Juho Mäki-Lohiluoma: Do We Dare to Ask the EU for New Regulation?

Juho Maki-Lohiluoma

Common regulation is essential for a functioning single market. However, in the EU’s legislative process, good intentions often lead to increasing bureaucracy and administrative burdens. Has confidence in the EU’s ability to deliver high-quality regulation been lost?

Despite its bad reputation, EU regulation has undeniable merits. Over the decades, EU-level legislation has gradually expanded to new sectors. Last year, the EU’s single market celebrated its 30th anniversary, with a history marked by a series of successes that have spurred economic growth and prosperity. EU regulation facilitates market access, increases competition, and at its best, offers European companies barrier-free access to the world’s largest market.

However, recent EU regulations have been disappointingly poor. Many legislative projects that started off with excellent ambitions ended up in confusion, with the original aims lost in a complex maze of bureaucracy and red tape. Consider the EU Listing Act. It was intended to simplify the listing rules for companies that want to list on public stock exchanges, but eventually became so bogged down during the legislative process, that the end-result is barely on the level where we started from. Regulations for individual pension products and corporate reorganizations became cumbersome. The new Digital Services Act, the Data Act, and the Artificial Intelligence Act all began with the right objectives but ended up adding layers of regulation unrelated to their original goals. The GDPR, often considered a Brussels success story, seems to simply have no limits to its scope of application, with nearly all data interpreted as personal data in the Courts. Neither the Corporate Sustainability Reporting Directive (CSRD) nor the Corporate Sustainability Due Diligence Directive can be praised for their quality, despite of avoiding the worst proposed excesses.

I’m not arguing that EU regulation should only prioritize business interests or economic growth. Many important societal objectives, such as privacy and consumer rights, require legislative protection, which often necessitates precise regulation that restricts business freedoms. We at the Confederation of Finnish Industries too have ultimately supported all the legislative proposals mentioned above, even in their final form.

However, the current EU regulatory culture has severely eroded confidence in developing regulations that safeguard Europe’s competitiveness and promote innovation and growth. Previously, sectors and companies themselves have often requested the Commission for additional regulation to drive single market harmonization. The threshold to do so has now been raised, since even the best of aims too often result in added administrative burden and legal uncertainty.

The GDPR, for example, desperately needs amendments to increase legal certainty and reduce administrative burdens. A revision of the Water Framework Directive could boost green transition projects. EU-level definitions for emission offsets could help create a new market that drives the green transition forward. The Capital Markets Union could benefit from harmonized debt order regulations, and a truly harmonized European copyright regime would stimulate growth and investment in the digital sector. Developing a real single market for services also holds significant potential, and this too is a project that happens through EU regulation.

However, these projects are complex and risky. Given recent experiences, it’s hard to be confident that the legislative processes will result in truly pro-competition, pro-innovation, and pro-growth regulatory frameworks. Many fear that proposing such ideas will only worsen the situation.

The problem becomes serious if industries and businesses stop proposing new regulations to the Commission, in fear of new problems. This would undermine the Commission’s and other policymakers’ understanding of regulatory needs, stalling harmonization even when the conditions are right. The single market’s development is seeing new political momentum, highlighted by the recent Letta Report, and there is a clear a need for new measures, but these are hampered by low trust and scepticism.

I believe we’ve now reached a low point in the quality of EU legislation. The new Commission, Parliament, and the Council have a tough job ahead to restore confidence in the legislative process. They must ensure that impact assessments of proposals are comprehensive, and that the resulting legislation provides the legal certainty and predictability that businesses need. This can be achieved by prioritizing quality over quantity in drafting new initiatives – and by considering, whether legislation is indeed always the best solution to solve the problems at hand.