On 16th November 2020, the European Council (“the Council”) adopted 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.
In the conclusions, the Council recognised that better regulation is one of the key drivers of sustainable, inclusive growth, fostering competitiveness, innovation, digitalisation and job creation, increased transparency and ensuring public support for EU legislation. As such, there is a steer toward ensuring EU regulation is transparent, simple, harmonious and mutually recognised and this commitment is reiterated in its conclusions.
The conclusions recognise the impact and existential threat of the pandemic on businesses, especially SME’s, in the EU and the need to ensure EU regulatory framework is competitive, effective, efficient and less burdensome as the EU emerges from the COVID-19 crisis for such businesses.
Highlighted within the conclusions, is the need for flexibility and experimentation in providing an agile, innovation-friendly, future-proof, evidence-based and resilient regulatory framework which fosters competitiveness, growth, sustainability, regulatory learning as well as European technological sovereignty and leadership.
The Council alludes in the conclusions to regulatory sandboxes as being concrete frameworks, providing for a structured context for experimentation and enabling a real-world environment for the testing of innovative technologies, products, services or approaches.
Regulatory sandboxes, which are being used increasingly in the legal sector, become more relevant in the context of digitalisation to ensure that for a limited time appropriate safeguards are in place to avoid falling into regulatory breach.
Back in May 2020, the Law Society reported on the collaborative initiative, LawtechUK, between Tech Nation, the Lawtech Delivery Panel and the Ministry of Justice to increase the development of new platforms, toolkits and online training through a government backed work programme. The adoption of new technologies such as regulatory sandboxes has been hailed as a ‘huge boost’ to innovation which could ‘transform the UK legal sector through tech’ by boosting the sector from 1.3% per year to 2.7% per year.
The Council remarks that experimentation clauses are often the legal basis for regulatory sandboxes and are used in EU legislation and many Member States’ legal frameworks. As such, they encourage the Commission to continue considering the use of experimentation clauses on a case-by-case basis when drafting and reviewing legislation.
Further, the Council call on the Commission to:
Regarding experimentation clauses:
- Create an overview of the main existing experimentation clauses in EU law;
- Identify policy areas and regulations in which additional experimentation clauses could possibly help to foster innovation and advance regulation and consult with Member States and stakeholders in respect of this.
Regarding regulatory sandboxes:
- Organise, in cooperation with Member States, an exchange of information and good practices regarding regulatory sandboxes between Member Stated and itself in order to:
a) Establish an overview of the state of play regarding the use of regulatory sandboxes in the EU;
b) Identify experiences regarding the legal basis, implementation and evaluation of regulatory sandboxes;
c) Analyse how learning from regulatory sandboxes at national level can contribute to evidence-based policy making at EU-level.
- Present a progress report on this exchange of information and good practices regarding regulatory sandboxes as well as on the overview of existing experimentation clauses in EU law in the first half of 202