Utrecht University

ACLE conference 5-6 March 2009Amsterdam

ENFORCEMENT BY REGULATORS THROUGH SELF REGULATION AND

COMPLIANCE PROGRAMS

Prof. Dr. Annetje Ottow

Utrecht University

Vertical vs. Horizontal Supervision

• Classic command-and-control model (Baldwin & Cave 1999):

“the force of law is used to prohibit certain forms of conduct or to demand some positive action or to lay down conditions for entry into the sector”

• Horizontal approach: focus is on collaboration with the supervisee, based on trust

Utrecht University

Horizontal Instruments

• Examples of horizontal instruments:

* self-regulation* co-regulation* covenants* compliance programs

• Stimulation of horizontal instruments? Responsive regulation model of Ayres & Braithwaite (1992): use of enforcement pyramid to examine which enforcement instruments should be deployed.

Utrecht University

Pyramid model

• The base of the pyramid is made up of the most co-operative instruments for ensuring compliance.

• The most severe instruments, such as fines and withdrawal of permits and licences are found at the top.

Utrecht University

Mix of instruments

• Message of the model is clear: a regulator must first search for co-operation and consulation, and opt for heavier sanctions only as last resort.

• Difficult balancing act: finding the right mix of horizontal and vertical instruments

• Question: when to use what? More research is needed to measure he effectiveness of the different instruments

Utrecht University

Regulators and horizontal supervision

• Tendency to use more horizontal instruments?

• Over or under horizontalisation?

• The use of compliance programs should be stimulated by regulators, but must always have repressive instruments up its sleeve.

• Risks of horizontalisation: capture, discrimination, intransparancy

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Tasks of regulators

• Task of regulators to regulate and not to delegate its powers to the supervisee: its raison d’etre is supervising companies

• Obligation to enforce? According to European and national law such an in-principle obligation does exist

• Horizontal supervision is designed to ensure compliance: the regulator is under no (legal) obligation to use only repressive measures.