Weekend Edition Nº76 by eulawlive

Nº76

OCTOBER 23

2021

Weekend

Edition

stay alert keep smart

SOFIA RANCHORDÁS

EXPERIMENTAL LAWMAKING IN THE EU: REGULATORY SANDBOXES

Nº76 · OCTOBER 23, 2021

Weekend

Edition stay alert keep smart

Experimental Lawmaking in the EU: Regulatory Sandboxes Soﬁa Ranchordás

tends to be situated in the realm of political science, Regulatory sandboxes, experimental clauses, and exdoes not exhaust the signi cance of modern experiperimental regulations are relatively unknown mental lawmaking and regulation. Experimental terms in EU law. Most recent law graduates and praclaws and regulatory sandboxes are much more titioners may have never heard of these concepts, —and sometimes much less— than experimentapartly due to the limited a ention devoted to legislist governance. As I have argued elsewhere (6), lative and regulatory studies in legal education (1). they are regulatory instruHowever, over the past two ments which offer the exidecades, a great deal has been wri en on experi- Experimental laws and regulatory bility, adaptability, room for compromise, and innovamental law and governance. sandboxes are much more —and tion-friendliness required by novel technological deveExperimentalism in the EU sometimes much less— than lopments. has been mainly associated experimentalist governance with multi-level governane term ‘experimental lawce frameworks (2) and the making’ is, nonetheless, elutransnational experimentasive. It encompasses different legal or regulatory spalist governance scholarship developed by Michael ces where a speci c number of actors is subject to a Dorf, Charles Sabel (and co-authors) (3), Jonathan differentiated regulatory framework. Regulatory Zeitlin (4), Gráinne De Búrca (5), and Tanja A. sandboxes are a leading and recent example of expeBörzel. is important strand of scholarly work forimental lawmaking which started at national level cuses on EU governance through framework rules and is now slowly making its way into the EU law and its revision through recursive review of the imtoolbox. plementation experience in diverse local contexts. Nevertheless, experimentalist governance, which

i. Full Professor of EU and Comparative Public Law, University of Groningen, e Netherlands; Professor of Public Law, Innovation, and Sustainability, LUISS Guido Carlo, Italy. 1. Ethan J. Leib, ‘Adding Legislation Courses to the First-Year Curriculum’, Journal of Legal Education58(2), 2008, 166-189. 2. Charles F. Sabel and Jonathan Zeitlin, ‘Experimentalist Governance’ in David Levi-Faur (ed.), e Oxford Handbook of Governance, 2012. 3. Michael C. Dorf and Charles F. Sabel, ‘A Constitution of Democratic Experimentalism’, Columbia Law Review 98(2), 1998, 267-473. 4. Zonathan Zeitlin, Extending Experimentalist Governance?: e European Union and Transnational Regulation, OUP, Oxford, 2015. 5. Gráinne de Búrca, Robert O. Keohane and Charles Sabel, ‘Global Experimentalist Governance’, British Journal of Political Science 44(3), 2014, 477 – 486. 6. So a Ranchordás, ‘Innovation-Friendly Regulation: e Sunset of Regulation, the Sunrise of Innovation’, Jurimetrics 55(2), 2015, 201-224.

Nº76 · OCTOBER 23, 2021

Weekend

Edition stay alert keep smart

regulatory implications as well as the design and methodology of experimental regulations and regulatory sandboxes will determine whether this experimental approach to law and regulation will indeed be successful and help advance responsible innovation in the EU. In this contribution, I draw upon recent scholarship and national experiences with regulatory sandboxes to shed light on the legal nature, innovative potential, and methodology of this instrument.

Regulatory sandboxes are experimental legal regimes which waive, modify national regulatory requirements (or implementation) or provide bespoke guidance on a temporary basis and for a limited number of actors in order to support businesses in their innovation endeavors. A regulatory sandbox oﬀers safe testbeds for innovative products and services without pu ing the whole system at risk. Sandboxing aims to promote thus the advancement of technology, new policy solutions through the promotion of collaborative regulation, and novel compliance initiatives between innovators and regulators.

Experimental Lawmaking: General Considerations

A er a brief experience of national implementation in the nancial, energy, healthcare, telecommunications, and data protection sectors, the EU has embraced the potential of regulatory sandboxes in its AI Regulation Proposal (7). Nevertheless, there are still many unknowns in the world of EU experimental lawmaking. e de nition, modus operandi,

e experimental method is nowadays well accepted both in the natural and social sciences. Experiments allow scientists to use an intervention to understand causality. In the public policy and regulatory areas, experimental regulations and regulatory sandboxes now permit policymakers to test the eﬀectiveness of policy and regulation (8). is con-

7. Proposal for a Regulation of the European Parliament and of the Council laying down harmonised rules on arti cial intelligence (Arti cial Intelligence Act) and amending certain Union legislative acts, COM/2021/206 nal. 8. Maria Mousmouti, ‘Making Legislative Eﬀectiveness an Operational Concept: Unfolding the Eﬀectiveness Test as a Conceptual Tool for Lawmaking’, European Journal of Risk Regulation 9(3), 2018, 445-464.

Nº76 · OCTOBER 23, 2021

Weekend

Edition stay alert keep smart

adapt national laws and policies to local circumstances.

tribution is focused on regulatory sandboxes so only a few words will be devoted to the general aspects of experimental legislation and regulation.

In recent years, a new type of experimental legal regime emerged: the regulatory sandbox. Regulatory sandboxes are designed to allow market actors to bene t from less burdensome regulatory conditions than those established by law (for example, concerning market access requirements for nancial products). e term ‘sandbox’ refers not only to the playgrounds where children can safely and freely play but also to the computer science term ‘sandbox’ (10). is term is a reference to an isolated testing environment which allows for the monitoring of a system and prevents malicious programs from damaging a computer system. In regulation, a regulatory sandbox is an instrument designed to test new services and products in an arti cially created regulatory environment. Regulatory sandboxes integrate the trend to promote so-called smart regulation, which can be seen as a regulatory strategy that seeks to micro-optimize the system and adapt regulation to technological advancements (11).

Experimentalism in law may take diﬀerent shapes and forms: Experimental clauses, experimental regulations, free-zones, and regulatory sandboxes are the most common manifestations of legal experimentalism. Since experimental legislation is primarily adopted at national or local levels, there is no EU-wide de nition of this concept. ‘Experimental law’ has been de ned in the literature as ‘a legislative or regulatory instrument of a temporary nature with limited geographic and/or subject application which is designed to test a new policy or legal solution and includes the prospect of an evaluation at the end of the experimental period.’ (9) is de nition materializes itself in the adoption of experimental clauses and later, experimental regulations which allow for the temporary adoption of legal measures that in theory are only applicable to a part of the population. Experimental clauses are dispositions included in statutes conferring the executive the power to experiment. Experimental clauses de ne at the level of primary legislation the goal, duration, scope, and limits of the experiment. Further details on the implementation of the experiments are regulated in secondary legislation. Experimental clauses provide thus a legal basis for the enactment of experimental regulations. e experiment will then consist in conferring an exemption, adopting an experimental scheme, or derogating from the regime established in primary legislation. Experimental clauses and regulations date back to centuries ago and were originally employed in the context of decentralized or federal states to allow local units to

Playing in the Sandbox: Rules of the Game Despite their fast-growing popularity, regulatory sandboxes are still in their infancy. is instrument was originally mentioned in August 2014 in the context of UK’s global FinTech policy. e UK Financial Conduct Authority established the rst FinTech regulatory sandbox soon a er. e rst sandboxes ran between 2015 and 2020 and were designed to advance eﬀective competition in the interest of consumers. Regulatory sandboxes emerged in this con-

9. Michiel A. Heldeweg, ‘Experimental legislation concerning technological & governance innovation – an analytical approach’, e eory and Practice of Legislation 3(2), 2015, 169-193. 10. Katerina Yordanova, ‘ e Shi ing Sands of Regulatory Sandboxes for AI’, KU Leuven CiTiP Blog, 18 July 2019. 11. Saule T. Omarova, ‘Technology v Technocracy: Fintech as a Regulatory Challenge’, Journal of Financial Regulation 6(1), 2020, 75-124.

Nº76 · OCTOBER 23, 2021

Weekend

Edition stay alert keep smart

Sandboxes are casuistic regulatory spaces by de nition

con rmations. Bespoke guidance consists in the provision of guidance and certainty about speci c rules in particular situations. is guidance is provided bilaterally to participants solely for the purposes of their trial.

text as future-proof regulatory instruments which oﬀer exible tools for uncertain market conditions. In 2020, the UK Financial Conduct Authority initiated a new sandbox (the Digital Sandbox) in order to support innovative rms which are addressing challenges caused by COVID-19. is new sandbox was established as a trial for the creation of potentially more permanent digital testing environments for nancial services.

Regulatory comfort is needed when a rm is interested in trying an innovative product or process in a live operating environment, but it is concerned about the potential breach of rules in this context and legal prosecution following this breach. In cases where the rm assesses the risk of non-compliance to be very high, the sandbox could, for the purposes of the trial, provide comfort about what the regulator considers to be compliant behaviour and what its approach to enforcement is. At the resemblance of bespoke guidance, regulatory comfort is provided to the innovator and others involved in the trial. is ‘comfort’ will only extend to the speci c agreed issues and it should be regarded as a bilateral agreement between the parties which may exempt the participant only from speci c charges regarding regulatory breaches. e innovator will monitor and report on their compliance performance during the trial period. With the tool ‘con rmation’, the sandbox con rms whether —and within which framework— a type of activity is permissible. Innovators will be responsible for complying with the relevant framework that governs their activity, monitoring and reporting on their progress, se ing-out their compliance performance and any unforeseen consequences.

Fintech regulatory sandboxes were regarded as successful at containing the risks of novel nancial products within the experimental playground and were rapidly emulated by other sectors. OfGem, UK’s energy regulator and later adopter of the sandboxing technique, explained that the appeal of this instrument results from the combination of the exibility of market-based solutions with a ‘robust and responsive regulatory and policy framework that protects and empowers consumers and encourages bene cial innovation.’

Derogation, Bespoke Guidance, Regulatory Comfort, and Con rmations While regulatory sandboxes tend to refer to the experimental (and thus temporary) disapplication of existing sandbox tools, derogation from regulatory frameworks or waivers are not the only tools employed in the context of sandboxes. Besides derogations, regulatory sandboxes can also oﬀer participants bespoke guidance, regulatory comfort, and

Nº76 · OCTOBER 23, 2021

Weekend

Edition stay alert keep smart

(vi) small number of selected participants admied to the sandbox group (cohort);

Sandboxes are casuistic regulatory spaces by de nition. ey aim to adapt existing rules to speci c innovative challenges by allowing for temporary derogations, additional guidance or regulatory comfort. Nevertheless, existing sandboxes are also de ned by multiple common elements because sandboxing does not amount to limitless ‘rule-bending’. ese elements include:

(vii) focus on promoting innovation and entrepreneurialism through regulatory relief; (viii) limited scope of the sandbox; (ix) restricted extent of regulatory relief (for example, limited to predetermined regulatory requirements such as waiving certain fees or license payments); (x) speci cation of exit rules, including grounds for expulsion of sandbox participants.

(i) strict speci cation of entry rules (for example, project that should be addressed, admission rules, information to be submi ed by applicants, exclusion grounds), including the obligation of applicants to demonstrate readiness for testing. Applicants should not be at a too early stage of their innovative process. Rather, they are required to demonstrate that they have a welldeveloped testing plan with clear objectives, parameters and success criteria;

Participation in regulatory sandboxes is subject to the admission, monitoring, and evaluation of the regulator. It is up to the regulator to select the proposals of the most suitable candidates it wishes to work with in a sandbox to address a speci c societal or technological challenge. Rules may be set aside or additional help with compliance may be given to the selected parties because there is the assumption that under normal market and regulatory conditions, these market operators would not be able to introduce an innovative product or service into the market. Moreover, regulatory sandboxes provide access to regulatory expertise and a set of tools to facilitate testing of new products that would otherwise not be granted access to markets. To illustrate, the UK Financial Conduct Authority’s sandbox is open to authorized rms, unauthorized rms that require authorization, and technology businesses. Successful applicants have come from diﬀerent sectors and, considering the global nature of FinTech, it is not surprising that the sandbox has a racted participants from overseas companies (namely from Canada, Singapore and the US). When applying to participate in a sandbox, businesses have to submit a project where they propose to test a certain hypothesis

(ii) justi cation for sandboxing. Regulatory sandboxes are not the default option at the time being for the regulation of products and services. erefore, it should be clear when establishing a sandbox that without this experiment, certain products or services would not be able to enter the market within a reasonable period of time under safe conditions; (iii) consumer bene t and limitation of consumer risks; (iv) potential to promote genuine innovation, as sandboxes do not admit applications which are not suﬃciently new or which are similar to already existing products or services; (v) short but preestablished duration of the sandbox (between three to six months for each group);

Nº76 · OCTOBER 23, 2021

Weekend

Edition stay alert keep smart

2020, the Council of the European Union adopted the Conclusions on Regulatory Sandboxes and Experimental Clauses, where these experiments were presented as tools for an innovation-friendly, future-proof and resilient regulatory framework (13). In this document, the Council states that regulatory sandboxes can oﬀer signi cant opportunities to innovate and grow for all businesses, especially SMEs, Experimental Lawmaking in the EU including micro-enterprises, as well as start-ups, in industry, services, and other sectors. e Council Experimental laws and regulations are still uncomalso encourages the Commission to consider the mon in the EU as regulations and directives tend to use of experimentation clauses on a case-by-case babe enacted on a permanent basis a er a long legislasis when dra ing and reviewing legislation and evative process. is contribution does not engage luate the use of experimentation clauses in ex-post with the political science scholarship on EU experievaluations and tness mental governance which, checks on the basis of an exas mentioned above, qualies EU framework regula- Experimental laws and regulations change of information with Member States. tions as experimental. (for example, that their novel digital platform can be suitable and safe for crowdfunding micro-credit but due to existing rules, it cannot start operating at that stage). In some cases, applicants will have to partner with other parties to be able to eﬀectively test their proposition.

are still uncommon in the EU

From a strictly legal and legislative perspective, there are very few truly experimental directives and regulations, that is, EU legislative instruments that establish a form of legal, organized, and temporary diﬀerentiation between citizens. One of the few exceptions is Council Directive 1999/85 amending Directive 77/388 as regards the possibility of applying on an experimental basis a reduced VAT rate on labour-intensive services (12). is experiment aimed to increase employment and reduce the black economy. is experimental directive was limited in time, involved the participation of nine Member States, and was subject to an evaluation.

One of the central frameworks for EU regulatory performance already includes part of the Council’s approach to experimentation. e European Be er Regulation policy Toolbox 21 on Research and Innovation includes ‘experimentation clauses’ in its toolset. is Toolbox situates the adoption of these instruments against the background of exible regulation and the promotion of innovation. According to the Be er Regulation Toolbox, experimental clauses can be used also ‘when detailed product or technological characteristics have to be de ned in legislation, but the policy goal could be met in the future by diﬀerent, innovative solutions.’ In this Toolbox, regulatory sandboxes are however misrepresented as they are de ned as ‘sophisticated experimentation clauses

is situation of sparse legal experimentation could be on the verge of changing. On 16 November

12. Council Directive 1999/85/EC of 22 October 1999 amending Directive 77/388/EEC as regards the possibility of applying on an experiment basis a reduced VAT rate on labour-intensive services, OJ L 277, 28.10.1999, p. 34. 13. Council Conclusions on Regulatory Sandboxes and Experimentation Clauses as tools for an innovation-friendly, future-proof and resilient regulatory framework that masters disruptive challenges in the digital age 2020/C 447/01, OJ C 447, 23.12.2020, p. 1.

Nº76 · OCTOBER 23, 2021

Weekend

Edition stay alert keep smart

…[or] a framework that allows innovations to be tested in a real-world environment subject to regulatory safeguards and support.’ Regulatory sandboxes are much more than experimental clauses: ey are instruments of bespoke guidance, contractual comfort, tailored monitoring, and collaborative regulation. On the contrary, the experience from the Member States that have actively experimented with legislation in the last decades reveals that experimental clauses and regulations do not require the same degree of collaboration between regulators and innovations (14). Instead, they are primarily top-down instruments.

e establishment of regulatory sandboxes can be regarded as a way of ensuring that there will be room for regulatory relief the experiment will be supervised by the competent authorities ‘with a view to ensuring compliance with the requirements of this Regulation and, where relevant, other Union and Member States legislation supervised within the sandbox’ (Article 53(1) EU AI Regulation Proposal). e establishment of regulatory sandboxes can be regarded as a way of ensuring that there will be room for regulatory relief. is is important to prevent that the proposed regulation of AI will not sti e innovative AI systems that remain unforeseeable at the time of the implementation of the regulation. In addition, the proposed AI regulatory sandboxes create additional opportunities to continuously develop the regulatory process and give time and space to national regulators to translate novel scienti c evidence into regulation. While AI regulatory sandboxes will not be allowed to be established if there is the risk of the violation of EU law, it remains unclear what additional limits and regulatory relief can further be oﬀered to regulators and innovators. At the time of writing, the legal basis for these regulatory sandboxes remains too limited to judge whether these experiments will be able to truly create safe testbeds for innovation without fragmenting the internal market and disrupting the goals of the proposed AI Act.

AI Regulatory Sandboxes e EU AI Regulation Proposal or, oﬃcially, the Arti cial Intelligence Act, is the rst EU legislative proposal to comprise regulatory sandboxes. ese instruments are, at the time of writing, presented in its Title V as ‘measures in support innovation’. e proposal does not regulate these regulatory sandboxes in detail as further dispositions will be established in delegated acts. Nevertheless, the proposed Regulation already provides a legal basis for these experiments with a glimpse of some of its potential limits and elements (15). Title V oﬀers to Member States competent authorities or the European Data Protection Supervisor the possibility to establish ‘AI regulatory sandboxes.’ ese sandboxes ‘shall provide a controlled environment that facilitates the development, testing and validation of innovative AI systems for a limited time before their placement on the market or pu ing into service pursuant to a speci c plan’. As it is customary in the context of regulatory sandboxes,

14. So a Ranchordás, Constitutional Sunsets and Experimental Legislation. A Comparative Perspective, Edward Elgar Publishing, 2014. 15. So a Ranchordás, ‘Experimental Regulations for AI: Sandboxes for Morals and Mores’, University of Groningen Faculty of Law Research Papers 7/2021.

Nº76 · OCTOBER 23, 2021

Weekend

Edition stay alert keep smart

Legal Implications e adoption of differentiated legal regimes is not exempt from controversy. At rst sight, regulatory sandboxes and experimental regulations challenge our basic notions of law as a regulation instrument that is meant to be certain (16), predictable, determinate, stable, and equal for all. In the Member States (17), the literature and courts analyzed for years the compatibility of experimental regulations with the principles of legality, legal certainty, proportionality, and equal treatment (18). In many cases, the existence of a clear legal basis (well-de ned experimental clauses), the introduction of a justi ed and objective differentiation between the different groups, and the adoption of necessary, adequate, and proportionate measures were sufficient to guarantee a minimum level of compliance with the mentioned legal principles. However, the constitutionality of experimental regulations and regulatory sandboxes is a complex subject which cannot be fully explained in a short contribution. I defer therefore here to the scholarship that has devoted more extensive a ention it. ere are nonetheless two aspects worth exploring in this article: First, the assessment of the compatibility between regulatory sandboxes and the principle of equal treatment (19) as discussed by the Court of Justice in Arcelor Atlantique (C-127/07) (20); and second, the connection between the design of a solid methodological framework for regulatory sandboxes and its legal soundness.

Regulatory Sandboxes and Equal Treatment Regulatory sandboxes introduce a differentiation between market actors. is implicates that there will always be a group which will be placed in a more favorable position that the one that has to comply with existing regulations. is differentiation varies depending on the scope of the regulatory sandbox and, in some cases, it may simply amount to compliance assistance. e mere act of differentiating between market actors cannot be regarded as a violation of the principle of equal treatment. Differentiation is inherent to any experiment and it is a precondi-

At rst sight, regulatory sandboxes and experimental regulations challenge our basic notion of law

16. So a Ranchordás, ‘Sunset Clauses and Experimental Regulations: Blessing or Curse for Legal Certainty?’, Statute Law Review 36(1), 2015, 28-45. 17. Hans-Detlef Horn, ExperimentelleGesetzgebung under demGrundgestz, Duncker &Humblot, Berlin, 1989. 18. So a Ranchordás, Constitutional Sunsets and Experimental Legislation. A Comparative Perspective, cit. 19. Ibidem. 20. Judgment of the Court of Justice (Grand Chamber) of 16 December 2008 , Arcelor Atlantique and Lorraine and Others (C-127/07), ECLI:EU:C:2008:728.

Nº76 · OCTOBER 23, 2021

Weekend

Edition stay alert keep smart

perimental regulation—and the same can most certainly be applied to regulatory sandboxes—is established according to objective criteria, the said differentiation shall be deemed in compliance with the principle of equal treatment. I would add as well that this differentiation should be proportionate to the goals that the regulatory sandbox aims to achieve. Considering that regulators can choose between different sandbox instruments, they should ensure that the one chosen is the least disruptive for the legal order and it introduces a regulatory intervention that is strictly necessary to advance the objectives of the regulatory sandbox. In addition, compliance with transparency requirements in the de nition of the entry and exit conditions of a sandbox is essential to protect the objective character of this differentiation.

tion for a sound iterative learning process. e de nition of two comparable groups (the control and the sample groups) are essential to test the de ned hypothesis and then later to determine whether the results can be generalized to the rest of the population. EU case law has established that the principle of equal treatment will not be endangered when this differentiation is solely made on the grounds of objective criteria. In Arcelor Atlantique (C-127/07), the Court analyzed the compatibility of the scheme for greenhouse gas emission allowance trading introduced by Directive 2003/87 (as amended by Directive 2004/101) with the principle of equal treatment. is Directive introduced a phased and partially experimental implementation of the greenhouse gas emission allowance trading scheme. e approach of this Directive enabled EU Member States to progressively extend the scope of this trading scheme to different industries. Advocate General Maduro expressed in this case no concern regarding a potential discrimination of the applications representing the steel sector, arguing that this was a case of ‘legislative experimentation’ which naturally required ‘that the new policy [was] applied to only a limited number of its potential subjects (...) as a result, the policy is arti cially circumscribed so that its consequences can be tested before its rules are extended, if appropriate, to all operators who might, in the light of its objectives, be subject to it. (22)’ The Advocate General clari ed that the differentiation which experimental legislation inevitably entails is compatible with the principle of equal treatment only if certain conditions are satis ed. Two criteria were pointed out in this context: rst, the transitory character of experimental laws; and second, the de nition of ‘the trial measure in accordance with certain objective criteria.’ In other words, as long an ex-

Legal and Methodological Frameworks e question whether a regulatory sandbox introduces a proportionate, legal, and equal measure depends to a great extent on its design. Lack of compliance with methodological rules on how to conduct scienti cally sound and objective experiments can also entail a violation of legal principles for diﬀerent reasons (23). First, many of the principles of good science coincide with the principles of good lawmaking and good government (for example, transparency or the duty of care), particularly at a time when there is a growing call for the rationalization of law and regulation. e diﬀerentiations introduced by regulatory sandboxes as well as their inherent costs for regulation and compliance will only be justi ed if the experiments are likely to advance valuable goals that exceed potential costs. A poorly designed experiment will most likely not produce

22. Opinion of Advocate General Poiares Maduro delivered on 21 May 2008 in Société Arcelor Atlantique et Lorraine and Others (C-127/07), ECLI:EU:C:2008:292. 23. So a Ranchordas, ‘Experimental Regulations and Regulatory Sandboxes: Law without Order?’, cit.

Nº76 · OCTOBER 23, 2021

Weekend

Edition stay alert keep smart

vation hub. It can be an experiment with real products (for example, a novel AI system in healthcare) tested in a real-world se ing. In this context, there always is limited control over extraneous variables and also this should be acknowledged to guarantee that the results of the experiment are not overintere long-term relevance of regulatory sandboxes preted. Moreover, when formulating the hypotheand their potential to advance innovation (for examsis, regulators should do so in comprehensive but eaple, as envisaged by the AI Regulation Proposal) desily perceptible terms so that all stakeholders are pends on how well these instruments are designed aware of what is being tested, how, and why. e de and implemented in the years ahead. As I have arnition of the different components of the hypothegued elsewhere, regulatory sandboxes should resis under testing should also be accompanied by the produce as much as possible the central elements of determination of different possible options on how eld experiments when they aim to test the need to conduct the intervention and effectiveness of regulaand a recommendation on tion (24). While this will not the advised option. To illusguarantee that sandboxes Regulatory sandboxes should trate, in the context of a reguwill become ‘perfect expereproduce as much as possible latory sandbox, regulators riments,’ it can at least help may wish to test whether ensure that they are emplothe central elements of eld alleviating regulatory buryed in a more rational way. dens (for example, market experiments when they aim to entry licenses) for small and e sound design of regulatest the need and effectiveness medium enterprises will tory sandboxes should ensupport the innovation protail that the objectives and of regulation cess. the hypothesis to be tested are clearly de ned from the A general design framework for regulatory sandbovery beginning of the experiment and, if possible, xes should explicitly de ne the terms of regulatory precede it. It should be evident to all parties what relief, the criteria utilized to select the control and the goals of the regulatory sandbox are, why certain sample groups, the different available sandboxing entry and exit conditions have been de ned, and options (for example, temporary derogation from whether its design is likely to be generalized to the rules, assistance with compliance), the duration of rest of society. erefore, especially when regulathe sandbox (and whether or not this period can tory sandboxes introduce experimental derogaand should be extended), and the terms of its evations, the independent variables (cause) as well as luation. In order to guarantee that an experimental the dependent variables should be known. A regulaintervention yields effective results, the duration of tory sandbox is not a laboratory or an isolated innothese bene ts, its results will suffer from limited internal and external validity, and it should not be used to inform evidence-based law and policymaking.

Nº76 · OCTOBER 23, 2021

Weekend

Edition stay alert keep smart

panies. Regulatory sandboxes can help innovators navigate the complex world of regulation, reduce regulatory uncertainties, and provide clari cation on regulatory and supervisory expectations. However, regulatory sandboxes are not a panacea. If poorly designed, regulatory sandboxes can give rise to regulatory arbitrage, the disapplication of substantial regulatory standards and safeguards, and the unjusti ed application of preferential treatments to new companies regarded as ‘innovative’ in detriment of incumbents.

the experiment should be proportionate to the characteristics of the sector, the complexity of the experiment, and the willingness of rms and citizens to participate in short or long-lived experiments and the impact of this duration on their rights. In complex cases, pre- and post-testing moments can be added to the experimental design. Clear guidance on the design of the hypothesis, the intervention as well as a proportionate duration are likely to advance the protection of the principles of legality, legal certainty, equal treatment and proportionality in the context of the implementation of experimental legal regimes.

In the EU internal market, regulatory sandboxes may create the risk of market fragmentation, if their design and implementation are not suﬃciently supervised by EU-wide level institutions. e result could be divergent supervisory practices, which can disrupt EU law and policy and impede the scaling up of innovative services or products across the EU. e answer to this potential problem lies once again in the clear design of regulatory sandboxes. e future of this regulatory tool in EU law and policy depends on the EU legislator’s ability to include a clear legislative basis for it, providing suﬃcient guidance to future delegated acts and preparing the foundations for a clear, thorough, and sound design of regulatory sandboxes.

Conclusion Experimental lawmaking is not new in the EU but it has thus far remained ‘under the radar’ of legal scholars. Experimentalism converts lawmaking into a learning process, giving legislators and regulators the opportunity to submit rules to frequent tests and assess whether they are still in syntony with new technological and societal developments. It is in this context that regulatory sandboxes emerged in recent years as innovation-friendly measures. Sandboxes allow for the customization of regulation and aim to reduce regulatory burdens of innovative com-

Nº76 · OCTOBER 23, 2021

Weekend

Edition stay alert keep smart

News Highlights Week 18 to 22 Oct 2021

General Court to hear action against EU Digital COVID Certi cate Regulation Monday 18 October

READ MORE ON EU LAW LIVE

Oﬃcial publication was made of an action for annulment against the EU Digital COVID Certi cate Regulation brought by 423 Italian residents in case Abenante and Others v Council and Parliament (T-527/21).

French Constitutional Court rejects to review legality of national provisions implementing EU law Monday 18 October

READ MORE ON EU LAW LIVE

e French Constitutional Court in case n° 2021-940 QPC Air France rejected to conduct a review of the legality of provisions of French law transposing the Convention Implementing the Schengen Agreement and Directive 2001/51, holding itself not competent to conduct such a review and nding that the mere transposition of EU law does not violate France’s constitutional identity.

EU and Qatar sign comprehensive air transport agreement Monday 18 October

READ MORE ON EU LAW LIVE

e EU and Qatar signed a comprehensive air transport Agreement, upgrading rules and standards for ights between the parties and se ing a new global benchmark by commi ing both sides to fair competition, and by including social and environmental protection.

Disciplinary proceedings against Bulgarian judge Miroslava Todorova breached freedom of expression, ECtHR rules Tuesday 19 October

READ MORE ON EU LAW LIVE

e European Court of Human Rights held in Miroslava Todorova v. Bulgaria that the disciplinary proceedings and the sanctions imposed on the applicant, who had been a judge and the President of the Bulgarian Union of Judges and who publicly criticised the actions of the Supreme Judicial Council, interfered with her freedom of expression.

Reports on supervisory independence of competent authorities published by European Supervisory Authorities

President von der Leyen’s speech on the Polish Constitutional Court judgment: main takeaways

Tuesday 19 October

READ MORE ON EU LAW LIVE

e European Banking Authority, the European Insura on nce and Occupational Pensions Authority, and the European Securities and Markets Authority published individual reports on the supervisory independence of competent authorities in their sectors, nding an overall good framework for supervisory independence, however, with some limitations.

READ MORE ON EU LAW LIVE

President of the European Commission Ursula von der Leyen delivered a speech in the European Parliament plenary session concerning the current rule of law situation in Poland in connection with the recent judgment of the Polish Constitutional Court challenging the principle of primacy of EU law and declaring several Treaty provisions as ultra vires in Poland.

Nº76 · OCTOBER 23, 2021

Weekend

Edition stay alert keep smart

Commission adopts communication on review of EU economic governance Tuesday 19 October

READ MORE ON EU LAW LIVE

e College of Commissioners adopted a communication that seeks to relaunch the review of the EU’s economic governance in the context of the changed circumstances in the a ermath of the COVID-19 crisis.

EDPB adopts guidelines on restrictions of data subject rights under GDPR Wednesday 20 October

READ MORE ON EU LAW LIVE

e European Data Protection Board adopted the Guidelines on restrictions of data subject rights under Article 23 of the GDPR, se ing out the criteria to apply said restrictions, the assessments that need to be observed, how data subjects can exercise their rights a er the restrictions are li ed, and the consequences of infringements.

Référendaire position available at the cabinet of Judge Öberg at General Court Wednesday 20 October

READ MORE ON EU LAW LIVE

Judge Ulf Öberg at the General Court (Luxembourg) is seeking a candidate for the position of legal secretary (référendaire), which will become available from 1 March 2022.

General Court dismisses actions brought by LOT airlines against acquisitions of certain Air Berlin assets by EasyJet and Lu hansa Wednesday 20 October

READ MORE ON EU LAW LIVE

e General Court issued two judgments in Polskie Linie Lotnicze ‘LOT’ v Commission (T-240/18 and T-296/18), dismissing the actions for annulment brought by Polish LOT airlines against the Commission’s Decisions authorising the acquisition of Air Berlin’s assets by EasyJet and Lu hansa.

Justice and Home Aﬀairs Agencies Network presents overview of actions for victims of human traﬃcking

European Parliament to bring action against Commission for failure to use rule of law conditionality mechanism

Wednesday 20 October

READ MORE ON EU LAW LIVE

e Justice and Home Aﬀairs Agencies Network, comprising EU agencies such as Eurojust, Europol, F and Frontex, has presented the rst full overview of actions to detect and protect victims of human traﬃcking.

READ MORE ON EU LAW LIVE

President of the European Parliament David Sassoli requested the legal services of the Parliament to begin preparations for legal action against the European Commission ‘for its failure to apply the Conditionality Regulation’ (2020/2092).

Nº76 · OCTOBER 23, 2021

Weekend

Edition stay alert keep smart

Court of Justice: total exclusion of blind person as paid juror is discriminatory on grounds of disability in the workplace ursday 21 October

READ MORE ON EU LAW LIVE

e Court of Justice ruled in Komisia za zashtita ot diskriminatsia (C-824/19) that an outright refusal to accept a blind juror, who is entitled to remuneration, to sit in criminal proceedings and perform his professional activity is discriminatory on grounds of disability in the workplace.

Court of Justice: EU institutions must ensure objective impartiality is preserved in the context of disciplinary proceedings against staﬀ members Friday 22 October

READ MORE ON EU LAW LIVE

In Parliament v UZ (C-894/19 P), the Court of Justice dismissed the appeal brought by the European Parliament against the General Court’s judgment UZ v Parliament (T-47/18) and recognised that the concept of ‘objective impartiality’ is applicable to an administrative investigation carried out in the context of disciplinary proceedings.

AG Koko clari es the need for environmental impact assessment for adoption of preliminary decisions derogating from protection of strictly protected species Friday 22 October

READ MORE ON EU LAW LIVE

Advocate General Koko delivered her Opinion in NamurEst Environnement (C-463/20), nding that competent authorities may adopt a preliminary decision to derogate from the protection of strictly protected species in projects that may have signi cant eﬀects on the environment even before performing the environmental impact assessment.

Court of Justice provides guidance on application of Freezing and Con scation Directive in purely internal case ursday 21 October

READ MORE ON EU LAW LIVE

e Court of Justice ruled in Okrazhna prokuratura – Varna (joined cases C-845/19 and C-863/19) that both the Freezing and Con scation Directive (2014/42) and the Charter are applicable to a criminal oﬀence such as narcotics possession for distribution purposes, even when all the elements inherent to the oﬀence are con ned within a single Member State.

Traineeship positions available at the Legal Services of the ECB Friday 22 October

READ MORE ON EU LAW LIVE

e European Central Bank published a call for applications for several traineeship positions of between 3 and 12 months in the Financial Law, Institutional Law, Supervisory Law and Data Protection Law divisions, starting as of March 2022.

AG Pikamäe: Residence Directive precludes national law providing for the loss of long-term residence status when not an EU habitual resident Friday 22 October

READ MORE ON EU LAW LIVE

Advocate General Pikamäe in his Opinion in Landeshauptmann von Wien (C-432/20), advised the Court of Justice to rule that the Residence Directive 2003/109 precludes national legislation providing for the loss of the long-term residence status for a third-country national where the holder of that status does not have his place of habitual residence or registration in the EU.

Nº76 · OCTOBER 23, 2021

Weekend

Edition stay alert keep smart

Insights, Analyses & Op-Eds e Court of Justice’s Judgments in the Spanish Goodwill cases: Clarifying Selectivity in State Aid Law?

Constitutional a ack or political feint? – Poland’s resort to lawfare in Case K 3/21

by Dimitrios Kyriazis

by Jeﬀery Atik and Xavier Groussot

READ MORE ON EU LAW LIVE

Op-Ed on the six State aid judgments delivered by the Court of Justice on the Spanish Goodwill regime, which explore how to assess the criteria of ‘selectivity’ when analysing the compatibility of State aid with the internal market.

READ MORE ON EU LAW LIVE

Second Op-Ed on the EU Law Live Symposium on the EU law implications of the Polish Constitutional Court Decision in case K 3/21. e authors focus on the rule of law as a point of equilibrium between power and liberty and explain why the Decision can be considered as ‘lawfare’.

e Judgement of the Court of Justice in LU. A missed opportunity to address certain aspects of the Framework Decision on nancial penalties

Komstroy (C-741/19): What’s in the seat?

by Marloes Spreeuw

by Gillian Cahill

READ MORE ON EU LAW LIVE

Analysis of the Court of Justice’s judgment in LU (C-136/20) concerning the interpretation of Council Framework Decision 2005/214/JHA on the application of the principle of mutual recognition to nancial penalties, which adopted a restrictive approach regarding the grounds for a refusal to recognise and execute a decision from an issuing Member State.

Sixth Op-Ed on the EU Law Live Symposium on the Komstroy judgment (C-741/19), focusing on the notion of the ‘seat of the arbitration’ placed in the macro landscape of the Court of Justice’s jurisprudence.

e Primacy of EU law Does Not Depend on the Existence of a Legislative Competence — Debunking the awed analysis of the Polish Constitutional Court

e Rule of Law, Breach and Consequence

by David Krappitz and Niels Kirst

by Paul Craig

READ MORE ON EU LAW LIVE

Fourth Op-Ed on the EU Law Live Symposium on the EU law implications of the Polish Constitutional Court Decision in case K 3/21. Paul Craig assesses the relevance of the Decision and explores the available options of the appropriate legal response by the EU.

READ MORE ON EU LAW LIVE

ird Op-Ed on the EU Law Live Symposium on the EU law implications of the Polish Constitutional Court Decision in case K 3/21. e authors focus on the Constitutional Court’s misconception of the concepts of the division of competences and the primacy of EU law.

Nº76 · OCTOBER 23, 2021

Weekend

Edition stay alert keep smart

e Scope and Limits of Extended Conscation of Proceeds of Crime in NonTransnational Cases by Francesco Rossi

READ MORE ON EU LAW LIVE

Analysis of the rst-ever judgment of the Court of Justice in Okrazhna prokuratura – Varna (Joined Cases C-845/19 and C-863/19) on the con scation of proceeds of crime since the adoption of the Freezing and Con scation Directive, clarifying its applicability to a non-transnational case.

Mad in Poland by Dimitry Kochenov

READ MORE ON EU LAW LIVE

Library - Book Review

Maria Tzanou

READ ON EU LAW LIVE

Oreste Pollicino

Judicial Protection of Fundamental Rights on the Internet Review of abook which examines the impact of new technologies on the fundamental rights of freedom of speech and privacy, as well as the right to data protection, by focusing on the US and the European judicial landscapes. Maria Tzanou explains why this book provides ‘a very useful and clear framework for critically re ecting on these issues from a transatlantic perspective’.