08/05/09 | Better regulation

Lightening the regulatory load on business

The quality of the EU regulatory framework remains a fundamental condition for European business to compete and to create employment. Legislation is necessary to give rights and opportunities and protect European business and citizens. Yet, legislation can also entail costs, especially for SMEs Additionally, the current body of EU legislation, known as the 'acquis communautaire', was not shaped all in one go but evolved over many decades. This gradual evolution can lead to unnecessary complexities and overlaps, and so the European Commission is trying to strike the right balance with its 'Better Regulation' strategy.

"Businesses should be free to spend their time producing and innovating - not filling in forms or reporting in overly bureaucratic ways," observes Commission Vice-President and Enterprise and Industry Commissioner Günter Verheugen.

More effective and efficient legislation

In order to make legislation less burdensome for enterprises, easier to apply and more effective in achieving its goals, the European Commission embarked on its 'Better Regulation' drive in 2002. The actions envisaged were to analyse the impact of proposed European legislation, simplify existing laws, and reduce the administrative burden. The Commission also wanted to consult with stakeholders to find out how EU laws affect them.

In this context, the Commission launched in 2005 a Strategy [218 KB] for simplifying the Union's regulatory environment. Since the launch of this strategy, "simplification has been mainstreamed into the work of the Commission. Through a range of coordinated activities, the Commission has built up a political and practical framework of action delivering tangible benefits for citizens, businesses and public administrations," the progress report explains.

Overall, 138 simplification initiatives, out of 185 in total for 2005-2009, have already contributed to streamlining the regulatory framework, improving working procedures and ensuring a well functioning internal market. The Commission's action since October 2005 will reduce the acquis by almost 10%, or about 1 300 legal acts and 7 800 pages of the Official Journal.

In parallel to the simplification strategy, the Commission has also launched an Action Programme for Reducing Administrative Burdens, which aims to cut costs for enterprises by focusing on the information that EU businesses are obliged to provide to public authorities or to private entities.

Concrete benefits

The legislative simplification efforts have delivered several concrete dividends to the European business community, particularly SMEs, as the following examples show.

The new General Block Exemption Regulation related to state aid, which harmonises and consolidates five legal acts into one text, allows Member States to approve a range of aid measures without, as was previously the case, first having to notify the Commission. Aimed at promoting job creation and competitiveness, this legislation covers a number of areas, including aid for SMEs, research, innovation and employment.

The simplification of the Community customs code is another example, modernising the EU's customs legislation and creating a paperless environment for authorities and traders. Once fully operational it will generate benefits to traders estimated at 2.5 billion euros per year

In Europe, public-sector purchases represent a significant portion of the economy, and a potentially powerful stimulus for enterprise and innovation. Everyday business opportunities in the public sector worth more than 1 billion euros appear on the EU-run website (Tenders Electronic Daily, TED). But many SMEs do not possess the mechanisms to keep track of public tenders, particularly those in other parts of the EU. A Common Procurement Vocabulary has been created and the procedure to publish procurement notices in the Official Journal (TED) has been simplified. This will facilitate the identification of public procurement opportunities anywhere in the EU.

Late payments in commercial transactions between companies or between businesses and public authorities still happen in the EU. This hampers the development of business and is even responsible for bankruptcies of otherwise viable companies, notably small or medium-sized enterprises (SMEs). Therefore, the Commission recently adopted a proposal to fight late payments. Amongst the proposed measures, public authorities will have to pay for the goods and services that they procure within 30 days. If not paid within this deadline, they will have to pay interest, compensation for recovery costs and a flat-rate compensation of 5% of the amount due, which kicks in from day one of the delay. This proposal will improve the cash flow of European business and will facilitate the smooth functioning of the internal market via the elimination of related barriers to cross-border commercial transactions.

The Action Programme for Reducing Administrative Burdens has also achieved several notable successes in cutting red tape for enterprises. A recent article focuses on these results.

The way ahead

Better regulation is an on-going exercise. The rate of reform continues apace. For 2009, the European Commission has included 33 additional simplification initiatives in its Legislative and Work Programme, covering such areas as the mutual recognition and enforcement of judgements in civil and commercial matters, agriculture, and state aid. In addition, following a thorough screening of the acquis, it found that a further 80 actions could be incorporated in future simplification activities, including legislation related to the internal market for goods, environment and public health.

"The snapshot provided by the screening of the acquis prepares the ground for future work. A programme which started with a limited number of initiatives now covers all policy areas and is taking an increasingly sectoral approach," the progress report concludes.

The text only of the articles can be republished as long as the source of the article is quoted: Enterprise & Industry magazine (http://ec.europa.eu/enterprise/magazine/index_en.htm), © European Union, 2008 - 2012