Fundamentals of Governance:Day Three – Governance

Ian Rennie

1. Legislative reform2. Regulation, audit and accountability3. Socio-political dimensions of Governance4. Governance and Political Institutions.

Timetable

LEGISLATIVE REFORMSession 1

• Different countries have different systems in place for making and updating laws– Common law is mainly based on the idea of precedent: when

a court makes a decision about a case, that decision becomes a part of the law of the country

– Civil law is based on legislation: general, written laws made by the government. In this legal system, the decisions of judges do not affect the laws of a country

– Sharia is the religious law of Islam: deals with many topics addressed by secular law, including crime, politics and economics, as well as personal matters. Sharia is applied by Islamic judges, or qadis.

National Law

• Governs the conduct of independent nations in their relationships with one another

• Primarily concerned with nations rather than private citizens– Public international law, which governs the relationship

between provinces and international entities– Private international law, or conflict of laws, which addresses

the questions of • which jurisdiction may hear a case• law concerning which jurisdiction applies to the issues in the case

– Supranational law or the law of supranational organisations.

International Law

• ... establishes a series of rights and demands that are recognised by EU member states' national judiciaries

• is governed by the European Court of Justice (ECJ)• legislation enacted by the law-making institutions of the

Council of the European Union and the European Parliament — comes in two forms: – Regulations become law in all member states the moment they

come into force, without the requirement for any implementing measures, and automatically override conflicting domestic provisions

– Directives require member states to achieve a certain result while leaving them discretion as to how to achieve the result. The details of how they are to be implemented are left to member states.

European Union Law ...

• The Vienna Convention on the Law of Treaties (in force since 1980) defines a treaty as:

• “... an international agreement concluded between States in written form and governed by international law ...”

• Only a minority of such agreements have treaty in their title (other common names include convention, protocol and agreement).

Treaties

• Is different from Law reform which is the process of examining existing laws, and advocating and implementing changes in a legal system, usually with the aim of enhancing justice or efficiency

• Law reform activities can include:– preparation and presentation of cases in court in order to change the common

law– lobbying of government officials in order to change legislation– research or writing that helps to establish an empirical basis for other law

reform activities• The four main methods in reforming law:

– Repeal (get rid of a law)– Creation of new law– Consolidation (change existing law)– Codification.

Reforming a National Legal System

• Can be the driver for other reforms, including reform of the economy

• True market economy cannot be created without ensuring full guarantees of private property and transparent predictability for entrepreneurial activity ...

• ... and sufficiently reasonable legal control over economic processes

• Legal reform is a tool for implementing necessary reforms:– balancing competing interests– creating a dynamic and sustainable economy– building a sustainable civil society.

Why Reform?

• Complete legal reform normally includes:– judicial reform– reform of various aspects of the structural system

and content of legislation– legal education– legal awareness by the population– corporate consciousness of the whole legal

community.

Reforming a National Legal system

• Delivering an independent judicial branch• elected, evaluated, and disciplined to ensure that

decisions are insulated from improper influences• in-service training programmes and investment

in adequately resourced law schools• with the power to challenge the executive and /

or legislative branches of Government• financially independent.

Scrutiny of Judicial Appointments

• Right to appeal against any judicial decision• Right to complain about the personal conduct of a

judge• Legislature can petition for the removal of a judge• In the UK this is delivered by ...

– Appearance before Parliamentary Committee– Media and social network scrutiny– The Lord Chief Justice’s Review presented to the Queen– Court Reports (an annual report on performance).

Accountability in Legal system

REGULATION, AUDITING AND ACCOUNTABILITY

Session 2

What Regulators Do

• There are economic, social and financial regulators• Regulatory bodies exercise a regulatory function, that is:

– imposing requirements, restrictions and conditions– setting standards in relation to any activity– securing compliance, or enforcement

• Where appropriate, operate at arms length from ministers, basing decisions on available evidence

• Some however are arms of executive departments of government although the majority nowadays in the UK are set up as independent entities.

Examples of Roles

• Gatekeeper role – maintains confidence in the market (e.g. pension providers)

• Setting standards – makes clear what is expected (e.g. professional standards)

• Drawing up detailed rules – identifies where action is needed (e.g. for safety, to ensure competition etc).

Catalysts

Advertising Standards AuthorityArchitects Registration BoardAssociation of Costs LawyersBar Standards BoardCare and Social Services Inspectorate WalesCare Council for WalesCare Quality CommissionCivil Aviation AuthorityClaims Management Regulation Commissioner for Public AppointmentsCommissioner for Public Appointments for Northern

IrelandCommittee of Advertising PracticeCompanies HouseCompetition Appeal TribunalCompetition CommissionCompliance Exchange Council for Healthcare Regulatory ExcellenceCouncil for Licensed ConveyancersCouncil for the Curriculum, Examinations and

AssessmentDepartment for Business, Innovation and SkillsFinancial Reporting CouncilFinancial Services AuthorityGambling CommissionGangmasters Licensing AuthorityGeneral Chiropractic Council

UK Regulating BodiesGeneral Dental CouncilGeneral Medical CouncilGeneral Optical CouncilGeneral Osteopathic CouncilGeneral Pharmaceutical CouncilGeneral Social Care CouncilGeneral Teaching Council for EnglandGeneral Teaching Council for Northern IrelandGeneral Teaching Council for ScotlandGeneral Teaching Council for WalesHealth and Safety ExecutiveHealth Professions CouncilHealthcare Improvement ScotlandHealthcare Inspectorate WalesHousing CorporationHuman Fertilisation & Embryology AuthorityHuman Tissue AuthorityInformation Commissioner's OfficeInsolvency ServiceIntellectual Property Regulation BoardInternational Association of Insolvency RegulatorsInternational Compliance AssociationLegal Services BoardLegal Services ReviewLondon Stock ExchangeMedicines and Healthcare Products Regulatory

Agency

National Lottery CommissionNorthern Ireland Social Care Council Nursing & Midwifery CouncilOfcomOffice of Fair TradingOffice of Rail RegulationOffice of the Legal Services Complaints

CommissionerOffice of the Scottish Charity RegulatorOfgemOfqualOfstedOfwatPensions RegulatorPharmaceutical Society of Northern IrelandPhonepayPlusPostcommPress Complaints Commission Public Appointments CommissionerRegulation and Quality Improvement AuthorityRegulatory LawRoyal College of Veterinary Surgeons.Royal Institution of Chartered Surveyors:

Regulation UKScottish Information CommissionerScottish Social Services Council .Social Care and Social Work Improvement

ScotlandSolicitors Regulation AuthorityTakeover PanelTenant Services AuthorityUtility Regulator

Case for Regulation

• Regulation must have clear intended outcome• Regulation should be based on a quantified

assessment of risk• It should be addressing a market failure or

social equity issue• Should not regulate just because we always

have done so.

Downsides and Limitations

Exercise ...

Better Regulation Five Principles

Any regulation should be:• Transparent• Accountable• Proportionate• Consistent• Targeted.

Auditing and Inspections

• Inspection and auditing are important enforcement tools

• But costly to the regulator and often costly in terms of opportunity cost of those inspected

• The work of many regulators is founded on the principle that every business should be inspected

• But is this the best way of targeting resources?

Scrutiny

• The way in which risk management and other methodologies are created, and the way in which different elements are used, should be open to scrutiny

• UK has increased scrutiny of proposals for new regulations e.g. through Regulatory Policy Committee which looks at impact assessments

• Parliament should have a role in scrutinising regulator performance overall (in a way that does not compromise independence).

Objectivity• Need to be familiar enough with sector being

inspected to understand it, but not to get over-familiar

• Need to listen to views of those (e.g. consumers) whose interests may be different from those being regulated (businesses)

• Need to seek evidence, not just opinion• Being open to scrutiny promotes objectivity.

Impartiality

• Be aware of potential for bias and try and use criteria that are as objective as possible

• Make sure inspectors’ targets do not give them ‘perverse incentives’

• Be aware of potential for conflict of interest e.g. people seconded into regulator from industry being regulated (needs careful management)

• Monitor and compare application of standards.

Improving Regulatory Performance?

• How can the performance of regulators be made more effective in terms of promoting compliance?

• How can the performance of regulators minimise possible adverse effects on business (e.g. admin burdens, stifling innovation, increasing barriers to entry)?

A Way Forward: OFRB

• Instead of ‘direct and inspect’• Use an outcome focused, risk-based (OFRB) approach• For example, this is the new approach to regulating

aviation security in the UK– Focus will be on delivery of security outcomes rather than the

delivery of specified processes– Transport Department will set overall requirements based on

threat at time– Industry will then be able to design security processes that

deliver specified security outcomes instead of having to follow detailed rules.

Risk Based – What It Means

• “ ‘risk-based’ regulation remains a valid approach. Put at its simplest terms, all it means is that you allocate your scarce resources to where you think the harm is most likely to occur and if that is to be successful that depends on having the right intelligence in place”

(Steve Brooker, Consumer Focus)

Earned Autonomy

• Earned autonomy – where regulators reduce the level of checking in response to the improved performance of individual businesses, costs for both businesses and regulators can be reduced

• This enables regulators to focus scarce resources on areas where the risk of non-compliance is highest e.g. cowboys.

The Pressure to Regulate

• Example– Many of us enjoy risky sports, and resent

any legislation designed to protect us. (Sport in the UK is associated with 160 deaths and 18 million injuries a year.)

– “Yet the same people can get very upset about what scientists might consider to be small risks - e.g. pesticide residues on fruit.” - Martin Stanley (author of ‘How to Be a Civil Servant’).

Politics and Regulation

• Political factors may put pressure on government to be too “light touch” in its regulation (e.g. banking)– Consequences of government inaction (or action) take

time to show up• At the same time, political factors (such as media

pressure) may cause government to intervene when doing nothing would be best

• Also, regulation may seem cheaper to government than the alternatives.

SOCIO-POLITICAL DIMENSIONS OF GOVERNANCE

Session 3

• Why is Governance so important to citizens of the world right now?

• What were the catalysts for the “Arab Spring”?

Exercise

GOVERNANCE AND POLITICAL INSTITUTIONS

Session 4

• “In framing a government to be administered by men over men the great difficulty lies in this ...

• ... you must first enable the government to control the governed ...

• ... and in the next place oblige it to control itself.”

James Madison, 1788

Governance – the challenge

• Political institutions are organisations which create, enforce, and apply laws

• that mediate conflict• make (governmental) policy on the economy

and social systems• otherwise provide representation for citizens.

Political Institutions

• The term 'Political Institutions' may also refer to the “rules of the game” ...

• ... the recognised structure of rules and principles within which the above organisations operate ...

• ... including such concepts as – the right to vote– responsible government– accountability.

Alternatively

• Congratulations, you have founded your own new country!

• What do you regard as the most important political institutions?

• And what is the appropriate governance for those institutions?

Exercise

DISCUSSION AND CLOSESession 5