Revenge Of The Trilogues

They sound like something from a sci-fi horror movie, but the Trilogues are actually already among us. In an excellent article, Vicky Marissen, MD of PACT European Affairs, has explained how these "three-way discussions" have moved further and further away from their rightful place in the latter part of the ordinary European legislative procedure and are now being used informally as a legislative shortcut - something the new EU agreement seems likely to make even worse.

Relying more on trilogues means that about 90% of EU legislation is adopted on first reading without any genuine legislative debate; and secondary legislation is being used to kick more sensitive cans down the Rue du Luxembourg. Indeed, trilogues are now happening within just a few days of each other without publishing the changes agreed, so it's impracticable for those outside the trilogues to follow or attempt to engage in what is really a closed debate. This was a frequent problem in the course of agreeing the new Payment Services Directive, for example.

The recent EU institutional agreement on better regulation won't fix this, as the Commission is able to use its participation in trilogues to (wrongfully) assume the role of legislator - note that its proposal for better regulation didn't even mention the word "trilogue" and merely stated that "The three institutions will ensure an appropriate degree of transparency of the legislative process, including of trilateral negotiations between the three institutions." If anything, that agreement promises more informal trilogues:

"Where appropriate, the three institutions may agree to coordinate efforts to accelerate the legislative adoption process, both during each institution's internal preparatory steps and during the inter-institutional negotiations."

Not only does this increasingly closed shop raise the risk of poor, ill-considered drafting that creates costs for the broader community, but the mere perception of an opaque process also widens the gap between EU legislators and EU citizens - a gap that is already wider than the one between national legislators and their citizens.

The EU's legislative process needs to be more transparent than national processes, not less, if the EU is to be respected or seen as a Good Thing.

I'm amazed the Brexit fans aren't sounding the alarm over this...

Oh, wait, no I'm not. The Brexit 'debate' is pure politics, not connected to anything real.

Privacy Not Core To Your Business? Take The ICO's 12-Step Programme

Though years in the making, it's possible that word of the EU's data protection reforms has yet to penetrate some boardrooms, let alone the IT development roadmaps of UK plc, and the UK Information Comissioner is very concerned that Britain will not be ready to comply. So much so that it has created a new website to urge preparation for the new law - even though the draft directive is not due to be passed until after the UK's referendum on EU membership, and will not take effect until mid-2018. 

Brexit fans should still be concerned. The US will tell you that appropriate privacy safeguards are just one cost of doing business with Europe, and the UK will also need to comply in substance if it is to qualify for cosy trade deals as a non-member of the EU. 

The ICO recommends starting with this 12-step programme.

Is The UK Framing Canada?

The economy, financial services and privacy are among the most sensitive political areas for the United Kingdom, yet with Mark Carney in charge at the Bank of England and the recent appointment of Elizabeth Denham as the UK's next Information Commissioner all these areas are now the responsibility of Canadians. Seems the UK government is looking for someone else to blame...

Distributed Ledger Technology: Cutting Through The Hype

A busy start to 2016 has meant the blog has suffered, but I have at least co-written an article with Susan McLean of Morrison & Foerster that cuts through the hype around blockchain and other distributed ledger technology (DLT). 

The article includes updates on a range of DLT initiatives across numerous business sectors; various policy and regulatory responses; as well as some thoughts on the challenges involved in implementing DLTs.

In January, I also posted on Pragmatist about on the potential use of DLTs for tracking and collecting royalties on music and other creative works. But whether this technology will address the root causes lurking beneath the biggest problems that the creative industry faces is another question...

RegTech Bottleneck?

The UK's Financial Conduct Authority is rightly proud of its Innovation Hub, Regulatory Sandbox and new "RegTech" approach, which includes "managing regulatory requirements more efficiently, and... how we can best support developments and potentially adopt some RegTech solutions ourselves."

But the figures suggest that either more resources are required or there has to be a quicker route to market for new firms.

Of 413 requests received as at February, about 215 firms (52%) obtained support from the FCA's Innovation Hub. But only 39 firms (18%) have either been authorised (18) or are going through the approval process (21).  And in a recent statement defending its record on processing applications for authorisation by P2P lending platforms, the FCA said that it has only processed 8 of 94 applications received (about 9%).

Something is gumming up the works!

In its statement on the P2P lending process, the FCA bravely claims that it is "taking a proportionate approach to regulation, recognising the need for consumers to be adequately protected and have the information they need". It has a deadline of 12 months to decide on applications (actually 6 months for complete applications). But it's not like these firms are trying to flout the law - they have willingly approached the FCA for approval. Indeed, the P2P lending industry spent years lobbying for regulation of the sector, which was introduced by the Treasury in early 2013 and took effect on 1 April 2014. Yet since then the FCA's figures suggest that over 40 new firms have applied to enter the market and 42 of them are unable to trade because their application to do so is yet to be approved. Another 44 firms are still relying on their interim permission by virtue of being licensed under the previous regulatory regime, and therefore (ironically) cannot offer the new Innovative Finance ISA because they are not yet fully authorised.

How many firms are able to persist against these regulatory headwinds remains to be seen, but the approach seems neither proportionate nor worthy of the FCA's ambition to foster innovation and competition for the benefit of consumers. So far, the traditional players remain pretty safely sheltered behind the FCA's regulatory wall.

Something must be done.

Either the FCA needs more resources or it must adopt a more expeditious approach to granting regulatory approval - a mechanism that allows firms to begin trading more quickly under certain thresholds, for example, as is the case with small payment institutions and small e-money institutions. Indeed, payment services firms enjoy their own regulatory regime (with a 3 month turnaround time for complete applications); and the P2P industry lobbied for that regime to be used as the basis for regulating their platforms - an approach which the French and Spanish have since adopted and the European Banking Authority supports.