Costs and compensations
This section addresses social, organzational and financial costs of regulation.
Juridification
uridification signifies excessive red tape. It describes situations in which the regulatee, individual or organization, is hamstrung, or even paralysed, by the demands of excessive rules, standards and instructions. There are at least three schools of thought on the potential solution to the juridification problem.
The fractured communications system approach, represented in different ways by Habermas
Paterson ‡ is the lead thinker in what might be called the reflexive approach. He traces the problem of juridification to a well-meaning, though misguided, over-zealous desire to cover all eventualities. Excessive focus on meeting detailed regulation creates a false security that leaves one subject to unanticipated problems. A solution requires a reflexive approach, oriented not to addressing detailed compliance, but to establishing sub-systems with flexible procedures for assessing and dealing with risk.
A third approach is the state-critique position developed recently by Fiona Haines, in collaboration with different co-authors. She has argued that to a significant degree juridification is a product of competing and often contradictory demands of separate regulators. She traces the cause of the situation to the state’s efforts to insolate itself from the risk-fallout exposure. Thus, juridification can only be solved at the level of the state’s own contradictions.
† Gunther Teubner, “Juridification: Concepts, aspects, limits, solutions,” in R. Baldwin, C. Scott and C. Hood (eds.), A Reader on Regulation (Oxford: Oxford University Press, 1998).
‡ J. Paterson, Behind the Mask: Regulating Health and Safety in Britain’s Offshore Oil and Gas Industry (Aldershot: Ashgate Dartmouth, 2000).
Haines, Fiona, and Adam Sutton, "The engineer’s dilemma: A sociological perspective on juridification and regulation.," Crime, Law and Social Change, 39(1) January 2003, 1-22
Juridification refers to the tendency for organizations and individuals to be overwhelmed by detailed rules, standards and instructions. Contrary to the common view that juridification can be minimized by improved strategies and techniques, the authors argue that to a large degree juridification is the product of incompatible competing demands on the regulatee. Using the example of a chief engineer in an Australian public hospital, they illustrate how he is required to be simultaneously a cost-conscious entrepreneurial risk-manager and a risk-avoiding maintainer of professional standards. These conditions, they argue, result from the political needs of the state to insolate itself from risk-fallout exposure: it is the consequence of refined regulatory strategy and technique; it cannot be resolved by just more of the same.
Haines, Fiona, and David Gurney, "The Shadows of the law: Contemporary approaches to regulation and the problem of regulatory conflict.," Law and Policy, 25(4) October 2003, 353-80
The authors examine the under theorized area of conflicting regulatory objectives: situations in which the different objectives of separate regulatory regimes act at cross purposes. They argue that most work in the recently emerging field of regulatory scholarship has focused on strategies and techniques for achieving an unproblematic, assumed to be morally righteous, compliance. Where conflict is considered, it is generally only considered as a deviation from compliance, due to self-interest or greed. They illustrate the dilemma of conflicting regulation with analysis of conflicts between the objectives of health and safety and competition regulations in Australia.
Regulatory Takings Doctrine
This doctrine holds that firms that suffer losses due to the strictures of imposed regulation should be compensated by the state for such loss. Three standard reasons are given for the promotion of this doctrine. First, a requirement to compensate will act as a deterrent to excessive and cavalier regulatory impositions. Second, such compensation provides insurance to investors, thus ensuring the maximum potential for investment is not hindered by the economic consequences of regulatory costs. Finally, such compensation constitutes fairness by sharing the costs of regulation across society more broadly, rather than excessively and exclusively burdening a small and specific group of stakeholders. Such arguments are particularly forcefully made in the case of international regulatory relationships.
In contrast, those opposing the doctrine argue that there is insurance available to protect against political risk, and that data suggests that many investors have been choosing this, more appropriate, route. Finally, while there is the danger of certain investors being unfairly hurt, particularly in an international context, this potential is offset by the harm that would be done to that country within the investment community, generally. The most serious risks of overreaction regulation, it is argued, can be constrained by national treatment and most favoured nation requirements in bilateral investment treaties and in customary international law.
William A. Fischel, “The political economy of just compensation,” Harvard Journal of Law and Public Policy, 20, 1996.
Michael A. Heller and James E. Krier, “Deterrence and distribution in the law of takings,” Harvard Law Review, 112, 1999.
Daryl J. Levinson, “Making government pay: Markets, politics, and the allocation of constitutional costs,” University of Chicago Law Review, 67, 2000.
Andrea L. Peterson, “The takings clause: In search of underlying principles, Part 1, Critique of current takings clause doctrine,” California Law Review, 77, 1989.
Been, Vicki, "Does an international ‘regulatory takings’ doctrine make sense?," New York University Environmental Law Journal, 11(1) 2002, 49-63
Addressing the discussion of whether NAFTA’s Chapter 11 might be used to force state and local governments in the United States and elsewhere to pay compensation for environmental property values, the author looks at the three main arguments in defence of such a “regulatory takings” policy. These reasons are protection against over-regulation; insurance to ensure productive risk-taking; and provision of fairness in the face of discriminating regulatory application. The author argues that none of these reasons justify an expansive definition in the international context.
Clough, Daniel , "Regulating expropriation and competition under NAFTA," The Journal of World Investment and Trade, 6(4) August 2005, 553-84
The author examines the question of whether competition regulation, such as deregulation of privatized utilities industries and the application of the ‘essential facilities’ doctrine to enterprises owned by foreign investors, can amount to a ‘taking’ of property so as to be subject to compensation for expropriation under article 1110 in Chapter Eleven of the North American Free Trade Agreement. He concludes that an examination of the NAFTA document leads to the conclusion that, while competition regulation is actually encouraged, it is not exempt from the expropriation provisions.
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