well as the new approach to "impact assessments". "Impact assessments" are a core issue at the TTIP negotiations, as they are to play a key role in preventing decision makers on either side adopting rules that would go against business interests of the other side, or as phrased in trade-lingo: "detrimental to transatlantic trade and investment".
TTIP will boost the use of impact assessments, and will introduce an emphasis on the effect new legislative proposals might have on US companies, on whether it is in sync with US rules, and whether it supersedes international standards. In fact, the Commission has discussed the role and design of impact assessment with the US authorities for ten years, struggling to find common ground and develop a mutual approach that would make the other party's economic interests an integral part of the assessment, a discussion that has now been moved to the TTIP negotiations.

Lawmaking in the future

Once such a common approach is in place in the EU impact assessment guidelines, this is what will happen: while the assessment is underway, the EU will have to make information available on planning and timing of the proposal. Due to the generous rules on transparency, US companies will be able to lobby to shape the rule in their interest, or prevent it, from day one, as will the US Government.  An impact assessment is not merely a heap of papers, but a process whereby the implications of a proposal are figured out. It will draw upon inputs from many sides; inputs and evidence will be gathered from business groups and other key stakeholders. It is clearly on the cards, that when adjusted to TTIP, impact assessments will provide US companies with an opportunity to stress whether it has a negative effect on their economic interests.
There are precedents: when the EU was preparing its new rules on chemicals, called REACH, the first countermove of the US government was to use the impact assessment as the argument to stop it in its tracks. After a long battle, the chemicals sector (on both sides) and the US government could note some influence on the outcome, but the end result was still far from their goal. This time, with a stronger set of rules, success would be more likely. A negative impact assessment – which would include indicators on the effects on trade, e.g. on corporations' profits – will serve as a “red alert” to the Commission and might make it think twice about tabling it, if not make the Commission ditch it. It could even mean that consideration for the interests of US corporations becomes the factor that makes the "Regulatory Scrutiny Board" stop a proposal in the first place, for instance if US corporations are able to deal constant blows to the impact assessment at hand, eg. by claiming its assessment of the trade impacts are estimated wrongly.

Simplification to meet US demands?

In the case that the Regulatory Scrutiny Board accepts a proposal and the accompanying impact assessment, US companies could up the stakes and take it to another level. They could ask the US government to initiate a "regulatory exchange" with the Commission. Such a dialogue implies the Commission should see if conflicts with the US on the matter, can be resolved either by exchanging the proposal by harmonising it with US rules that cover the same area, or if the corresponding US rules should be accepted as equivalent (mutual recognition), which would leave US companies untouched by new rules. And then there is a third option – explicitly mentioned in the EU proposal for "regulatory cooperation", namely that of "simplifying" the proposed rules. "Simplifying" is a rather unclear concept, but is intended to avoid "regulatory burdens on companies" – burdens which we have learnt over the past few years can be e.g. improved working conditions or environmental regulation. Also, it is one of the key concepts used by the Commission under the Better Regulation programme.
Clearly it would not be a victory in itself for US corporations, or for the US government, if they win the battle on the final form of a proposal, as there is always the risk of losing the battle when either the Council or the European Parliament starts looking at amendments to the original draft written by the Commission. At that point, the proposal will most likely already look like a compromise with both the US government and US corporations, so some politicians, and even governments, might take a cautious approach. But should eg. the European Parliament dare  introduce changes that could be detrimental to US companies, the Commission would be able to halt the process, and have the changes carefully examined through another impact assessment.

Like hand in glove

The proposals all sound highly complicated, but this is the simple summary: Better Regulation and TTIP fit hand in glove. Both will lead to a bigger and more complex bureaucracy, set up to keep regulation on a tight leash and make sure big business comes first. It goes a long way towards rule-making where corporate interest becomes primary law, and everything else comes second, no matter what politicians or what platforms are elected to take decisions on our behalf. Both – Better Regulation and TTIP – are dangerous in their own right. Together they spell disaster.