Building EU Regulatory Capacity

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EXECUTIVE POLITICS AND GOVERNANCE

BUILDING EU REGULATORY CAPACITY THE WORK OF UNDER-RESOURCED AGENCIES IN THE EUROPEAN UNION EVA HEIMS

Executive Politics and Governance Series Editors Martin Lodge London School of Economics and Political Science London, UK Kai Wegrich Hertie School of Governance Berlin, Germany

The Executive Politics and Governance series focuses on central government, its organisation and its instruments. It is particularly concerned with how the changing conditions of contemporary governing affect perennial questions in political science and public administration. Executive Politics and Governance is therefore centrally interested in questions such as how politics interacts with bureaucracies, how issues rise and fall on political agendas, and how public organisations and services are designed and operated. This book series encourages a closer engagement with the role of politics in shaping executive structures, and how administration shapes politics and policy-making. In addition, this series also wishes to engage with the scholarship that focuses on the organisational aspects of politics, such as government formation and legislative institutions. The series welcomes high quality research-led monographs with comparative appeal. Edited volumes that provide in-depth analysis and critical insights into the field of Executive Politics and Governance are also encouraged. Editorial Board Philippe Bezes, CNRS-CERSA, Paris, France; Jennifer N.  Brass, Indiana University Bloomington, USA; Sharon Gilad, Hebrew University Jerusalem, Israel; Will Jennings, University of Southampton, UK; David E.  Lewis, Vanderbilt University, USA; Jan-Hinrik Meyer-Sahling, University of Nottingham, UK; Salvador Parrado, UNED, Madrid, Spain; Nick Sitter, Central European University, Hungary; Kutsal Yesilkagit, University of Utrecht, the Netherlands. More information about this series at http://www.palgrave.com/gp/series/14980

Eva Heims

Building EU Regulatory Capacity The Work of Under-Resourced Agencies in the European Union

Eva Heims Department of Politics University of York York, UK

Executive Politics and Governance ISBN 978-3-319-97576-4    ISBN 978-3-319-97577-1 (eBook) https://doi.org/10.1007/978-3-319-97577-1 Library of Congress Control Number: 2018954341 © The Editor(s) (if applicable) and The Author(s) 2019 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, express or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. Cover credit: © Doug Armand / GettyImages This Palgrave Macmillan imprint is published by the registered company Springer Nature Switzerland AG The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland

Foreword

This book is about the inter-organisational relationships between European Union (EU) and national regulatory bodies. I am all too aware, however, that a book about this topic may almost seem irrelevant at a time when the EU is, once more, in crisis. As the United Kingdom is preparing to leave the EU, populist movements are gaining ever more traction in the EU’s Member States. The objectives and values of the EU seem under pressure as never before. Why should we care about cooperation between bureaucratic agencies in such times? At the heart, the work of these regulatory bodies is fundamental in producing policy outcomes that affect all EU citizens and that are crucial to the legitimacy of the EU at large. Without the cooperation taking place between regulatory actors in the EU on a daily basis, cross-border risks in the EU cannot be managed effectively. That is not to claim that this multi-level, transnational bureaucracy is failsafe and that it produces desirable outcomes at all times, far from that. However, it does mean we need to be aware how important the work of regulators is for the maintenance of an integrated market that has been a key rationale for the creation of the EU. Bureaucracies are always and everywhere fundamental for the maintenance of the state. Especially in times of crisis they are often the backbone of continuation, of keeping things going, for better or for worse. In that spirit, this book hopes to shed light on the work EU agencies and national regulators carry out

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every day to ‘level the playing field’ in an integrated market and to keep us safe from cross-border risks. York, UK May 2018

Eva Heims

Acknowledgements

Many people have supported me in conducting the research for this project and in helping me to develop my thoughts. My greatest debts in this regard are owed to Damian Chalmers and Martin Lodge. It was Damian’s course on Law and Governance of the Single European Market, which provided me with the initial inspiration for my own research project. Without his support and encouragement at this stage I might not have dared to embark on this project and an academic career. Martin, in turn, opened my eyes to the world of research on public policy, regulation and public administration outside of EU studies, which is undoubtedly reflected in this book. Neither of them ever tired of diligently reading the many drafts of the initial work I produced for this project. They never failed to give me support and encouragement when the things got difficult. I am immensely grateful to them. There are many other people whose constructive feedback and support was invaluable over the years. Ed Page provided crucial feedback at key stages of the project, for which I am very thankful. Christel Koop, Madalina Busuioc, Tobias Bach, Eva Ruffing, Hussein Kassim, Waltraud Schelkle, Julia Black, and Hellen Wallace all provided feedback or inspired my thinking on the topic of this book over the years. I would like to thank them all. I would also like to thank my colleagues in the Department of Politics at York, for the feedback they provided on this project, as well as for providing such a collegiate working environment. I am indebted to the officials who gave up their time to speak to me about their work for this research project. Without these conversations my understanding of the relevant regulatory issues would have remained vii

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rather superficial. Their input has undoubtedly been crucial for enhancing my ability to understand rather technical regulatory problems and I thank them for their patience in this regard. More importantly, however, without their willingness to give up their time and to explain technical issues to me, this book could not have been completed. A very special thanks is also owed to the Foundation of German Business and the German Federal Ministry of Education and Research. Their financial support made it possible for me to fully concentrate on the empirical research that underpins the findings of this book. Last – but by no means least – I am grateful for the support of my family and friends. I would like to thank my brother and his family, my aunt and uncle, and especially my parents for always being there, including in the completion of this project. I dedicate this book them (even though I cannot help but wonder whether a book on bureaucracy is something they ever hoped to be dedicated to them…). Finally, I cannot thank Ned enough. He has had to endure a lot as a result of this research project. I cannot express how thankful I am to him for always taking my latest panic over a ‘not-so-final draft’ with good humour.

Contents

1 Regulatory Capacity Building   1 2 An Organisational Perspective on Regulatory Capacity Building in the EU  27 3 Building EU Capacity to Monitor the Safety of Drugs  53 4 Building EU Maritime Safety Regulatory Capacity  83 5 Food Safety: Building EU Regulatory Capacity Through the Backdoor 111 6 Building an Integrated Banking Market While Containing Cross-Border Risks 153 7 The Future of Regulatory Capacity Building in the EU 193 Index 221

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Abbreviations

ADR AMG BaFin BfArM BfR BMELV BSE BTSF BVL CEBS CHMP COREP CPRD CRD CRR Defra DSRU EBA EBC ECB EFSA EMA EMSA ESAs ESRB EU FINREP

Adverse drug reaction German Medical Act (‘Arzneimittelgesetz’) Federal Financial Supervisory Authority Federal Institute for Drugs and Medical Devices Federal Institute for Risk Assessment Federal Ministry of Consumer Protection, Food and Agriculture Bovine spongiform encephalopathy Better Training for Safer Food Federal Office for Consumer Protection and Food Safety Committee of European Banking Authorities Committee for Medicinal Products for Human Use Guidelines on Common Reporting Clinical Practice Research Datalink Capital Requirements Directive Capital Requirements Regulation Department for Environment, Food and Rural Affairs Drug Safety Research Unit European Banking Authority European Banking Committee European Central Bank European Food Safety Authority European Medicines Agency European Maritime Safety Agency European Supervisory Authorities European Systemic Risk Board European Union Guidelines on Financial Reporting xi

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ABBREVIATIONS

FSA FSA FVO GP HELCOM

Financial Services Authority Food Standards Agency Food and Veterinary Office General Practitioner Helsinki Convention on the Protection of the Marine Environment of the Baltic Sea Area IMO International Maritime Organization MAFF Ministry of Agriculture, Fisheries and Food MANCP Multi-Annual National Control Plan MARPOL International Convention for the Prevention of Pollution from Ships MCA Maritime and Coastguard Agency MCA Medicines Control Agency MDA Medical Devices Agency MEPC Marine Environment Protection Committee MHRA Medicines and Healthcare products Regulatory Agency MSC Maritime Safety Committee NGO Non-governmental organisation Paris MoU Paris Memorandum of Understanding on Port State Control PEI Paul-Ehrlich-Institute PEM Prescription-Event-Monitoring PhVWP Pharmacovigilance Working Party PRA Prudential Regulation Authority PRAC Pharmacovigilance Risk Assessment Committee SSM Single Supervisory Mechanism SRM Single Resolution Mechanism UK United Kingdom WHO World Health Organization

List of Tables

Table 7.1 Table 7.2

Different modes of EU regulatory capacity building The nature of inter-organisational relationships

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CHAPTER 1

Regulatory Capacity Building

This book explores EU regulatory capacity building in the context of a mismatch between rule-making authority and administrative capacity at the EU-level. It puts forward that the ensuing EU regulatory capacity gap is at least partially filled by specialised EU agencies. These EU regulatory bodies have emerged across numerous policy areas in the last three decades. Since they lack authority and administrative capacity, they seem to be symptomatic of the EU’s regulatory capacity gap, rather than a solution to it (further discussed in the first section of this chapter). However, despite their considerable limitations, EU regulatory bodies fulfil crucial regulatory functions and have developed into influential regulatory bodies. They have been able to do so because national regulatory bodies devote their time and resources to the working groups, expert committees and decision-­ making bodies of these EU agencies (see second part of the chapter). In contrast to other literature in this field, this book hence argues that the key to understanding EU regulatory capacity building is the question why national regulators are willing to support EU agencies—potential rivals— in their work. Previous literature has been too ready to assume that national regulators are willing to do so because they have shared professional norms, are functionally interdependent or fear interference from political principals. Existing literature hence overestimates the resilience of the complex cooperation and coordination processes that are the backbone of EU regulatory capacity building (further discussed in the third

© The Author(s) 2019 E. Heims, Building EU Regulatory Capacity, Executive Politics and Governance, https://doi.org/10.1007/978-3-319-97577-1_1

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section of this chapter). This book suggests that whether national ­authorities are willing to support EU agencies in their work—thus building EU regulatory capacity—depends on whether supporting EU agencies helps national regulators to handle the key regulatory challenges they face in their day-to-day work (the last section of the chapter outlines this key argument).

1.1   EU Agencies as Answer to the Regulatory Capacity Gap of the EU? Faced with global markets and supply chains, the traditional administrative toolbox of the state has become increasingly ineffective (cf. Boin and Rhinard 2008). While international and supranational organisations have been gradually more entrusted with the task to set harmonised regulatory standards to meet these challenges, national administrations remain in charge of applying and enforcing harmonised rules on the ground (Eberlein and Newman 2008). This means we face a tremendous regulatory capacity gap when cross-border flows of goods, services, capital and people are concerned (cf. Lodge 2014). While shared regulatory standards are set through international and regional regulatory bodies, national administrations continue to hold the authority and the capacity to regulate industry on the ground. The dangers of this regulatory capacity gap are particularly grave in the European Union, where market integration has gone furthest (cf. Heidbreder 2014). Whilst the EU sets regulatory standards and has the responsibility to manage cross-border risks in its integrated market, its administrative capacity is far too small to fulfil this duty (Eberlein and Newman 2008; Van Boetzelaer and Princen 2012), and national administration remain responsible for implementation of EU law (Versluis 2007). The mismatch between the regulatory responsibilities of the EU and the administrative capacities at its disposal are one of the greatest flaws of its regulatory system (Majone 2000). While, for example, there is only one set of shared EU rules about ship safety, it is national authorities—not EU bodies—that have the administrative capacity to verify the safety of ships on the ground. And while, for example, all EU countries have shared rules about the safety evaluation of pharmaceuticals, it is experts of national agencies—rather than EU experts—that have the resources and the knowledge to monitor and evaluate whether a medicine on the market is safe to

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use. As Majone notes “regulation is not achieved simply by rule-making; it also requires detailed knowledge of, and intimate involvement with, the regulated activity” (Majone 2000, p. 280). This ‘intimate involvement’ is found in national administrations—rather than in supranational bodies— in the regulatory regimes of the EU.  The ensuing capacity gap has not only been noted to threaten the legitimacy of the EU (Eberlein and Newman 2008; Majone 2000), but also to question its very governability (Scharpf 1999). In many ways, then, the Member States and the institutions of the European Union have created a system that is based on a fundamental disparity between regulatory responsibilities, regulatory authority and administrative capacity (cf. Heidbreder 2015). While the EU needs to be able to manage cross-border risks and to create a level-playing field for industry in an integrated market, its highly dispersed regulatory system has rendered the fulfilment of these responsibilities exceedingly difficult: regulatory practices of national administrations continue to differ widely, which opens the door for regulatory arbitrage, while also creating loopholes for undetected risks (such as contaminated meat) to cross internal borders freely. Indeed, the integrated market of the EU—and the cross-border risks associated with it—run the risk of creating a “situation where different parts of inter-connected systems are separately administered in such a way as to render the total administrative effect ineffective or counter-­ productive”. Christopher Hood refers to such situations as ‘multi-­ organisational sub-optimisation’ (1976, p.  17), which characterise the limitations of government to realise its capacities. If, for example, food control authorities in France do not carry out effective controls, health risks from unsafe food could quickly spread to other EU countries, thus rendering regulation ineffective. If authorities in one country do not enforce rules—or interpret them in a lax manner—regulatory loopholes are created that can render the given EU-wide regulatory regime counter-productive. The regulatory capacity gap of the EU has hence provided pressure to act (Majone 1997), which political actors in the EU have responded to within the framework of the dominant norm of delegation to non-­ majoritarian institutions that has been observable across the globe (Gilardi 2005; McNamara 2002): specialised EU regulatory bodies—such as agencies, committees and offices—have mushroomed over the past decades

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(Busuioc et  al. 2012; Busuioc, 2013;  Dehousse 1997; Kelemen 2002, 2005; Maggetti and Gilardi 2011; Majone 1997; Mathieu 2016; ­Levi-­Faur 2011; Rittberger and Wonka 2011). Indeed, it has been argued that “the idea took hold that no area of EU business was complete without its agency or authority” (The Economist, 2001). In the field of economic and social regulation, the number of such bodies has been continuously on the rise, especially since the early 2000s. Whilst the European Medicines Agency was already established in 1995, other policy areas soon followed suit, such as the founding of the Committee of European Banking Supervisors in 2004, which was then surpassed by the European Banking Authority in 2011. Equally, we saw the emergence of the European Maritime Safety Agency and European Food Safety Authority in 2002, whilst the European Chemicals Agency started working in 2007. In total, the EU currently has 34 of these so-called ‘decentralised agencies’. In 1990, only three of these bodies existed. By 2000, this number had risen to twelve, and by 2005 this number had reached 25. Some commentators have described this as an exercise in “bureaucratic self-aggrandizement” on part of the European Commission (Kelemen 2002, p.  98). Specialised EU regulatory bodies may indeed seem to be able to close the EU’s regulatory gap, for example by supporting consistent implementation of EU law by national regulators (Kaeding and Versluis 2014; Versluis 2012). However, instead of building a regulatory interface with the regulated industry, EU regulatory bodies create an interface with the relevant authorities in the Member States (Eberlein and Grande 2005). As a result, EU regulatory bodies are usually not involved in risk management ‘on the ground’. This remains the responsibility of national regulators that represent the operative arm of this transnational bureaucracy (cf. Wilson 2000 [1989], pp. 31–110). Next to these severe restrictions to their formal authority, their administrative capacities are in fact miniscule. Take the European Banking Authority, for example: it is responsible for the setting of technical regulatory standards aimed at ensuring the financial soundness of banks. It has roughly 170 members of staff and an annual budget of around €35,000,000. In comparison, the German Federal Financial Supervisory Authority (BaFin) has around 3200 staff members and a budget of approximately €224,000,000. Whilst direct comparisons need to be treated with care—after all tasks and responsibilities are never identical across different regulatory bodies—it is clear that the administrative capacity and regulatory expertise continues to reside with national authorities despite the emergence of EU regulatory bodies.

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The small administrative capacity of EU regulatory bodies becomes especially visible in comparison to their US counterparts. In order to manage risks from foods and medicinal products in a market of around 320,000,000 consumers, the US Food and Drug Administration employs around 14,500 people and has an annual budget of roughly €3.2billion ($4.3billion). In comparison, the combined number of staff and annual budgets of the European Food Safety Authority and the European Medicines Agency add up to around 1,100 people and €328,000,000 per year in order to regulate a market of a population of around 510,000,000. Astoundingly, in spite of their miniscule administrative capacity, these EU regulatory bodies have been quite successful in producing the output demanded of them, and have usually been described as effective in their work (Eberlein and Newman 2008, p.  45). For example, in 2013 the European Banking Authority submitted 57 technical regulatory standards on highly complex issues to European Commission, although it only had around 120 members of staff then (EBA 2013, p. 14). Similarly, the European Food Safety Authority delivered more than 200 scientific opinions and evaluations in 2015, even though it relies entirely on external experts—who are often scientists from national food risk assessors— to formulate this scientific output (EFSA 2015, p.  50). Indeed, EU agencies have developed into influential regulatory bodies despite their limitations in resources and authority. Some of them assess risk. For instance, the European Food Safety Authority and the European Medicines Agency are responsible for formulating scientific opinions on questions of safety and risk emanating from particular products and materials.1 Other EU regulatory bodies—like the European Securities and 1  Please note that these agencies do not take legally binding decisions. Rather, the European Commission decides on the basis of these scientific opinions. This is so because powers cannot be fully delegated to specialised EU regulatory bodies. If, for example, and EU agency has the task to authorise products for the market—such as the European Medicines Agency—the European Commission remains formally in charge of authorisation on the basis of an expert opinion of the specialised agency. This is a result of the so-called Meroni doctrine established in case law: It does not allow for a delegation of decision-making powers to independent EU agencies in order to keep the ‘institutional balance’ between EU institutions intact (Meroni SpA v ECSC High Authority (Meroni I) [1957 and 1958] E.C.R. Spec. Ed. 133, and Meroni SpA v ECSC High Authority (Meroni II) (10/56) [1957 and 1958] E.C.R. Spec. Ed. 157). For further commentary see, for example, Griller and Orator (2010). Recently the European Court of Justice seems to have lifted these restrictions on agencies. The consequences of this ruling are unclear at the time of writing. For an analysis (see Chamon 2014). In practice, the European Commission generally ‘rubber-stamps’ the decisions of EU regulatory bodies.

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Markets Authority—are responsible for the setting of detailed technical standards that govern the behaviour of national regulators and the regulated industry. Bodies like the European Aviation Safety Agency and the Food and Veterinary Office, in turn, inspect the regulatory practices of national authorities. In other words, EU regulatory bodies are heavily involved in key regulatory tasks, including the setting of safety standards and the monitoring of whether these are adhered to. In taking decisions on whether a given product is safe, or which rules regulators and industry in the EU should follow, they perform powerful regulatory activities. That EU regulatory bodies have developed into forces to be reckoned with is visible in how they are viewed by national governments and EU institutions alike: for example, a review of the powers transferred to Brussels by the Dutch government focused—amongst other issues—on EU agencies. In this review, the Dutch government voices stark concern about the need for EU agencies to take the view of national governments into account when taking decisions or devising regulatory guidelines (Ministerie van Buitenlandse Zaken 2013, p.  2 and 4f). The potential influence these bodies can wield has indeed been the subject of numerous parliamentary inquires in the Member States. A case in point is the British House of Lords Inquiry about the EU regulatory bodies concerned with financial regulation (see House of Lords 2009). Also, the European Parliament has on occasion refused to sign off the accounts of several EU agencies. As a result of concern about the influence of industry on the work of EU agencies, the European Parliament delayed its approval of the past expenditure of the European Food Safety Authority, the European Medicines Agency and the European Environment Agency for the year 2010 (also, see Bach and Fleischer 2012; Jacobs 2014). EU agencies are thus regarded as important players that need to be constrained by political actors. Overall, then, they appear to have developed into powerful regulatory bodies that facilitate European capacity to regulate its integrated markets effectively. However, given the extremely limited formal authority and administrative capacity of these EU regulatory bodies, it is puzzling that they have turned into such powerful regulatory actors. To understand EU regulatory capacity building, then, we need to uncover how EU regulatory bodies are able to get their work done despite their formal limitations.

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1.2   Uncovering How EU Agencies Get Their Work Done: The Role of National Regulatory Authorities In order to uncover how EU agencies generate regulatory capacity despite their limited authority and resources, we need to take a close look at the central role that national authorities play in these bodies. Indeed, some observers have argued that the proliferation of EU regulatory bodies equates to a strengthening of Member States since national officials hold crucial positions in these EU regulatory bodies (Kreher 1997, p.  226): national officials constitute the executive boards and expert committees of EU agencies and other regulatory bodies. This means that the decisions emanating from these bodies effectively represent the coordinated views of national authorities. It also means that EU agencies get their work done—be it the issuing of technical standards or of scientific opinions—if and when national officials are able to come to an agreement on a specific issue when working together in EU agencies. As a result, EU regulatory bodies have been described as hubs of transnational networks of national regulators (Chalmers 2005, p. 649; Dehousse 1997; Eberlein and Grande 2005; Majone 2000). In order to be able to fulfil their tasks, then, EU regulatory bodies need to closely bind national authorities into their work to make use of their resources and expertise (Eberlein and Grande 2005; Majone 1997; Sabel and Zeitlin 2010, 2012): In the absence of proactive engagement with their tasks on part of national counterparts, EU agencies could not carry out their work (Busuioc et al. 2011). This means that EU regulatory capacity is generated through national authorities and officials who come together in EU agencies to coordinate their work with each other and to support EU agencies in their work (cf. Bach and Ruffing 2016). While Slaughter has referred to such transgovernmental ties as a “new world order” in which regulators that coordinate their actions need to be seen as the “new diplomats” (1997, 2004), in the EU context these ties have indeed been described as an instrument of capacity-building through the coordination of practices between national regulators at a transnational level (Dehousse 1997; Heidbreder 2013; Hobolth and Martinsen 2013). If the transgovernmental ties formed between national regulators in the forum of EU regulatory bodies are indeed to be understood as an exercise in capacity building, national regulators need to form shared views on

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‘how to get things done’ in EU regulatory bodies: in order to coordinate their practices, national authorities need to “agree on what the problem is and which response it calls for” (Dehousse 1997, p. 254). Understanding the EU’s capacity to manage cross-border risks in the absence of the necessary resources and expertise is hence linked to understanding how and why coordination between national authorities in EU regulatory bodies functions. Ultimately, it is this type of coordination and cooperation between national and EU regulatory bodies that generates EU regulatory capacity through the back-door. Given how productive EU agencies are despite their miniscule resources, national regulatory bodies must devote considerable time, effort, expertise and other resources to regulatory processes in EU agencies. The de facto capacities of EU regulatory bodies can hence only be understood as a result of the support of national regulators in their activities. This means that especially ‘high capacity’ regulators— which have the necessary resources and regulatory expertise—need to play a great role in this if we consider that they possess the most valuable expertise and the largest amount of resources to devote to EU agencies. Indeed, they have been observed to play the most central role in such coordination efforts (Maggetti and Gilardi 2011). In many ways, then, understanding EU regulatory capacity building requires studying why high capacity regulators choose to proactively support EU agencies by coordinating with sister authorities in EU agency expert panels, working groups and decision-­ making boards. It is surprising that national authorities have seemingly embraced the role played by these EU bodies if one considers the creation of EU agencies has usually been seen critically by national regulatory authorities (Coen and Thatcher 2008a). Moreover, power dynamics are not necessarily absent from interactions between regulatory bodies (Bach and Newman 2010) and relations between regulators can at times be shaped by national interests (Maggetti and Gilardi 2011). Although they are often confronted with similar challenges vis-à-vis the regulated industry and their political ‘masters’ (Maggetti and Gilardi 2011, p. 833), regulators are embedded in vastly differing institutional contexts in their home countries (Sabel and Zeitlin 2010) and often have differing regulatory philosophies and practices (Van Boetzelaer and Princen 2012). Moreover, supporting EU agencies in their work through coordination with sister authorities is costly for national regulators since they represent the operative arm in this transnational bureaucracy (cf. Wilson 2000 [1989], pp. 31–110): their main duty is the regulation of a given risk-producing industry ‘on the ground’, and

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as any organisation they do so under resource constraints, which have intensified in the age of ‘austerity’. Supporting EU regulatory bodies in their work at best represents an auxiliary task to their core mission. The question of how potential conflicts between regulatory bodies are solved and why national authorities are willing to support EU agencies in their work is thus the crux for understanding how EU regulatory capacity is generated though EU agencies. This book examines how and why regulatory actors in the EU work together and support each other in light of the potential lines of conflict between them and the potentially costly nature of coordination. At its heart, this question is of immediate importance for understanding the capacity of the EU to manage cross-border risks and create a level-playing field in the absence of the necessary resources and expertise at the supranational level to do this responsibility justice (Egeberg 2006; Trondal and Peters 2013, pp. 299f and 303). That national authorities are quite happy to ‘volunteer’ their expertise to EU agency regulatory processes and have seemingly found ways to resolve conflicts within these bodies is startling if we consider that coordination and cooperation between governmental authorities is perennially riddled with difficulties. Indeed, coordination among public authorities is seen as one of the most pervasive problems of government in bureaucracy studies (Wilson 2000 [1989], p. 268f; also see Hood 1976, p. 17ff). The need for coordination in interdependent settings—and the difficulty of maintaining coordination processes—have been described as one of the central limits of administration (Hood 1976, p. 17ff). Coordination and cooperation between governmental authorities is often problem-laden as a result of the tendency of bureaucratic actors “to get and to keep as much [turf] as they can” (Wilson 2000 [1989], p. 28). Protecting their turf equates the maintenance of their autonomy—for example vis-à-vis the governments that there are accountable to—is usually seen as a key motivation for bureaucratic behaviour (Wilson 2000 [1989], p. 179ff): in order to maintain their organisations, public authorities are known to strive for autonomy from other actors since this allows them to define their work in their own terms. This, in turn, helps to establish a sense of mission within an agency, which is usually helpful in order for the organisation to stay in control. For example, this helps executives to ensure that officials throughout the organisation are carrying out their work as required, which again feeds into the authorities’ ability to maintain its autonomy vis-à-vis potential rivals and political actors (Wilson 2000 [1989], p. 183f). Although students of bureaucracy are well-versed

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in the perennial difficulties with cooperation between government ­authorities, the literature on EU agencies astonishingly does not seem to be surprised about the extent to which EU agencies rely on, and indeed receive, support from national regulatory authorities. Although it has illuminated us about the reasons for the creation and design of EU regulatory bodies (Chiti 2013; Christensen and Nielsen 2010; Coen and Thatcher 2008b; Mathieu 2016), their independence (Gehring and Krapohl 2007; Groenleer and Busuioc 2014; Ossege 2016; Wonka and Rittberger 2010), accountability (Buess 2014; Busuioc 2009, 2010, 2012, 2013; Groenleer 2009) and day-to-day operation (Busuioc and Groenleer 2012; Trondal 2010), it seemingly regards the cooperation between national and EU regulatory bodies as ‘natural’ (with some important exceptions, see Bach and Ruffing 2013; Bach et al. 2016; Busuioc 2016). As a result of this, existing literature neglects the fragility of EU regulatory capacity building that rests on the behaviour of national and EU regulatory bodies towards each other. In order to do the complexity and fragility of the EU’s regulatory system justice, this book hence approaches EU regulatory capacity building as based on formal and informal inter-organisational relationships between regulatory bodies at the EU and the national level (cf. Egeberg and Trondal 2016; Trondal and Peters 2013). This organisational approach alerts us to the need to elucidate the motivations and behaviour of national and EU regulatory bodies in this emerging transnational bureaucracy. Seen in the light of the turf protection tendencies of bureaucratic actors, the proactive support of EU regulatory bodies on part of national regulators is particularly intriguing. Bureaucratic actors are usually more likely to attempt to limit the influence of any rivals that fulfil similar tasks to them: governmental authorities usually want to be the only ‘sheriff in town’. In working together in EU agencies, however, national regulators in the EU create capacities for an EU regulatory body that can potentially rival them in their field, thus supporting them actively in their work, rather than trying to limit their influence. Of all things they could devote their resources to, why do national authorities choose to devote their resources to support potential rivals? Even though national authorities might have a common interest under conditions of interdependence, conflicting interests might persist at the same time, rendering it difficult to solve such collective action problems. Under the assumption of limited resources, active engagement with positive coordination is costly for national regulators (cf. Scharpf 1994). Costs are not only accrued by investing time and resources

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in the coordination process itself. Rather, as an outcome of engaging in coordination and defining new working practices, national authorities will need to invest resources into modifying their own practices: they may have to change the computer systems they use to collect data, change their organisational set-up or retrain staff (etc.). Since their existing practices are usually based on underpinning regulatory philosophies, administrative traditions and norms these changes can run into resistance within national regulators (Van Boetzelaer and Princen 2012, p. 821). The book is hence devoted to the question of how cooperation and coordination between regulatory actors in the functions EU and why national regulators are willing to support EU agencies in their work. At its heart, this question is of immediate importance for understanding EU regulatory capacity building in the absence of formal supranational capacity. To understand how EU regulatory capacity building we need to study which conflicts arise when national officials get together in EU agencies, through which mechanisms they are resolved and why national regulators are willing to support EU agencies in their work despite the potentially material and nonmaterial costs of doing so.

1.3   Why Do National Regulators Support EU Agencies in Their Work? Scholarship on EU agencies and EU governance has tended to equate the creation of specialised EU regulatory bodies with EU regulatory capacity building (cf. Egeberg et al. 2012; Mathieu 2016), rather than to question how these administratively miniscule authorities get their work done. There is also an important body of scholarship that highlights the complexity of EU regulatory capacity building as resting on a myriad of webs of interactions between national and EU officials and organisations (Egeberg and Trondal 2016; Trondal 2010; Trondal and Peters 2013). However, none of these contributions alerts us to the fragility of EU regulatory capacity building because it rests on an implicitly assumed willingness of EU and national administrative officials to cooperate and coordinate. By taking an organisational approach rooted in the bureaucratic politics assumption that organisations do not have a ‘natural’ tendency to cooperate and coordinate, this book takes a fundamentally different starting point to the study of EU regulatory capacity building (shared by some recent studies of EU agencies; for example, Bach et al. 2016; Busuioc 2016). The organisational perspective the book rests on

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highlights the potentially brittle nature of this capacity building exercise, while aiming to explain why regulatory capacity is generated in the face of potentially tremendous obstacles. It hence addresses a gap in current scholarship which rests on assumptions that tend to be either too optimistic or too pessimistic about capacity building through cooperation and coordination in the EU. Although the literature on EU agencies and EU regulatory capacity has not explicitly identified the puzzle that this book rests on, it has implicitly addressed it by offering three different explanations for why national regulators may be willing to support EU agencies in their work: the importance of shared professional norms of regulatory norms, the pressures of (perceived) interdependencies between regulators, and the threat of intervention of regulators’ principals (‘the shadow of hierarchy’). While all of these factors are likely to be important in motivating regulators’ behaviour, their lack of an organisational perspective renders it difficult for them to explain variation of cooperation and coordination patterns in different policy areas. Overall, these three approaches over-characterise coordination processes in EU regulatory bodies, which results in a lack of observation of variation in how and why coordination functions in varied settings. Moreover, they all neglect the potential problems associated with coordination between government authorities pointed out in the public administration literature (as discussed in the previous section). Each of these approaches is discussed below in order to demonstrate that the organisational perspective this book employs helps us to advance our understanding of EU regulatory capacity building. 1.3.1  Professional Norms as Basis of EU Regulatory Capacity Building This approach highlights that national regulators are willing to work with each other and to support EU agencies in their work because regulators belong to professional and epistemic communities. Professionals are keen to exchange practices, learn from each other and maintain their professional reputation amongst their colleagues (Eberlein and Grande 2005; Slaughter 2004, p.  59; Sabel and Zeitlin 2008, 2010; Trondal 2010, p. 22). In this view, regulators generate EU regulatory capacity through cooperation and coordination because this means ‘acting professionally’ to them. Learning and deliberation are used to overcome collective action problems and solve coordination problems (Majone 1997, p. 271ff; 2000, p. 295ff).

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[…] an agency that sees itself as part of a transnational network of institutions pursuing similar objectives and facing analogues problems […] is more motivated to defend its policy commitments and/or professional standards against external influences. This is because the agency executives have an incentive to maintain their reputation in the eyes of the other members of the network. Unprofessional or politically motivated behaviour would compromise their international reputation and make co-operation difficult to achieve in the future. (Majone 1997, p. 272)

This strand of literature hence draws our attention to the importance of the norms of professional communities of experts that regulatory actors are embedded in as drivers of regulatory capacity building beyond formal capacities. In this view, cooperation and coordination between national and EU regulators are based on peer pressure, such as the perceived need to enhance and maintain reputation amongst expert colleagues. Information as valuable resource is seen to play a key role: although EU regulatory bodies do not have the formal authority to induce coordination between national authorities, they are seen to possess crucial information through which they can exercise regulatory control and promote coordination (Majone 1997; Eberlein and Grande 2005, p. 100). In a similar vein, the literature on EU comitology committees has emphasised that coordination between highly specialised national officials happens through persuasion and deliberation in an expertise-based and consensus-driven problem-solving mechanism (Joerges and Neyer 1997; Joerges and Vos 1999; Rhinard 2002). Trust between regulatory actors is usually described as facilitating factor of coordination in this context (Eberlein and Grande 2005, p. 103; Börzel and Heard-Lauréate 2009, p.  143). In contrast to the organisational approach that this book emphasises, then, this scholarship does not sufficiently recognise potential frictions between regulators. Whilst professional norms certainly play a crucial role in shaping the attitude of regulators towards supporting EU agencies in their work, it is likely that their interests—and hence behaviour—are shaped by more complex settings in which their main aim is to carry out their main regulatory tasks and handle key regulatory challenges, while guarding their turf. Moreover, the focus on consensus-driven deliberative forms of ­coordination in EU agencies disregards that differing regulatory tasks of EU regulatory bodies set up different relations between national regulators: technical standard-setting, for example, is likely to cause more contention between regulators than regulatory tasks focused on information exchange. The

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generalised focus on professional norms hence disregards important sources of variation in coordination patterns across different policy areas and different national regulators. Also, the focus on trust between regulators does not help us to understand why the same set of actors coordinate in relation to one aspect of their work (thus ostensibly trusting each other), whilst not doing so in other areas of their work. The deliberative approach has also argued that national officials engage in deliberation, mutual exchange and learning in order to define common ways of doing things because they know that a centrally imposed solution would be ‘unworkable’ on the ground. By engaging in coordination, national officials can find common solutions which they can adapt to the circumstances in their own country (Sabel and Zeitlin 2010, p. 15; also see Eberlein 2010a). Sabel and Zeitlin capture this idea in the concept of the ‘penalty default’: if national officials do not engage in coordination they know that the European Commission (potentially in conjunction with the European Parliament and the Council) will impose a harmonised standard on them. In the diverse setting of the EU, in turn, such a centrally imposed solution is seen as unworkable by Sabel and Zeitlin (and in their view national officials also see this as an untenable outcome) (Sabel and Zeitlin 2010, p. 15). This idea takes into account the national contexts of regulators, without, however, considering that the circumstances across countries might shape regulators ideas and interests to a considerable extent, rendering agreement on common solutions difficult. In other words, this literature has a tendency to overestimate the extent to which national and EU regulators are willing to work with each other. This has the result that EU regulatory capacity generation may be taken for granted, whereas it may indeed rely on inter-organisational relationships that can become dysfunctional or break down altogether. Overall, the assumption that regulators are inherently interested in exchanging practices and in learning from each other underestimates that supporting EU agencies in their work is a resource intensive and time-­ consuming process for national authorities. As such, then, this strand of literature underestimates the nature of the coordination problems that can arise between governmental authorities, as highlighted by the public administration literature that was outlined in the previous section. Whilst national authorities might indeed inherently value exchanging views with their peers, the realities of getting their day-to-day regulatory work done under time-constraints and their aim to keep existing practices intact render it more questionable whether professional norms are indeed the back-

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bone of EU regulatory capacity generation. In this regard, it has been put forward that national regulators need a stronger incentive to coordinate and to support EU agencies. In other words, they need to ‘get something out of’ these activities (Van Boetzelaer and Princen 2012, p. 822). 1.3.2  Interdependencies as Basis for EU Regulatory Capacity Building Another line of thought emphasises that regulators are willing to work with each other because of their interdependence in managing integrated markets and cross-border risks. In this view, regulators work with each other since they cannot carry out their work effectively if other regulators fail to do their job in a context of interdependence. The aim is not altruism. It results from the recognition that a global regulatory system based on transgovernmental networks is only as strong as its weakest link. (Slaughter 2004, p. 57)

Slaughter’s view can easily be applied to the regulatory system of the EU. These explanations hence emphasise that rationally acting regulators have an interest in coordinating their actions and supporting potential rivals in their work: due to the cross-border nature of risks they cannot successfully pursue their regulatory goals without working with each other. Research has demonstrated that the higher the perceived level of interdependence between regulators in the EU, the more intensive their cooperative efforts in EU agencies and committees (Van Boetzelaer and Princen 2012). (Perceived) interdependence is seen to provide the involved regulatory actors with the necessary incentive to commit resources to coordination. This approach argues that the main potential benefit of coordinating in the forum of EU regulatory bodies is an increase in the homogeneity of risk management practices. National regulators hence do not receive an added value from coordination in cases where national authorities are not directly affected by the activities of authorities in other Member States. In such cases—it is put forward—the coordination activities of national regulators mainly benefit the European Commission, rather than the national regulators engaged in coordination. Thus, in such cases of low (perceived) interdependence national regulators lack an incentive to support EU agencies in their work (Van Boetzelaer and Princen 2012, p. 822).

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This approach, however, struggles to explain cases in which regulators fail to coordinate despite (perceiving to be) interdependent. Also, this approach tends to neglect that national regulators can potentially gain other ‘added values’ from transnational coordination than the approximation of regulatory practices that directly affect them. Although functional accounts usefully point out that regulators have a reason to care about the effectiveness of the work of their sister authorities, they neglect the possibility that they also care about their regulatory work ‘at home’. After all, they are the operative arm of this regime that carry out the day-to-day work of regulation within the institutional contexts of their home countries, which are bound to throw particular regulatory challenges at them. Similarly to the approach that emphasises the importance of norms and learning they neglect the possibility of politically motivated behaviour of regulators. National authorities are likely to form their preferences not just in relation to interdependence with EU and other national regulators, but also in relation to their national contexts in which they carry out their primary regulatory work. In this regard, the focus on interdependence underestimates the problems that are usually associated with coordination between governmental authorities identified in the public administration literature. 1.3.3  The ‘Shadow of Hierarchy’ and ‘Interests’ as Bases for Regulatory Capacity Building The ‘shadow of hierarchy’ view of the EU governance literature emphasises that in principal-agent relationships national officials coordinate if there is a threat that coordination will otherwise be replaced by hierarchical intervention (i.e. intervention by the principal) (Héritier and Lehmkuhl 2008, 2010; Eberlein 2010b; also see Börzel 2010; Rhodes 1996; Scharpf 1997). This idea highlights that despite the lack of formal authority of EU regulatory bodies, ‘hierarchy’ is not necessarily absent when coordination between national authorities and EU agencies is concerned and might hence push regulatory bodies to support each other: these interactions take place within the framework of a legal system in which hierarchical authority is present in the form of the legislative process of the EU, as well as the European Commission and the European Court of Justice as ‘guardians’ of the European legal order. However, the assertion that these hierarchical ‘threats’ shape behaviour of regulators have been largely based on assumptions underpinning theoretical principal-agent modelling, rather

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than empirical substantiation. It assumes that regulators behaviour is shaped by the formal rule framework of the EU, rather than by the immediate formal and informal institutional contexts they operate in that range from the international to the domestic level. The assumption that national regulators consider the large scale implications of their actions in relation to the EU’s institutional framework remains questionable, especially since it has difficulty capturing variation patterns of coordination across different sectors that are all part of the EU’s legal framework. Importantly, this approach counteracts the weaknesses of the previous two approaches by acknowledging that regulators can have political interests, such as power and the accumulation of resources. This is crucial since it takes into account that national regulators are unlikely to be only motivated by professional norms. However, rational choice institutionalist approaches tend to focus on material and instrumental interests. In this regard, this approach seems to regard the interests of national regulators to be exogenous to the institutional framework of the system of the EU. Interests, however, are arguably formed in complex institutionalised settings, which include—but go beyond—the professionally motivated seeking of reputation, ‘power’ or resources within the incentive structures of the EU system (cf. Wildavsky 1987, 1992). In this regard it is also worth mentioning rational choice approaches since they explicitly acknowledge the importance of interest-driven behaviour of bureaucratic actors. (To the author’s knowledge, however, these have not been applied to cooperation between regulators in the EU so far). The rationalist budget-maximising approach, for example, stipulates that bureaucratic actors are motivated by the aim to maximise their organisation’s budget as a means to increase their own power (Niskanen 1994 [1971]). This approach directs our attention to the rational behaviour of regulators as operative arm of an emerging transnational bureaucracy (cf. Trondal 2010; also see Wilson 2000 [1989], pp. 31–110). Since engaging in the solving of coordination problems is costly, national regulators are likely to want to receive some kind of added value from transnational processes. Yet, they over-emphasise the material and instrumental nature of preference formation at the expense of interests that are shaped by institutional contexts (for example, Wildavsky 1994). On the empirical level, this rational choice inspired framework also does not necessarily hold up well in relation to transnational coordination of regulators in the EU.  If national regulators in the EU are budget-­ maximising, we can expect them to engage extensively in transnational

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processes because the additional task of coordinating with their colleagues endows them with extra resources. Indeed, in some cases national authorities receive EU funds to partake in the work of EU agencies. For example, national food risk assessors receive money from the European Food Safety Authority for their contribution to the work of this EU agency.2 Also, drug and food safety experts receive remuneration for scientific assessments they prepare for the European Medicines Agency and the European Food Safety Authority (for example, see MHRA 2013, p. 6). In the latter case, however, these contributions are relatively small amounts, which are reportedly insufficient to cover the costs of even the most formalised support work for the EU agency (EFSA 2013a, especially p.  23). Indeed, national regulators usually experience a (perceived) loss of resources through their experts’ involvement in the work of EU agencies since their experts are often busy with ‘European businesses’ instead of doing their job at home. In other cases, national experts heavily involved in EU working groups do not receive any remuneration, such as in the case of the European Banking Authority. It hence seems difficult to explain proactive support of EU agencies’ work on part of national regulators purely from a budget-maximising perspective. Even though medicines regulators receive relatively substantial remuneration for their work in the European Medicines Agency, national officials in other policy sectors receive little or no financial reward for their efforts. This, however, does not correspond to the absence or presence of cooperation on the empirical level. Nevertheless, such a rationalist perspective reminds us that regulators are likely to want to see some kind of ‘payoff’ from their engagement with coordination processes. Budget-­maximising approaches, however, cannot adequately explain how national regulators are able to perform ‘cost-benefit analyses’ that would enable them to decide whether or not to support EU agencies in their work. For example, how they define and weigh potential collective gains against potential losses of reputation as a result of engaging with EU agencies is arguably impossible to understand without taking into account how their EU agency-related activities relate to their main regulatory work ‘at home’. This book argues that an organisational approach highlights the importance of individual national regulators’ motivations and behaviour as the 2  Financial contributions are attached to the so-called ‘Focal Point Agreements’ that EFSA concludes with each national authority individually. These payments, however, do not have an official legal base and remain informal in character (EFSA 2013b, p.16ff).

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basis of EU regulatory capacity generation. Such an organisational perspective enables us to explain variation in support for EU agencies across sectors and Member States, which the (implicitly) existing explanations for EU regulatory capacity generation cannot. This book’s perspective is rooted in Wilson’s view of bureaucratic organisations, which leads us to expect that national regulators are keen on guarding their ‘turf’ and are only willing to support EU agencies in their work if this does not undermine this fundamental goal (cf. Wilson 2000 [1989]). To what extent this is the case is likely to depend on how participation in EU agencies work relates to their ‘core mission’, meaning their core regulatory activity. On this basis and borrowing from regulation scholarship, the book suggests that national regulators are willing to support EU agencies in their work when it helps them to handle the key regulatory challenges they face on a daily basis. The key regulatory challenges national authorities face may, for example, be shaped by the specific structure of the regulated industry in their country or the by institutionalised constraints imposed by them in national regulatory regimes (such as lack of access to expertise or data). The organisational perspective developed in the next chapter hence conceptualises the interests of national regulators to be shaped mainly by the primary regulatory work and challenges they face in institutionalised settings.

1.4   The Plan of the Book As mentioned above, the next chapter expands on the notion that an organisational approach to the study of EU regulatory capacity can yield important insights. It develops the analytical framework of the study by discussing how regulators perceive their own core mission and key regulatory challenges, and outlines how support of EU agencies’ work can help them to face these challenges. Chapter 2 ends by outlining the case selection and empirical methods of the book: the analytical framework and underlying theory of the book require in-depth study of the motivation and behaviour of individual national regulators across sectors and ­countries that are characterised by variation in regulatory challenges. Equally, the study needs to focus on high capacity regulators since these have less to gain from supporting EU agencies, while being key for EU regulatory capacity building. On this basis, the book focuses on the UK and German regulators’ approach to EU regulatory bodies in drug safety monitoring, maritime safety, food safety and banking supervision.

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The four subsequent chapters are based on case studies of EU regulatory capacity building in these four sectors: Chap. 3 shows that German medicines regulators support the European Medicine Agency in its drug safety monitoring role because it provides them with access to data they lack in the institutionalised German context of data protection. The UK regulator, on the other hand, participates proactively in the EU agency’s work to maintain its status as ‘gold standard’ regulator in the field. The second empirical chapter (Chap. 4) shows that German and UK regulators reluctantly endure inspections by the European Maritime Safety Agency. National authorities also do not proactively engage in mutual exchange in the forum of EMSA. This can be explained by the fact that EMSA helps them to handle one key regulatory challenge (ensuring that other authorities to their work as well as they do), but undermines another (maintaining an international regulatory framework for a highly global industry). As a result, EU regulatory capacity building in maritime safety is subverted by national authorities that favour international regulatory efforts as a means to handle regulatory challenges in this sector. Chapter 5 on food safety provides a significant contrast to maritime safety: on paper, national authorities do not need to engage with the European Food Safety Authority to a great extent, but they have voluntarily built a comprehensive supporting network. Similarly, the inspections of the Food and Veterinary Office may seem likely to be unpopular with national authorities, but German and British authorities embrace them. The chapter shows that this is the case because both EU regulatory bodies help German and UK authorities to handle the key challenges they face in food safety, namely the maintenance of an authorities scientific reputation and the control of a complex network of local food inspection authorities. EU regulatory capacity is hence generated to a greater extent than the formal structure of this EU regime would lead us to expect. The final empirical chapter (Chap. 6) focuses on a case in which the EU agency (the European Banking Authority) is particularly limited in its resources, while still managing to produce a staggering amount of technical regulatory standards. The chapter shows that this is a result of national agency ­providing staff to the EBA’s working groups to draft technical standards. They do so because it enables them to influence outcomes in order to adjust them as much as possible to the particular regulatory challenges they face at home (emanating from the structure and size of the banking industry in their own country).

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The concluding chapter highlights that the theoretical argument that this book developed in Chap. 2 is largely sustained in the empirical analysis of the four cases studies. It reiterates that regulatory capacity building in the EU is built on inter-organisational relations between EU and national regulatory bodies, in which national regulators are willing to support EU agencies in their work because it helps them to handle their own regulatory challenges. The chapter highlights that this mutual capacity building is likely to lead to an overall enhancement of autonomy and influence of regulatory bodies vis-à-vis other government actors. That has important implications for the accountability and legitimacy of EU and national regulatory agencies. The conclusion also discusses the implications of Brexit for regulatory capacity building in the EU and the UK. The chapter points out that the findings of the empirical analysis show that UK regulators have made a considerable contribution to EU regulatory capacity building. Indeed, UK officials are regarded as having been central to EU capacity building by their peers in the four sectors this book focuses on. The evidence also points at substantial influence of UK officials in EU regulatory bodies. This implies that Brexit is likely to be a lose-lose for the UK and the EU situation as far as regulatory capacity building is concerned.

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Sabel, C.  F., & Zeitlin, J.  (2010). Experimentalist Governance in the European Union: Towards a New Architecture. Oxford: Oxford University Press. Sabel, C. F., & Zeitlin, J. (2012). Experimentalism in the EU: Common Ground and Persistent Differences. Regulation and Governance, 6(3), 410–426. Scharpf, F.  W. (1994). Games Real Actors Could Play. Positive and Negative Coordination in Embedded Negotiations. Journal of Theoretical Politics, 6(1), 27–53. Scharpf, F. W. (1997). Games Real Actors Play: Actor-Centered Institutionalism in Policy Research. Boulder: Westview Press. Scharpf, F.  W. (1999). Governing in Europe. Effective and Democratic? Oxford: Oxford University Press. Slaughter, A.-M. (1997). The Real New World Order. Foreign Affairs, 76(5), 183–197. Slaughter, A.-M. (2004). The New World Order. Princeton: Princeton University Press. Trondal, J.  (2010). An Emergent European Executive Order. Oxford: Oxford University Press. Trondal, J., & Peters, B. G. (2013). The Rise of European Administrative Space: Lessons Learned. Journal of European Public Policy, 20(2), 295–307. Van Boetzelaer, K., & Princen, S. (2012). The Quest for Co-ordination in European Regulatory Networks. Journal of Common Market Studies, 50(5), 819–836. Versluis, E. (2007). Even Rules, Uneven Practices: Opening the “Black Box” of EU law in Action. West European Politics, 30(1), 50–67. Versluis, E. (2012). Catalysts of Compliance? The Role of European Union Agencies in the Implementation of European Legislation in Poland and Bulgaria. In M.  Busuioc, M.  Groenleer, & J.  Trondal (Eds.), The Agency Phenomenon in the European Union: Emergence, Institutionalisation and Everyday Decision-Making. Manchester: Manchester University Press. Wildavsky, A. (1987). Choosing Preferences by Constructing Institutions: A Cultural Theory of Preference Formation. American Political Science Review, 81(1), 3–22. Wildavsky, A. (1992). Indispensable Framework or Just Another Ideology? Prisoner’s Dilemma as an Antihierarchical Game. Rationality and Society, 4(1), 8–23. Wildavsky, A. (1994). Why Self-Interest Means Less Outside of a Social Context: Cultural Contributions to a Theory of Rational Choices. Journal of Theoretical Politics, 6(2), 131–159. Wilson, J.  Q. (2000 [1989]). Bureaucracy: What Government Agencies Do and Why They Do It. New York: Basic Books. Wonka, A., & Rittberger, B. (2010). Credibility, Complexity and Uncertainty: Explaining the Institutional Independence of 29 EU Agencies. West European Politics, 33(4), 730–752.

CHAPTER 2

An Organisational Perspective on Regulatory Capacity Building in the EU

This chapter develops the analytical framework of the book. It suggests that an organisational perspective that is rooted in a bureaucratic politics approach can help us to make sense of variation in patterns of support of EU agencies’ work on part of national regulators. Rooted in literature on bureaucratic politics and actor-centred institutionalism, the chapter suggests that national regulators support EU agencies’ work when they perceive this to add value to their core work by helping them to handle key regulatory challenges (see the first section of this chapter). Far from being a rationalist approach focused only on what regulators gain in material resources, this approach highlights that we need to understand what individual regulators perceive to be the key regulatory challenges in the context of their specific policy sector and country. According to insights from bureaucracy studies, an activity helps regulators to protect their turf if it strengthens their ‘core mission’. In the context of national regulators in the EU setting, this means that their activities in EU agencies need to relate and be useful for their ‘core mission’, i.e. the regulatory work they carry out ‘at home’ on a day-to-day basis. This means that national regulators are likely to be particularly willing to support EU agencies in their work when this helps them to handle the key regulatory challenges they face. Key regulatory challenges are closely linked to the main regulatory task in each sector, such as data collection versus inspections, and the nature of the regulated industry in a given country (see the second section © The Author(s) 2019 E. Heims, Building EU Regulatory Capacity, Executive Politics and Governance, https://doi.org/10.1007/978-3-319-97577-1_2

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of this chapter), as well as being shaped by domestic institutions. Regulatory challenges are hence conceptualised as a function of regulatory tasks and the nature of the regulated industry that, however, can also be shaped by the constraints exerted upon regulators in their institutionalised domestic settings.

2.1   Turf Protection in Institutionalised Regulatory Settings Rooted in literature on bureaucratic politics, the chapter suggests that national regulators support EU agencies’ work when they perceive this to add value to their core work by helping them to handle key regulatory challenges. As rational actors, national regulators seek to offset the costs associated with supporting an EU agency’s work with the potential benefits that are attached to it. Supporting the work of EU agencies is costly for them: they invest time and resources in these processes. More elusive and far-reaching costs could also be associated with supporting EU agencies. For example, national regulators’ professional reputation could suffer as a result of the presence of an EU agency in their field. The theoretical angle of the book is rooted in bureaucratic politics approaches that emphasise the central role core missions play in channelling the behaviour of government agencies (Wilson 2000 [1989]). In this line of thought, government agencies are fundamentally driven by the desire to maintain (and where possible enhance) their autonomy. Autonomy in this regard refers to ‘wriggle room’ to interpret their own mandate and to carry it out as they see fit, rather than being significantly constrained by, for example, a ‘meddling’ minister or by the predominance of another government agency working in their field. In contrast to budget-maximising approaches (Niskanen 1994 [1971]) this theoretical angle does not presume that trying to maximise their budget is necessarily the only or the best way to maintain their autonomy. To the contrary, government agencies may wish to have fewer tasks and less finance available in order to avoid being dragged into areas of work that are too complex because maintaining autonomy requires an agency to do its job well (Wilson 2000 [1989]). A government agency that is generally regarded as highly competent is much less likely to be subject to excessive control by elected government and is more likely to be able to subject other government agencies to its own way of doing things (Carpenter 2001, 2010).

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A key consequence of this theoretical premise is that government agencies—including regulators—mostly care about being able to perform their core mission well (Wilson 2000 [1989]). In the case of regulators, core missions can usually be equated with their core regulatory task, such as scientific risk assessments in the case of food and pharmaceuticals regulators. Maintaining autonomy is not only associated with performing the organisation’s core mission well, but also with the protection of this core mission from ‘creep’ by other organisations. Ultimately, government agencies want to protect their autonomy in a bid to organisational survival: the survival of your organisation is threatened if another government body fulfils the same or a similar role to you, especially if this organisation is seen to being doing its job better than your organisation. This means that the protection of organisational autonomy and core missions is ultimately linked the turf protection dynamics highlighted in Chap. 1: government agencies try to protect the “domain of problems, opportunities, and actions over which an agency exercises legitimate authority” (Bardach 1998, p. 164) from other government agencies. As outlined in Chap. 1 it is this turf protection dynamic that renders the creation of regulatory capacity in EU agencies that are dependent on support from national agencies so surprising. EU agencies have the potential to infringe on national regulators’ turf. Even if national regulators are not worried about this, supporting an EU agency in its work is bound to be a peripheral task at best. From a bureaucratic politics angle, however, we would expect an agency to focus on its core mission, rather than to invest time and resources on peripheral tasks. This chapter puts forward that the active contribution of national regulators to the work of EU agencies is much less surprising if we recognise the flip side of this theoretical argument, which is often overlooked: if government agencies often do not cooperate with each other and support other agencies in their work because they want to protect their ‘turf’, they should be very happy to support another agency’s work if this in some way helps in the protection of its core mission (Heims 2018). This means that Organisation A is likely to be interested in supporting Organisation B in its work if the process of doing so helps Organisation A to perform its core mission better. In other words, cooperation and support of another agency’s work ceases to be a peripheral task if it helps the agency in question to perform its core function. All too often turf protection dynamics are equated with ‘selfish’ bureaucratic behaviour. Highlighting this flipside of turf protection dynamics

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points to a more nuanced dimension of this type of bureaucratic behaviour: government agencies do not merely care about organisational survival because decision-makers in agencies want to safeguard their own jobs. Rather, government agencies and their staff usually believe they have been given a particular task because it is in the public interest to fulfil the objectives given to them by policy-makers (Bardach 1998, p. 165; Peters 2015, p.  10). After all, they have been given a particular mission for a reason and being all too willing to engage in activities that are not contributing to this overarching goal is not what the public and elected government would usually want them to do. In the context of regulatory capacity building in the EU, the support of EU agencies by national regulators—and the question whether this activity helps national regulators to fulfil their core mission—takes place in a multi-level context. This means that while the work national regulators do for EU agencies happens at the EU-level, the core mission that national regulators want to safeguard is usually situated ‘at home’, at the national level. A core question for EU regulatory capacity building, then, is whether EU-level activities of national regulators can help them to add value to the main work they do in their home countries. This means that national regulators perceive their calculation of whether supporting an EU agency in its work is ‘worth it’ through the filter of needing to carry out their core mission in institutionalised webs of actors beyond the EU framework. Effectively, national regulators are embedded in multi-level games: the work carried out in EU agencies does not represent a closed system in which only the directly involved actors shape cooperation between EU and national agencies. Rather, whether national regulators think that supporting an EU agency in its work—and hence whether they are willing to engage with it proactively—depends on whether they see this to be desirable in relation to their main regulatory work, which usually takes place in the context of their home country. National regulators’ approach to EU agencies’ work is hence informed by parameters outside the EU framework, which reflects that national regulators are the operative arm of the transnational bureaucracy of the EU: their core mission is not to support EU agencies in their work. Rather, their main duty is usually the carrying out of regulation ‘on the ground’ in their home countries. Auxiliary activities such as sending staff to sit on scientific committees of EU agencies is thus evaluated in relation to the

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primary frame of reference of the context in which national regulators carry out their core mission. Overall, the book takes a theoretical outlook that is rooted in the bureaucratic politics approach and its emphasis on government agencies’ focus on their core mission. The book puts forward the argument that national regulators are willing to proactively support EU agencies in their work if this helps them to carry out their core mission better. To what extent this is the case depends on the nature of a regulator’s core mission and how the particular activity carried out in the process of supporting an EU agency speaks to this core mission. This is the subject of the second part of this chapter, which expands upon the role played by ‘regulatory challenges’ in the safeguarding of core missions and bureaucratic autonomy.

2.2   The Importance of Key Regulatory Challenges The previous section outlined that government agencies are much more likely to support potential rival agencies in their work if this helps them to carry out their ‘core mission’. In the case of regulatory agencies the ‘core mission’ is their main regulatory task. The book puts forward that whether they perceive their support of an EU agency’s work to help them carry out their core regulatory task depends on whether it helps them to tackle the key challenges they face in carrying out their work. The key proposition of this book is that regulatory capacity in the EU is built despite the miniscule capacities of EU agencies because the process of working in and for EU agencies often helps national regulators to deal with such core regulatory challenges. The book suggests that regulatory challenges are inherently linked to the nature of a particular regulatory task and of the regulated industry. They may also be shaped by the domestic institutional setting of national regulators. Overall, the theoretical framework advanced here suggests that national regulators in different countries face largely similar challenges. At times, however, the institutionalised domestic context in which a particular national agency performs its task may differ to sister authorities in other countries. This means the relative importance of sectoral versus national level dynamics on regulatory challenges remains to be explored empirically. The support of EU agencies’ work hence opens a window of opportunity for national regulators that can explain if and why they are willing to commit resources to these processes: strategically acting national re­gulators

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may use their activities in EU agencies to help them overcome challenges that they are otherwise unlikely to be able to counteract. The specific nature of regulatory tasks, regulated industries and the institutionalised constraints a regulator faces in the domestic context render it difficult for regulators to strategically develop other  means to counteract such challenges. At least in theory, the process of participating in the work of an EU agency can provide a ‘deus ex machina’ to national regulators in this respect. This may be the case if, for example, participation and support of the EU agency’s work provides a national regulator with access to data that would be impossible to access in the institutionalised constraints it faces ‘at home’. ‘Deus ex machina’ effects are unlikely to be the norm, however. It is also possible that the support of EU agencies’ work simply contributes to national regulators’ ability to tackle a regulatory challenge, for example, by facilitating access to data that is easier to obtain through working with an EU agency than it would be without working with the EU regulator. A case in point are highly globalised industries with extensive cross-jurisdictional effects of business behaviour, in which supporting EU agencies may be a way for national regulators to control cross-border businesses more effectively by gaining access to better information of the a company’s work in other jurisdictions through their work in an EU agency. 2.2.1  Conceptualising Regulatory Challenges As outlined above, regulatory challenges are inherently linked to the nature of regulatory tasks, the nature of the regulated sector and institutionally embedded constraints (for example on resources) faced by regulators in their domestic context. Regarding the relationship between regulatory tasks and regulatory challenges, the chapter outlines that particular types of work pose particular types of challenges. At the most basic level, regulation and associated tasks need to fulfil three functions of control: standard-setting, information-gathering (or monitoring), and behaviour modification (i.e. enforcement) (Hood et al. 2001). This means that in order to regulate the behaviour of an industry legislators and regulators need to formulate which behaviour is desirable (i.e. which standards they should conform to), they need to be able to monitor whether industry actors conform to these standards, and they need to have mechanisms in place to bring industry actors’ behaviour into line with required standards if they diverge (cf. Dunsire 1978; Hood et  al. 2001). Whilst all three

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functions are key to regulatory processes, in practice, regulatory agencies’ core task is often situated within one of these three areas of activities (at least in the European context). While they may perform tasks in all three areas of control, they statutory duty may focus them on one area in particular. Alternatively, they may perceive one area to be their core area of work (for example for reputational reasons, see Gilad 2015) or the context of a particular sector may require focus on one set of activities over others. Crucially, the three types of control activities are each associated with specific regulatory tools and instruments. These, in turn, each tend to be associated with particular regulatory challenges. Standard-setting activities of regulators usually involve the issuing of (technical) regulatory rules and guidelines. Construed more widely, this also includes the issuing of licenses and opinions on particular products (which may entail the granting of market authorisations or the issuing of a price-cap on utilities). This wider definition makes sense particularly in a European context, where regulators are not usually given rule-making powers in contrast to their US counterparts which tend to have far-­ reaching standard-setting and enforcement powers. Standard-setting processes can involve the effective quasi negotiation of technical standards and guidelines with affected industry actors in order to legitimise rules and to increase the likelihood of application of these rules by the industry. A key regulatory challenge in this regard is the attainment and maintenance of the de facto legitimacy as authoritative standard-setter, as well as pitching the level of the standards at the most appropriate level of detail or generality as to avoid non-compliance and creative compliance (Black 2008). This tends to pose heavy informational demands on regulators (cf. Ogus 2004, p. 150f). For example, setting effective standards to minimise environmental pollution requires detailed information about regulatees polluting behaviour and the current state and effects of environmental pollution. In a similar vein, the granting of market authorisations and expert opinions on particular groups of products is associated with the challenge to have access to the required expertise and experts, as well as with the need to be perceived to be an expert authority in a specific field by the regulated industry, civil society organisations and the public (for example, see Scott 2010). In a nutshell, this means that key challenges associated with standard-setting tasks are the access and maintenance of high quality expertise and information, and the maintenance of (perceived) authority as legitimate standard-setter in the given policy sector.

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Information-gathering activities relate to monitoring and inspection tools and instruments. Monitoring of compliance of industry actors as well as of the performance (or safety) of particular products usually require large numbers of staff as well as access to the best possible data about the performance and safety of particular products or companies. This also applies to inspection regimes which require the access to a sufficiently high number of inspectors with the required expertise. Information-gathering tasks are hence mainly associated with challenges relating to the access to the ‘right’ kind of data and information, and large staff numbers. To cope with this double challenge ‘risk-based’ approaches have been adopted widely, which target inspections on the regulatees that pose the greatest risk (e.g. historically bad compliance performance). These approaches, however, bear their own challenges of how to prioritise particular risks over others (Baldwin and Black 2016). Behaviour-modification activities relate to activities of enforcement and compliance, which includes tools of sanctioning (such as fines and court action) as well as ‘softer’ tools, such as persuasion. Key challenges for regulators here relate to the ability of posing credible threats as well as maintaining a good enough relationship with regulatees to allow for persuasion to be effective (cf. Ayres and Braithwaite 1992; Shapiro and Rabinowitz 1997). Regulators usually face the challenge to guess the motivations for compliance pursued by regulatees and to choose the most effective behaviour-modification strategy accordingly. Research on compliance has shown that this is mostly about the difficulty of choosing the right ‘mix’ between compliance and deterrence strategies (Gunningham 2010). Some of the key challenges inherent in these three core regulatory functions hence are access to the right kind of data, access to sufficient ‘boots on the ground’ (e.g. inspectors), and access to staff with the right kind of expertise. Which key challenges a given regulator faces is, however, not only a function of the nature of its regulatory task. It is also closely linked to the nature of the regulated industry. For example, key regulatory challenges differ if you are regulating an industry that consists of a very large number of small businesses or an industry with a few ‘giants’. While the former poses the key challenge of how to control the behaviour of such a large number of businesses, the latter poses the challenge of controlling highly complex businesses and of handling the asymmetry of information that exists between them and the regulator due to their size and complexity. In

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case of the former industry, then, it is more likely that the key challenge faced by a regulator relates to being able to inspect such a large number of businesses effectively (or to otherwise gather data on their behaviour) while the latter is more likely to pose the challenge of accessing the necessary expertise to counterbalance asymmetries of information. This means that regulatory challenges are related to the size and structure of the regulated industry. How large is an industry in a given country? How many businesses does a regulator oversee and how dispersed are these geographically? Is the industry mostly composed of a heterogeneous or a homogenous set of organisations (i.e. is there a mix of large and small businesses or is the industry composed of one or the other?). Industries in the same sector could either be similar or different in different countries, so regulators in the same sector may or may not face different challenges in different countries in this respect, which remains an empirical question to an extent. How complex are businesses in the regulated industry in relation to the scale of their operation as well as in relation to the products and services they provide? Complexity of businesses rises with the size of their organisation, for example. Equally, businesses that make or provide goods and services based on cutting edge technology (such as nanotechnology or advanced online and IT applications, such as driverless cars) are more complex to regulate than ‘low tech’ or well-known products. Another core dimension relating to regulatory challenges is whether businesses operate largely within the confines of the nation state or whether their business activities are multinational in character. The latter pose challenges of coordination to a greater extent than the former. These different dimensions of the nature of a regulated industry are cross-cutting (i.e. an industry may be heterogeneous because it includes small and large, high and low tech businesses). The above propositions are anchored in the wider public policy literature that argues that policy sectors differ fundamentally. They are populated by different policy communities and networks consisting of relationships between different types of businesses, non-governmental organisations and government departments (for example, Rhodes 1990; Richardson 1982; Sabatier and Jenkins-Smith 1993). Although this literature is diverse, it shares the view that policy processes, in which we include regulatory processes here, differ from sector to sector. This book shares this assumption and argues that in regulatory processes we need to focus on the nature of the regulatory task and the regulated industry in this respect. Nevertheless, while regulatory challenges are a function of regulatory tasks and the nature of the regulated industry, they can also be shaped

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by the constraints exerted upon regulators in their institutionalised domestic settings. National administrative systems differ, for example in respect to the independence given to regulators, how dispersed the wider administrative system a regulator operates is etc. (for example, Verhoest et  al. 2010). In other words, the domestic setting shapes which types of resources, tools, legal powers etc. national regulators have in the first place. This, in turn, has an effect on the extent to which they can handle the challenges that emerge from the nature of the regulatory task and the regulated industry. On the theoretical level, then, the chapter proposes that national regulators face regulatory challenges that emanate from the nature of the regulatory task and the regulated industry. To what extent these challenges can be tackled by them depends on the constraints they operate in at the domestic level. This means that on the empirical level we would expect to find national regulators in the same sector to face broadly similar challenges as they are likely to have similar tasks in the same sector in different countries and as industry structures may be similar too  (although this always remains an empirical question). This means that the theoretical premise of the book expects regulators in different countries to face broadly similar challenges due to the mentioned sectoral effects. However, it is possible that domestic institutional settings have a far greater effect on regulatory challenges that put forward here, for example if they independently shape the nature of the regulatory task and the regulated industry. As a result, the proposition that regulatory challenges are mainly ‘sectoral’, rather than ‘national’ needs to be empirically verified. Equally, the conceptualisation of regulatory challenges advanced here runs the risk of neglecting challenges faced by regulator that are not a direct function of any of these factors, for example, the degree of politicisation of a particular sector. The framework needs to be exposed to empirical verification to ascertain the extent to which regulatory challenges are mainly a function of the nature of tasks and regulated industries. A further caveat is in order: Whilst particular regulatory tasks and the nature of a regulated industry pose certain functional challenges to regulators, key regulatory challenges may not necessarily be discernible solely through a ‘desk analysis’ of a regulator’s key tasks and the nature of the industry. Any regulator is likely to perform a multitude of tasks and it is difficult (if not impossible) to determine which dimension of the nature of an industry, as outlined above, pose the severest difficulties to the regulator. Moreover, what is most important for understanding whether a regulator thinks that supporting an EU agency in its work will help to tackle

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key regulatory challenges is what the regulator perceives its key challenges to be. This means that any attempt of a priori identification of regulatory challenges must always be verified empirically against the organisation-­ internal perception of such challenges. Far from being a rationalist approach focused only on what regulators gain in material resources, then, the approach taken in this book highlights that we need to understand what individual regulators perceive to be the key regulatory challenges in the context of their specific policy sector and country. 2.2.2  The Link Between EU Agencies’ Tasks and National Regulators Key Regulatory Challenges The core argument of the book is that national regulators are willing to support EU agencies in their work if it helps them to tackle their key regulatory challenges because this helps them to maintain (and strengthen) their ‘turf’. The previous section outlined that all regulators face particular challenges in their work, which relate to the nature of their tasks and ‘their’ industry. This is the ‘demand side’ of regulatory challenges. This, however, represents only one side in the equation of whether a given national regulator is willing to support an EU agency in its work. In order to know whether a national agency is willing to ‘work for’ an EU agency we also need to take into account the ‘supply side’, i.e. whether participating in an EU agency’s work provides a given regulator with something that helps to tackle key regulatory challenges. If a national regulator, for example, lacks access to a specific type of data the question is whether its participation in an EU agency will provide it with access to this specific type of data. In order to take into account this ‘supply side’ we need to consider what type of work a given EU agency does and in which type of processes and activities national regulators are involved in when supporting the work of an EU agency. This means we also need to take into account the tasks of EU agencies and the specific frames for interaction they provide. EU agencies fulfil a variety of tasks. Some gather and distribute information and data, others issue scientific risk assessments or set technical standards. Some of them inspect the regulatory practices of national regulators and have the task harmonise the regulatory practices of national regulators by providing a forum of exchange between them. Moreover, some provide operational assistance to national authorities. Most of them fulfil a variety of tasks combining several of the mentioned areas of activity.

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Whether or not national regulators perceive their engagement in EU agencies to be worthwhile is hence crucially depended on whether there is a ‘match’ between the specific task(s) of EU agencies and what national regulators require to tackle their key regulatory challenges. Crucially, however, this ‘matching’ process is more difficult to assess then it may first appear. We cannot simply identify national regulators’ key challenges from the outside and verify whether, on paper, an EU agency task matches these challenges. Instead, it is crucial to take into account whether and how exactly the process of participating in the tasks of EU agencies provides national regulators access to something it values. This means we need to consider how EU agency tasks bind national regulators into the work of this EU agency. In other words, we need to think of EU agency tasks as frames that structure the interaction between EU agencies and national regulators in specific ways. To do so, we need to not only consider the formal tasks of EU agencies but also the informal processes associated with the carrying out of their tasks. For example, in the process of needing to discuss and decide upon a scientific opinion about a particular chemical in committees of an EU agency national regulators may get an insight into the working practices of other regulators or insights into the regulated industry, which may help them to tackle their regulatory challenges. This means in considering the ‘supply side’ of EU agency tasks, we need to consider which processes of interactions between national and EU regulators they unleash. Cooperation between EU agencies and national regulators is hence not an outcome that is ‘achieved’ and ‘completed’. Rather, national regulators evaluate the process of cooperation unleashed by a particular task of an EU body. As a result, national regulators discover—and potentially redefine— their assessment of a task of an EU body in the process of carrying out activities in the forum of this EU body. This means that their own perception of their key regulatory challenges and whether supporting an EU agency’s work helps them to tackle these is not a fixed ‘one-off’ calculus that happens only once before deciding whether or not to fully engage with an EU agency’ work. Rather, their own interpretation of their regulatory challenges and whether working in an EU agency is beneficial is affected by the participating in an EU agency’s work because these processes are dynamic. In other words, at least on the theoretical level ‘calculations’ of whether and how much to support an EU agency are constantly in flux: for example, the participation in an EU agency’s work may provide the means to tackle a regulatory challenge once and for all, thus rendering

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active participation in the EU agency less necessary. Or regulatory ­challenges of national regulators could change because the nature of the regulated industry, statutory tasks or the resources available ‘at home’ change independently of the work of an EU agency. All of these could alter a national regulator’s ‘calculation’ of how much to engage in an EU agency’s work. This means we cannot infer national regulators’ ‘costbenefit-­calculation’ of whether or not to support and EU agency from their initial reaction to the creation of an EU agency or initial approach to supporting an EU agency when this is first established. As a result, we need to study cooperation between national regulators and EU agencies over time to understand if, how and why EU regulatory capacity is being created. In order to understand how national regulators assess the value of their participation in the work processes of EU agencies we need to get a better understanding of the nature of these processes. As already mentioned, this book suggests that these processes are fundamentally shaped by the tasks of EU agencies because these tasks represent institutional frameworks that set up specific relationships between EU agencies and national regulators. In short, EU agency tasks arrange the involved actors into particular constellations (cf. Scharpf 1997, p.  44ff). They arrange how, when, where and with whom exactly EU agency and national regulatory staff meet. They configure the type of relationship between the EU body and individual national authorities and set out in which format their interactions take place (and hence the extent to which this configures a top-down relationship between EU and national regulators). Depending on the task of an EU agency, then, horizontal or vertical relationships between EU agencies and national regulators are established through this institutional framework. Outside the framework provided by a particular task of an EU agency, the EU agencies and national regulators might have a different relationship with each other: depending on the task, EU agencies and national regulators meet eye-to-eye or on a top-down basis. The institutional framework provided by an inspection task of an EU body, for example, sets up a vertical relationship between the EU body and national authorities whilst they are being inspected by the EU body. When, however, they come together outside the institutional framework provided by this task they might meet as partners on a horizontal level. It is this particular task and the relationship and process of interaction attached to it which national regulators will evaluate in in its relation to what value participation in the process can bring to tackling their key regulatory challenges.

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EU agency tasks hence also define the specific roles EU agencies and national regulators play in the particular work of the given EU agency. This means that the very same EU agencies and national regulators might play different roles in the context of the carrying out of different tasks. Take standard-setting, for example: if an EU regulatory body has the task to set technical standards national regulators come together in its forum to formulate and decide on these rules. In that setting, their role is defined as one of being competitors in the seeking of influence on the end result. It defines their role to be one of adversaries in this particular context, even if the involved actors have very friendly relations with each other outside the context of the institutional framework provided by a standard-setting task. The institutional frameworks set by tasks hence set up particular incentive structures for the strategic behaviour of national regulators. Standard-setting, for example, provides for an incentive structure to influence proceedings to the greatest degree possible. An inspection task of an EU body, in turn, sets up the incentive for national regulators to do everything in their power to appear compliant with the required norms. National regulators then need to evaluate whether these processes and their actions in them are helpful in tackling their key regulatory challenges or not. Overall, then, this book suggests that EU agency tasks provide institutional frameworks at the micro-level, and hence provide specific incentives for strategic behaviour of national regulators. Through these incentive structures interaction processes between EU agencies and national regulators emerge. National regulators evaluate whether partaking in these processes is helpful for tackling their core regulatory challenges or not. This ’supply side’ of EU agency tasks represents the final piece in the puzzle of how regulatory capacity is created in the EU despite the miniscule administrative capacities of EU regulators. The book argues that EU regulatory capacity is built because national regulators support EU agencies in their work and cooperate with sister regulators in the forum of EU agencies. National regulators are willing to do so if and when supporting EU agencies in their work and proactively engaging in transnational cooperation helps them to tackle the key regulatory challenges they face in their own work. This is the case because national regulators have limited resources and need to make sure that participation in ‘peripheral’ tasks (such as working for EU agencies) helps them to maintain and strengthen their own ‘turf’. They can maintain their turf and strengthen their own organisational position if they can make use of transnational cooperation to help

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them in their own regulatory work. At least on a theoretical basis, then, supporting EU agencies in their work does not only build EU regulatory capacity where it hardly exists in formal terms, it also strengthens the regulatory capacity of national authorities. This analytical framework of the book is anchored in theoretical accounts of bureaucratic politics, actor-centred institutionalism and resource exchange theory. It is anchored in bureaucratic politics scholarship in that it assumes that regulators are rational bureaucratic actors that want to defend their ‘turf’ and organisational survival. In ‘Wilsonian’ tradition, this approach assumes that organisational turf protection is not necessarily focused on defending and increasing budgets (cf. Niskanen 1994 [1971]). Instead, organisational survival is best defended by focusing on the organisation’s core mission and by carrying out this mission well. The book is thus not anchored in bureaucratic politics scholarship that regards bureaucratic actors as acting ‘selfishly’, potentially acting against the public interest by doing so. To the contrary: the book aims to push bureaucratic politics into a different direction by putting forward that government agencies want to survive mainly because their staff deeply believe in the value of their public mission. As a result, organisational survival is not just about wanting to keep one’s job, it is about being able to carry out work that the public value. We can hardly criticise government agencies for doing their best to carry out a mission that we entrusted to them. This is not to say that all government agencies necessarily act in the ‘public interest’ all of the time, if ever. Rather, their pursuit of the public interest and organisational survival is necessarily shaped through the eyes of their own organisation. The book’s approach is thus deeply anchored in the organisational approach to the study of government. In emphasising the importance of resources (widely construed) in national regulators’ ‘calculations’ about how actively to support EU agencies in their work, the book’s analytical approach has also taken inspiration from resource dependence theory (Alexander 1995; Oliver 1990). This approach suggests that government agencies cooperate with each other if their resource bases depend on each other. However, this book emphasises the contingent nature of resource dependency and introduces a subtler understanding of how government agencies evaluate whether cooperation yields valuable resources to them or not. ‘Valuable resources’ in the understanding advanced here may include information received from other regulators through informal exchanges that take place in the formal framework of carrying out work together.

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The approach to bureaucratic politics taken in this book is also institutional. It emphasises the agency of individual regulators to take decisions on how proactively to engage in transnational cooperation with regulators from the EU and other countries. However, it assumes that agency is constrained by bounded rationality (Simon 1957) as well as institutional frameworks (Hall 2009; Scharpf 1997). In other words, regulators’ own views of their key regulatory challenges and which resources they value are not necessarily ‘objectively true’ but based on their own perceptions that are shaped by limited attention span, time and information-processing capacities. This theoretical anchoring provides a powerful rationale for studying national regulator’s own perceptions through in-depth qualitative research. The theoretical approach of the book also assumes that regulators’ agency is constrained fundamentally by institutional frameworks they are embedded in. These institutional frameworks range from the micro-level to the institutionalised settings of national bureaucratic and economic systems. Micro-level frameworks are mainly the EU agency tasks that provide specific incentives for agency behaviour, which, in turn, then result in particular cooperation patterns between regulators. The agency of regulators, for example to counteract their own resource limitations, are also fundamentally constrained by the nature of the bureaucratic system they operate in and the nature of the industry they regulate, both of which may be deeply rooted in the nature of the political and economic system of a given country (Hall and Soskice 2001; Painter and Peters 2010). Whether a regulator is facing many small or a few large companies may, at least in some areas, be embedded in the role firms play in the economic system of this country (Hall and Soskice 2001). Since the nature of these institutional constraints on national regulators may differ from country to country, we may expect that regulators in different countries may take different approaches to supporting EU agencies. At the same time, however, the chapter has already put forward that different regulatory sectors and regulated industries are very likely to pose similar challenges to regulators in different countries. To some extent the precise extent to which national regulators face similar challenges in different countries when regulating the same industry remains an empirical question to be further explored in the remainder of the book. The book proposes that differences in national institutions interact with regulatory challenges inherent in a regulated sector irrespective of the country in which this sector is being regulated. In other words, we may expect cooperation patterns and rationales for supporting EU agencies on part of

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national regulators to differ across different sectors since different sectors pose different regulatory challenges and because EU agencies have different tasks in different sectors. This cross-sector variation may be complemented by cross-country variation of motivations of why national regulators support or do not support EU agencies in their work if national regulators face challenges that are rooted in particular institutionalised setting in their home country. Empirical study will tell us more about the respective importance of sector and country-level factors in shaping the regulatory challenges national regulators face. To this end, the chapter now turns to the methodology the study relies on in order to verify the merit of the theoretical propositions outlined in this chapter.

2.3   A Brief Note on Methodology The chapter concludes with an overview of the study’s methodology. It outlines the four policy sectors that were selected for empirical study, namely, food safety, maritime safety, drug safety monitoring and banking supervision. These sectors were chosen due to expected variation in regulatory challenges posed by these sectors. The section also explains that the book focuses on high capacity regulators from two countries, the UK and Germany to study why or why not they support EU agencies in their work. Studying high capacity regulators is important in this respect because low capacity regulators cannot support the work of EU agencies through expertise and staff to a significant extent. Focusing on these types of national agencies would hence not allow us to understand EU regulatory capacity building through support of EU agencies’ work by national regulators. Moreover, the selection of the UK and Germany provides as with variation in institutional domestic settings that helps us to ascertain the respective importance of sectoral or country-level influences on regulatory challenges. 2.3.1  Selecting Regulatory Sectors for Empirical Study As noted above, the book suggests that core regulatory challenges are likely to differ in line with regulatory tasks of national regulators and the nature of the regulated industry. Whether national regulators can get something out of supporting EU agencies in their work, in turn, depends on the tasks of EU agencies as well. In order to explore through empirical study to what extent regulatory challenges indeed differ in different ­sectors

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and how they influence national regulators’ assessments of their support of EU agencies we hence need to study how regulatory capacity is built in EU agencies in different sectors. This means that to the extent that regulatory challenges can be identified a priori, the chosen sectors should differ in relation to the nature of the regulated sectors, regulatory tasks and EU agency tasks. On this basis, the study focuses on the study of EU regulatory capacity building in drug safety monitoring, maritime safety, food safety and banking supervision. Drug Safety Monitoring  Drug safety monitoring concerns the monitoring of the safety of medicinal products. When drugs are approved for market entry only relatively little is known about them. They have only been studied in a small sample of the population. As a result, medicines regulators gather data on adverse effects of drugs on the market, a hugely complex data-gathering and evaluation exercise (Waller 2010). The European Medicines Agency (EMA) has the task to monitor the safety of drugs on a European scale. It creates European regulatory capacity by approving drugs for the European market and by evaluating their safety after market approval. It relies on national regulators to evaluate data on adverse drug reactions to be able to do so: staff from national pharmaceuticals regulators come together in its scientific committees to evaluate whether the safety of particular drugs needs to be reconsidered in light of the collected data. The case of drug safety monitoring is potentially very interesting in comparison to the food safety case (discussed below): regulatory staff in both sectors are part of a scientific or ‘epistemic community’, which the academic literature on EU governance has argued is an important rationale for why national regulators support EU agencies. However, regulatory challenges in these two sectors are likely to differ, which provides us with an opportunity to study whether these are reflected in differences in the approach national regulators’ take to supporting the two respective EU agencies. Maritime Safety Shipping is a highly international and highly mobile industry that has virtually no barriers-to-entry (Tan 2006). This renders it extremely difficult for maritime safety regulators to ensure that ships do not pose a threat to human life and the environment due to uneven enforcement of international regulatory standards in different countries. The EU agency in this field is the European Maritime Safety Agency (EMSA) and it has an inspection task. It verifies whether national authori-

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ties inspect ships in their ports as required by EU legislation (meaning it inspects the inspectors). In doing so, EMSA creates EU regulatory capacity by approximating the working practices of highly diverse national bureaucracies to arrive at a ‘European’ way of inspecting the safety of ships. This has the potential to close regulatory loopholes which have thus far enabled ships to aim for ports where enforcement practices are known to be lax (Ringbom 2008). The maritime safety case serves as an interesting comparative case in relation to food controls (see below): in the food safety regime the Food and Veterinary Office (FVO) has the task to inspect the practices of national authorities. If national regulators merely assessed the value of EU agencies on the basis of the type of task they perform, we would expect national regulators to have quite similar approaches to the EU bodies in both fields. However, the key regulatory challenges in these two sectors are likely to differ significantly. This helps us to assess how national regulators assess the value of inspections of an EU agency if faced by different regulatory challenges. Food Safety  Substances that enter the food chain may be detrimental to human, animal or environmental health. Scientific evaluations of the safety of such products and substances are thus required to manage risks. Food safety also requires that food safety rules, for example hygiene standards, are adhered to by industry actors, including the highly dispersed gastronomic industry and other food outlets. In this context, EU food safety regulation is carried out by two different EU regulatory bodies through which regulatory capacity is created: food risk assessment is the responsibility of the European Food Safety Authority (EFSA). The Food and Veterinary Office (FVO, also known as the Health and Food Audits and Analysis Directorate of the DG for Health and Food Safety of the European Commission) is in charge of the realm of food controls (i.e. inspections of food businesses). EFSA has the responsibility to issue scientific risk assessments and provide scientific advice. National officials come together in the forum of EFSA to generate knowledge in order to support the European agency in its scientific work. The case is particularly interesting because staff from national officials do not participate in the EU agency by sitting on its scientific committees. In comparison to other EU agencies, such as the EMA, its scientific panels are constituted of ‘independent’ experts, rather than representatives from national authorities. This raises the ­question of how EFSA is able to build regulatory capacity and whether (and, if so, why) national regulators are involved in supporting

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EFSA’s work. In food controls, the FVO has the task to inspect the practices of national authorities to approximate practices. This provides an interesting comparison to capacity building through EMSA, which also inspects national authorities’ practices. Banking Regulation and Supervision  Large banking groups tend to be cross-national in character, rendering it particularly difficult for regulators to verify a banking group’s financial soundness. The European Banking Authority (EBA) has the task to set technical standards for banking regulation in order to approximate the regulatory practices of national regulators. Decisions on technical standards are adopted by its Board of Supervisors that consists of national banking regulators and supervisors. While harmonised technical standards level the playing field for the banking industry, they also build EU regulatory capacity by facilitating the joint regulation of cross-border banks by several national regulators. Outside the Single Supervisory Mechanism this happens in so-called supervisory colleges. The EBA oversees the joint decision-making on issues such as capital adequacy and liquidity by national regulators in supervisory colleges. It can also mediate in cases of disagreements about the position of a cross-border group by national regulators. With little more than 150 staff members this EU agency is particularly constrained in its administrative capacity and its ability to draft technical standards heavily depends on work carried by officials from national regulators on its working groups. 2.3.2  Selecting National Regulators for In-depth Empirical Study In order to analyse and substantiate the theoretical propositions made in this chapter we need to analyse the regulatory challenges of particular national regulators in particular sectors, including their own perceptions of these challenges. As already noted, since the regulatory capacity of EU bodies is largely based on the active participation of the regulators that have the necessary capacity—i.e. the resources and the expertise—to contribute to EU regulatory capacity building (Maggetti and Gilardi 2011), we need to study which approach ‘high capacity’ national regulators take to supporting EU agencies in their work. Focusing on high capacity regulators is also vital because at face value it is more questionable what—if anything–they can get out of supporting EU agencies in their

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work, i.e. we may doubt whether proactive support of EU agencies can help them in tackling their key regulatory challenges. In other words, we may be more accepting of the idea that low capacity national regulators can get value from EU agencies than high capacity regulators. As the chapter proposed earlier, regulatory challenges may also differ from regulator to regulator in relation to the constraints they face in the institutionalised domestic setting they operate in. As a result, the study selected regulators from two countries with ‘high capacity’ regulators that differ in institutional domestic settings: the UK and Germany. German and British regulators have relatively large administrative capacities in the four selected policy sectors in comparison to authorities from Member States with smaller industries and/or less differentiated public administrations.1 It is crucial to note that ‘high capacity’ here is only used in such relative terms: ultimately, it remains difficult to define what regulatory or administrative capacities indeed are. Here, they are regarded as a relatively high amount of resources (such as budgets and staff numbers) and regulatory expertise. To gauge to what extent differences in national institutional settings have an effect on regulatory challenges faced by regulators, the UK and Germany were selected to represent potential variation in this regard. They are often described as having different regulatory philosophies and administrative traditions (Bekke and Van der Meer 2001, p. 12ff and p. 61ff; Knill 1998, 2001; Pollitt and Bouckaert 2011, p. 47ff; also see Moran 2003 and Müller 2002). Administrative traditions capture ­administrative structures and styles, and the manner in which these are embedded in the politicaladministrative and legal systems of a country (Knill 2001, p. 61). Germany’s administrative system is decentralised as a result of its federal structure. Germany’s administrative system is hence of a highly segmented character, 1  For example, the Latvian Financial and Capital Market Commission has 124 staff members (FKTK 2012, p. 66) and a budget of approximately €5,779,000 (ibid., p. 72). In comparison, the German Federal Financial Supervisory Authority (BaFin) has around 3200 staff members and a budget of approximately €224,000,000. The Czech pharmaceuticals regulator employs around 340 people and its annual budget is around €88,800,000 (SUKL 2013, p.  72f). The British equivalent, in turn, has a budget of around €144,000,000 (MHRA 2013, p. 66) and it has around 930 members of staff (ibid., p. 16). However, capacity is not best addressed in quantitative measures alone. Rather, it also crucial whether a given regulator is usually seen as highly expert and competent by its peers in the EU and beyond, and whether its actual performance –rather its potential– is realised (Nelissen 2002), p. 13). In the end, administrative capacity might differ across tasks within the same regulator and whether it exists always remains an empirical question.

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which, however, is accompanied by h­ ierarchical oversight structures. Moreover, it has a civil service culture focused on civil servants with legal training that serve life-long careers in specific parts of the administration. Actions of officials are usually guided by formal rules. The UK’s administrative system, in turn, is far more centralised, which, however, is accompanied by relative autonomy of local government to act with large margins of discretion on a day-to-day basis. This is accompanied by a civil service culture that is more flexible in its expectations of the training officials should receive, and officials frequently rotate to various positions in the civil service. At the same time, administrative units, such as regulators, often have significantly more autonomy from other government actors than their German counterparts (Gilardi 2005; Knill 2001, p. 61-84). In relation to differing regulatory philosophies a pertinent example of variation across Germany and the UK is the much higher level of up-take of ‘risk-based’ (as well as ‘principles-based’) approaches by UK regulators than by German authorities (Rothstein et al. 2013). Such regulatory approaches are based on broad underlying principles, rather than detailed formal rules that guide regulatory behaviour. They are also usually classified as two countries with different types of capitalism. While the UK is classed as a liberal market economy, Germany is a coordinated market economy (Hall and Soskice 2001). Differences in their economic system could have an impact on the nature of the industries they are regulating and could mean that they face different regulatory challenges. Such differences in bureaucratic and economic structures can be crucial in the sense that national authorities assess the value of proactively engaging with an EU agency’s work in relation to these national institutional ties. However, as mentioned already, the theoretical framework of this study suggests that sectoral differences may be more crucial for shaping regulatory challenges than differences in national institutions. Regulators in both countries have important industries and a (long) history of regulation in all four chosen policy sectors (i.e. pharmaceutical, banking, maritime and food industries). This means that if sectoral factors are most crucial for shaping regulatory challenges we would largely expect them to face very similar regulatory challenges. If institutionalised national a­ dministrative structures and economic structures are more crucial in shaping regulatory challenges we would expect UK and German regulators to mainly face different challenges, even when regulation in the same sector is concerned. Regulators in the same country may then face similar challenges across different sectors. To some extent this has been left open for empirical exploration and we shall return to this question in the conclusion.

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2.3.3  Empirical Analyses The analysis of primary data focused on the time span between the establishment of the EU agency in each sector  to the end of 2016. In drug safety monitoring this encompassed 1995 to the end of 2016, it covered the years 2003 to 2016 in maritime safety, in banking supervision analysis was focused on the years between 2004 and 2016, and in the case of food safety the primary material covered extended from 2003 to 2016 in food risk assessment and 1998 to 2016 in food controls. The primary material analysed varied across the four policy sectors and precise references are made to it in each substantive chapter. In broad terms, the material used to explore the value of the theoretical framework developed in this chapter was mainly focused on the following documents: • EU legislation and guidelines governing the interactions between regulatory actors and the regulation of industry in the four regulatory regimes; • Official documents published by EU agencies, the British and German regulators, and the European Commission. These included all available annual reports in all four sectors and all just mentioned regulatory bodies, all available minute meetings (especially of the administrative boards and expert bodies of EU agencies in which national officials work ‘for’ EU agencies, as well as of meetings of boards and expert panels in British and German regulators), reports, position papers, as well as speeches of regulator executives; • Regulatory outputs of EU, British and German regulators, such as technical standards, guidelines for industry and regulatory action, scientific opinions, risk assessments and inspection reports; • Expert literature, such as journal publications of regulatory officials pertaining to the issues they perceive to be the most crucial regulatory challenges in their field; • Semi-structured interviews with 42 high-level officials from EU agencies, British and German regulators and ministries, and the European Commission. These were mostly officials who are directly involved in cooperation between EU agencies and national regulators.2 It was agreed for interviewees to remain anonymous, and 2  Please note that while effort was made to cover as much of the stated time period through the selection interviewees, the full coverage of the period from the inception of EU agencies to the end of 2016 is based on the documentary analysis outlined above.

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interviews lasted between 30 minutes to 2 hours and more, with the exception of one e-mail interview (see notes in each chapter for anonymised lists of interviewees). Where interviewees are quoted in the book this serves as illustration of points that were supported by the corroborated empirical material, rather than being the only evidence available. Interviews were conducted in English and German. Were quotes from German officials are provided these were translated into English by the author.

References Alexander, E.  R. (1995). How Organizations Act Together: Interorganizational Coordination in Theory and Practice. Luxembourg: Gordon and Breach. Ayres, I., & Braithwaite, J.  (1992). Responsive Regulation: Transcending the Deregulation Debate. Oxford: Oxford University Press. Baldwin, R., & Black, J.  (2016). Driving Priorities in Risk-Based Regulation: What’s the Problem? Journal of Law and Society, 43(4), 565–595. Bardach, E. (1998). Getting Agencies to Work Together: The Practice and Theory of Managerial Craftsmanship. Washington, DC: Brookings Institute. Bekke, H.  A., & Van Der Meer, F.  M. (Eds.). (2001). Civil Service Systems in Western Europe. Cheltenham: Edward Elgar. Black, J.  (2008). Form and Paradoxes of Principles-Based Regulation. Capital Markets Law Journal, 3(4), 425–457. Carpenter, D.  P. (2001). The Forging of Bureaucratic Autonomy: Reputations, Networks, and Policy Innovation in Executive Agencies, 1862–1928. Princeton: Princeton University Press. Carpenter, D.  P. (2010). Reputation and Power: Organizational Image and Pharmaceutical Regulation at the FDA. Princeton: Princeton University Press. Dunsire, A. (1978). Control in a Bureaucracy. New York: St. Martin’s Press. Gilad, S. (2015). Political Pressures, Organizational Identity, and Attention to Tasks: Illustrations From Pre-Crisis Financial Regulation. Public Administration, 93(3), 593–608. Gilardi, F. (2005). The Formal Independence of Regulators: A Comparison of 17 Countries and 7 Sectors. Swiss Political Science Review, 11(4), 139–167. Gunningham, N. (2010). Enforcement and Compliance Strategies. In R. Baldwin, M.  Cave, & M.  Lodge (Eds.), The Oxford Handbook of Regulation (pp. 120–145). Oxford: Oxford University Press. Hall, P.A. (2009). Historical Institutionalism in Rationalist and Sociological Perspective. Explaining Institutional Change: Ambiguity, Agency, and Power. Cambridge: Cambridge University Press. Hall, P. A., & Soskice, D. (Eds.). (2001). Varieties of Capitalism: The Institutional Foundations of Comparative Advantage. Oxford: Oxford University Press.

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Heims, E. (2018). Why Cooperation Between Agencies Is (Sometimes) Possible: Turf Protection as Enabler of Regulatory Cooperation in the European Union. In T. Bach & K. Wegrich (Eds.), The Blind Spots of Public Bureaucracy and the Politics of Non-Coordination (pp. 113–131). Basingstoke: Palgrave Macmillan. Hood, C., Rothstein, H., & Baldwin, R. (2001). The Government of Risk: Understanding Risk Regulation Regimes. Oxford: Oxford University Press. Knill, C. (1998). European Policies: The Impact of National Administrative Traditions. Journal of Public Policy, 18(1), 1–28. Knill, C. (2001). The Europeanisation of National Administrations: Patterns of Institutional Change and Persistence. Cambridge: Cambridge University Press. Maggetti, M., & Gilardi, F. (2011). The Policy-Making Structure of European Regulatory Networks and the Domestic Adoption of Standards. Journal of European Public Policy, 18(6), 830–847. Moran, M. (2003). The British Regulatory State: High Modernism and Hyper-­ Innovation. Oxford: Oxford University Press. Müller, M. (2002). The New Regulatory State in Germany. Birmingham: University of Birmingham. Nelissen, N. (2002). The Administrative Capacity of New Types of Governance. Public Organization Review, 2(1), 5–22. Niskanen, W. A. (1994 [1971]). Bureaucracy and Public Economics. Brookfield: Elgar Publishing. Ogus, A.  I. (2004). Regulation: Legal Form and Economic Theory. Oxford and Portland: Hart Publishing. Oliver, C. (1990). Determinants of Interorganizational Relationships: Integration and Future Directions. The Academy of Management Review, 15(2), 241–265. Painter, M., & Peters, B. G. (Eds.). (2010). Tradition and Public Administration. Basingstoke: Palgrave. Peters, B.  G. (2015). Pursuing Horizontal Management: The Politics of Public Sector Coordination. Lawrence, Kansas: University Press of Kansas. Pollitt, C., & Bouckaert, G. (2011). Public Management Reform. A Comparative Analysis: New Public Management, Governance and the Neo-Weberian State. Oxford: OUP. Rhodes, R.  A. W. (1990). Policy Networks: A British Perspective. Journal of Theoretical Politics, 2(3), 293–317. Richardson, J. (Ed.). (1982). Policy Styles in Western Europe. London: Allen and Unwin. Ringbom, H. (2008). The EU Maritime Safety Policy and International Law. Leiden: Martinus Nijhoff Publishers. Rothstein, H., Borraz, O., & Huber, M. (2013). Risk and the Limits of Governance: Exploring Varied Patterns of Risk-Based Governance Across Europe. Regulation & Governance, 7(2), 215–235.

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Sabatier, P., & Jenkins-Smith, H. C. (Eds.). (1993). Policy Change and Learning. Boulder: Westview. Scharpf, F. W. (1997). Games Real Actors Play: Actor-Centered Institutionalism in Policy Research. Boulder: Westview Press. Scott, C. (2010). Standard-Setting in Regulatory Regimes. In R.  Baldwin, M.  Cave, & M.  Lodge (Eds.), The Oxford Handbook of Regulation (pp. 104–119). Oxford: Oxford University Press. Shapiro, S., & Rabinowitz, R. (1997). Punishment versus Cooperation in Regulatory Enforcement: A Case Study of OSHA. Administrative Law Review, 14(4), 713–762. Simon, H. (1957). Models of Man. Social and Rational. Mathematical Essays on Rational Human Behavior in a Social Setting. New York: Wiley. Tan, A.  K.-J. (2006). Vessel-Source Marine Pollution: The Law and Politics of International Regulation. New York: Cambridge University Press. Verhoest, K., Roness, P. G., Verschuere, B., Rubecksen, K., & MacCartaigh, M. (2010). Autonomy and Control of State Agencies: Comparing States and Agencies. Basingstoke: Palgrave Macmillan. Waller, P. (2010). An Introduction to Pharmacovigilance. Chichester: Wiley-Blackwell. Wilson, J.  Q. (2000 [1989]). Bureaucracy: What Government Agencies Do and Why They Do It. New York: Basic Books.

CHAPTER 3

Building EU Capacity to Monitor the Safety of Drugs

The pharmaceutical market is often described as one of the most tightly regulated industries in modern economies (Permanand 2006; Schweitzer 1997). Almost all drugs need to be authorised before they can enter the market, which is used as a tool for ensuring sufficient standards of quality, efficacy and safety. Moreover, the safety of drugs is monitored after they have been granted market authorisation: information about the safety of drugs is necessarily limited when they first enter the market since they have commonly only been tested in a very limited number of people and over short time periods (for example, Routledge 1998). These groups usually exclude children and pregnant women, and studies presented in market authorisation applications cannot provide knowledge about the effects of long-term use of a given drug (Mann and Andrews 2014). Moreover, the interactions with other medicinal products will not have been established during pre-authorisation clinical studies. Especially very rare adverse reactions to drugs can only be detected through the monitoring of drugs used by the wider population.1 As a result, many countries have systematic monitoring schemes of adverse drug reactions in place, which are mostly based on the spontaneous reporting of adverse reactions by healthcare professionals and the industry to regulatory authorities. Such monitoring  The WHO defines adverse drug reactions (ADRs) as unintended, harmful reactions to medicinal products that occur at a normally used dosage of the medicine (2008). 1

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systems are referred to as pharmacovigilance, which the World Health Organization (WHO) defines as “the science and the activities relating to the detection, assessment, understanding and prevention of adverse effects or any other medicine-related problem” (WHO 2004, p. 1). Studies of EU regulatory capacity building in pharmaceuticals regulation have focused mainly on cooperation in the field of market authorisation procedures (for example, Abraham and Lewis 2000; Gehring and Krapohl 2007; Hauray and Urfalino 2009). Pharmacovigilance, on the other hand, has remained largely neglected. However, when considering regulatory capacity to manage drug safety risks, pharmacovigilance represents a crucial part of the process of managing public health risks arising from drugs. In the EU, the European Medicines Agency (EMA) has been in charge of the authorisation of some types of pharmaceuticals since the 1990s. It scientific evaluations are carried out by scientific committees which are comprised of experts from national pharmaceuticals regulators. For the products it authorises it also has the responsibility to continuously monitor their safety once they are on the market through a scientific committee which is also staffed by national regulatory officials. However, historically the agency had hardly any formal pharmacovigilance capacities. While recent reforms have enhanced its capacities in this area of work, they remain small in light of the responsibility of needing to monitor adverse drug reactions in a population of over 500 million EU citizens. The first section of this chapter outlines the role of the European Medicines Agency in the building of EU drug safety monitoring capacity and demonstrates the extent to which it relies on the input of national regulators in this regard. Although the EMA did not compensate national authorities for the time that their staff spent on the agency’s pharmacovigilance committee until 2014, the committee has continuously produced safety assessments that are based on proactive and extensive support by staff from national regulators, without which the EMA would not have been able to build EU pharmacovigilance capacity. The rest of the chapter is devoted to answering the question of why national regulators are proactively engaged in the EMA’s pharmacovigilance work. It suggests that UK and German pharmaceutical regulators support the pharmacovigilance work of the EMA to this extent because it helps them to tackle the key regulatory challenges they face in their core work at home. In the field of pharmacovigilance the key regulatory challenge is to gather a large number of high quality data on adverse drug

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reactions in order to control whether pharmaceuticals on the market are indeed safe. Due to its institutional setting, German regulators face this challenge to a much greater extent that their UK counterpart. The UK regulator, in contrast, has access to excellent data sources at home, which have rendered it into the ‘gold standard’ of pharmacovigilance in Europe (see Sect. 3.2). The chapter demonstrates that German regulators proactively participate in the EMA’s drug safety monitoring committee to get access to data and expertise that is impossible for them to get at the domestic level. The UK regulator participates not because it helps it to handle a key regulatory challenge, but because it helps it to retain the ‘gold standard’ status in its peer group of regulators. EU regulatory capacity building in this field hence rests on a process of epistemic competition (see Sect. 3.3).

3.1   The European Medicines Agency and Drug Safety Monitoring The European Medicines Agency (EMA) was established in 1995, taking up its residence in London (then called the European Agency for the Evaluation of Medicinal Products, EMEA). A central aim of its creation was to ensure that national pharmaceutical regulators could not refuse market authorisation to medicinal products from foreign companies in order to protect their domestic pharmaceuticals industry. The operations of the agency are overseen by its Management Board, which is comprised of one representative of national authorities from each Member State, as well as representatives from the European Commission, the European Parliament, patients’, doctors’ and veterinarians’ organisations. The EMA has the task to evaluate the safety and efficacy of some type of drugs for market approval in the so-called ‘centralised procedure’. Other types of drugs continue to be evaluated by national regulators in the so-called ‘decentralised procedure’. Products authorised by national regulators in the decentralised procedure can be marketed in other EU countries as well. Under the centralised procedure pharmaceutical companies apply for one market authorisation that will grant them access to the whole market of the EU. The applications get evaluated by the Committee for Medicinal Products for Human Use (CHMP) of the EMA and are formally granted by the European Commission. The centralised procedure is compulsory for medicines containing a new active substance to treat HIV or AIDS,

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cancer, diabetes, neurodegenerative diseases, auto-immune and other immune d­ysfunctions, viral diseases, medicines derived from biotech processes, advanced-therapy medicines, and orphan medicines.2 The scientific evaluations of the CHMP are carried out by experts from national regulators under the leadership of officials of two particular national regulators (the so-called rapporteur and co-rapporteur). The EMA is also responsible for providing scientific advice and for arbitrating disagreements about drug safety between national regulators. The EMA does not only build EU regulatory capacity by evaluating some products for access to the whole EU market, it is also responsible for building European capacity to continuously monitor the safety of all drugs on the European market. Firstly, it is responsible for constantly monitoring the safety of the drugs it authorised in the centralised procedure by collating and evaluating reports on adverse drug reactions it receives from national regulators and the pharmaceutical industry. It also acts as hub of a network of European pharmaceutical regulators and pharmacovigilance watchdogs. The role of the European agency is the continuous coordination of the pharmacovigilance system for centrally authorised products,3 the coordination of and mediation between national pharmacovigilance systems in the case of products authorised in the decentralised procedure, and the monitoring of compliance in all Member States.4 Even though a national regulator may have authorised a given medicinal product, it might be available in all other EU Member States. As a result, safety concerns arising from this product in the territory of a particular national regulator need to be communicated and coordinated with all other national regulators. This is an emblematic symptom of the capacity-gap between EU regulatory standard-setting and its capacity to ensure that these standards are met throughout its territory: the EU agency and national regulators authorise pharmaceuticals to the whole European market, but no single regulator in the EU has the capacity to continuously monitor the safety of these drugs once they are on the market. Instead, these monitoring schemes, that mostly consist of ‘spontaneous reporting’ of adverse drug 2  Please note that this chapter focuses exclusively on the EMA’s responsibilities regarding medicines for human use. It also have responsibilities for veterinary medicines, which are outside the scope of this chapter. 3  See Guidelines on Good Pharmacovigilance Practice (formerly Volume 9A of The Rule Governing Medicinal Products in the European Union). 4  Art. 57(1)(c); Art. 57(1)(i), Regulation (EC) No 726/2004.

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reactions by the pharmaceutical industry and healthcare professionals to national reporting centres, retain this capacity at the national level. This gap is particularly glaring in the case of drugs authorised under the centralised procedure since the EMA is responsible for mitigating the risk of adverse drug reactions for this product group. In order to fulfil its obligations, the EMA to some extent depends on the information gathered by national regulators and the industry. Equally, it relies on support of national regulators in relation to encouraging healthcare professionals to report adverse drug reactions. To create EU regulatory capacity to monitor and evaluate the safety of drugs on the European market, then, the flow of information is crucial as the operation of the regulatory regime is reliant on all information about suspected adverse drug reactions being shared between the industry, the EMA and national regulators. In theory, the EMA is well-placed to counteract this capacity gap and to build EU regulatory capacity in the process. In practice, however, it was heavily reliant on national regulators’ willingness to support its work by passing on information and coordinating their pharmacovigilance systems with each other and with the EMA before the EU pharmacovigilance regime was reformed in 2010. Since then, it has had more direct access to relevant data but has become much more reliant on national regulatory staff to help it in managing its greatly increased pharmacovigilance workload (see below). This dependence on national regulators’ support has been particularly acute in the field of pharmacovigilance since the European agency’s responsibilities in this field lacked behind its market approval responsibilities for a long time. At the European level, the concept of pharmacovigilance was introduced in 1993 by Council Directive 93/39/ EEC.5 The introduction of EU-level pharmacovigilance formed part of the wider European pharmaceuticals policy developed at the time, which became institutionalised in 1995 through the establishment of EMEA and the set-up of the EU-wide market authorisation procedures for pharmaceuticals (the centralised and decentralised procedures referred to above). Pharmacovigilance stayed in the background during these developments, 5  Regulation concerned with the market authorisation of drugs and drug safety has since been collated in ‘Directive 2001/83/EC of the European Parliament and of the Council of 6 November 2001 on the Community code relating to medicinal products for human use’, and ‘Regulation (EC) No 726/2004 of the European Parliament and of the Council of 31 March 2004 laying down Community procedures for the authorisation and supervision of medicinal products for human and veterinary use and establishing a European Medicines Agency’.

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and it is only recently that the regulatory framework has been strengthened vis-à-vis the regulation of market authorisation, thus becoming more closely integrated with the latter (Bahri et al. 2007; Bahri and Arlett 2014; European Commission 2007; Waller 2010, p. 92f). The requirements of the original pharmacovigilance regime of 1993 were relatively restricted in their scope, mainly demanding each Member State and manufacturer to have a pharmacovigilance system in place, enabling them to gather, collate and evaluate reports of adverse drug reactions. The emphasis has been on rules extended towards the industry, which comprise of detailed reporting obligations, i.e. the type of information that companies need to pass on to regulators and the timeframes within which they need to do so. Regulations for national pharmacovigilance systems have been of a very broad scope, leaving the running of these systems up to the Member States. These provisions remained largely untouched during reforms of the EU pharmaceuticals regime in 2001 and 2004. The introduction of the data-base EudraVigilance in 2001, however, represented a turning point, at which all spontaneous reports of adverse drug reactions started to be assimilated and shared electronically at the European level. The amount of data (i.e. spontaneous reports) to be handled by this electronic system quickly increased from a few hundred to tens-of-thousands of reports to reaching over 1.2 million reports in 2016. The facilitation of these large amounts is one of the major responsibilities of the EMA and its related workload has dramatically increased in line with the increase in received reports (see EMEA/EMA Annual Reports 1997–2016). The most dramatic departure from the status quo of the European pharmacovigilance regime occurred with a reform passed in 2010 and implemented in 2012. In contrast to previous changes to the pharmaceuticals legislation, this reform was entirely devoted to the field of pharmacovigilance, thus linking it more clearly to the pre-marketing and market approval stages. In general, the approach of the reform has been to strengthen pharmacovigilance, i.e. to give them a higher profile and more wide-ranging tools instead of mainly focusing on the market-authorisation procedure to ensure the safety of drugs (European Commission 2007). Before the 2012 reform, regulators effectively found themselves in a power vacuum in relation to the industry in the phase between market authorisation and a situation in which there was clear evidence that a drug is unsafe (Waller 2010, p. 92f). Regulators were thus in control before a drug entered the market as the industry had to supply additional

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i­nformation if requested by the regulator. The moment a drug was on the market, however, this power-balance shifted towards the manufacturer, who was (and still is) usually best informed about the drug in question after this point. The regulator only reached the lost degree of clout in the presence of compelling evidence against the safety of a given drug, in which moment the ‘nuclear option’ of revoking the market authorisation can be employed (ibid.). However, such instances are relatively rare, and often a company will voluntary withdraw a product if it thinks it will lose the battle of data analysis against the regulatory experts. The 2012 reform is crucial in that it shifts the power balance towards the regulator at the expense of the pharmaceutical industry: regulators are now able to request specific post-­authorisation studies from the manufacturer (Art.22a(1)(a) of Directive 2010/84/EU). Moreover, the system has become more centralised since pharmaceutical companies now have to enter reports on adverse reactions into EudraVigilance directly, instead of reporting to their national database.6 This has shifted the EMA’s capacity gap from the reliance on national regulators to pass on information to a reliance on national regulators to support it in the collation and evaluation of these vast amounts of data. The EMA’s responsibilities in pharmacovigilance have also increased significantly as a result of the reform, although its core functions have remained stable over the years: the EMA has the task to make decisions about the safety of drugs on the market by collating and evaluating information obtained through spontaneous reporting.7 Within the EMA, the CHMP, comprised of officials from national drug regulators,8 debates and decides whether a drug is safe in light of the collated data.9 This is also the committee that authors opinions on whether to grant market authorisation for a drug in the first place (on the basis of which the Commission takes the official decision).10 The CHMP was advised by the Pharmacovigilance Working Party (PhVWP)—also comprised of national  Art.107(3), Directive 2010/84. Please note that this is not a comprehensive list of the 2012 reform. 7  Art.21-29, Regulation 726/2004. The EMA has this task only in relation to products that were authorised by the EMA and the European Commission. If products are concerned which were authorised in the decentralised procedure, the national authority in question remains the responsible body for pharmacovigilance (Art. 101-108, Directive 2001/83). 8  Art.61(1), Regulation 726/2004. 9  Art.22, Regulation 726/2004. 10  Art.5(2), Art.10, Regulation 726/2004. 6

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experts—until the 2012 reform. This Working Party was subsequently superseded by the Pharmacovigilance Risk Assessment Committee (PRAC). Its membership basis goes beyond the delegates of national authorities of the PhVWP since a representative of a patient organisation, a representative of the health professions and six independent scientific experts are also part of the committee. As a fully-fledged scientific committee, PRAC has a more wide-ranging and role that is of a higher profile in comparison to its predecessor working group.11 Nevertheless, the core work of these bodies has remained the same: both expert committees— the CHMP and formerly the PhVWP and now the PRAC—meet once a month during the same time. The PRAC discusses and formulates scientific advice about post-marketing safety of a drug on the request of the CHMP or a national regulator. This means that the EMA’s PRAC builds EU regulatory capacity by providing advice on the safety of marketed drugs on the basis of data from all Member States and by forming coordinated opinions on whether a risk management measure needs to be put in place for a given drug or whether its market authorisation needs to be changed in light of new data on its safety. PRAC also evaluates the regular reports on safety monitoring for particular products submitted by the responsible pharmaceutical company (the so-called Periodic Safety Update Report), provides advice on arbitration in case national regulators disagree on the pharmacovigilance safety evaluations, and reviews post-­authorisation safety and efficacy studies requested from pharmaceutical manufacturers. The scientific evaluations of PRAC are administratively supported by EMA staff but the substantive evaluative work is carried out by staff of national regulators that comprise the PRAC. Evaluations of particular products are led by experts from specific national regulators through rapporteur and co-rapporteurships. The EMA is thus reliant on national regulators supporting it in its work by engaging with evaluative responsibilities of its pharmacovigilance committee in a proactive and constructive way. For national regulators this means committing the time of their staff to these EU procedures. EU regulatory capacity can ultimately only be built if national regulators take this work seriously and commit highly qualified staff to these processes. At the same, the building of EU regulatory capacity relies on national regulators coming together in previously the PhVWP and now PRAC to come to shared evaluations about data signals generated by adverse drug reactions and whether these substantially shift the  Art. 61a(1)(c) and (d), Regulation 1235/2010.

11

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so-called benefit-risk balance of a drug. However, the EU regime has not formalised a harmonised standard as to how to carry out this evaluation. Equally, it has not prescribed to national regulators how to run pharmacovigilance in their respective countries. Largely, the EU-level regime requires national regulators’ to run a functioning spontaneous reporting system.12 It is not specified how these systems should operate.13 As a result, we can expect national differences in how pharmacovigilance is approached and how benefit-risk balances of drugs are assessed. If national regulators are to be able to build regulatory capacity in the pharmacovigilance committee of the EMA, conflicts in this respect need to be mediated, for example through an informal coordination of practices and tacit agreement on how to evaluate adverse drug reactions. This is also true in the case of the CHMP, which comprises of national regulatory staff. However, the EMA has traditionally compensated national regulators financially for the time their staff spent on work for the CHMP. In case of national regulator support of EMA’s CHMP it is hence less surprising that national regulators are willing to support the EMA’s work (indeed, EMA spends around a third of its budget on compensating national regulators). However, this was not the case for the work national regulatory staff did on the PhVWP and then PRAC until August 2014. National regulators were not financially compensated for their EMA pharmacovigilance work until that date since the EMA was only then able to levy pharmacovigilance fees from the industry as a result of the significantly enhanced pharmacovigilance workload resulting from the 2012 reform. The majority of the EMA’s budget has traditionally come from industry levies, which, however, were only charged for market authorisation work before the summer of 2014. The increase in pharmacovigilance resources has since enabled the EMA to financially compensate national regulators for the pharmacovigilance work national staff do for the EMA.  Indeed, national regulators have voiced concerns about the extent to which their pharmacovigilance contributions were stretching their own resources in the interim of heightened workload after the 2012 reform and the absence of reimbursements to them until 2014 (EMA 2012a, p. 4; 2012b, p. 6). This renders pharmacovigilance a particularly interesting case of EU regulatory capacity building since it is not immediately clear why national regulators were willing to support this part of the EMA’s work before  Art.102, Directive 2001/83.  Ibid., Art.101, Art.102.

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being financially compensated for it. While individual staff members may always have had a clear incentive to sit on the EMA’s pharmacovigilance panel (this could be of scientific interest to them or be helpful in career development), it remains less clear why national regulators were willing to commit these resources on an organisational level (i.e. why agency executives were not worried about committing their staff time to the work of a potential rival organisation). This is especially interesting in the two years in which the EMA had significantly enhanced pharmacovigilance responsibilities for which it needed national regulators support without being able to compensate them financially for this work. That national regulators have supported EMA pharmacovigilance work proactively before and after the 2012 reform is visible in its ability to fulfil its responsibilities despite its relatively small pharmacovigilance capacities, especially in the years after the 2012 reform and the introduction of reimbursements in 2014 (for example, EMA 2013, p. 7). Although the EMA’s resources have steadily increased over its life time, by 2016 the EMA had reached just under 900 staff members and a budget of €305.099 million (up from 441 staff and a budget of €163.113 million in 2007). Even though this may sound impressive, for the largest part of its history only a small part of these capacities were devoted to pharmacovigilance work. Despite these constraints, the EMA has evaluated over 2000 signals about potential safety issues emerging from pharmacovigilance data (mostly from EudraVigilance) every year since 2012, the PRAC prioritised and evaluated an average of 77 signals per year since 2012, and  assessed an average of 583 Period Safety Update Reports between 2013 and 2016 (for data, see EMA Annual Reports 2012–2016). In order to be able to deliver these outputs, the EMA requires the support of national regulatory staff on PRAC and of national regulators to identify and prioritise signals about potential safety concerns. Even though the same market authorisation procedures for a single market in pharmaceuticals existed before 2012, the EMA did not have the formal resources to deliver these types of outputs and was essentially reliant on national regulators’ pharmacovigilance work to fulfil these functions. In these years, the EMA led on many coordination projects to collect and evaluate data for the whole European market, for example by supporting national regulators’ work sharing in the reviews of Periodic Safety Update Reports and in developing coordinated efforts in signal detection. All of these required proactive support from national regulators. Despite the near absence of any formal pharmacovigilance resources prior to the 2012 reform, the EMA was already able

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to detect and prioritise signals in not too dissimilar numbers if compared to the post-2012 data. In 2006, for example, it identified 1282 signals of which 84 were prioritised for further evaluation by PhVWP and CHMP (EMA 2006, p.  32). In 2007, identified signals amounted to 1111 of which 64 were prioritised (EMA 2007a, p. 28). It is remarkable that the EMA was able to build EU drug safety monitoring capacity despite quasi absence of resources prior to 2012 and it is impressive that it has managed to handle the immense pharmacovigilance workload resulting from the 2012 in light of relatively limited resources. The theoretical argument of the book suggests that the EMA has been able to do so due to the proactive help it receives from national regulators in carrying out its work. The theoretical framework of the book puts forward that national regulators are willing to support EU agencies’ work if it helps them to carry out their core mission. This means we would expect German and UK pharmaceuticals regulators to support the pharmacovigilance work of the EMA if it helps them to tackle key regulatory challenges they face. The next section is devoted to identifying the key regulatory challenges in the field of drug safety monitoring generally, and as perceived by UK and German regulators specifically.

3.2   Key Regulatory Challenges in Drug Safety Monitoring An awareness of potential harm arising from drugs has been around for hundreds of years; however, market authorisation and safety monitoring procedures only came about in the 1960s as a response to the Thalidomide tragedy (Routledge 1998). Thalidomide was first introduced in 1957 (in West Germany), followed by numerous countries in succeeding years. Supposedly a harmless cure for morning sickness and nausea, it led to severe birth defects in children of mothers who had taken Thalidomide during their pregnancy (for example, WHO 2004). Before Thalidomide, virtually the only way to draw attention to safety concerns was the ­publication of adverse reactions in the medical literature (Waller 2010, p. 1). In this regard, the Thalidomide crisis represented a veritable turning point in the history of pharmaceutical regulation by bringing about formal market approval systems and schematic surveillance of adverse drug reactions after authorisation. Since Thalidomide the change in drug safety monitoring has been driven by drug safety disasters (for an overview of drug safety debacles/ scares, see Edwards and Biriell 2007; and Waller 2010, pp. 1–14).

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The occurrence of such disasters after having introduced spontaneous reporting systems shows that these systems are not necessarily always effective (see, for example, Practocol in the 1970s, Waller 2010, p. 5) and that the monitoring of drug safety poses particular regulatory challenges. A well-known example is the painkiller Vioxx (containing the active ingredient Rofecoxib). Merck & Co. voluntarily withdrew Vioxx from the market in 2004 since data gathered after authorisation suggested that the product increased the risk of heart attack and stroke in patience using the product over a long period and in high dosage (cf. EMA 2004a, b). In this context, they key overarching regulatory challenge in the area of pharmacovigilance is not a result of the particularities of the regulated industry but a result of the nature of the regulatory task of data-gathering and evaluation: the key challenge consists in gathering high quality, meaningful data on adverse drug reactions for which regulators often need to rely on patients, healthcare professionals and the industry. A connected challenge is the need to effectively mine these large amounts of data to detect signals about adverse drug reactions from the same drug and to establish causal links between a pharmaceutical product and an adverse effect experienced by a patient. Expert in the field have noted that the growing experience in pharmacovigilance has not rendered the task simpler, and that increasing knowledge about adverse reactions shows that this issue area is indeed of growing complexity (Waller 2010, p. x). For example, it is now recognised how difficult it is to detect adverse reactions which are similar to the background pathologies of the group of treated patients, to prevent reactions which only occur after long-term use, or to identify effects which are similar to the treated illness itself (ibid.). A related challenge concerns the setting of an acceptable level of risk. The clear public health benefit stemming from pharmaceutical products must be weighed against the possibility that the use of some drugs might cause an ‘unacceptable’ level of harm. When the safety standard of medicinal products is concerned, regulators generally refer to the benefit-risk ­balance: in short, the benefits of a given product need to be clear in face of inevitable risks emanating from all drugs. The benefit-risk balance of a product is established during the authorisation process in the form of a benefit-risk assessment; however, there is no precise definition of a ‘balance’ in this regard (EMA 2007b, 2008). Equally, no algorithm or summary metric that makes a straightforward quantitative comparison of different treatments options possible is available (Council for International Organizations of Medical Sciences 1998, as quoted in EMA 2007b, p. 3).

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Pharmacovigilance is concerned with the question whether newly emerged information on adverse effects of a certain drug have changed the ‘benefit-­ risk balance’. How to determine when such a level of unacceptability is reached, however, is especially difficult if a certain medicinal product has irreplaceable positive effects at the same time. The regulatory challenge of managing these public health risks is thus immense for regulators. While withdrawing the market authorisation of a product that is found to have ‘unacceptable’ adverse health effects is the ‘nuclear’ option, there is also new tendency to conceptualise pharmacovigilance as ‘risk management process’ (cf. Waller 2010, p.  2; Mann and Andrews 2007, p.  10). Thalidomide, for example, has undergone a revival in recent years for the treatment of certain cancers since it is now recognised that harm caused by this drug can be prevented if avoided during pregnancy (Waller 2010, p.  3). This refers to the identification of the specific risks attached to a product, followed by finding a way to manage these risks by ensuring that adverse effects cannot materialise. Thus, recognised risks are managed through targeted interventions (such as providing a female patient who is taking Thalidomide with effective birth control) (Mann and Andrews 2007, p. 6f). Moreover, many systems have started to give patients a more active role in pharmacovigilance. In many countries, pharmacovigilance processes of the previous decades are now regarded as having been too passive, thus giving way to a more proactive approach of requiring the industry to engage in post-authorisation safety studies and present a ‘risk management’ plan for each product (Waller 2010, p. 62). On a general level, then, the key regulatory challenges of drug safety monitoring are how to gather, mine and evaluate data on adverse drug reactions. Regulators in the UK and Germany face these challenges to different degrees. Regulators in both countries adopted comprehensive medicines acts and established spontaneous reporting systems for adverse drug reactions as consequences of Thalidomide’s devastating effect on unborn babies. In the UK, the Committee on Safety of Drugs was formed in 1963 as a direct response to the Thalidomide tragedy. A successor of this committee (the Commission on Human Medicine) today forms the expert body advising the Medicines and Healthcare products Regulatory Agency (MHRA),14 which is the UK’s pharmaceuticals regulator that is responsi14  See Part 1, Section 2 and 3 of the Medicines Act 1968. With regard to pharmacovigilance, it is the Pharmacovigilance Expert Advisory Group of the Commission on Human Medicines that advises the MHRA.

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ble for running the UK pharmacovigilance regime. The MHRA was formed in 2003 as a result of a merger between the Medicines Control Agency (MCA) and the Medical Devices Agency (MDA). The MHRA is in charge of running the UK’s British spontaneous reporting system, called the ‘Yellow Card Scheme’. In the 1980s more proactive information-­ gathering tools for adverse drug reactions were developed by way of tracking the records of specific patients. Disillusioned by successive drug safety disasters which had demonstrated the weaknesses of spontaneous reporting (Waller 2010, p. 6), an expert in the field (Professor ‘Bill’ Inman, who had been influential in the development of the Yellow Card Scheme) developed a more proactive form of gathering data about adverse drug reactions, called prescription-event-monitoring (PEM).15 This scheme is today run by the Drug Safety Research Unit (DSRU, which works independently from the MHRA). Under this scheme, GPs fill in a questionnaire to record all observed events in the first 10 000 patients they prescribe a newly authorised drug to. As the GPs are obliged to report all events listed in the patients’ notes, they do not have to evaluate independently whether a certain event is causally linked to the treatment with the new prescription medicine (for an overview of the system, see Shakir 2007; Layton and Shakir 2014). Another approach to data collection used for pharmacovigilance in the UK is the General Practice Research Database (GPRD), now part of the Clinical Practice Research Datalink (CPRD), which also has its roots in an individual initiative (an individual family doctor who developed a database containing his patients’ records). The model of compiling patient data developed by a family doctor spread to other practices, firstly through personal contact with the developer, then through a Venture Capital set up for this purpose. Reuter bought this business in 1993, and then donated it to Department of Health in 1994. It was operated by the Office for National Statistics until 1999, and was henceforward operated by the MCA (now MHRA) (for a documentation of the history of the GPRD, see Lawson et al. 1998; Wood and Coulson 2001). It became part of the Clinical Practice Research Datalink (CPRD) in March 2012. It is jointly funded by the MHRA and the National Health Service (NHS) National 15  William Howard Wallace (‘Bill’) Inman has been a crucial figure in the development of British pharmacovigilance. For a history of British pharmacovigilance (including details about the development of the DSRU) from the personal perspective of Bill Inman (see Inman 1999).

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Institute for Health Service (NIHS). The CPRD consists of anonymous records of patients registered at around 480 GP (family doctor) practices in the UK.  No comparable database exists anywhere in the world, thus making it a popular source of data for research, especially with regard to pharmacovigilance (Parkinson 2014). The MHRA hence has access to a great variety of high quality data sources on adverse drug reactions going beyond data from the spontaneous reporting scheme. It systematically combines Yellow Card and CPRD data for pharmacovigilance purposes (MHRA 2014, p. 11). Yellow Card data had also become more comprehensive in the meantime since reports can be filed directly by patients, rather than just healthcare professionals, since 2012. Although the MHRA as had to face the challenge of a more restricted pharmacovigilance budget since 2012–2013, it’s access to such a level of quality and diversity of data is largely unmatched by other pharmaceuticals regulators. While the MHRA faces the challenge to establish causal links between drugs and adverse effects and to make judgement calls on the benefit-risk-balance, it has successfully tackled the challenge of accessing high quality data to a considerable extent. In contrast to the British system, German regulators have not developed or gained access to a multitude of data-gathering tools over the years. The German system of pharmacovigilance relies largely on spontaneous reporting of adverse drug reactions. The German authorities responsible for the spontaneous reporting system are the Paul-Ehrlich-­ Institut (PEI, responsible exclusively for biomedical products) and the ‘Federal Institute for Drugs and Medical Devices‘ (Bundesinstitut für Arzneimittel und Medizinprodukte, BfArM) (responsible for all other categories of medicinal products). The BfArM and PEI work with almost identical procedures and instruments when pharmacovigilance is concerned (Hagemann and Paeschke 2007, p. 228). Spontaneous reporting in Germany also began in the first half of the 1960s as a response to Thalidomide. At that time, however, no national authority charged with the tasks existed (ibid.). Rather, the Drug Commission of the German Medical Association (‘Arzneimittelkomission der deutschen Ärzteschaft’) collected reports of adverse drug reactions in the immediate aftermath of the Thalidomide tragedy (ibid., p. 229). The predecessor of the BfArM was only founded in 1975 after a lengthy period of putting together the medicines act (‘Arzneimittelgesetz’) as a consequence of Thalidomide. The PEI had already existed since 1896 but only took up a role as public authority of medicines control in 1972. The existence of a research insti-

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tute (which also acts as federal regulatory authority) focusing specifically on biomedicines (PEI) renders Germany an expert country in this field. However, Germany has not matched the UK in its availability of data on adverse drug reactions, and data gathering tools resembling the British case would be unlikely to develop in Germany due to data-protection concerns. Instead, Germany established dedicated pharmacovigilance research units in hospitals to obtain more information on adverse drug reactions occurring in specific patient groups (such as children) which was inspired by the French pharmacovigilance model (Hagemann and Paeschke 2007, p. 229f; Vogel 2007, pp. 38–43).16 In 2011, BfArM funding of these centres ended and the initiative was replaced with BfArM funding for specific pharmacovigilance research projects (Hagemann and Paeschke 2014). While German regulators have increasingly been able to make use of larger amounts and higher quality spontaneous reporting data (BfArM 2014, p.  7), they face the regulatory challenge of accessing high quality data sources on adverse drug reactions to a far greater extent than their British counterpart as a result of the relative lack of diverse data sources on adverse drug reactions, especially in relation to the lack of access to data sources that establish clearer causal links between drugs and adverse effects (as present in the UK Prescription-Event-Monitoring Scheme and the CPRD database). The theoretical framework of this book, as laid out in Chap. 2, leads us to expect that national regulators are only willing to proactively support EU agencies when it helps them to tackle key regulatory challenges. In case of the German regulators, then, we expect them to support the pharmacovigilance work to a significant degree if doing so provides access to more diverse data sources. However, it is much less clear why, if at all, the UK MHRA would proactively support the EU agency in its work, given its access to a diverse set of high quality data. Supporting the EMA proactively in its work may thus depend on whether it provides the MHRA with better tools to evaluate pharmacovigilance data. Alternatively, the MHRA may not see great benefit in supporting the EMA in the context of its access to superior data sources. The final section of this chapter examines to what extent the PEI, BfArM and MHRA support the pharmacovigilance work of the EMA and whether this is indeed related to the extent to which this allows them to tackle key regulatory challenges.  As introduced in an amendment of the Arzneimittelgesetz in 2004 (‘12.AMG-Novelle‘),§

16

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3.3   Why UK and German Medicines Regulators Support EMA’s Work In the absence of formally harmonised pharmacovigilance practices, national authorities must perceive themselves to be ‘getting something out of it’ if they are to coordinate their substantive pharmacovigilance practices in order to come to shared evaluations in the forum of the EMA, especially before they were financially compensated for doing so. Indeed, this case study finds that both UK and German authorities engage proactively with the EMA’s pharmacovigilance work and actively participate in informal coordination of their own pharmacovigilance practices since they both perceive it to add value to their pharmacovigilance work at home. What they perceive to be getting out of their support for the EMA differs, however, since it is informed by the different regulatory challenges they face domestically: proactive engagement with pharmacovigilance decision-­ making about the safety of drugs in the EMA has enabled the UK to become the informal ‘gold standard’ of how data should best be collected and evaluated in EU Member States. Supporting the pharmacovigilance work of the EMA hence provides the British MHRA with the advantage of not having to adjust its own practices to a different model, which in its perception would be inferior to its own model. German authorities, on the other hand, gain an insight into the exceptional data sources of the UK through its engagement with the work of the EMA, which they cannot obtain easily in their domestic context. At the same time, the German regime has followed the incentive to improve its own data sources in order to remain competitive vis-à-vis the ‘gold standard’ of the UK model. When discussions about the benefit-risk balance of drug safety are concerned that enable national regulators to come to shared evaluations of drug safety in the EMA, the UK MHRA has been able to establish its own practices as ‘informal gold standard’. To do so, spontaneous reports about adverse drug reactions and other available data are evaluated to analyse whether the benefit-risk balance of a given product has shifted or not. The CHMP undertakes this analysis when centrally authorised products are concerned, while being advised by the PRAC (and previously the PhVWP) on whether the benefit-risk balance of a given medicinal product has shifted in light of new evidence on adverse drug reactions.17 There are no EU requirements, however, as to how the benefit-risk balance in these  Art.21-29, Regulation 729/2004; Art.101-108, Directive 2001/83.

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committees of the EU agency should be evaluated. In carrying out such form of analyses in the EMA, it hence depends on national regulators to coordinate their approaches in order to come to shared evaluations, which form the basis of EU pharmacovigilance capacity building. In this regard, the MHRA has established the British pharmacovigilance model as ‘gold standard’ in a capacity building process that is based on epistemic competition between national pharmaceuticals regulators in the committees of the EMA. I think we have seen ourselves, rightly or wrongly, as having one of the strongest—if not the strongest—system of pharmacovigilance. But we have basically seen ourselves as this big team player.18

One manifestation of this clout of the UK is its possession of the chair of the PhVWP and PRAC. Out of twenty-one years of operation (1995–2016), its chair was held by British experts for seventeen years.19 Largely, it has been able to establish itself as ‘gold standard’ as it has a greater wealth and quality of pharmacovigilance data available than other countries, and it has a scientific research tradition that claims to be superior to the scientific traditions of other countries. Arguably, it is the combination of these aspects that has mattered as other national authorities possess some of these qualities but not all. In this regard, the existence of the Clinical Practice Research Datalink (CPRD) and Prescription-Event-­Monitoring (PEM) in the UK have been decisive. Especially the CPRD allows for a unique possibility to study ‘signals’ (i.e. hypotheses) that emanate from spontaneous reporting data (Parkinson 2014), which the data available to German—and other authorities—simply does not permit. Overall, both data-bases represent a distinctive opportunity for linking given medicinal products with specific symptoms as both data sources hold a comprehensive record of a patient’s history, rather than individual, out-of-context entries about a symptom in a given patient (ibid.; Layton and Shakir 2014). 18  Interviewee D1. In this respect, the interviewee also stressed that the MHRA as a clear financial interest to do so, as national authorities will obtain more resources from EMA the more rapporteurships (i.e. main responsibility for the authorisation of a new drug in the centralised procedure) it takes. 19  See EMA Annual reports 1995-2016. 1995-1998, chaired by Dr. Susan Wood; 19992000, chaired by Dr. Patrick Waller; 2005-2010, chaired by Dr. June Raine since then until the time of writing (EMA, 2014, 2015, 2016). (The three years in-between were chaired by a French expert, and one year was chaired by a Spanish representative.)

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It is questionable, however, whether the UK would have been able to establish and maintain itself as the informal standard—on which capacity is built as it enable shared evaluations of benefit-risk balances—without its claim to a superior scientific research tradition in this field as some national authorities have not been lacking far behind in the commitment of resources and the availability of data (the Nordic countries, for example, also have sophisticated databases in this respect).20 Rather, its influence in essentially setting the coordinated standard of substantive pharmacovigilance practices also emanates from the perceived superiority of its research tradition in this field: The research approaches of evidence-based medicine (and thus epidemiology and pharmacoepidemiology) are rooted in Anglo-­ Saxon tradition, and as one German regulator said “epidemiology is en-­ vogue”. In other words, its research methods are currently widely seen as resulting in research of higher quality than, for example, the German tradition of ‘Grundlagenforschung’ (pure research or basic research) and casuistics. Whereas the former methods rely on controlled experiments and the observation of the distribution of health-events in a population, the latter focuses on the discussion of the underlying principles of medical research and the generalisation of findings from single cases. As the UK MHRA owes its ability to represent the informal gold standard on which EU capacity building rests, other national authorities have an incentive to develop more elaborate forms of pharmacovigilance data. In the case of Germany, the wish to obtain better data to assess adverse reactions (specifically with regard to testing ‘signals’ that emerge from spontaneous reports) resulted in the establishment of ‘national pharmacovigilance centres’ as part of an amendment to the Medicines Act in 2004.21 These were dedicated research institutes in hospitals, which focused on research of adverse drug reactions in specific patient groups, each possessing a distinct research focus.22 All of them, however, specifically studied whether non-elective admissions to hospitals were due to an 20  Please note in this respect that the populations of these countries are too small to carry equal weight as the UK in terms of data quantity. 21  See change to §62 of the Arzneimittelgesetz in 2004 (‘12.AMG-Novelle‘). 22  Hospitals in the cities of Wuppertal, Jena, Rostock, Greifswald, Weimar and Munich currently operate such pharmacovigilance centres. Please note that these centres were not necessarily established after 2004; rather, they existed beforehand as independent research institutes. The change in the 2004 legislation, however, envisages using these systematically as part of the German pharmacovigilance system. As a consequence of the 2004 legislation, the further development of such a network of national pharmacovigilance is still ongoing.

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adverse drug reaction in the population of patients admitted to the hospital they form part of. This approach was inspired by the French pharmacovigilance system (Vogel 2007, p.  38f), which is composed of 31 ‘Centres régionaux de pharmacovigilance’. These collect reports about adverse reactions from healthcare professionals and conduct independent pharmacovigilance research.23 In the German context, these pharmacovigilance centres were replaced with direct funding for pharmacovigilance projects in 2011. Germany, then, attempts to compete with the British model by learning from the French system, rather, than the ‘gold standard’ of the British CPRD and Prescription-Event-Monitoring. Such systems would be difficult to implement in Germany due to the nature of data protection laws and its decentralised health care system, as opposed to the UK’s National Health Service, which has greatly facilitated the emergence and existence of the CPRD and PEM (see Parkinson et al. 2007; and Shakir 2007). The UK, on the other hand, having established itself as ‘informal standard’ in the transnational coordination process is not necessarily of the view that there is a lot to learn from other national authorities or that it needs to compete with these: Clearly we have gone there [to support the work of the EMA] in a collaborative spirit, but I don’t think we got an awful lot out of Europe in a sense, specifically in the area of pharmacovigilance. I can’t think of an example where we thought, hey, that’s a good idea, let’s bring this to the UK.24

The informal standard set by the UK affects how scientific arguments need to be brought forward by national officials when they come together in the forum of the PRAC (and previously the PhVWP) in the EMA.  Scientific argumentation based on evidence-based medicine and (pharmaco-)epidemiology is dominant in this setting, in which the UK experts are practically ‘at home’. This is not necessarily the case for other national officials, as other research traditions might play a more crucial role in their country, such as basic research and casuistics in Germany. We have problems with data protection here in Germany, and I think it is necessary to be careful in this regard, but that does limit the possibilities for conducting epidemiological studies, and thus the assessment of risk […]. In  Art. 5144-14 and Art. 5144-15, Code de la Santé Publique.  Interviewee D1.

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that respect the Nordic countries and the Brits have an advantage and they are better in this field than we are. Well, currently in pharmacovigilance we go from the assessment of an individual case of a spontaneous report to ‘which evidence do we have?’, and hence to epidemiology. Epidemiology is thus what is meant to provide us with information about the critical value of the risk stemming from a medicinal product. Evidence-based medicine [from which epidemiology derives] has Anglo-Saxon roots. […] So the British just have more practice in thinking in these terms.25

Since this dynamic is even observable when German authorities are concerned—which are also ‘big players’ in this field with a qualitatively high research base—this pattern of epistemic competition can be expected to affect other high capacity regulators as well. Especially in Member States which lack expertise in this field, this form of knowledge sharing of course bears great potential to be beneficiary. At the same time, however, it is likely to affect national experts from countries that are active players in the regime more than national experts from Member States that stay relatively passive in expert deliberation (Ernst and Young 2010, for example, p. 120). Since the MHRA sees itself as having access to the best data and the best approach to assessing this data, its officials can at times perceive the capacity building process in EMA to ‘lower standards’: People do bring different perspectives to the table. Obviously you are working together with these people and there is a very friendly collaboration. Pharmacovigilance in Europe has done a good service in terms of getting people together. But of course if we are talking about making a specific decision… You know that idea that the best decision will be the one that is reached through compromise, rather than by the best arguments winning the day is—I think—potentially a problem.26

A German expert, on the other hand, said that the deliberation among European experts provided the opportunity to discuss differing viewpoints, whereby the strongest arguments tended to come out on top (rather than compromise). Then we have to discuss with our colleagues from across the EU, and that is of course sometimes overly bureaucratic. However, it does bear the advantage that one gets to hear the opinion of others and has to justify, so you  Interviewee D2.  Interviewee D1.

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have to be very precise in expressing your view and you might really have to justify it, which might be quite a good form of control.27

The discrepancy between these two perceptions is not surprising if one considers that the UK has established itself as informal gold standard in the field of pharmacovigilance in Europe: as UK regulators perceive their expertise in assessing the benefit-risk balance to be superior to other national regulators’ expertise, they are likely to have the impression that deliberation in the forum of the Pharmacovigilance Working Party and the CHMP result in ‘compromise’. At the same time, in this context it is not surprising that a German official is of the view that there is something to be learned from deliberation among colleagues in the forum of the EMA’s expert committees. In this regard, then, the relative absence of regulatory challenges relating to access to data for the MHRA frames these perceptions: it can add value to its own regulatory work at home by ensuring that decisions of the EMA are based on its own way of doing things to the greatest degree possible. This, in turn, requires active engagement with and support of the EMA’s work. German authorities, on the other hand, perceive the added value of their contribution to the work of the EMA to be the access to such potentially ‘superior’ forms of data and data analysis that they lack at home. This form of access has hence the potential to help them tackle regulatory challenges that are embedded in their national regime. In this regard the engagement with EMA provides German authorities—and others—access to data collected from across all national authorities. All data on adverse drug reactions collected by the national authorities need to be passed on to the EMA.  In order facilitate this information-­ gathering exercise, the EMA set up the online database EudraVigilance in 2001  in which all reports on adverse reactions are compiled (EMEA 2001, especially p.  11, 13 and 35). This enables all national regulators to access reports gathered on an EU-wide basis (ibid.). The 2012 reform centralised the system further in that industry now has to pass all reports on adverse reactions directly to EudraVigilance.28 Datamining techniques are used by the experts (in their capacity as national and EMA regulator) in order to extract ‘signals’ from this data (Waller 2010, p. 44ff). These serve the purpose of verifying any potential shifts in  Interviewee D2.  Art.107(3), Directive 2010/84.

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the benefit-risk balance, i.e. determining whether the risk of a given drug is still acceptable in the light of newly emerged information on adverse reactions related to this drug. The detected signals hereby serve as hypotheses, which then have to be further tested (for example, by making use of existing databases, such as the CPRD, or the conduct of novel studies) (ibid.). Supporting the work of the EMA by sitting on PRAC hence also bears the advantage that it provides direct access to the expertise of British officials. Engagement with the pharmacovigilance work of the EMA also provides access to spontaneous reporting data that might have been created in starkly different ways. In this respect, the route an adverse drug reaction report had taken before it reached EudraVigilance before the 2012 reform could differ significantly: whereas around half of the reports received by the British MHRA originate from doctors, the German BfArM receives the vast majority of these reports from the industry (Davis et  al. 2007, p.  202; Hagemann and Paeschke 2007, p.  231; Hasford et  al. 2002; Waller 2010, p. 36). While this gives the impression that German doctors are less involved in spontaneous reporting, research has shown that both countries have roughly similar rates of reporting by doctors (Belton 1997; Hasford et al. 2002). What the figures thus show is that German doctors hardly ever report to authorities directly. Rather, a few of them report to their professional association and most of them report to the relevant pharmaceutical company, which then passes the information on to the authorities. In this regard, it is likely that German doctors pass on the information about adverse drug reactions to the industry in informal personal exchanges (Hasford et al. 2002, p. 948).29 In the UK, the opposite is the case where doctors (and now also patients) report directly to the authorities, using the so-called Yellow Card form. This is arguably the case since it is the most time-efficient way for doctors to report adverse drug reactions to the sales representative of the relevant pharmaceutical company when he or she is visiting the practice. The sales representative then passes on the information to the company’s pharmacovigilance unit, which in turn has to report to the authorities. This is, however, theoretically the case for German and British doctors since they receive similarly frequent visits from sales representatives in both countries (Lieb and Brandtönies 2010; Prosser and Walley 2003). Hence, the reason for this is most likely to be rooted historically, where British authorities were  German regulators that were interviewed shared the view that this is the case.

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very actively engaged in encouraging doctors to use the Yellow Card soon after the Thalidomide crisis (Inman 1999). This process was not present in Germany to a similar extent where an authority to collect adverse drug reaction reports was only established in 1978 (Hagemann and Paeschke 2007, p. 228). German regulators regret that doctors will not report to them directly as this would enable German experts to get in touch with the reporting doctor directly, thereby giving them the opportunity to ask more detailed information. In general, however, regulators are glad about each report that is filed, even if it is communicated to the industry, rather than the regulator. ‘Under-reporting’ on part of healthcare professionals is a widely discussed issue among experts in the field (for example, Bateman et al. 1992; Hasford et al. 2002), and studies show that time-constraints are a major source of this problem. Reporting is a legal obligation for healthcare professionals in some countries, such as Sweden; however, observers usually note that this is not significant for the practice of reporting since such an obligation is not enforceable (ibid.). Medicines regulators do not regulate the healthcare professions and hence have to rely on the methods of persuasion, such as providing information about the importance of reporting. This means that reports which were entered into EudraVigilance before 2012 passed through very different channels and might have been of different i­nformational content, depending on the practices of the country they originate in. The engagement with the EMA hence provided national authorities with an opportunity to access data with these different qualities at a time when their pharmacovigilance contribution to the EMA was not financially rewarded. The building of EU pharmacovigilance capacity through the work of national officials in the PhVWP and PRAC is supported by pragmatism on part of the staff of the EMA. Historically, it has not expressed an ‘appetite’ to extend its own role in terms of ‘adding value’ to the practices of national authorities in an explicit manner, by, for example, engaging in research of how to encourage adverse drug reaction reporting by healthcare professionals, or best practice analyses of national pharmacovigilance systems. Largely, the agency has been keen to assert itself as ‘mere’ hub of a network, which values national diversity in expertise and practices.30 It has thus contributed to capacity building by allowing room for diversity of national practices as well as allowing room for the pattern of epistemic 30  The discourse of the EMA in, for example, its Annual Reports reflects this. This was also clearly articulated by Interviewee D5.

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competition between national pharmaceuticals regulators to emerge that provides a backbone for shared evaluations of adverse drug reactions.31

3.4   Conclusions The chapter demonstrates that the EMA has considerable pharmacovigilance responsibilities. In order to fulfil them, it requires national officials to carry out scientific assessments in its pharmacovigilance committee. Before 2014, however, national regulators were not financially compensated for the time their staff spent on EMA pharmacovigilance work. To build EU pharmacovigilance capacity national officials must also be able to agree on scientific evaluations of adverse drug reactions and benefit-risk balances, even though the EU regime has not pushed for harmonisation of how pharmacovigilance practices. Building EU regulatory capacity in pharmacovigilance has hence required national regulators to coordinate their practices in the forum of the EMA and to support the pharmacovigilance work of the EU agency despite the costly nature of committing staff to these processes. The chapter shows that they have been willing to do so because they perceive to be getting something out of it. While the key regulatory challenge in pharmacovigilance is related to access to good data on adverse drug reactions, the UK MHRA has not experienced extensive difficulties in this respect. In the field of pharmacovigilance, the UK possesses access to an extraordinary wealth and quality of data on adverse drug reactions, as well as a highly regarded scientific approach to evaluate this data. The 31  The empirical research presented in this chapter was supported by the following interviewees: Interviewee D1, former pharmacovigilance official of the MHRA (then MCA) and representative to EMA (then EMEA), scientific expert in pharmacovigilance. Interview conducted on 15 December, 2011. Interviewee D2, pharmacovigilance official of the PEI and representative to EMA, scientific expert in pharmacovigilance. Interview conducted on 20 December, 2011. Interviewee D3, pharmacovigilance official of BfArM and representative to EMA, scientific expert in pharmacovigilance. Conjoint e-mail interview with interviewee D4, responses received on 27 January, 2012. Interviewee D4, pharmacovigilance official of BfArM, scientific expert in pharmacovigilance. Conjoint e-mail interview with interviewee D3, responses received on 27 January, 2012. Interviewee D5, pharmacovigilance official of EMA, former official at the European Commission (DG Sanco) and the MHRA. Interview conducted on 3 February, 2012.

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proactive engagement with the work of the EMA, then, adds value to the work of the UK regulator by ensuring that it does not have to conform to a model of a different national authority, which it would perceive to be inferior, rather than helping UK authorities to tackle a specific regulatory challenge. For the German authorities, on the other hand, engagement with the work of the EMA helps them to tackle a key regulatory challenge by providing them with access to the data and expertise of the perceived ‘gold standard’ (i.e. the UK model), which German authorities would not be able to attain within the their domestic context (for example due to data protection found in Germany in comparison to the UK). At the same time, this gives German authorities an incentive to improve their own expertise (which is of substantial quality in its own right) in order to avoid the perpetual costs of adjustment to the ‘gold standard’ supplied by the model of a different regulator. The quality of data available in the German drug safety monitoring regime has indeed been enhanced, for example, through reforms that have widened the spontaneous reporting base, the establishment of (now defunct) new pharmacovigilance research centres in hospitals, and funding for pharmacovigilance research from national regulators. EU capacity building in pharmacovigilance in the EMA is hence based on a process of epistemic competition, which helps to coordinate practices as a means to come to shared scientific evaluations, as well as holding the potential to enhance pharmacovigilance practices across the board. Capacity building in pharmacovigilance is thus largely a result of informal coordination between national regulators, which is pragmatically supported by the staff of the EMA. Indeed, EMA staff has not attempted to intervene in these informal coordination processes as such, for example, by surveying the practices of national authorities or promulgating a ‘best practice’ model. Arguably, this lack of interference has contributed to national authorities’ willingness to support the EMA’s tasks.

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CHAPTER 4

Building EU Maritime Safety Regulatory Capacity

Oil spills resulting from tanker accidents such as the Torrey Canyon disaster in 1967 or the sinking of the Erika (1999) and the Prestige (2002) demonstrate the potentially catastrophic impact of the maritime trade on the environment. The Torrey Canyon disaster has gone down in history as one of the worst oil spills at sea. When the Torrey Canyon ran aground on a reef off the shores of Cornwall in the UK it was the worst oil spill ever to have happened. The supertanker spilled an estimated 94 to 164 million litres of crude oil, heavily polluting the coastline of the surrounding countries in the process. Torrey Canyon and similar incidents have a resulted in large scale regulatory reform. Such accidental pollution, however, only represents one side of the coin. The accumulative effective of the release of relatively small amounts of oil into open waters also considerably contributes to overall environmental damage (GESAMP 2009). Regulatory efforts have hence focused on both forms of pollution, as well as extending to the health and safety of seafarers. The European Union became active in maritime safety regulation in the mid-1990s. In doing so, the EU added another level of regulatory activity in a field that had since been governed through the interaction of national, regional and international actors. Being global in its nature, the maritime trade has traditionally been challenging to regulate and the international level has played a crucial role in reducing marine pollution that  emanates  from  the maritime trade. In this regard, the International Maritime Organization (IMO) plays a © The Author(s) 2019 E. Heims, Building EU Regulatory Capacity, Executive Politics and Governance, https://doi.org/10.1007/978-3-319-97577-1_4

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crucial role in maritime safety regulation. This has been complemented by numerous regional agreements, such as the Paris Memorandum of Understanding on Port State Control. In this regulatory context, the European Maritime Safety Agency (EMSA), established in 2002, has the task to inspect the regulatory practices of national maritime safety authorities. This has the potential to build EU regulatory capacity by ensuring that no national authority creates regulatory loopholes, for example, through lax inspections of ships in anchoring in their ports by national regulators. EMSA also provides training for national officials and a forum for mutual exchange, as well as providing operational support to national authorities. The facilitation of mutual exchange between national authorities bears further potential to approximate ship inspection practices and thus build EU regulatory capacity. However, for EMSA to be effective in building EU regulatory capacity, it relies on national authorities to adjust their practices to its recommendations and to engage proactively in mutual exchange with sister authorities when getting together in EMSA. EMSA can rely on the binding nature of EU law and potential enforcement through the European Commission in respect to the latter to some extent, although regulatory capacity building would be exceedingly slow if it was entirely reliant formal enforcement action on part of the European Commission. This means that effective regulatory capacity building through EMSA’s inspection relies on national authorities’ willingness to adjust practices to EMSA’s recommendations quickly and to go beyond hierarchically enforceable requirements in this respect (see Sect. 4.1). In contrast to the pharmacovigilance task of the EMA, then, European regulatory capacity building through an EU agency here is not reliant on national authorities carrying out regulatory work on behalf of the European agency. Rather, capacity building relies on national regulators being willing to adjust their own practices as a result of their engagement with EMSA’s inspection task and EMSA’s training sessions. ‘Support’ of an EU agency’s work as a means of building EU regulatory capacity hence means quite different things depending on the tasks of the EU agency and the nature of the regulated sector. The book suggests that national authorities will be willing to support the work of an EU agency if this helps them to tackle key regulatory challenges they face in their daily work. The key regulatory challenges in maritime safety result directly from the nature of the highly mobile maritime industry. This makes it extremely difficult for regulators to control the number of unsafe ships on the seas. From the perspective of high

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capacity regulators, such as the UK and German maritime safety authorities, a key challenge in this respect is that authorities from other countries may be unwilling or unable to rigorously inspect ships in their ports. In their perception, another key challenge is the maintenance of a functioning international regulatory regime that is necessary due to the highly international nature of the regulated industry (Sect. 4.2). While EMSA inspections of national regulators help UK and German authorities to handle one key regulatory challenge they face (lax inspections by other regulators), they are highly sceptical about EMSA’s, and the EU’s, ability to contribute to the second core challenge they perceive: the maintenance of an international regime. In their view, the very existence of EMSA undermines the international maritime safety regime. These doubts are only somewhat mitigated by the operational support EMSA provides to national regulators. As a result of this, they are reluctant to be inspected by EMSA and to share their views with sister authorities in EMSA training sessions. EU capacity building in this field is thus encumbered by the relative reluctance of some national authorities to engage with EMSA’s work (Sect. 4.3). However, in this field this may not undermine (and paradoxically perhaps even enhance) transnational regulatory capacity due to the existence of a strong international regime.

4.1   The European Maritime Safety Agency and the Control of Unsafe Ships The first wave of EU legislation in the field of maritime safety was an attempt to harmonise the implementation of international standards across Member States, while also being aimed at the creation of a level-playing field for the shipping industry in the framework of the Single European Market (European Commission 1993, also see, Blonk 1994). Part of this early involvement was the establishment of a port state control regime in 1995, thereby directly building on the Paris Memorandum on Port State Control (Paris MoU), and creating close cooperation between the two regimes (König 2002, p.  44).1 The Paris MoU is an administrative 1  Originally established under Council Directive 95/21/EC of 19 June 1995 concerning the enforcement, in respect of shipping using Community ports and sailing in the waters under the jurisdiction of the Member States, of international standards for ship safety, pollution prevention and shipboard living and working conditions (port State control). This has been amended several times since. The current port state control regime is regulated under Directive 2009/16/EC of the European Parliament and of the Council of 23 April 2009 on port State control.

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a­ greement between maritime authorities of participating states to the end of ensuring effective enforcement of regulatory standards on the inspection of foreign-flagged vessels in a host country’s ports, which was established in 1982. The maritime policy of the EU was then fundamentally reformed as a direct response to the Erika disaster (for a detailed elaboration on the historical evolvement of EU engagement in the international context, see Jenisch 2004; Pallis 2006, 2007; Ringbom 2008, p.  31ff). The Erika was a Maltese flagged oil tanker which broke in two and sank in December 1999 off the French Atlantic coast, thereby spilling more than 10,000 tonnes of heavy fuel oil and thus polluting 400km of coastline. The Erika had gone through various forms of inspection, which had all failed to notice that the ship would not be able to withstand tough weather, thereby raising questions of adequacy of such controls. It has been argued that—for the first time—there was widespread acceptance (and expectation) that the response to the disaster would come from the EU level in the aftermath of this tragedy (König 2002). As a consequence of the sinking of the Erika, the EU passed various measures which further strengthened existing legislation and established a European Maritime Safety Agency (EMSA), which is located in Lisbon.2 EMSA was entrusted with the task of monitoring the application of the relevant legislation in the Member States with the aim of coordinating the practices of national authorities across Member States in order to close regulatory loopholes.3 The agency is governed by an Administrative Board that is comprised of one representative of each Member State, four representatives of the Commission, and four professionals from the regulated sector (who do not have the right to vote).4 The Member State representatives are usually officials from the given country’s ministry of transport. The board appoints an executive director who is in charge of managing the agency.5 EMSA has the overarching objective to “help them [Member State authorities] to apply Community legislation properly”.6 Hereby, the agency also has the responsibility to evaluate the “effectiveness of the mea2  See Regulation (EC) No 1406/2002 of the European Parliament and of the Council of 27 June 2002 establishing a European Maritime Safety Agency. 3  Recital (1), Art.1(1), Regulation 1406/2002. 4  Ibid., Art.11(1). 5  Ibid., Art.15, Art. 16(1). 6  Ibid., Art.1(2).

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sures in place”.7 Moreover, EMSA provides Member State authorities with very specific services: it delivers training programmes for national authority staff,8 and operates various data-bases for the exchange of information between Member State authorities.9 It also operates an emergency response vessel fleet and a satellite system to monitor oil spills.10 The 2013 reform of its founding regulation also broadened EMSA’s tasks by requiring it to cooperate with the European Border Control and Coast Guard Agency (formerly Frontex) and the European Fisheries Control Agency.11 As part of its monitoring activities, EMSA officials carry out inspections of national inspectorates (i.e. ‘inspecting the inspectors’).12 In this regard, EMSA plays a somewhat double-edged role: on the one hand, it has to deliver training sessions as a ‘partner’ of national authorities. At the same time, EMSA has to actively monitor the practices of national authorities and then inform the Commission about cases of non-compliance, which could bring an infringement proceeding against the country in question on the basis of this information. EMSA’s inspection task, then, also gives it the role of a supervisor of national authorities that has to be prepared to ‘tell on’ national colleagues (COWI 2008, p. 35, 64). Whereas its training task has the potential to  provide an arena for agreement between all involved actors, the  inspection task is theoretically  more prone to cause conflict between EMSA and national authorities. EMSA inspections of national authorities usually take the following form: the inspected national regulator presents an overview of their inspection system and the related procedures. EMSA officials then collect written evidence, carry out interviews with officials at the headquarters of the relevant national regulator and conduct analyses of national statistics of inspections. They then observe actual inspection practices for several days.13 EMSA inspection teams are usually comprised of three assessors, who spend a few days at the headquarters of the national authorities and with the inspection teams in ports, during which inspections on board of ships are witnessed. EMSA officials report back an overview of the findings while still on site. It then takes several weeks for the formal EMSA  Ibid., Art.1(2), Art.2(b).  Ibid., Art.2(c)(i). 9  Ibid., Art.2(d)(ii). 10  Ibid., Art.2(c)(i). 11  Article 2(b), Regulation 1406/2002. 12  Art.2(b)(i), Art.3, Regulation 1406/2002. 13  The visits policy is laid down in Decision 25/06/2004 of EMSA’s Administrative Board. 7 8

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report to be written, and even longer for the final report (including the Commission’s assessment) to be drafted (EMSA 2007, p. 5). These reports remain confidential (between EMSA, the Commission and the Member State in question).14 In case EMSA detects deficiencies when carrying out an  inspection of a  national authority’s work, the Commission tends to request that EMSA revisits such authorities in order to verify whether they are meeting their obligations (EMSA 2010a, p. 70). The EU maritime safety regime has several cornerstones with implications for EMSA’s inspections. Firstly, the organisations which set technical standards for ships, and survey whether ships registered in a particular country are of adequate standard are inspected by EMSA (these so-called classification societies are responsible for ‘flag-state control’).15 Moreover, the inspection of foreign-flagged vessels in European ports (‘port state control’) is organised under the IMO, Paris MoU and the equivalent EU Directive.16 EMSA’s role in this regard is to inspect the practices of national inspectors. Also, the reception facilities for ship waste provided by ports are regulated, requiring ships to leave their waste in ports, rather than in coastal waters or the open sea (such as ballast water which is polluted by oil).17 The provision of these is inspected by EMSA as well. Of these measures, especially port state control is seen as an effective means to deal with the most feared source of pollution: sub-standard ships, which are registered in states that do not enforce international safety standards for ships, so-called ‘flags of convenience’. The corner stones of port state control inspections are laid out in the international IMO instruments, which are mirrored in regional agreements and EU law. The key principle in this regard is the inspection of ships by flag and port states. Next to EMSA’s operational capacities, its main task is to ensure that already existing standards and procedures are followed across all Member States. Thus, EMSA’s task is to ensure that practices across Member States are coordinated. This has the potential to build EU regulatory capacity in maritime safety as it can help to ensure  Art.3(3), Regulation (EC), No 1406/2002.  See Regulation (EC) No 391/2009 on common rules and standards for ship inspection and survey organisations; and Directive 2009/15/EC on common rules and standards for ship inspection and survey organisations and for the relevant activities of maritime administrations. 16  See Directive 2009/16/EC on port state control. 17  See Directive 2000/59/EC on port reception facilities for ship-generated waste and cargo residues. 14 15

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that all ships passing through EU waters adhere to the same standards in practice; thus closing loopholes which had previously enabled sub-­standard ships to go undetected due to (for example) inadequate implementation of internationally agreed inspection procedures in some countries.18 It is in this realm that the EU detected a gap to be filled by its involvement in a highly international regime (see next section), namely through the tough enforcement of international/EU standards that could be a more potent motor for the coordination of practices than the role of the IMO, Paris MoU etc. could allow for (Knudsen and Hassler 2011; Koivurova 2012). At the same time, EMSA also has the task to run an extensive training programme in order to facilitate the coordination of practices. Topics of training workshops are spread over the whole range of EU activities in the field. For example, there are workshops which teach the content and implications of EU maritime legislation and trainings focusing on ‘best practices’ in port state control. Equally, workshops on the implementation for specific legal instruments of the EU regime are available. This is based on the idea that EU regulatory capacity can be built through coordinated practices of national authorities, which can be facilitated if national officials come together to discuss how they are doing things within their home administration, thus learning from each other to reduce incompliant and ineffective practices.19 The agency attaches high hopes to the potential of these sessions: As much as the networks that EMSA has established through workshops, seminars, assessment visits and training sessions feed knowledge into the Agency, knowledge is also diffused across the European Union, promoting a common culture of maritime safety through the exchange of knowledge and know-how by the relevant experts [emphasis added] (EMSA 2005, p. 7). EMSA not only sees these trainings as service provision to national authorities but also uses them to learn about national practices, formulate ‘best practices’ on the basis of this knowledge and as a means to disseminate these (see, for example, EMSA 2008, p.  33). In this regard, the agency describes itself as active motor for EU regulatory capacity building since it establishes and disseminates informal standards in form of ‘best practices’ amongst national authorities on the basis of assessments of all reports on the inspections of national administrations (so-called ‘horizontal assessments’) (EMSA 2010a, p. 33).  Recital (3), Regulation 1406/2002.  Recital 5, Regulation 1406/2002.

18 19

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Overall, then, EMSA has the potential to build EU regulatory capacity in maritime safety through the approximation of national regulatory practices through inspections as well as through the facilitation of mutual exchange between national agencies. However, its own administrative capacity is particularly limited. It started off with 14 staff members in 2003, by 2016 it had 246 staff members. Its budget has been largely stable since 2010, ranging between €50 and €55 million. Its highest budget to date was close to €58 million per year but budget cuts in 2014 decreased this to roughly €53 million euros, with a slight recovery in the subsequent years. The agency is financed from the European Union budget. Despite its small capacity, the agency provides operational support to national agencies and it manages to carry out numerous inspections and training activities every year. Indeed, about half of its budget goes towards pollution response services, such as oil-spill response equipment, vessels, radar and optical satellite images and remotely-controlled monitoring aircraft that are on stand-by to support national agencies in emergencies. EMSA also runs a satellitemonitoring service called CleanSeaNet. It also provides a platform for exchange of EU vessel-traffic information (SafeSeaNet) and the port state control information platform Thetis. Moreover, to approximate practices EMSA also runs a large number of visits and trainings every year. In 2015, for example, it carried a total of 44 visits (encompassing all areas of its work) and 22 training activities with nearly 600 participants (EMSA 2015a). In 2016, it carried out 41 visits, 24 training activities with over 600 participants and 50 workshops for exchange of best practices (EMSA 2016). Of its visits, on average 14 per year are inspections of national regulators within the EU (Le Den et al. 2017, p. 74). While EMSA has some direct oil-spill response capacities and can to some extent rely on the hierarchical enforcement mechanism from the Commission attached to its inspections in order to build EU regulatory capacity, it relies on national regulators to a significant extent to do so. Harmonisation of practices on the ground relies on national regulators’ willingness (and ability) to do so even in the absence of infringement proceedings. Training activities require proactive engagement on part of national officials. This means EMSA requires acceptance on part of national authorities in order to build EU regulatory capacity in the face of its small administrative capacity. Overall, EMSA is highly dependent on national authorities willingness to cooperate, to adjust their practices and to provide it with data it requires to operate its IT systems (see the findings of Le Den et al. 2017, p. 120).

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4.2   Key Regulatory Challenges in Maritime Safety The key regulatory challenges in maritime safety emanate directly from the highly mobile shipping industry which has virtually no barriers-to-­ entry. From the perspective of high capacity national regulators, a key regulatory challenge in this context is that authorities from other countries may be unwilling or unable to rigorously inspect ships in their ports, which undermines the overall effectiveness of transnational regulatory regimes. Another (perceived) key challenge for German and UK maritime safety authorities is the maintenance of a functioning international regulatory regime that is necessary due to the highly international nature of the regulated industry. A look at the history of the vessel Prestige, which shipwrecked off the shores of Galicia in Spain in 2002, exemplifies national authorities’ reliance on the work carried out by sister authorities in other countries and the importance of an international regime to ensure effectiveness of regulation in this field: the Prestige was built by a Japanese shipyard and was completed in 1976. When it shipwrecked, it was flying the flag of the Bahamas. It was owned by a Greek, who himself was registered in Liberia. For its fateful journey it was chartered by a Russian company, which had its offices in Switzerland. On this trip, the Prestige was transporting oil from Latvia to Singapore. Its classification society—the expert body certifying the safety of a ship—was the American Bureau of Shipping. The highly international web the Prestige was part of demonstrates why effective regulation of the shipping industry is so difficult. Vessels such as the Prestige operate in a sector in which virtually no barriers to entry exist: ship-owners can re-flag their vessels within a day and can register in different jurisdiction to evade liability. Before shipwrecking, port state control inspections of the tanker had been carried out in Saint Petersburg, Dubai and Guangzhou (Traisbach 2005, p. 169). The oil spill resulting from its sinking polluted thousands of kilometres of Spanish, French and Portuguese coastline, which had a devastating effect on wildlife, ecosystem and local fishing communities. The effectiveness of port state controls is seen as hugely important by regulators in the field since they are the most promising mechanism to deal with the problem posed by ‘flags of convenience’. These are states that allow sub-standard ships to be registered under their flag since they do not enforce international safety standards for ships. ‘Flags of convenience’ are seen as one of the major issues, with regard to the continuing

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existence of sub-standard ships. Overall, experts in the field are of the view that the main safety issue remaining is not the quality or quantity of existing regulatory standards, but rather their effective enforcement in a highly complex, global arena (Tan 2006, p.  4). This view is also mirrored by policy-makers in the UK and Germany (see Donaldson Report, Department of Transport 1994, para. 4.26; and Pallas Report 2000, p. 44ff). In line with the importance of the highly mobile nature of the maritime industry and the perceived importance of an international regulatory regime, the UK and German maritime safety authorities have been dominant players in the IMO and continue to regard it as the most crucial regulatory body in the field. The European Union, in turn, only became active in maritime safety in the mid-1990s. In doing so, the EU added another level of regulatory activity to a field that had since been governed through the interaction of national, regional and international actors. This is crucial in order to understand the perceptions of key regulatory challenges on part of UK and German regulators. These perceptions are fundamentally shaped by the prevalence of transnational regulatory regimes in this field that precede coordination efforts in the EU. Most crucial in this regard is the IMO (headquartered in London), which was established in 1948, and became operational in 1959. It is a specialised agency of the United Nations, which has over 170 members (for an overview of the history of the IMO, see, for example, Mankabady 1984; Srivastava 1990). Negotiations and policy at the IMO are mostly influenced by the dominant developed countries, including the UK and Germany (Tan 2006, p. 98ff). Some emerging countries, such as Brazil and India, have also started to wield power in the IMO setting. Overall, it is largely the developed countries pushing for stringent environmental protection, whereby developing countries are more likely to defend the interest of the maritime industry, which has gradually become located in these countries over the past decades (ibid.). International regulation of the shipping industry had already existed in nineteenth century and the foundation of the IMO was an attempt to make such international arrangements more effective by way of establishing a permanent international body. In the field of oil pollution, the Torrey Canyon disaster was the decisive trigger to bring about an international agreement aimed at preventing environmental damage from this source, which came into being in the form of MARPOL 73/78.

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This framework was henceforth complemented by regional agreements aimed at vessel-source oil pollution prevention (for example, see Boehmer-­ Christiansen 1984). One of the earliest in this respect was the 1969 Bonn Agreement for Co-operating in Dealing with Pollution of the North Sea by Oil, which was a reaction of the North Sea states to the Torrey Canyon disaster. The first agreement to tackle the problem of marine pollution generally (rather than focusing on oil) was the Helsinki Convention on the Protection of the Marine Environment of the Baltic Sea Area (HELCOM). In order to enforce such measures more effectively, port state control (which renders it possible to verify the safety of foreign flagged vessels in one’s own ports) became a transnational regulatory regime in the 1980s. The Paris Memorandum of Understanding on Port State Control (Paris MoU) has traditionally fulfilled this task in Europe. Information on oil spills and ships calling at European ports had thus been shared through regional bodies for several decades, such as HELCOM, the Bonn Agreement and the Paris MoU before the EU and EMSA entered the scene. Especially in the field of oil pollution these efforts (specifically port state control) have shown great success in modifying the behaviour of the industry as oil pollution and accidents have been declining significantly (for a discussion of the Paris MoU, see König 2002). The UK and German authorities have been involved in these transnational regulatory efforts from the beginning. When the EU entered the scene in the 1990s, cooperation was hence already firmly transnational in character, which has had a fundamental impact UK and German authorities’ perception of the role EMSA can play in helping them to tackle the key regulatory challenges associated with the highly international shipping industry. Historically, the UK has been highly influential in the internationalisation of the maritime safety regime, dating back to the crucial developments in the nineteenth century when its fleet accounted for half the world’s tonnage (Braithwaite and Drahos 2000, p. 425). To this day, it strongly favours regulation at the IMO level over EU rules if the latter ‘gold-plate’ international standards. The UK has remained highly influential in IMO negotiations, not least due to its large number of staff and representatives there as a result of being the IMO’s host nation (Tan 2006, p. 98ff).20 Germany’s role has been somewhat less prominent but nevertheless the country holds a relatively large degree of influence due to its expertise (ibid.), whereby it  Interviewees also regularly referred to the UK’s influence as experienced host nation.

20

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also emphasises that the IMO, rather than the EU, is its favoured level of regulating the maritime industry.21 The UK and Germany used to belong to the ‘traditional’ maritime states, which in the past defended the freedoms of the maritime industry. Today (and for the past decades), however, both countries can be categorised as defending the interests of ‘coastal states’, such as environmental issues. This has developed due to increasing internal political pressure but also the changed nature of the global regime, in which a small but persistent number of sub-standard ships register in ‘flags of convenience’, which is of great concern to them in relation to the environment and the levelling of the playing field (i.e. their competitiveness as flag states). Both countries continue to host a shipping industry to this day and remain important flag states. While authorities in both countries are pursuing the goal of retaining and attracting ships to their flags, this has been challenging, especially for the German maritime safety authority, the Dienststelle Schiffssicherheit (‘Ship Safety Division’), which has seen a continuous decline in registered ships and tonnage. While 624 larger ships were registered under a German flag in 2009, by 2014 this number had declined to 368 (Dienststelle Schiffssicherheit 2014, p. 30). A recent tax relief for ships registered in Germany aims to reverse this decline (Dienststelle Schiffssicherheit 2016). The UK Maritime and Coastguard Agency (MCA), in turn, has also seen decreases in registered ships and tonnage, but has overall maintained a larger number of ships under its flag, and numbers have not consistently gone down (MCA 2014, p. 5). At the end of March 2016 the UK Ship Register stood at 1,323 vessels. In calendar year 2015, the total tonnage on the UKSR increased by 8%, reversing three years of decline (MCA 2016, p. 17). German and UK officials belong to the most engaged officials in international regulatory fora in maritime safety and carry considerable weight in this respect, also in EMSA’s Administrative Board.22 In this forum, ministry officials from the UK and Germany have not only stressed the importance of the IMO in their view (EMSA 2011, p. 7; 2012, p. 6), but have also continuously emphasised the need to keep resources devoted to EMSA in check. The decisive issue in their view has been whether tasks 21  The industry and national officials of some regulators usually argue in favour of IMO rules—as opposed to European rules going further than the international ones—arguing that a global industry needs global regulation. For a counter view to this (see Ringbom 2008, pp. 7–14). 22  This was confirmed by all interviewees.

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given to EMSA have the potential to ‘add value’ to national practices in the field in order to ensure that resources are not devoted twice for the same purpose. This is generally visible in the discourse of ‘Northern’ countries in the notes of Administrative Board meetings (for example, see EMSA 2006, p. 5) and was also confirmed by interviewees. Although the UK and Germany have largely similar perceptions of regulatory challenges as shaped by the nature of the industry and their similar role in the IMO in which they both defend coastal and maritime state interests, each country also has a specific national context that shapes their perceptions of regulatory challenges in the sector. As island state the UK requires large capacities to monitor its coasts and the ships calling at its ports. Germany, on the other hand, has a much shorter coastline but an accident has the potential to have grave consequences due to the delicate and specific nature of the Wadden Sea and a lack of connection between German coastal waters and the oceans (Pallas Report 2000, p.  44; Tomuschat 2005, p.  16ff; also see Lagoni 2001). Neither British nor German waters were directly affected by grave accidents in the recent past (such as the Erika and Prestige) but incidents in the 1990s shaped the regimes of both countries. In the UK the Braer accident in 1993 caused pollution of the coasts of the Shetland Islands and subsequently heavily influenced the UK regime (Tan 2006, p. 96f). As a result of ‘Donaldson Report’ on this accident, the UK took the lead at the EU level. For example, it pushed vehemently for the Classification Societies and Port State Control Directives (Plant 1995, p. 466). Indeed, the UK pioneered ­crucial aspects of the European port state control regime, most notably operational inspections and the principle of discriminating against ships with poor safety record (Bell 1993, p. 368). This shows that despite general scepticism towards the EU regime, the UK can see value in EU-level regulation if this enhances the practices of poorly performing national regulators in other EU countries. Germany, on the other hand, experienced an accident of the MS Pallas in 1998, which resulted in an oil spill near the island of Amrum, causing considerable discussion about possible reform of the German regime (Lagoni 2001, p.  267). The immediate consequence was the setting-up of an accident response authority shared by the federal and the Länder level. However, the official inquiry that followed largely urged Germany to get more involved in EU and IMO discussions (Pallas Report 2000, p. 89). A challenge pointed out by MCA and Dienststelle Schiffssicherheit alike related to access to staff with the required expertise to carry out ship

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inspections. British and German inspectors usually were at sea as technical (e.g. ship engineer) or nautical crew members (e.g. captains), and then undergo an apprenticeship before becoming ship inspectors. Since ever fewer young people from each country go to sea, however, this picture could change dramatically in the future, and in Germany staff which has no experience at sea is being trained as port state control officials (also see MCA 2014, 2015). In this regard, especially in port state control the principle of ‘professional judgement’ (as opposed to procedural checklists) is defended by the MCA and the Dienststelle Schiffssicherheit. Their respective evaluation of the extent to which EMSA helps them in tackling this challenge may thus depend on whether it provides assistance in training ship inspectors to the level that their ‘professional judgement’ about a ship’s safety can be relied upon. Both regulators regard access to staff with the necessary expertise as crucial to control risks emanating from ships.

4.3   Reluctant Acceptance of EMSA Inspections by National Authorities EMSA has the potential to build regulatory capacity through monitoring and facilitating the implementation of EU maritime safety law. To be able to do so, EMSA carries out ‘visits’ to Member States (i.e. inspections) and it provides training programmes for national officials. There is an inherent tension between these two tasks: EMSA has the task to observe whether Member States practices are compliant on behalf of the European Commission, while also being required to take the role of a partner authority to national authorities by providing a forum for mutual exchange in its training sessions. The dialectic in EMSA’s tasks is also mirrored in differing visions of how to build EU regulatory capacity: a focus on compliance and harmonised practices in need of hierarchical enforcement co-exists uncomfortably with the idea of coordinating practices through mutual exchange. Indeed, in practice the above described tension between inspection and training tasks of EMSA creates an environment in which the former diminishes the potential of the latter. Due to the ‘shadow of hierarchy’ present in EMSA’s inspection tasks, Member State officials are less inclined to openly share experience and practices in the forum of the European agency. This is largely so since the Commission has been a zealous enforcer of EU norms on the basis of EMSA inspection reports (for example, European Commission 2009a, b, 2010a, b).

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In this light, national authorities have often voiced their unease with the zealous approach to infringement proceedings of the Commission on the basis of EMSA’s inspection reports. For example, national officials have complained that they had usually already changed their system on the basis of EMSA preliminary findings that were reported to them immediately after the EMSA inspection (Groenleer et  al. 2010). EMSA Administrative Board meeting minutes show the constant worry of national officials about the European Commission handling of EMSA inspection findings. Member State authorities have asked the Commission to discuss inspection findings with them in the forum of the Administrative Board. The Commission, however, insists that these are discussed in more detail in the relevant Comitology Committee (COSS, the Committee on Safe Seas and the Prevention of pollution from ships) (see EMSA 2007b, p. 10; 2010b, p. 6). There have also been complaints by national officials that they do not get sufficient time to remedy negative inspection findings before an infringement procedure is started against them, and German officials have repeatedly questioned whether the level of intensity of inspections is necessary (EMSA 2007, p. 5; 2011a, p. 6; 2011b, p. 10). The first time the Commission initiated an infringement procedure on the basis of a report, it failed to inform EMSA about this, which reportedly irritated the agency and the given national authorities (Groenleer et  al. 2010, p. 1220; EMSA 2006b, p. 7f). After the first letters announcing the impending infringement procedures based on EMSA’s finding had gone out, Member State officials remarked that this potentially tainted the image of EMSA’s inspections and might result in a less open atmosphere between the involved actors (EMSA 2006b, p.  8). Indeed, MCA and Dienststelle Schiffssicherheit staff reported that EMSA inspections matter to them more in relation to the avoidance of infringement procedures than as a tool that can help them in their own work: Well, in the end those [EMSA inspection teams] are the same people one meets in relation to various topics in different national and international organisations. We know each other, of course. So the whole thing does have a rather cooperative character. Of course they have a close look, and of course one does not want to be noticed in a negative way, and what you really, really don’t want is an infringement procedure.23 To give you an example, we came very close to being infracted for our late transposition of the Vessel-Traffic Monitoring Directive and the Port  Interviewee M1.

23

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State Control Directive, and so that was quite obviously one of the things, and we weren’t alone as a Member State.24

Both officials mentioned infringement procedures immediately when asked which significance EMSA inspections bear to them. EMSA officials directly involved in carrying out ‘visits to Member States’ also emphasise the checking of compliance, as opposed to an enhancement of practices, and the Commission is clearly intent on ‘putting EMSA inspection reports to use’. EMSA’s input doesn’t create effects by itself. They come to us [the European Commission] to be able to follow up with the remit that is given to us by the treaties, whether it is to clarify subjects with Member States, whether it is to take them to the Court, so an infringement procedure, or even to impose fines, that is now the case under the new Class Regulation. So all these things have to be assessed here, by the Commission.25

EMSA’s role in this regard is hence to be seen rather as an enforcement agency of the Commission (which supplies the necessary information for enforcement), than a hub of national authorities in which mutual exchange happens. British and German officials expressed a clear worry about the role that the flow of information between EMSA and the Commission poses to them in terms of revision of existing legislation and proposals of new legislative initiatives, which is generally shared by many other national authorities (EMSA 2011c, p. 11.). National authorities are now acutely aware of the flow of information between EMSA and the Commission, and mainly worry about having to take corrective steps, even in cases where they think they are applying EU law correctly. This inhibits them to speak openly about their practices in the forum of EMSA’s trainings. EMSA training sessions are, theoretically speaking, the most likely place to find regulatory capacity building through exchange of practices and mutual learning. However, capacity building through EMSA remains limited in this regard. The majority of training sessions are lecture-type trainings on the content of EU legislation, during which EMSA staff explain these legal provisions to national officials from ministries or maritime safety authorities (although the sessions have become more interactive over time, see Le Den et al. 2017, p. 102). Port state control training sessions are  Interviewee M10.  Interviewee, M6.

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meant to provide more of a forum for exchange of practices but according to a German port state control officer time for these can usually only be found after the end of the training sessions in the evenings and whether they take place hence depends largely on the levels of motivation of the individual inspectors.26 Whereas all interviewees agreed that the trainings are popular amongst officials (not least because attendance is fully paid for by EMSA), national officials are permanently aware of the potential flow of information between EMSA and the Commission, hence hampering their willingness to engage in a candid exchange of views. In this regard, national authorities are very critical of EMSA’s dual role as enforcer and facilitator of mutual exchange (Le Den et al. 2017, p. 50). An EMSA official, on the other hand, also noted that the difference in the level of expertise between national officials can make an effective exchange of practices difficult. But I think another issue here is since EMSA is an EU body, Member States that are not performing superbly are a bit reluctant to come to EMSA and very openly share their problems because they sometimes feel that that might be used against them. The EU Commission is then ultimately the body that may sue them for non-compliance, so there is a little bit of that as well. But I think generally we create a relatively good atmosphere in the sense that we are of course not trying to cheat Member State representatives in the sense that they come here and discuss their problems and then we go and use the information obtained in that way by knocking on the Commission’s door. But it’s still on the back of the minds of the Member State officials that they cannot be too open about things that they are doing27 The training office of EMSA basically puts people together in the same room, and they listen, and there is not really an exchange of good practices. It [the training program of EMSA] is more a process of EMSA preaching the good word, on what a good practice should be. […] Nobody will—in public like that when everybody is present—admit certain weaknesses in their system.28

Capacity building through mutual exchange has hence been restrained as a result of the close link between EMSA and the Commission which diminishes national regulators’ willingness to openly exchange practices in the forum of EMSA. However, over the years of its existence mutual exchange has gradually improved and a recent external evaluation of EMSA found  Interviewee M9.  Interviewee M4. 28  Interviewee M3. 26 27

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that many national authorities thought that mutual exchange of ‘best practices’ had enhanced regulatory capacity overall (Le Den et al. 2017). While initially restrained mutual exchange in EMSA training sessions may have become more effective with the maturing of EMSA as an agency, national authorities have started to question the value and nature of EMSA inspections more as time has passed since they think that the many years of EMSA visits have resulted in effective harmonisation and compliance with EU legislation (EMSA 2014, p.  10). This means that, one the hand, national officials think that EMSA has effectively built EU regulatory capacity in maritime safety. On the other hand, they have not become more inclined to embrace EMSA visits over time. Rather, they are increasingly highlighting the costly nature of EMSA visits to them due to the resources they need to devote to the preparation and follow-up of EMSA visits. Some national officials, including German ones, have argued that EMSA inspections take up too much of their staff time and in this context have even offered to construct data about the amount of time their staff are taken away from their regular work during an EMSA visits (EMSA 2014b, p.  6). Hence, in the context of EMSA’s Administrative Board meetings, they took the opportunity to suggest that EMSA’s inspections could be based on a risk-based system, meaning they would largely target national authorities with a bad track record of implementing the EU framework. Swedish officials amongst others suggested that an adoption of this principle for Member State visits would allow EMSA to save resources (EMSA 2013). The European Commission rejected this as it said it would be impossible to construct legitimate risk profiles of national authorities. This, in turn, was questioned by some Member State officials, including the UK and German authorities (EMSA 2013b, p. 10). A risk-­ based approach would indeed enable high capacity authorities to tackle a key regulatory challenge they face: they would still get the benefit of knowing that the least well-performing authorities are inspected, thus closing loopholes that render the regulatory regime as a whole ineffective, without having to bear the costs of these inspections themselves. On the whole, this demonstrates just to what extent national authorities indeed worry about the resource intensiveness of working with EU agencies. This push for reform of the EMSA inspection system by national authorities resulted in the establishment of a working group aimed at revising the methodology of EMSA visits, showing that these have not become more legitimate over time in the eyes of high capacity national authorities (administrators from Belgium, Cyprus, Denmark, France, Germany, Italy, Luxembourg, Malta, Netherlands, Sweden and the UK volunteered to sit

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on the working group) (EMSA 2014, p. 2). This process resulted in the adoption of a revised methodology for EMSA visits aimed at easing the administrative burden for national authorities by making information available to EMSA in ‘Member State’ profiles to avoid repeat requests for information from the EU agency. Even this change, however, has not put a stop to national administrations weariness about EMSA inspections (EMSA 2015b, p. 12; 2015c, p. 10). Although the new methodology has improved the situation in their view, they still find EMSA’s visits to be based on procedure more than on the substantive question of whether a given national regulator’s practices are adequate for effectively safeguarding maritime safety (Le Den et al. 2017, p. 75). This scepticism of EMSA visits has been amplified by the confidential nature of EMSA’s inspection reports, as a result of which possibilities of mutual learning through one another’s EMSA inspection reports is ­limited. In the forum of EMSA’s Administrative Board, officials from some Member States have voiced that it would be useful to be able to learn from inspection reports as a means of building regulatory capacity, which would require inspection reports to be of a transparent nature (EMSA 2010c, p. 3 and 6). In this regard, the equivalent IMO inspections have more potential since inspectors of national authorities form small teams and inspect another country’s practices. Officials are able to observe how things are done in other authorities first hand but the procedure lacks the enforcement mechanism of the European Union. Indeed, a Polish official brought forward the idea to establish a similar system in the EU regime to allow for mutual learning; however, the Commission is of the view that not all Member States would feel comfortable with this (EMSA 2009, p. 9; also see Le Den et al. 2017, p. 81). For national authorities that defend the IMO’s place as international rule-maker—like the UK and German authorities—an added worry about the role of EMSA is their aim to keep purely European rules in check since these undermine, rather than promote, maritime safety in their perception. Their support of EMSA’s (and the European Commission’s work) is thus fundamentally shaped by their perception that key regulatory challenges in this sector are best tackled by international regulatory cooperation: Sometimes it is good when EU interests are bundled somewhere, through the Commission or whomever. But not in this field. After all, international cooperation at the IMO is very well-rehearsed indeed. And if the EU wants to have a common position you can get together on a case-by-case basis. We

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always do this before IMO sessions, there is always a meeting, a coordination in the EU. That exists anyhow, we do not need to have EMSA for that.29 I would say the biggest issue in that area [maritime safety] is the competence ambitions in trying to create …an EU platform for maritime safety within an industry that is international. Now why do I say that is a problem? Well, it’s because the shipping industry is more than international, it’s global, and it appears to be, we have seen evidence of an EU-centric approach going further than is necessary for approximated risk associated to safety and hence putting European flags at a comparative disadvantage. And to some extent there is within that the risk to undermine and to undo a lot of the good work that has come out of the Paris Memorandum, for example.30

The role of the Commission and EMSA in transnational regulatory capacity building is hence contentious in the perception of British and German officials (also see EMSA 2011, p. 7 and 2012, p. 6) as it could undermine international regulatory efforts and their competitiveness as flag states.31 Whereas a coordination of a position to be defended internationally between some Member States is seen as desirable by them (the UK, Germany, the Netherlands and the Nordic countries often coordinate their position), British and German officials think that a long-standing convention of doing so is sufficient, and are weary of the Commission’s ambitions to formalise these. Moreover, in their view there is a safety trade-off in appearing as a bloc in the IMO. Reportedly non-European countries become less cooperative when faced with an already agreed European position: with the aim of having a global regime, rather than a European one, this has potential implications for safety as non-European countries become less willing to agree to more stringent safety standards mainly supported by EU countries. The generally negative view of EMSA’s and the European Commission’s role in regulating the maritime industry effectively on part of German and UK authorities raises the question why they nevertheless lent (limited) support to EMSA’s work. German and UK officials are heavily engaged in the work of EMSA’s Administrative Forum and tend to do their best to adjust their practices to EMSA’s recommendations following a ‘visit’. This is surprising, given that they do not seem to think that EMSA is p­articularly helpful in helping them to tackle the key regulatory challenges emanating from this highly mobile industry. However, EMSA inspections need to be  Interviewee M1.  Interviewee M10. 31  These two factors go hand-in-hand in the perception of the UK and German authorities since being flag states allows them to enforce maritime safety standards vigorously when ships flying their flag are concerned. 29 30

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considered in the wider context of the services it provides to national authorities, which UK and German officials take into account when assessing which ‘added value’ EMSA’s tasks bring to them. Especially the provision of the vessel-traffic-monitoring system SafeSeaNet, the port inspection data-base Thetis and the oil-spill satellite-monitoring scheme CleanSeaNet are usually seen as effective service delivery on part of the agency. CleanSeaNet, for example, is able to provide satellite pictures of all European seas to Member State authorities. These pictures monitor potential oil spills and can detect the polluting vessel. If a potential oil spill is detected in national waters the relevant national authorities are informed within 30 minutes of the satellite passing over the oil spill.32 The national authorities can then decide to check upon the possibility of a spill on site. This system is economically advantageous for all Member States as it is cheaper than aerial surveillance by plane (COWI 2008). This ‘added value’ of CleanSeaNet is even recognised by Member States with large administrative capacities, such as the UK and Germany (for example, COWI 2008, p. 54; EMSA 2011, p. 5, 12, 14). Authorities with small administrative capacities report to derive distinct advantages from EMSA services, especially in relation to the vessel-traffic monitoring system, the port inspection data-base, and the satellite oil-spill monitoring scheme that EMSA runs. These are seen to decrease cost at the national level whilst enhancing overall safety. Administrations with large capacities and expertise like the UK and Germany, however, remain to be convinced of the benefits of some of EMSA services. They are keen to avoid a duplication of effort in EMSA and ‘at home’. Nevertheless, in their perception they derive a crucial benefit from EMSA’s tasks that contributes to the effectiveness of their work: under conditions of interdependence, they regard EMSA’s inspections as a vehicle to ensure that their colleagues in other countries are also carrying out effective port state controls, which is a prerequisite to the effectiveness of their work on the whole. This attitude is also reflected when the provision of training by EMSA is concerned. The exchange of practices in EMSA trainings might be hampered through their hierarchical nature and the fear of admitting to possibly non-compliant practices; nevertheless, national officials stress that EMSA trainings can be very helpful for them in certain regards, such as the 32  CleanSeaNet supplements monitoring systems at the national and regional level, which were in place before its inception. For example, members of HELCOM operate aerial surveillance in cooperation, thereby flying over heavy traffic routes at least twice per week and once per week in areas of sporadic traffic. The Bonn Agreement operates a similar arrangement. This service now cooperates with EMSA’s CleanSeaNet facility.

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possibility to get assistance from EMSA in securing correct i­mplementation (see COWI 2008, p. 34f). EMSA officials stated that they generally receive this feedback from many Member States. While German and UK authorities do not perceive this as helpful assistance as such (ibid.), they recognise that it is helpful for authorities with smaller administrative capacities.33 Overall, then, the presence of EMSA’s operational services can far better explain how EMSA helps small capacity authorities to tackle their regulatory challenges than what UK and German authorities get out of supporting EMSA processes. Authorities in the UK and Germany only perceive SafeSeaNet, Thetis and CleanSeaNet to ‘add value’ to their work, whilst remaining keen to avoid a duplication of effort in other areas. This is especially the case in the realm of port state control inspections, where the UK and German officials stress the importance of relying on the experience and expertise of their port state control officers instead of introducing a proceduralised EU regime. The continued importance of ‘professional judgement’ of national inspectors contributes to the reluctant acceptance of EMSA port state control inspections on part of the MCA and the Ship Safety Division. The Paris MoU has avoided checklists and highly proceduralised forms of port state inspections from its inception (Kasoulides 1997, especially p. 132).34 The reliance on the expertise of highly experienced ship inspectors has been the cornerstone of this regime since, and the Paris MoU and the EU regime have set rather broad standards for the procedures to be used,35 while also specifying the level qualifications needed by national inspectors.36 As a result, the conduct of inspections remains largely based on ‘professional judgement’: it is set out which documents need to be checked on board for the most basic form of inspection (‘initial inspection’) but whether the inspector goes further and what he/ she chooses to scrutinise more closely is not strictly regulated. The principle of ‘professional judgement’ is vehemently defended by MCA and Dienststelle Schiffssicherheit officials. The reliance on ‘professional judgement’, rather than proceduralised inspection norms, renders EMSA inspections tolerable to MCA and Dienststelle Schiffssicherheit officials: While EMSA inspections verify  Confirmed in interviews with German and British officials.  Also see Paris MoU, Code of Good Practice for Port State Control Officers, Annex I, Rule 1. 35  See Paris MoU text, especially Section 3 and Annex I. 36  Art.22(1) and Annex XI of Directive 2009/16. 33 34

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whether national officials are trained sufficiently, whether the port state control data-base Thetis is run correctly by national authorities etc., national officials retain autonomy in the realm of ‘professional judgement’. However, the risk-based nature of the regime makes it increasingly harder for both national regulators to hit their inspection targets (with the UK not reaching them in recent years). In combination with the staff shortages they are facing, the EU port state regime is challenging to implement for them which could lead to further resistance to it in the future. Continued limited support of EMSA by British and German authorities is hence likely to be contingent on the maintenance of professional judgement as core logic of control in the port state control regime. On the whole, they would be far more supportive of EMSA’s work if it proved to be less resource intensive for them, for example, through the introduction of a risk-based EMSA visit system.37   The empirical analysis presented in this paper was supported by the following interviews: 37

Interviewee M1, official of the Dienststelle Schiffssicherheit (Ship Safety Division). Interviews conducted on 26 September, 2012, and 19 December, 2012. Interviewee M2, former official of EMSA, official of the Maritime Directorate of Luxembourg. Interview conducted on 31 October, 2012. Interviewee M3, official of EMSA, former national representative to the IMO and official of the MCA. Interview conducted on 28 November, 2012. Interviewee M4, former official of EMSA and the European Commission (then DG TREN), expert in maritime law. Interview conducted on 29 November, 2012. Interviewee M5, official at the UK Department of Transport and representative to EMSA. Interview conducted on 30 November, 2012. Interviewee M6, official of the European Commission (DG MOVE) and representative to EMSA. Interview conducted on 7 December, 2012. Interviewee M7, former official of EMSA (Administrative Board), former official at the UK Department of Transport. Interview conducted on 12 December, 2012. Interviewee M8, official of the Dienststelle Schiffssicherheit (Ship Safety Division). Interview conducted on 19 December, 2012. Interviewee M9, port state control inspector of Dienststelle Schiffssicherheit (Ship Safety Division). Interview conducted on 19 December, 2012. The author also accompanied the inspector on a six hour port state control inspection in the port of Bremen on 19 December, 2012. Interviewee M10, official of the MCA. Interview conducted on 10 January, 2013.

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4.4   Conclusions EMSA has the task to build EU regulatory capacity in maritime safety by approximating regulatory practices of national regulators. This has the potential to close loopholes that make regulation ineffective, which is of particular pertinence in the context of the nature of the shipping industry. Its international character and low-barriers to entry has made it exceedingly difficult to reduce small but persistent numbers of sub-standard ships that fly flags of countries that do not enforce safety standards for ships. The control of ships with foreign flags in host countries’ ports (port state control) has been an effective tool to tackle this issue but, like many other issues in maritime safety, relies on equally tough inspections across countries. EMSA’s inspection of national regulators and training sessions bear the potential to play a role in ensuring equally tough port state control inspections (as well as equally tough inspections in other areas of maritime safety across Member States). However, a small agency with fewer than 300 staff, it relies on national authorities to adjust its practices to its recommendations from its inspections and its training provision. The chapter demonstrates that capacity has, to a large extent, been built through the link between EMSA and the European Commission, which frequently uses EMSA inspection findings to enforce change of regulatory practices of national regulators through infringement procedures. This, however, has significantly contributed to scepticism of the UK and German regulators (as well as many other high capacity regulators) towards EMSA and the European Commission, inhibiting their proactive engagement with EMSA inspections and trainings. Indeed, national officials worry about openly discussing their views and practices in EMSA practices since they are keenly aware of EMSA’s link to the European Commission and infringement procedures. This has restrained capacity building through mutual exchange in this sector. The pattern of reluctance and limited support of EMSA on part of high capacity regulators can be understood in light of their perception of the key regulatory challenges they face: while EMSA’s inspections help UK and German authorities to handle one key regulatory challenge they face (lax inspections by other regulators), they are highly sceptical about EMSA’s, and the EU’s, ability to contribute to the second core challenge they perceive: the control of an international and highly mobile industry. In their view, the very existence of EMSA undermines the international maritime safety regime. The perception of UK and German regulators

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that EU involvement in the field undermines the effectiveness of the international regime poses the very interesting question whether there is a trade-off between building European and international regulatory capacity in maritime safety. Paradoxically, limiting EU capacity in the field may contribute to building transnational regulatory capacity at the international level in maritime safety. The findings of this case study also serve as crucial comparison to the case of food controls (see Chap. 5): the EU regulatory body in this field (the Food and Veterinary Office) has the task to inspect the practices of national food control authorities. However, regulatory actors in the fields of maritime safety and food controls face different regulatory challenges. A comparison thus provides us with further insights into how challenges that national regulators face inform their perception of the value of supporting the work of EU agencies.

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EMSA. (2007b, March 20). Administrative Board Meeting Minutes of the 17th Meeting. Lisbon: EMSA. EMSA. (2008). Annual Report. Lisbon: EMSA. EMSA. (2009, March 12). Administrative Board Meeting Minutes of the 23th Meeting. Lisbon: EMSA. EMSA. (2010a). Annual Report. Lisbon: EMSA. EMSA. (2010b, December). Horizontal Assessment Report—Port Reception Facilities (Directive 2000/59/EC). Lisbon. EMSA. (2010c, June 14). Administrative Board Meeting Minutes of the 27th Meeting. Lisbon: EMSA. EMSA. (2011a, March 28). Administrative Board Meeting Minutes of the 29th Meeting. Lisbon: EMSA. EMSA. (2011b, June 8). Administrative Board Meeting Minutes of the 30th Meeting. Lisbon: EMSA. EMSA. (2011c, November 10). Administrative Board Meeting Minutes of the 31th Meeting. Lisbon: EMSA. EMSA. (2012, March 16). Administrative Board Meeting Minutes of the 32th Meeting. Lisbon: EMSA. EMSA. (2013a, June 6). Administrative Board Meeting Minutes of the 36th Meeting. Lisbon: EMSA. EMSA. (2013b, November 13, 14). Administrative Board Meeting Minutes of the 37th Meeting. Lisbon: EMSA. EMSA. (2014a, November 13, 14). Administrative Board Meeting Minutes of the 40th Meeting. Lisbon: EMSA. EMSA. (2014b, March 26). Administrative Board Meeting Minutes of the 38th Meeting. Lisbon: EMSA. EMSA. (2015a). Consolidated Annual Activity Report. Lisbon: European Maritime Safety Agency. EMSA. (2015b, November 17, 18). Administrative Board Meeting Minutes of the 43rd Meeting. Lisbon: EMSA. EMSA. (2015c, March 17, 18). Administrative Board Meeting Minutes of the 44th Meeting. Lisbon: EMSA. EMSA. (2016). Consolidated Annual Activity Report. Lisbon: European Maritime Safety Agency. European Commission. (1993). A Common Policy on Safe Seas. Brussels: COM (93) 66 final. European Commission. (2009a). Maritime Safety: Commission Requires Proper Implementation of Port State Control Rules. Brussels, 29 January, IP/09/178. European Commission. (2009b). Maritime Safety: The Commission requires Proper Implementation of Port State Control Rules. European Commission. (2010a). Maritime Safety: Commission Sends a Reasoned Opinion to Malta on Port State Control. Brussels, 5 May, IP/10/512.

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European Commission. (2010b). 2010 Maritime Safety: Commission Sends Formal Request to Portugal to Step Up Port State Control. Brussels, 24 June, IP/10/809. GESAMP (Joint Group of Experts on the Scientific Aspects of Marine Environmental Protection). (2009). Pollution in the Open Ocean: A Review of Assessments and Related Studies. Report No. 79. Groenleer, M., Kaeding, M., & Versluis, E. (2010). Regulatory Governance Through Agencies of the European Union? The Role of the European Agencies for Aviation and Maritime Safety in the Implementation of European Transport Legislation. Journal of European Public Policy, 17(8), 1212–1230. Jenisch, U. K. (2004). EU Maritime Transport: Maritime Policy, Legislation and Administration. Journal of Maritime Affair, 3(1), 67–83. Kasoulides, G. C. (1997). Global and Regional Port State Regimes. In H. Ringbom (Ed.), Competing Norms in the Law of Marine Environmental Protection (pp. 121–140). London: Kluwer Law International. Knudsen, O. F., & Hassler, B. (2011). IMO legislation and its Implementation: Accident Risk, Vessel Deficiencies and National Administrative Practices. Marine Policy, 35(2), 201–207. Koivurova, T. (2012). Integrated Maritime Policy of the European Union: Challenges, Successes, and Lessons to Learn. Coastal Management, 40(2), 161–171. König, D. (2002). Port State Control: An Assessment of European Practice. In P.  Ehlers, E.  Mann-Bohrgese, & R.  Wolfrum (Eds.), Marine Issues: From A Scientific, Political and Legal Perspective (pp. 37–54). The Hague: Kluwer Law International. Lagoni, R. (2001). Case Study of Germany. In E.  Franckx (Ed.), Vessel-Source Pollution and Coastal State Jurisdiction (pp.  255–259). The Hague: Kluwer Law International. Le Den, X., Lessmann, F., Floristean, A., Blagoeva, T., Poteron, S., Ellegarrd, C., & Sandager Hansen, J.  (2017). Evaluation on the Implementation of the Regulation (Ec) No 1406/2002 Establishing EMSA. Copenhagen: Ramboll. Mankabady, S. (Ed.). (1984). The International Maritime Organization. London: Croom Helm. MCA. (2014). Annual Report and Accounts 2013 to 2014. Southampton: Maritime and Coastguard Agency. MCA. (2015). Annual Report and Accounts 2014 to 2015. Southampton: Maritime and Coastguard Agency. MCA. (2016). Annual Report and Accounts 2015 to 2016. Southampton: Maritime and Coastguard Agency. Pallas Report. (2000, February 16). Unabhängige Expertenkommission ‘Havarie Pallas’. Presented to the Bundesminister für Verkehr, Bau- und Wohnungswesen. Berlin.

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Pallis, A. A. (2006). Institutional Dynamism in EU Policy-Making: The Evolution of the EU Maritime Safety Policy. Journal of European Integration, 28(2), 137–157. Pallis, A. A. (2007). Maritime Interests in EU Policy-Making: Structures, Practices and Governability of Collective Action. Journal of Maritime Affairs, 6(1), 3–20. Plant, G. (1995). A European Lawyer’s View of the Government Response to the Donaldson Report. Marine Policy, 19(6), 453–467. Ringbom, H. (2008). The EU Maritime Safety Policy and International Law. Leiden: Martinus Nijhoff Publishers. Srivastava, C.  P. (1990). The Role of the International Maritime Organization. Marine Policy, 14(3), 243–246. Tan, A.  K.-J. (2006). Vessel-Source Marine Pollution: The Law and Politics of International Regulation. New York: Cambridge University Press. Tomuschat, C. (2005). Einleitung. In C. Tomuschat (Ed.), Schutz der Weltmeere gegen Öltankerunfälle: Das rechtliche Instrumentarium (pp.  16–19). Berlin: Duncker and Humblot. Traisbach, K. (2005). Haftung und Entschädigung bei Öltankerunfällen. In C. Tomuschat (Ed.), Schutz der Weltmeere gegen Öltankerunfälle: Das rechtliche Instrumentarium (pp. 169–214). Berlin: Duncker and Humblot.

CHAPTER 5

Food Safety: Building EU Regulatory Capacity Through the Backdoor

Food safety issues go to the very heart of the importance of regulation: more than anything else, the risk of eating unsafe foods resembles a direct threat to the bodily integrity of the consumer. At the same time, food is an economic good that represents a vital industrial sector in many countries, thereby also playing an important role in exports and as an employer. The food and drinks industry is the largest manufacturing sector in the EU in terms of jobs, as well as providing a significant trade surplus of around €30 billion to the EU market. Moreover, food is often tightly linked to cultural habits and traditions (Vos 2010). Regulation of the food sector is hence placed in a complex setting of (conflicting) demands placed upon public authorities relating to health, tradition, competitiveness and trade issues. Shared safety standards based on ‘sound science’ are meant to promote harmonisation to eliminate trade barriers and to avoid trade disputes in the integrated market of the EU and with third countries. This, however, remains far from simple in a field where uncertainties inevitably prevail, thus rendering shared scientific assessment of food risks particularly challenging. Disputes over the science underpinning the safety of food during trade disputes have fundamentally eroded trust in food regulation in the public, most notoriously as a result of the BSE crisis. The complexity of setting scientific food safety standards is matched—if not surpassed—by inspection and audit systems attempting to verify whether standards are adhered to in practice: each stage of the

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production, processing and distribution of foods potentially bears hazards, which is exacerbated by the fragmented nature of the food industry. In an integrated market, unsafe practices in one EU Member State that go undetected have the potential to detrimentally affect other Member States. In the EU—and many European countries—a large part of the legislation, institutions and processes in place we currently find in regard of food safety were established as a response to the BSE crisis of the 1990s. In this regard, this crisis was a veritable turning point in the approach to food safety in Europe. Public confidence in producers and public authorities was (in-)famously low as a result of the crisis, in which it was often unclear whether public authorities were claiming beef to be safe or risky on scientific or political grounds (for example, Vincent 2004). In an attempt to avoid such issues in future and restore consumer confidence (European Commission 2000), the EU embarked on a reform process which culminated in the establishment of the European Food Safety Authority (EFSA) in 2002. This authority is solely responsible for ‘risk assessment’ (i.e. the science of evaluating whether food is safe), which has become divorced from ‘risk management’, the latter referring to policy decisions and inspection activities. The EU body responsible for the inspections and control of food safety legislation—the Health and Food Audits and Analysis Directorate of the DG for Health and Food Safety (DG SANTE) (formerly the Food and Veterinary Office, FVO)—on the other hand, did not become ‘agencified’ as a result of the crisis, whilst its mandate became nevertheless more far-reaching (see Sect. 5.1). The separation of risk assessment and management also became institutionalised in the German food safety regime in the aftermath of the BSE crisis, which resulted in the establishment of Federal Institute for Risk Assessment (BfR) and the Federal Office of Consumer Protection and Food Safety (BVL) in 2002. Although the BSE crisis also led to a fundamental shake-up of the risk management architecture in the UK, ‘risk assessment’ and ‘risk management’ were institutionally integrated into the Food Standards Agency (FSA) when it was formed in 2000. Food safety agencies in both countries have been grappling with the erosion of trust in scientific food safety evaluation since the BSE crisis as a key regulatory challenge. Food controls agencies in the UK and Germany, in turn, are both facing the key challenge of needing to see hundreds of local authorities that inspect food safety practices on the ground (see Sect. 5.2). In contrast to other EU agencies, EFSA does not primarily constitute a hub of a transgovernmental network of food safety regulators. In order to

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render EFSA’s scientific outputs credible it was seen to be crucial to make it ‘independent’ of the influence of national representatives, which might defend industrial policy objectives in the forum of an EU agency (cf. European Commission 2000). On paper, then, the relationship between EFSA and national authorities remained largely undefined. However, its small administrative capacity and lack of formal ‘bite’ renders EU regulatory capacity building without the support of national regulators challenging. Equally, the presence of the FVO (now DG SANTE) inspections sets up a firmly hierarchical relationship between the European Commission and national control authorities, which has the potential to inhibit the development of mutual exchange, ‘best practices’ and might bear the potential for turf battles, as observed among maritime safety authorities in the last chapter. However, to build capacity to regulate the single market through coordinated practices, the European Commission needs national authorities to embrace efforts aimed at harmonising their practices. Although we may not expect great enthusiasm for the EU food regulators on part of national authorities under the named circumstances, German and UK authorities actively support EFSA in its work and welcome the  FVO’s inspection. Building a network with other food safety agencies in Europe enables national food risk assessors and EFSA to harmonise their risk assessments to the greatest possible extent in order to avoid a public backlash if they issue contradictory scientific opinions. EFSA’s growing tasks have not been matched with increasing resources, as a result of which the support of national authorities has been invaluable for EU regulatory capacity building. In food controls, UK and German authorities value FVO inspections as a means to coax their local inspection authorities into uniform inspection practices (see Sect. 5.3).

5.1   EFSA, the FVO and the EU Food Safety Regime The European Food Safety Authority (EFSA) is responsible for scientific risk assessments. Contrary to other EU agencies, such as the EMA, however, its scientific panels are comprised of ‘independent’ experts rather than national agency officials. We would hence not necessarily expect national regulators to play a large role in supporting EFSA and in building

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EU regulatory capacity. The Health and Food Audits and Analysis Directorate of the DG for Health and Food Safety (DG SANTE) (formerly the Food and Veterinary Office, FVO) on the other hand, inspects national food inspection agencies to close regulatory loopholes emerging from diverging practices. We may expect that national agencies oppose being inspected by an EU body (as they do in maritime safety). This part of the chapter outlines the historical development of the EU regulatory for food safety and the formal tasks and responsibilities of the two EU bodies entrusted with its safeguarding. In doing so, it demonstrates why they cannot successfully complete their tasks, and build EU regulatory capacity to maintain food safety in the process, without the proactive support of national regulators. Originally, food was regulated at the European level in relation to furthering market integration rather than safety. Under the old approach to harmonisation foodstuffs crossing borders were to be harmonised by replacing national legislation with detailed European rules (Vos 2010, p. 152; also see Buonanno 2006). The so-called ‘Chocolate Directive’ has become particularly notorious for difficulties in agreeing on the composition of a product that can be deemed to be ‘chocolate’.1 The issues with this ambitious approach to harmonisation became alleviated through the introduction of the principle of mutual recognition developed in the landmark Cassis de Dijon case. In other words, if food was seen to follow compositional and safety rules of a given exporting Member State, there was no reason to believe that it would be seen as less safe in the importing country. To implement this strategy food legislation powers were delegated to the European Commission under consultation with Comitology committees (consisting of national representatives, scientific experts and interest group representatives) (ibid.). Concurrent with the surge in the use of Comitology, the application of food safety measures—first by food businesses and then the enforcement by national control systems—were increasingly verified by the Food and Veterinary Office (FVO), which had checked the safety of food imports since 1979. When it emerged in 1996 that BSE might be linked to Creutzfeld-Jacob disease, this system was shaken to the core. The Medina Ortega Report (based on an enquiry carried out by temporary committee set up by the European Parliament for this purpose)

1  Council Directive 73/241/EEC relating to cocoa and chocolate products intended for human consumption, amended by Directive 2000/36/EC.

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argued that the European Commission had attached greater importance to industrial and national interests than the protection of public health during the crisis (European Parliament 1997). It also remarked that the FVO had been hindered from carrying out inspections in the UK at certain stages during the crisis, whilst also being prevented from publishing the results of the inspections it undertook publicly (ibid., p. 13, 19, 22, 24). This was seen as a major flaw in addressing the crisis since it was the inadequacy of verification of the situation on the ground—rather than the absence of legal provisions—which contributed to the scale of the crisis (ibid., also see p. 27). On the basis of this allegation of a ‘policy of concealment’ found in relation to veterinary inspections during the BSE crisis in the UK (ibid., p. 24), the FVO’s inspection reports were mandated to be published publicly in a restructuring process of the FVO at the end of the 1990s. Food safety started to take centre stage in reform proposals in order to regain the public’s trust in the EU’s risk management capacity, whilst also ensuring that alleged food safety concerns could not be used as illegitimate non-tariff barriers in the future (cf. Braithwaite and Drahos 2000, p.  403). The Commission thus reacted swiftly to the allegations of the Medina Ortega Report—under pressure of a motion of censure from the European Parliament—and largely dismantled the Comitology based system (Buonanno 2006, p. 263). As consumer trust remained at a significant low, the Commission subsequently entrusted three leading food safety experts to draft a report on the question whether an independent agency could improve scientific advice provided to Community institutions (James et al. 1999). This also entailed further questions as to whether such an agency should provide information (i.e. scientific advice only) or also intervene to manage risks. The report concluded that the reform of the Comitology system was not sufficient to safeguard public health, and suggested the establishment of a powerful and independent ‘European Food and Public Health Authority’, which would be involved in scientific assessments, policy-making, inspection and audit processes, hence also incorporating the work of the FVO in its remit (ibid., p.  38). It was regarded to be specifically vital that this Authority was independent of national governments as the public had lost faith in the ability of these institutions to deliver ‘unbiased’ risk assessments and management. During the drafting of this report (between May and December 1999), the Santer Commission resigned under the pressure of facing a censure motion from the European Parliament and Romano Prodi was appointed

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Commission president. The Commission’s response to the expert report was the White Paper on Food Safety, which rejected the establishment of a fully-blown regulatory authority, largely due to the Meroni doctrine and the complexities of the interwoven nature of EU and national law (European Commission 2000, also see Buonanno 2006, p. 266f). Instead, an ‘information agency’ was proposed, a credo of ‘independence, excellence and transparency’ was created, and the separation of ‘risk assessment’ and ‘risk management’ was advocated. The resulting legislative proposal for a revised ‘General Food Law’ and the establishment of a European Food Authority (EFA) was submitted to the legislative process in November 2000, during which the Parliament inserted ‘safety’ into the authority’s name. EFSA was hence created at the beginning of 2002—and started operating in 2003—in order to provide the scientific underpinning of food safety policy and to provide scientific advice.2 It is located in Parma, Italy. The functions of the FVO, however, were not ‘agencified’. However, it moved to Grange (County Meath, Ireland) in 2002 in order to emphasise its special status as office within the Commission. At the end of 2015, this was reversed when the FVO was reintegrated into the Commission as the Health and Food Audits and Analysis Directorate of the DG for Health and Food Safety (DG SANTE) (the remainder of the chapter will refer to the FVO, rather than DG SANTE since this is what the body was called during the vast majority of the time period covered in this study, with the exception of the year 2016). The ‘General Food Law’ operates on the underlying fundamental principle that unsafe foods should not be placed on the market.3 In this regard, foods are deemed to be unsafe if they are considered to “injurious to health” or “unfit for human consumption”.4 This includes not only possible short-term and long-term effects of certain foods consumed by an individual, but also its potential effect on subsequent generations and cumulative toxic effects.5 The primary responsibility to ensure this lies with food operators at all stages of the production, processing and distribution of foods.6 This is coupled with the principle that food safety can only be ensured if a comprehensive system of traceability is in place, so 2  Art.22(1), Regulation 178/2002. See Chapter III of this Regulation in regard to EFSA’s structure, tasks and responsibilities. 3  Ibid., Art.14(1). 4  Ibid., Art.14(2)(a) and (b) respectively. 5  Ibid., Art.14(4)(a) and (b). 6  Ibid., Art.17(1) and Art.19.

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that withdrawals and warnings of certain foodstuffs can be precise and targeted.7 Food businesses hence have the responsibility to be able to identify by whom they were supplied with which foodstuffs and, in turn, whom they supplied with certain foods.8 Member States enforce food law, thereby needing to make sure that standards are adhered to at all stages of production, processing and distribution, for which they need to maintain a comprehensive control system.9 EFSA’s overarching task is the provision of scientific advice and support for food safety policy-making in the EU,10 especially in regard to supplying scientific opinions to the European Commission which form the basis of relevant legislation.11 This includes scientific advice in relation to nutrition and GMOs.12 Hereby EFSA’s role is not only related to ensuring that food is safe per se, but also to act as scientific authority that can be relied upon to ensure a smoothly functioning Single Market in which all Member States share the same food safety standards.13 In carrying out its scientific tasks, the agency is to be characterised by independence, scientific quality, transparency and diligence in performing its tasks.14 Hereby, it should act in close cooperation with national authorities, and Member States have the duty to cooperate with EFSA to enable it to fulfil its tasks.15 In this regard, EFSA also needs to promote the harmonisation of risk assessment procedures across national risk assessment bodies.16 However, the agency lacks ‘bite’ in this respect since it has no formal sanctions or other tools at its disposal to prompt national regulators into cooperation and into coordination of practices. Capacity building in this respect hence rests on the willingness of national regulators to engage with EFSA and its sister authorities from other countries to a significant extent. The scientific opinions of EFSA are provided by the scientific panels of the authority, which are specialised according to specific fields of food safety, such as GMOs, pesticides, nutrition and contaminants.17 The work  Ibid., Recital 28 and 29, Regulation 178/2002.  Ibid., Art.18, Regulation 178/2002. 9  Ibid., Art.17(2), Regulation 178/2002. 10  Ibid., Art.22(2), also see Art.29, and Art.31, Art.33 and Art.34. 11  Ibid., Art.22(6), Art.23(a) 12  Ibid., Art.22(5)(a) and (c) respectively. 13  Ibid., Recital 34. 14  Ibid., Art.22(7). 15  Ibid., Art.22(8). 16  Ibid., Art.23(b). 17  Ibid., Art.28(1) and (4)(a)-(h). 7 8

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of these panels is coordinated by the overarching Scientific Committee (composed of the Chairs of the panels and six independent experts), which also delivers opinions on cross-panel issues or areas that are not covered by any panel.18 EFSA staff mainly organise the scientific panels and working groups. It also has some scientific experts that help to prepare the scientific work of the panels. The core of its scientific work, however, is carried out by ‘independent experts’, rather than expert representatives from national risk assessors.19 This means that the role of national risk assessors in the European system is peculiar since national experts do not play a formally institutionalised role in EFSA’s expert panels, in contrast, to, for example, the EMA’s expert panels (see Chap. 3). This renders EFSA into a particularly critical case for the purpose of this project: in contrast to other EU agencies, national regulators do not have a statutory obligation to provide staff to sit on EFSA’s panels. In theory, this could provide fertile ground for conflict and competition between national regulators and EFSA or, at the very least, a lack of active support of EFSA’s work on part of national regulators. The peculiar nature of national authorities in the EFSA context is amplified since—contrary to many other EU agencies—the board presiding over EFSA’s actions is not composed of national representatives either. Rather, it consists of 14 members chosen for their competence and relevant expertise, whereby the aim is to achieve a broad “geographic distribution”.20 Four of these members should either represent consumers or “other interest” in the sector and an additional member is representing the European Commission.21 The Management Board is responsible for the overall steering of the organisation in conjunction with the agency’s Executive Director.22 The lack of involvement of national regulator staff could enhance potential conflicts between EFSA and national regulators or, at best, result in apathy of national agency executives vis-à-vis the European agency. Rather than being directly involved in the steering of the agency or its scientific work, representatives from national authorities come together in the so-called ‘Advisory Forum’, where they have the task to generate  Ibid., Art.28(2).  Ibid., Art.28(4). 20  Ibid., Art.25(1), Recital 41. 21  Ibid., Art.25(1). 22  Ibid., Art.25 and 26. 18 19

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knowledge that can support EFSA in its scientific work.23 Other than advising the Executive Director of the agency, its main purpose is to support EFSA in its formulation of scientific advice by establishing a forum for exchange between national risk assessors that pools expertise.24 National representatives hence do not directly comprise its scientific panels, as a result of which they could keep their support of EFSA’s work to a minimum. This renders this case an excellent opportunity to study why national authorities support an EU agency in its work since their formal responsibility to do so is limited. Indeed, EFSA’s ability to fulfil its statutory responsibilities are astonishing, given its miniscule administrative size. Even though the agencies resources have expanded considerably since its inception, it is still a miniscule administration in light of the amount of output that it delivers. In 2004 the agency had around 127 staff and a €29.1million budget and it issued 159 scientific opinions. By 2009 this budget had more than doubled to €70.96 million, its staff had more than tripled to around 400 staff, and its scientific outputs had quadrupled to 636. In 2016, EFSA had a budget of €79.5 million, 464 staff members and close to 500 scientific outputs, which is the average number of outputs it has produced annually in recent years (all these figures were taken from the respective annual reports of EFSA). This means EFSA achieves an astonishing amount of work under very tight resource constraints. Indeed, it struggles considerably to achieve its workload under the set timeframes and routinely misses its 90% target for timeliness. It has explicitly highlighted that it is under-­ staffed and under-resourced in relation to its objectives (EFSA 2015, p.  3). Although EFSA’s scientific panels are staffed with ‘independent experts’, in practice the majority of these experts are staff from national regulators (the extent of this practice will be further explored in the first part of the last section of this Chapter). The latest external review of EFSA states explicitly that the quality of scientific output depends fundamentally on the input by national authority experts (Ernst and Young 2017, p.  115). Given the absence of a formal role of national regulators on EFSA’s scientific panels it is puzzling that national authorities are willing to support a potential ‘competitor agency’ in its work to this extent. Explaining when and why they are willing to do so is hence the crux to understanding EU regulatory capacity building. EFSA also does not have  Ibid., Art.27(1).  Ibid., Art.27(3) and (4), Recital 44.

23 24

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formal bite to coordinate scientific outputs and working practices of national regulators, which forms the basis of transnational regulatory capacity building. The extent to which national food risk assessors nevertheless engage in coordination is thus equally important to understand regulatory capacity building in the EU. EU regulatory capacity building in food safety, however, does not only require scientific assessment capacity, but also the enforcement of regulations, such as hygiene provisions, by food businesses on the ground. As noted by the Commission in the aftermath of the BSE crisis: Recent food safety crises have highlighted deficiencies in national systems of control. At the heart of the problem is the lack of a harmonised Community approach to the design and development of national control systems. There is therefore a clear need for a Community framework of national control systems, which will improve the quality of controls at Community level, and consequently raise food safety standards across the European Union (European Commission 2000, p. 29f).

Entrusted with this enhancement and harmonisation of the implementation of food safety standards is the Health and Food Audits and Analysis Directorate of DG for Health and Food Safety (DG SANTE), which was the Food and Veterinary Office (FVO) until the end of 2015. The FVO’s task is to inspect whether EU food safety law is adhered to on the ground in EU countries and in Third Countries exporting food to the EU.25 Whereas this was initially carried out by inspecting food businesses, there has been a gradual shift towards inspecting and auditing control practices of national control authorities instead. The emphasis shifted to verifying whether national control authorities carry out their tasks in line with EU requirements in the late 1990s (FVO 1999, p. 3f), when the FVO was restructured in the aftermath of the BSE crisis. With the adoption of Regulation 882/2004, in turn, this trend has been reinforced towards audits of national control systems (also see FVO 2004).26 25  Art.45 and Art.46, Regulation No 882/2004 of the European Parliament and of the Council of 29 April 2004 on official controls performed to ensure the verification of compliance with feed and food law, animal health and animal welfare rules. 26  Please note that at the time of writing (February 2014), a reform proposal of Regulation 882/2004 is being discussed (see Commission Proposal for a Regulation of the European Parliament and the Council on official controls and other official activities performed to ensure the application of food and feed law, rules on animal health and welfare, plant health,

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FVO audits in Member States now assess whether their control system adheres to EU norms, whereby food businesses are only visited in order to observe control officials during their work, rather than inspecting the businesses as such. In this vein, it is seen to be the responsibility of Member States to ascertain themselves through internal audits that their control system meets EU requirements, which they need to present to the Commission in so-called Multi-Annual National Control Plans (MANCP).27 The role of the FVO in the capacity building process is to act as overseer, whilst authorities in the Member States play a role of potential wrongdoers who bear the burden of proof of presenting their compliance to the FVO. This bears the potential for contention to arise between the FVO and national authorities, for example, in cases of disagreement whether particular practices are compliant or not. Although regulatory capacity in this case can be built through infringement proceedings initiated by the European Commission, this is unfeasible on a larger scale and coordinated practices are far more likely to be operating if national authorities proactively embrace the work of the FVO as a motor for change in their own work. National authorities are also under no obligation to participate in training courses established by the Commission in the ‘Better Training for Safer Food’ programme. This means that participation in these activities as a means to building regulatory capacity through coordinated and harmonised practices requires proactive seeking out of these opportunities by national authorities. In order to embrace the hierarchical oversight of the FVO despite this potentially contentious nature and to participate in voluntary training activities, the core argument of the book suggests the national authorities must perceive these processes to add value to tackling the core regulatory challenges they face in their day-to-­day work.

plant reproductive material, plant protection products and amending Regulations (EC) No 999/2001, 1829/2003, 1831/2003, 1/2005, 396/2005, 834/2007, 1099/2009, 1069/2009, 1107/2009, Regulations (EU) No 1151/2012, [….], and Directives 98/58/ EC, 1999/74/EC, 2007/43/EC, 2008/119/EC, 2008/120/EC and 2009/128/EC)). By tying various sectoral Regulations and Directives and Regulation 882/2004 into one piece of legislation, it is primarily concerned with a change to the manner in which official controls are financed, which has so far been under discretion of Member States. The proposal foresees that Member States should fully recover these costs. It also foresees the harmonisation of import controls across the plant, animal, feed and food areas. 27  Art.46, Regulation 882/2004.

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5.2   Key Regulatory Challenges in Food Safety A key challenge for food safety regulators is the politicised environment they have operated in since the BSE crisis. Their scientific assessments frequently come under intense public scrutiny, often being accused of being captured by the industry or of producing assessments that are not scientifically sound. UK and German food safety agencies both perceive the need to maintain public trust in the science underpinning their work as a key regulatory challenge. When it comes to food inspections on the ground, UK and German authorities both face the challenge that inspections of food businesses are carried out by a large number of local authorities that is difficult to oversee and to control. This section discusses these key regulatory challenges in food safety regulation in the German and British contexts. Generally speaking, the management of food safety faces a high degree of complexity on two levels. Firstly, it is charged with scientifically assessing the safety of food under conditions of uncertainty. For example, the scientific assessment of the safety of foods deriving from new technologies—such as nanotechnology and genetically-modified organisms—is necessarily linked to uncertainty about their long-term consequences. Equally, availability of new scientific knowledge often demonstrates the shortcomings of former risk assessments, such as in the well-known case of the Bisphenol A (a chemical found in food plastic containers and bottles). After decades of use of Bisphenol A in baby bottles (etc.) concerns were raised about its neural and behavioural effects in infants, as a result of which, it is now banned for use in infant feeding bottles. Secondly, the control systems in place to verify whether foods are safe as defined in food safety standards (for example, whether they are contaminated with dioxin) are facing extraordinary challenges: each stage of the production, processing and distribution of foods potentially bears hazards (such as the risk of contamination with chemicals or bacteria), which is exacerbated by the fragmented nature of the food industry. Whilst the control of hygiene practices of food businesses remains one essential component in this regard, the verification of safety of food products requires resource ­intensive sampling and laboratory analysis. It remains impossible to test every steak or bag of soybean sprouts. The identification of sources of food safety hazards is thus extraordinarily complicated. These key regulatory challenges in food safety significantly affect the British and German food safety regulators. The UK and Germany funda-

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mentally reformed the organisation of scientific advice in their risk assessment regimes in the aftermath of the BSE crisis. Whereas Germany institutionally separated ‘risk assessment’ (i.e. scientific expert advice) from ‘risk management’ (i.e. policy-making and food control activities) as a result of the crisis, the UK integrated these tasks in one authority. In Germany, the Federal Institute for Risk Assessment (Bundesinstitut für Risikobewertung, BfR)—which was founded in 2002 under the auspices of the Federal Ministry of Consumer Protection, Food and Agriculture (Bundesministerium für Ernährung, Landwirtschaft und Verbraucherschutz, BMELV)—is responsible for the risk assessment of food stuffs. The BfR supplies risk assessments to the ‘risk managers’, namely the BMELV and the Federal Office for Consumer Protection and Food Safety (BVL). The latter was also founded in 2002 in conjunction with the BfR and henceforward started acting as coordinating authority in relation to food safety controls, which fall under the responsibility of the Bundesländer. In the UK, the Food Standards Agency (FSA)—an independent non-ministerial government department—was established in 2000 in order to re-establish the confidence of consumers in the capacity of the state to manage risk responsibly in the aftermath of the BSE crisis (James Report 1997). The FSA combines risk assessment and risk management tasks. It is hence responsible for delivering scientific opinions, as well as for formulating (some) policy and being responsible for food controls. The FSA hence oversees the food controls carried out by local authorities. Next to differing in the separation of risk assessment and risk management, the FSA and BfR also differ in relation to the nature of the scientific basis for their decision-making. In the risk assessment branch of its work, the FSA relies on eight scientific committees composed of independent experts in the respective field and at least one lay member. They are selected through an open competition process, whereby many are researchers at UK universities. The FSA’s in-house scientific division is overseen by a ‘Chief Scientist’ and whilst many staff members have a background in relevant scientific research, no primary research is carried out in-house. However, the FSA commissions research from research bodies. In its organisation of scientific advice the FSA is thus similar to EFSA. In contrast to EFSA and the FSA, the BfR carries out research in-house. In other words, a visitor will be able to find laboratories on its premises. Hereby, its scientific output is produced by the members of staff who are actively involved in these research activities. The key rationale in this regard is that

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only active researchers are fully integrated in the scientific community (for example, through the presentation of papers at specialised conferences). This, in turn, is seen as an essential underpinning for scientific work of high quality and independence by the BfR.28 Moreover, in its scientific work the BfR is being advised by 15 expert panels (called BfR-Committees), of which each comprises of at least ten external experts who contribute to the BfR’s work on a voluntary basis. These experts are mainly employed by other expert authorities, the industry and universities. However, in contrast to the FSA’s and EFSA’s panels, their role is purely advisory and scientific opinions are written by BfR employed staff. The BfR is the exception, rather than the rule, in EU-wide comparison: only two other authorities carry out in-house research, the French and Danish food safety regulators. Despite these differences in the formal organisation, authorities in both countries face the same key regulatory challenge. The regulators in both countries perceive the need to foster trust in their capabilities in a context of public mistrust towards the ability of science to answer food safety questions. For example, the task to work in the ‘interest of the consumer’ has been the key rationale in how the FSA underpins and justifies its actions: But I am always thinking ahead to what’s around the corner for consumers. What they are worried about. The Daily Mail has a lot to answer for! […] In our latest survey, 65% [of the public were] confident in FSA to protect health with regard to food safety. That trust is not a given. It has to be earned every day. It can be lost far more easily than won.29

The central theme that “we must ensure that we maintain trust”30 or that in case of ineffective control systems “we risk damaging our most valuable commodity: that of consumer trust”31 runs through FSA thinking like a red line: “Putting the consumer first” is at the forefront of its strategic objectives (for example, see FSA 2013, p.  6). (For a review of the  Interviewee F3.  Speech by Tim Smith, then Chief Executive of the FSA, entitled ‘What the Food Standards Agency does to ensure healthy food’, 19 November 2008. 30  Speech by Tim Smith, then Chief Executive of the FSA, to the Association of Independent Meat Suppliers conference Saturday 18 October 2008. 31  Speech by Tim Smith, then Chief Executive of the FSA, for a meat trades journal event, 13 February 2009. 28 29

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FSA’s degree of success in ‘putting the consumer first’, see Dean Review 2005). Indeed, the FSA regularly monitors its reputation and the trust the public places in it (for example, FSA 2017, p. 27f), an exercise on which it places great importance. The UK regime was particularly affected by the BSE scandal of the 1990s due to the central role played by British beef in the outbreak of the crisis. At the time, the Ministry of Agriculture, Fisheries and Food (MAFF) was responsible for food safety. It was widely regarded as having failed to handle the crisis adequately (for an overview, see Rothstein 2006). Due to the widespread perception that government had lied to and deceived the public, a central tenet in the reform of the regime was to regain public trust (BSE Inquiry Report 2000), which remains deeply engrained in the FSA to this day. Similarly to the FSA, the BfR’s approach to science is also shaped by considerations of the confidence of consumers placed in these processes: In its daily work the Federal Institute for Risk Assessment is confronted with a wide range of expectations all aimed at the same goal—reliable, sound knowledge for decisions [emphasis added by author]. (BfR 2005, p. 4) Today, scientific statements are interpreted in the cross-fire of divergent interests. Science itself no longer speaks with one voice. Scientific statements are frequently challenged, and this is a popular pastime. […] Scientific progress and the fine-tuning of measurement methods and analytics have led to a feeling of growing uncertainty particularly in the food sector. One objective of our Institute and its staff is, therefore, to win back the confidence of the general public [emphasis added by the author]. (BfR 2007, p. 4)

The BfR hence does not only perceive its responsibility to be the provision of high quality expertise, but also the maintenance of public confidence in its work. Food risk assessors are hence embedded in a context of the historical legacy of the BSE crisis and contested forms of expertise. Extensive support of EFSA’s work despite a lack of formal rules requiring proactive participation is hence potentially explainable if the BfR and the FSA both see this to be of value for restoring and maintaining public trust. Nevertheless, the different nature of the two organisations in terms of the presence and absence of in-house scientific research may cause different perceptions of the value of supporting EFSA. To what extent this is the case remains an empirical question that will be explored in the next section of the chapter. On a theoretical level, it is plausible that it may be more

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painful for the BfR to give up its in-house research capacity (e.g. staff) to a European agency which does not have this capacity. The FSA may be less able to support EFSA through its staff sitting on its scientific panels or may be less likely to perceive this as problematic since, in contrast to the BfR, it does not pride itself to be a research-intensive institution. In food controls, we also observe differing formal organisational set-­ups in the two countries: in Germany food safety controls are mostly carried out by local authorities, which, however, come under the responsibility of the relevant ministries of the Bundesländer, rather than the BVL (for a detailed overview of the German control system, see DG SANTE 2017). The BVL, in turn, is the national contact point of the FVO in relation to the organisation of FVO audits, without, however, possessing the authority to oversee the work of the Bundesländer. During an audit in Germany, the FVO usually visits two Bundesländer that were selected by the BVL. The audit report produced by the FVO, on the other hand, is about Germany, rather than the specific states that were visited. In contrast, in the UK the FSA is responsible for the delivery of food safety controls: the FSA monitors, audits and liaises with local authorities in their delivery of food safety controls. For Scotland, this role was devolved to Food Standards Scotland (FSS) on 1 April 2015. In this regard, the FSA and FSS are the contact points of the FVO, for which they organise audits in the UK (for an overview of the UK food control system, see FVO 2012, 2015).32 The work of the FVO in Germany is thus situated in a setting of many potential fields of tension, such as between the Länder, and between the Länder and the BVL, which might be feared to be intervening into the responsibilities of the Länder. In contrast toto the BVL, the FSA and FSS have legal authority to be well-informed about what happens at the local level and to attempt to effect changes when practices are not satisfactory. However, authorities in both countries operate in the context of the complexity of overseeing a system that is faced with a highly decentralised industry and administrative control structures. In both the UK and in Germany, the FSA, FSS, BVL and Länder authorities need to oversee the practices of over 400 local authorities. Indeed, for the FSA the role as overseer and partner of local authorities has been characterised by tensions:

32  Please note that the research conducted for this project focuses on the FSA’s role, rather than the role of FSS, in order to contain complexity.

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I want to see better partnership working between us and you [local authorities], and vice versa. Our effectiveness as an organisation [the FSA] is highly dependent on how you deliver.33 Our key problem is that we are a relatively small agency. But there are 469 local authorities in the UK.34

Local authorities often underperform due to resource pressures, which, in turn the FSA cannot counteract. By 2015 the coordination of the system was regarded as so problematic and Local Authorities as so ill-equipped to perform their role under tight resource constraints that the FSA is in the process of fundamentally reforming the system at the time of writing (the autumn of 2017) (FSA 2016, p. 3). Although the hierarchical nature of FVO inspections may potentially induce conflict between the FVO and authorities in the Member States, authorities in the UK and Germany may instead embrace FVO audits if they help them to tackle the key regulatory challenge of maintaining effective coordination between the myriad of different authorities.

5.3   Going Above and Beyond: Why National Authorities Support EFSA and the FVO As demonstrated in the first Section of this paper, national food safety assessors have few formal incentives to actively support EFSA in its work and EFSA has little formal ‘bite’ to induce coordination of practice between national regulators. Despite these formal constraints on EU regulatory capacity building, the first part of this section demonstrates that capacity is built against the odds because supporting EFSA provides the British and German authorities with an opportunity to tackle the core challenge of maintaining public trust in the science underpinning food risk assessments. Nevertheless, this capacity-building—and the support it rests on—is brittle since national regulators find the extent of their de facto subsidy to EFSA problematic. The first section of this chapter also showed that, in contrast to EFSA, the FVO has the bite to formally inspect national food control authorities, with the sanction of infringement proceedings 33  Speech by Tim Smith, then Chief Executive of the FSA, entitled ‘National key priorities for the FSA and local authorities’, 9 April 2009. 34  Speech by Dr Ian Reynolds, then Deputy Chair of the FSA, entitled ‘Future Challenges for Enforcement’, 15 October 2007, p. 2.

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attached. While this holds the potential to build capacity though harmonisation through tough enforcement of EU law, the practical constraints of this approach require national authorities to be supportive of the FVO’s work by embracing the changes it suggests beyond mere compliance. However, the hierarchical nature of intervention may induce conflict, rather than support, as observed in the case of EMSA in Chap. 4. The second part of this Section demonstrates that capacity is built to a surprising extent since British and German authorities embrace FVO inspections as a means to tackle their key regulatory challenge of coordinating a multitude of food control authorities at different levels of government. 5.3.1  Capacity Building Through EFSA EFSA has a legal mandate to develop network and cooperation structures with national authorities and scientific organisations that work within its remit in order to build EU regulatory capacity based on the harmonisation of practices. In this regard, capacity building through coordination between EFSA and national authorities was institutionalised through the Advisory Forum.35 Whilst national authorities do not have an official role in carrying out EFSA’s work through expert representatives as found in other EU agencies (such as in drug safety monitoring, see Chap. 3), EFSA and its Advisory Forum were envisaged as coordinative bodies that bring national authorities together to generate knowledge. However, the Advisory Forum consists of high level officials (usually the directors of national risk assessors and EFSA) and merely meets four to six times a year, which renders the generation of knowledge in fields of highly specialised expertise challenging. The organisational structures of developing a network of risk assessors at the operational level that would indeed be able to generate knowledge were left largely undefined in the formal set-up of the regime. To what extent such structures were to be developed was thus highly dependent on EFSA’s and national risk assessors’ initiative and willingness to engage in capacity building through the generation of knowledge and coordination of practices. Indeed, in practice extensive structures through which national risk assessors and EFSA coordinate their scientific output and pool their expertise have developed. This process was formally initiated by EFSA and national risk assessors through the Strategy for Cooperation and Networking,  Ibid., Art.27.

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which was formulated by the Advisory Forum and then adopted by EFSA’s Management Board in 2006. It is based on the premise that EFSA and national authorities have the task to develop scientific opinions “which are recognized as truly authoritative both within the EU and in the wider international arena” under resource constraints which can be counteracted through transnational cooperation (EFSA 2006a, p. 2). Intricate tools for networking and cooperation have thus developed: national authorities have started to establish new links and institutional relations in order to share resources and expertise. Whilst they continue to do so on an ad hoc basis in the Advisory Forum, the more formalised ESCO projects (‘scientific cooperation projects’) are carried out by national experts as chosen by the Advisory Board, members of EFSA’s scientific panels and EFSA’s scientific staff in order to generate new knowledge. Moreover, ‘scientific networks’—which are chaired by EFSA— enable EFSA and national risk assessors to make use of expertise available in relevant specialist bodies in other Member States (and beyond, since networks can invite experts from outside the EU to participate). They act to collect and exchange scientific data and information, share risk assessment practices, and to contribute to the coordination of risk assessment practices.36 Another tool to exchange information on a wider range of issues is the Information Exchange Platform, which started operating in 2008. EFSA and national risk assessors can upload notifications that they have started working on a particular risk assessment, final risk assessments, national work plans and country profiles onto this platform in order to make sure that they all have easy access to each other’s work (see EFSA 2012a). Moreover, in 2014 EFSA introduced a system of scientific staff exchanges, including more senior as well as PhD and post-doctoral researchers. This has also been complemented by research grants provided to national authorities by EFSA.  Overall, then, EFSA and national risk assessors have developed extensive structures to coordinate their work and to generate knowledge on a transnational basis on the basis of a relatively loose formal framework envisaging them to do so (also see Ernst and Young 2012, 2017). In order to manage these manifold coordination activities ‘Focal Points’ were introduced in 2008. These are individuals or units in national authorities which ensure the practical implementation of the above described 36  See EFSA’s Decision concerning the establishment and operation of European Networks of scientific organisations operating in the fields within the Authority’s mission.

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activities. The Focal Point network is also used for disseminating requests for assistance, which can, for example, be requests for data on a specific issue, such as animal cloning (155 such request were made by EFSA and national risk assessors in 2012), and the dissemination information (for example, about scientific conferences). Whilst these mechanisms are particularly useful for counteracting resource restraints (such as information deficits) and for avoiding duplication of work, the Focal Point network was also created in order to prevent public disagreement over scientific output. Experience shows that scientific advice can vary occasionally. In order to address divergences, actions need to be taken at an early stage. To support the efforts made by the Advisory Forum in the past, the identification of divergences were included in the Focal Point Agreements. […] Being vigilant is a precondition for identifying diverging views between and among Member States and EFSA.  Parties involved will discuss any divergences, looking for a possible solution in good time. (EFSA 2008a, p. 10)

In this regard, circulation of information via the Focal Point Network— and the other identified coordination mechanisms—can be used for the identification of potential scientific divergences whereby all authorities can screen each other’s scientific outputs for potential divergences. An additional strategy for mitigating the occurrence of divergent opinions is avoiding these altogether as much as possible by harmonising risk assessment methods “to establish a common approach of risk assessments throughout Europe in order to reinforce both the credibility and coherence of scientific opinions […]. This strategy will help build greater confidence in the advice available to the European Commission, Member States and food businesses […]” (EFSA 2006a, p. 4, emphasis added, also see EFSA 2015b, p. 14; EFSA 2016, p. 26). Credibility and the absence of diverging scientific opinions thus seem to be intimately linked in the view of risk assessors. This, in turn, is linked to the (perceived) need to build confidence in the output produced by risk assessors. Since risk assessors would like to avoid countering individual scientific opinions, there might be a perceived need to raise standards to an all-around high level in order to avoid disagreements (ESCO 2008, p. 32). Knowledge generation is thus used as a tool to prevent diverging scientific opinions, which might be detrimental to the key regulatory challenge of maintaining public trust in the science provided by risk assessors. Risk

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assessors, in turn, perceive their support of EFSA in its responsibility to provide scientific advice to add value to their work by helping them to maintain trust in the authoritative nature of their scientific outputs. This can explain the puzzle why high capacity authorities like the FSA and the BfR engage so actively in ‘volunteering’ their expertise to another research body, thus potentially loosing credit for their work: the conservation of public trust depends on being able to publicly demonstrate that they are able to produce ‘sound science’. In the context of historically low levels of trust in their work, risk assessors perceive it to be mutually beneficial to act as united ‘scientific front’ since frequent disagreements between them could be interpreted as the inability of science (and hence risk assessors) to provide authoritative answers to questions of risk and safety. The underlying idea to prevent scientific disagreement is present in EFSA’s founding regulation, which states that the agency “shall exercise vigilance” in order to identify diverging scientific opinions at an early stage.37 It then needs to seek direct contact and deliberation with the body that is in disagreement.38 The product of this process should be a joint statement to be delivered to the European Commission—and made public—that clarifies the scientific uncertainties underlying the disagreement.39 This formal procedure, however, is rarely used (for an example of its usage, see EFSA 2012b). Usually, EFSA and national authorities prefer to make use of the manifold coordination structures developed in the aftermath of the adoption of the Strategy for Cooperation and Networking to solve divergences—if possible—at an early stage and at a more informal level than the formal procedure allows for in order to then communicate a clear scientific message to risk managers and the public. At least on an informal level, then, a key aim of engaging proactively in the coordination of their scientific work is not only to counteract resource constraints, but also to resolve scientific divergences across national authorities and/or EFSA before scientific opinions (or other advice) are adopted in order to maintain the scientific credibility of food safety regulators (EFSA 2012a, p. 6f). Although diverging interpretations of scientific data are to be expected under conditions of uncertainty, risk assessors aim to resolve these—if possible—before publication of scientific opinions in order to maintain the confidence in risk assessors’ ability to assess risk  Art.30(1), Regulation 178/2002.  Ibid., Art.30(2). 39  Ibid., Art.30(4). 37 38

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accurately. National authorities are hence keen to share their projects and results with each other not only to make efficient use of resources and to exchange information per se, but also to ensure that everyone is ‘on-­ board’ with their opinion in order to prevent public disagreement about their scientific output. The aim to prevent divergences could, for example, clearly be seen in the BfR’s opinion on isoflavones,40 which it send to EFSA in order to achieve Europe-wide agreement on the issue as quickly as possible (EFSA 2008b, p. 11). In this regard, food safety regulators are aware that divergences might be picked up and miscommunicated by the media: divergences were ­present in cases of Bisphenol A and ethyl lauroyl arginate (ELA) as pointed out by the Norwegian risk assessor in the Advisory Forum. The BfR commented on this by way of confirming that these are common results of scientific uncertainty but that risk assessors needed to be aware that they can provoke criticism in the media (EFSA 2009a, p.  8). EFSA thus attempts to communicate with national risk assessors during the process of writing scientific opinions in order to avoid divergences after publication (ibid.), especially in cases where such a divergence could have been avoided. Cooperation provides the opportunity to “make effective use of synergies, benefit from the European pool of expertise and avoid duplication of work and unnecessary divergence of opinion”.41 Moreover, bilateral meetings between EFSA and a given national risk assessor take place before publication in areas were opinions might be diverging (EFSA 2008c, p. 20). EFSA has also pushed for precise guidelines on how scientific divergence are to be handled, whereby the discussion in recent years has started to focus more on how to explain scientific divergences to the public (EFSA 2014a, p. 5; 2014b, p. 4; 2015a, p. 15; 2015c, p. 4; 2017, p. 5). In this regard, then, risk assessors are acutely aware of the perception of their work in the public sphere. Criticism by the media or other public and political actors has the potential of undermining the credibility of risk assessors by questioning the extent to which they are indeed able to pro40  Isoflavones are a class of plant substances, which often occur naturally in foodstuffs. For example, they occur in high concentrations in soybeans. Some scientific studies point out beneficial effects of these substances (such as a reduction in breast cancer). At the same time, there is evidence that they can have detrimental effects for people with particular conditions, such as a thyroid dysfunction. 41  Speech by Catherine Geslain-Lanéelle, then Executive Director of EFSA, entitled ‘Food Safety in Europe: Progress through Cooperation’, Oslo, 12.June 2008.

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duce ‘sound science’. In this vein, the maintenance of the scientific reputation is also seen as question of how to communicate uncertainties to risk managers and the public by risk assessors (EFSA 2009a, p. 8).42 Indeed, food safety regulators often come under enormous pressure—from NGOs, the media and the European Parliament—in relation to the value of its scientific output, it is often criticised of being influenced by industry interests. In this context, diverging scientific opinions can potentially fuel controversies as to whether they differ as a result of influence by particular interests. EFSA and national risk assessors view it as crucial to prevent such undermining of their scientific authority through mutual support of their work. To build a bridge between science and consumers it is important to know the consumer and to be aware of and to understand the public perception of risk […]. We know how important it is to speak with one voice, as a result of which we go to great lengths to ensure that statements about risk assessment are commonly agreed upon and harmonised. (BfR 2012, p. 7) Unless the scientific basis for EU food law is trusted, from an untainted and reliable source, free from undue sectoral or political interests, it cannot help risk managers build confidence.43

NGOs and the European Parliament have been particularly forceful in their sustained critique of EFSA in relation to its independence from the industry (for example, see CEO 2013; Friends of the Earth 2004; also see Chalmers 2005).44 As national experts play a crucial role in EFSA’s scientific work, this critique in essence touches upon the practices of risk assessors at large, whilst also amplifying EFSA’s attempts to ensure confidence in its scientific authority through scientific coordination. Moreover, the relationship between the Commission has been fraught with tensions as a result of EFSA’s wish to establish its scientific authority as clear dividing  Also pointed out by interviewee F1.  Speech by Catherine Geslain-Lanéelle, then Executive Director of EFSA, entitled ‘Joining forces for safer food in Europe: the food safety system in the EU’, Lisbon, 19. September 2007. 44  As a result of this concern, the European Parliament delayed its approval of EFSA’s past expenditure for the year 2010. The European Medicines Agency and the European Environment Agency was also subjected to this process by the Parliament. Similarly, the Court of Auditors has criticised the presence of conflicts-of-interest of experts in four EU agencies, including EFSA. 42 43

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line to the Commission’s sphere of authority, whilst also acting as partner of the Commission (Groenleer 2009, p. 183ff). In order to tackle the key regulatory challenge of maintaining public trust—and their scientific reputation—mutual support is strategically important for EFSA and national authorities as this can mitigate the occurrence of public disagreement over scientific outputs (EFSA 2003, p. 2, 2006b). In order to maintain public trust in their work—and thus their scientific reputation—national risk assessors engage in transnational knowledge generation in EFSA. By their very nature, however, group processes tend to undermine the recognition of individual contributions. This might be perceived as particularly grave by members of the group that contribute most. Indeed, the BfR and its French counterpart—which both carry out in-house research—contest the formal organisational set-up of scientific coordination in EFSA since the contributions of national risk assessors are not formally recognised. The mismatch between EFSA’s formal ‘light-­ weight’ incorporation of national risk assessors in its work and the realities of the active engagement of national risk assessors in these processes has an impact on the acceptance of the EFSA system among national risk assessors that contribute most, especially in terms of their primary research capacities. Whilst coordination is necessary for maintaining their reputation, they would prefer a system which provides formal recognition for their immense input. Coordination in EFSA thus results in a paradox for high-capacity research intensive authorities since in their perception they need to coordinate to maintain public trust, whilst also needing to maintain the reputation of their own scientific output. The BfR has questioned which benefits national authorities derive from sharing their expertise with EFSA (EFSA 2008d, p.  7; 2008e, p.  8 and 10). This has gone hand-in-hand with the complaint that national experts are taken away from their daily work to do EFSA’s work instead, whilst also reporting a lack of resources provided to Focal Points by EFSA (EFSA 2008b, p. 9; 2008d). The German risk assessor has also noted that EFSA is too busy with fulfilling requests of the European Commission to take into account the priorities of national authorities in its work (EFSA 2008f, p. 4f). Similarly, the French authority has argued that networked cooperation should be more formalised in order to provide for adequate recognition of the work of national officials. The UK FSA has voiced fewer concerns about the extensive use of national resources in EFSA in comparison to authorities which are actively engaged in primary research, but its staff members are represented in EFSA Panels. On the one hand, this

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means that resources might be lacking at the FSA, whilst, however, this also provides the opportunity “to have UK science represented” in EFSA.45 The BfR has suggested reforming EFSA into a rapporteur system akin to the institutional set-up of the European Medicines Agency, especially since in practice more than half of EFSA’s panel scientists are staff of national authorities (EFSA 2009a, b; also see EFSA 2004, p. 4; Ernst and Young 2017). In the eyes of the French and German authorities this would avoid duplication of work, whilst also providing for a recognised contribution of national officials. Other authorities—such as those from Ireland, Belgium and Sweden—on the other hand have disagreed vehemently with this view as a rapporteur system would be too resource intensive for small authorities (ibid.). In this respect, smaller authorities fear the dominance of larger countries in a rapporteur system. At large, national authorities consistently highlight that the time that their experts spend on EFSA activities is time they cannot spend on activities for their home organisation, which can be difficult for them to handle (Ernst and Young 2017, p. 112, p. 117). While 77% of national regulators think that EFSA’s work and output helps them to reduce their costs, while 23% do not think so. According to the most recent review of EFSA it is high capacity authorities that contribute the most to EFSA’s work that feel that duplication of work bears  additional costs  to them (ibid., p.  116). Discontent in this respect has also been voiced by national authorities regarding the costs of running Focal Points (EFSA 2013a, p. 3). Indeed, the BfR performed an analysis of the Focal Point work in Germany that concluded that EFSA’s contribution to running Focal Points was less than 50% of the funding required to maintain the work of the Focal Point (EFSA 2013b, p. 4). On the whole, this means that national regulators support EFSA in its work by providing its staff to EFSA’s scientific panel and by engaging in extensive coordination activities in order generate knowledge. Both aspects are crucial for EU regulatory capacity building and would not be possible without intensive support by high capacity national regulators. Especially research-intensive authorities, such as the German BfR, have consistently supported EFSA’s work extensively, while also highlighting that they see this as a highly problematic cross-subsidy. German and UK regulators support EFSA since it provides them with an opportunity to minimise bad publicity that comes along with scientifically divergent opin Interviewee F4.

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ions from different authorities. The extent of contestation from the BfR, however, shows that the system is not inherently resilient as it relies heavily on largely voluntary input by high capacity regulators that are not satisfied with these arrangements. 5.3.2  Developing Transnational Regulatory Capacity in Food Controls The FVO audit process was established to coordinate food control practices across Member States in order to close enforcement loopholes that can endanger smooth functioning of the Single Market and safe foods throughout its territory. Capacity building in food controls hence rests largely on hierarchical intervention by EU-level actors to bring national level actors’ practices into line. At the same time, the FVO inspection process is increasingly being complemented by horizontal coordination processes that provide national authorities with access to the expertise of their colleagues across all Member States in order to engage in mutual exchange. In order to realise the potential of these capacity building mechanisms, national authorities need to embrace changes suggested by the FVO beyond trying to achieve mere compliance, as well as needing to voluntarily embrace opportunities for mutual exchange with colleagues from other countries. Given the potential conflict induced by FVO inspections and the voluntary nature of mutual exchange and training sessions, national authorities may not be inclined to proactively support and embrace these mechanisms. This section shows that German and UK authorities are nevertheless willing to do so to a surprising extent because they perceive these mechanisms to help them with the key regulatory challenge of coordinating a large amount of food control authorities in their national regimes. The FVO has the task to inspect national authorities and the European Commission can make use of FVO reports when significant deficiencies are noted to enforce EU legislation in the Court of Justice. Moreover, the Commission evaluates national control systems in relation to EU law.46 In this regard, it makes use of a wide array of sources to portray the function46  Art.44, Regulation 882/2004 of the European Parliament and of the Council of 29 April 2004. on official controls performed to ensure the verification of compliance with feed and food law, animal health and animal welfare rules.

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ing of national control activities, including the so-called Multi-Annual National Control Plans (MANCP reports) that national authorities have to submit to the Commission, FVO inspection reports and discussions in the Standing Committee on the Food Chain and Animal Health (SCFCAH) (European Commission 2012). In comparison to many other EU policy areas, then, the Commission possesses an extraordinarily detailed picture of application of EU law on the ground. It can use this knowledge not only to initiate infringement proceedings, but also to impose trade restrictions when the FVO finds grave shortcomings in the application of EU standards in third countries.47 In light of the findings of maritime safety authorities’ reluctance to embrace EMSA inspections (Chap. 4), we may expect inspections which are tightly linked to enforcement action by the Commission to provoke resistance amongst national officials. Instead, however, national authorities use FVO audits to increase control over their own territory. Despite the differing formal set-up of control systems in Germany and the UK, authorities use FVO audits in a similar manner in the context of heavily decentralised administrative systems which they have the responsibility to oversee. Whereas FVO inspections were reportedly dreaded by control authorities in the Member States in the past, this has become much less pronounced in recent years. Largely, authorities in the UK and Germany find FVO recommendations helpful as a means to improve the functioning of their control systems since it provides them with an expertise they do not have, thereby enabling them to increase control over their own territory. The emphasis placed on control systems—rather than the inspection of food businesses—has rendered this change possible. In comparison to the other EU regulatory bodies studied in this book, the FVO does not formally act as a hub of a transgovernmental network of national officials. Whilst it interacts directly with control authorities in all Member States, it is not designed to provide a forum for direct interaction between these national authorities. In this regard, then, the FVO’s and the European Commission’s interpretation (and enforcement) of EU legislation—rather than group processes involving national officials—can be expected to be used as main motor for the capacity building through the coordination of regulatory practices. FVO missions are clearly targeted at the assessment of compliance, rather than the provision of advice to

 Ibid., Art.56. Also see Art.53 of Regulation 178/2002.

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national officials (Lodge and Wegrich 2011, p.  96). A FVO official expressed this by saying that “after all, we are not a consulting body”.48 The rather hierarchically structured audit process is organised as follows. Member States are informed about the upcoming inspections of the next year in November of each year. Two to three months before the audit, the FVO then sends the FVO contact point (the FSA and FSS in the UK and the BVL in Germany) in the given Member State a pre-audit questionnaire on the implementation of certain pieces of legislation and also provides them with contact details of the lead auditor and their audit plan. Based on the information received in this questionnaire, the FVO informs the contact point which type of competent authorities they would like to visit (usually two; for example, in relation to the UK, the FVO might want to visit on authority in Wales and one in England). The FSA (or FSS) or the BVL then decide which local authorities or Länder to visit (unless the audit is due to an alert having been raised about a particular premise or authority). The local authorities or the Länder usually devise a list of premises that could be visited and on the day it is decided which businesses are going to be visited (for example, often inspections in a small and a large business will be accompanied by the FVO). The audit begins by an introductory meeting at the FSA or the BMEL, which the other authorities to be visited also attend. Then the audit continues in a specific local authority or Land with another introductory meeting in which this authority presents its control system to the FVO team. After this, several businesses are visited, whereby the FVO team observe the officials of the competent authorities carrying out a control. After having visited the foreseen local authorities or Länder a closing meeting is held at the premises of the FSA or the BMEL respectively. These final meetings have a formal character in which the FVO presents its findings, rather than engaging in deliberative exchange of views with the visited control authorities. In large countries like the UK or Germany, this FVO audit process in general takes 10 days to two weeks. The FVO then submits a draft report of the visit on which the competent authorities can comment, whilst also needing to submit an action plan on how to remedy the identified shortcomings. The draft report has been put together after potential consultation with the Commission’s legal service if necessary and is hence not as such ‘up for discussion’. Overall, then, FVO missions serve to assess and to achieve compliance with EU legislations, thus formally being of a hierarchical nature.  Interviewee F10.

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Despite the formally hierarchical nature, UK and German authorities do not contest FVO audits. Rather, they perceive them to be helpful to their own work by enabling them to increase the control over their own territory. In Germany, FVO audits have helped to create a role for the BVL which the Länder perceive to be helpful in comparison to having been ‘left alone’ to cope with FVO audits in the past. Moreover, in recent years Länder authorities have also started to coordinate their actions extensively as a response to the work of the FVO, which the federal level and the Länder see as beneficial in identifying and remedying shortcomings in official controls. After the BVL’s inception, German Länder authorities were at first “suspicious”49 about the role played by this new body in coordinating FVO audits. Since the implementation of food controls rests firmly in the hands of the Länder it remained to be seen whether this federal institution would be able to carve out a role for itself without causing struggles over competence between the federal and the Länder level. By now, the Länder find the BVL’s assistance in the organisation of FVO audits very helpful, not least since they arrange the administration of these visits (such as providing a car for the FVO team and booking their hotels). The BVL is like a bundling body. […] It reduces our workload, I would say. […] We perceive this to be a supporting hand. They gather all the relevant information from the Länder and compare them against each other, that is especially important when the action plan for the implementation of the recommendations is concerned.50

FVO audits have thus ‘interfered’ in the relationships between federal and Länder level actors in a positive manner, which can partly account for the change from ‘dreading’ FVO audits to appreciating these as helpful on part of the Länder. In this sense Germany’s federal system is now seen to be working extremely well in relation to FVO audits, which was not the case before the BVL was established and built a working coordinating role for itself.51 In this sense, coordination between Länder has also intensified as a means to follow-up on FVO recommendations. These are addressed to Germany as a country, although they are based on observations in (usu As expressed by interviewees.  Interviewee F8. 51  Interviewee F10. 49 50

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ally) two Länder. In the relevant working groups of the consortium of the Länder for consumer protection (‘Länderarbeitsgemeinschaft Verbraucherschutz’, LAV), Länder now discuss how to change practices across the whole country to bring them into line with FVO recommendations. That has really improved, the coordinating working groups of the Länder are very good, they really disperse the results of an audit in the whole country, so that everyone knows what’s going well or what isn’t going so well.52

In this regard, the FVO process has also started to pull the Länder together in areas in which no agreement on practices could be found amongst them before, for example, in the case of mechanically separated meat: clearly set out recommendations of the FVO audit report prompted agreement on shared guidelines on practices.53 In case of the UK, FVO audits do not interact with similarly complex federal structures. However, they also provide an opportunity for the FSA to increase control over its territory since they have an impact on the relationship between the FSA and local authorities: FVO audits give the FSA an additional tool to coax local authorities into compliance. For example, the FSA communicates to local authorities that any severe shortcomings found in a given FVO audit could adversely affect the entire UK as they could undermine consumer confidence in UK products.54 The FSA has also used negative FVO audit reports to justify the need for action to the industry. For example, as the then Chief Executive of the FSA Tim Smith put it to the UK dairy industry: Although the last FVO mission in September 2007 found no serious shortcomings, they will be coming back in 2009. Our house needs to be in order. We need to impress them and secure a clean bill of health. I think it’s fair to say that having been caught out once none of us wants a repeat. So let’s continue to work together to ensure we get it right.55

 Ibid.  Interviewees F8 and F10. This happened in the working group on meat and poultry hygiene (‘Fleisch- und Geflügelfleischhygiene und fachspezifische Fragen von Lebensmitteln tierischer Herkunft, AFFL’). 54  Interviewee F13. 55  Speech by Tim Smith, then Chief Executive of the FSA, entitled ‘Is dairy fit for the twenty-first century diet?’ Delivered at the Dairy UK Conference, 16. September 2008. 52 53

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Moreover, the FSA sees the FVO’s work as critical to maintain the reputation of food safety authorities in the context of interdependence. It has emphasised that it welcomes the ‘tough’ approach taken by the FVO, especially in order to safeguard the effectiveness of food controls in the new EU Member States (FSA 2003, p. 8). Overall, authorities in the UK and Germany have come to value FVO audits in a similar manner since they have induced better coordination within their country and can be used as a justification for action vis-à-vis the industry. Since the FVO provides them with additional expertise on how to run their control systems, the FVO audit processes provides overseeing control authorities  with the opportunity to be in more effective command over their own territory. More crucially, UK and German authorities explicitly value the input provided by the FVO as a means to improve their practices. In other words, they do not perceive the FVO as a body that is mainly contributing to the enforcement of EU law. Rather, they view its recommendations to further safety by enhancing their practices. As one interviewee put it “it is as if you were getting management consultants in for free”.56 Another interviewee stated in this regard that “it is a bitter pill to swallow, but it needs to happen”.57 This, however, was not always the case. When the FVO was inspecting businesses—instead of national control systems—its recommendations were often  dismissed as being an unfair evaluation. After the shift to auditing control systems as a result of Regulation 882/2004—and several rounds of audits in each topic area—authorities in the Member States have come to see FVO recommendations as highlighting problems in their overall control system.58 As noted by a FVO official, “we often get the feedback that our comments are helpful. Because we see things with different eyes”.59 National officials share this view: In my experience, if something was criticised [by the FVO] it was usually justified. Even if one then normally tries to defend the system and to find excuses because usually it will have something to do with the complexity of the task and staffing issues. But one does know that they have struck a nerve.60

 Interviewee F12.  Interviewee F13. 58  Interviewee F8. 59  Interviewee F10. 60  Interviewee F8. This view was also expressed by interviewees F5, F6, F10, F11 and F12. 56 57

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Improving practices and demonstrating satisfactory results in FVO audits hereby also bears an external dimension since third countries might ban imports of EU products on the basis of FVO reports. As a result, all Member States have an interest in ‘looking good on paper’. In order to understand why national authorities are able to view the FVO’s recommendations in this manner, we need to consider that the European Commission is not a zealous enforcer in the field. This means that although the FVO provides ‘tough’ criticisms of national control systems it is the exception—rather than the rule—that the Commission makes use of this information to initiate infringement proceedings. Usually, the Commission only makes use of this option in case of severe and lasting incompliance (i.e. which are not found to have been remedied by the FVO after successive rounds of audits in a particular field).61 In this regard, the FVO sees infringement proceedings initiated by the Commission as failure of its work.62 Moreover, national officials are also aware that the FVO’s work not only assesses their compliance but also highlights to the Commission where legislation needs to be clarified or is unfeasible for national authorities to implement. Overall, the Commission is willing to consider simplifications in legislation if Member States display great difficulties to comply, for example, with reporting requirements (i.e. the MANCP) (European Commission 2009a, p. 9). The character of the FVO’s work in being helpful for national authorities and the Commission alike is also demonstrated in its use of so-called fact-finding missions. These serve to, for example, observe and analyse problems that Member States are facing in their work without being linked to an audit and FVO recommendations, whereby the results are not published publicly. Hierarchical coordination hence significantly contributes to EU regulatory capacity building, not least because German and British authorities are proactively embracing them to improve their food safety in their ­territories. It is crucial to point out, however, that we cannot generalise from the British and German cases to other Member States as limited documentary material in this field means that the results presented here rely heavily on interviews with British and German officials.

61  See the Commission’s annual reports on national implementation of EU law in this regard. Largely, they show that only long-lasting cases of incompliance (often found in Greece in this policy area) result in infringement proceedings. 62  Interviewee F6.

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Capacity building also bears another dimension next to formal inspections: Hierarchical coordination as means of capacity building is becoming gradually more interwoven with horizontal forms of coordination as resource pressure renders intensive FVO audits in all sectors and countries more difficult. The FVO summarises its observations in the so-called ‘Overview’ or ‘General’ reports. The main aim of these reports is to pull together the main findings of several audits in a relevant issue area as observed across different Member States. They thus highlight where problems with compliances are widespread and where implementation works well across countries (for an example, see FVO 2010, p. 2). At the same time, they also point out ‘good practices’ observed during their audit. This aims at making practices across countries more accessible to competent authorities. Also, the overview reports try to establish whether legislation is working as intended and whether implementation is feasible for control authorities in the Member States. In this regard, these reports also provide recommendations to the Commission, for example, about the need for clarification of a particular legal provision. After EU legislation is passed, Member States are usually “left to their own devices”63 and the overview reports attempt to counteract this by bringing together officials from the Member States at the FVO premises to discuss the overall state of control systems in a given issue area. The FVO is hereby establishing transgovernmental ties at these events, whereby national officials can hear the points of view of their counterparts in other countries. These reports have existed since 2001, but FVO officials state that they have grown in importance, especially in relation to bringing together national officials to discuss them and explicitly pointing out ‘good practices’ (which became an explicit feature of the reports in 2013). The underlying idea is that competent authorities can more easily identify practices of authorities in other Member States as a source of learning, which is indeed used by national authorities (albeit in relatively rare cases).64 We thus observe elements of mutual exchange in this part of the regime, which, however, is mediated by the FVO as it remains the body that identifies ‘good practices’. Such horizontal forms of coordination can also be found in the FVO’s training and use of ‘national experts’ which acts as FVO team members during audits (see, for example, FVO 1999, p. 3; 2007, p. 30): These officials get to know other countries’ practices and can use this knowledge in relation within their home administrations.  Interviewee M10.  Interviewee F5, F6, F10.

63 64

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They receive FVO training since in their role as FVO national experts they are expected to act as EU official, thus transcending their national perspective, whilst also giving national officials the opportunity to develop transgovernmental links and additional expertise.65 Similarly to the FVO’s approach to ‘Overview Reports’, the Commission also singles out ‘good reporting practice’ in relation to reporting practices in the Multi-Annual National Control Plans (MANCPs). For example, the Commission has pointed out that substantive indicators of performance and tracking of costs of control activities—which are found in France, Finland, Sweden and Slovenia—should be seen as ‘best practice’ (European Commission 2012, p. 4). Similarly, it has put forward that the process of risk categorisation of food businesses in the Netherlands, Finland and Slovenia should be used as examples by other authorities (ibid., p. 5). It also finds the publication of business inspection results (as found in Denmark, the UK, Belgium and the Czech Republic) noteworthy (ibid., p. 10). Another ‘good practice’ in the view of the Commission are quality management systems which are measured against external standards (i.e. ISO 9001), which we find in the Czech Republic, Lithuania, Slovenia, and Germany. As in the case of the FVO’s identification of ‘good practices’, this is a relatively novel development. In this vein, the Commission has also started to run a forum of exchange about how to run national audit systems (European Commission 2013, p. 6). The increasing prevalence of transgovernmental ties and horizontal coordination as basis for capacity building is particularly visible in the ‘Better Training for Safer Food’ programme which was established under the auspices of the Commission in 2006.66 The training programme was devised to ensure that control staff is kept “up to date with relevant EU standards. This should ensure that controls become more harmonised and effective” (European Commission 2006, p. 5). A key idea hereby is that the training should be cascaded by participants, i.e. they should present what their learned during the training in their home authorities (this indeed happens in the UK and Germany, see FSA 2011, p. 11, and the MANCPs of the Länder). The programme was introduced in the wake of a shift from rather prescriptive Directives to Regulations which allow for 65  Interviewees emphasised the importance of this. FVO officials value the specific expertise of national experts and an interviewee who has acted as national expert explained the value of acquainting oneself with other administrative systems and control practices. 66  The legal mandate for the programme derives from Art.51, Regulation 882/2004.

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more freedom of interpretation of legal norms,67 such as from provisions prescribing that tiles in food businesses need to have a specific size to the legal norms that walls should be easy to clean. In the programme, national control officials attend training programmes on a specific topic which is run by national authorities or independent organisations. Although Commission staff is present in these trainings, tutors are not Commission staff. Rather, they are national officials or experts in the field (for a detailed overview of the programme see its Annual Reports which have been published since 2006). The Commission (and the Consumers, Health and Food Agency that it has delegated the organisation of the programme to) are hereby only responsible for the organisation of the programme, whilst the content is delivered by experts in a given field selected particularly for this purpose across different Member States. This, for example, may be officials from a national authority which excels in its control systems in a particular field, which is seen to disseminate ‘best practices’.68 Hence, whilst the programme is hierarchically devised, it establishes mutual exchange and transgovernmental ties between national officials. But in addition what we saw with this training since 2006 was also that— and initially that was not foreseen—by bringing together people from different Member States, they start to get this network. One of the things that we see now is that the people which come in contact with each other during the training, afterwards they continue to be in contact because they think ‘now I know someone, for example, in Germany or someone from Poland etc., I will just call that colleague’. That’s gives them another point of contact if they have a problem, they call and ask ‘what do I have to do?’69

The programme has been seen as success by all involved actors (see European Commission 2009b, p. 15),70 although language barriers remain a problem (ibid.). For example, especially older control officials might not speak English well enough to dare to attend such a training.71 Nevertheless, the trainings are consistently over-subscribed, whereby the high quality of 67  As stated by Interviewee F9. An example is the so-called ‘hygiene package‘ (Regulation No 853/2004 of the European Parliament and of the Council of 29 April 2004 laying down specific hygiene rules for on the hygiene of foodstuffs; and No 852/2004 of the European Parliament and of the Council of 29 April 2004 on the hygiene of foodstuffs. 68  Interviewee F12. 69  Interviewee F9. 70  This view was also unequivocally expressed by all interviewees. 71  Also pointed out by interviewees.

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the substance delivered by tutors is seen as key to this success.72 It has been noted that officials often would like to improve their know-how in a given area—rather than just being focused on compliance with EU standards— which is rendered possible through the high quality substance of the courses (which also include ‘hands-on’ training, such as practicing inspections by visiting food businesses). The programme is linked to the FVO audits since it is consulted in the selection of topics to be covered by the courses: the FVO can thus single out areas in which widespread shortcomings exist in control systems across countries. The BTSF team of the Commission then also asks the FVO to monitor whether the training courses are taking effect on the ground. The hierarchical audit mechanism has thus become intertwined with a training programme through which expertise of national officials and experts is spread horizontally to other national officials to build EU regulatory capacity. Overall, then, coordination among food control authorities has developed elements of mutual exchange between national officials, although these exchanges to some extent remain mediated by the FVO and the Commission. Especially, the BTSF programme, however, is firmly built on the expertise of experts outside these EU bodies. These developments need to be seen not only in the light of increased use of Regulations, but also the effect of resource constraints on the FVO and Commission auditing process in an enlarging EU, combined with increasing amounts of EU food safety standards: the FVO, for example, is trying to move away from auditing all Member States for all issue areas as this has become ­increasingly difficult in an enlarged EU. Rather, in future it will aim to audit a representative cross-section of countries in each issue area: “Our aim is to help them improve their systems. If we can do this without going to see all of them [the Member States], we will do so.”73 Mutual exchange mechanisms contained in overview reports, Commission reports on Member States’ MANCPs and the Better Training for Safer Food programme—which are building a transgovernmental network of sorts between national control staff—are thus a pragmatic response to building EU regulatory capacity in changed circumstances. In regard of the more horizontal forms of coordination, control officials in the Member States are being bound into a professional community, which does not

 F6, F8, F11, F12.  Interviewee F5.

72 73

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engage in extensive interactions outside this EU system. This is perceived as an added value by the involved national authorities. British and German authorities regard the engagement with transnational processes to be beneficial since the newly emerging forms of horizontal coordination between food control authorities provide them with additional access to expertise that helps them to oversee the extraordinarily complex food control systems in their country, for example, through the creation of a hitherto nonexistent professional community of food control officials.74

 The empirical analysis of this chapter was supported by the following interviews:

74

Interviewee F1, official of EFSA (Advisory Forum), food safety expert. Interview conducted on 17 January, 2014. Interviewee F2, official of EFSA, food safety expert. Interview conducted on 22 January, 2014. Interviewee F3, official of the BfR and representative to EFSA, food safety expert. Interview conducted on 3 February, 2014. Interviewee F4, official of the FSA and representative to EFSA. Interview conducted on 4 February, 2014. Interviewee F5, former official of the FVO, official of the European Commission (DC SANCO). Interview conducted on 5 March, 2014. Interviewee F6, official of the FVO. Interview conducted on 6 March, 2014. Interviewee F7, official of the European Commission and representative to EFSA (DG Sanco). Interview conducted on 10 March, 2014. Interviewee F8, official of Thuringia Ministry for Social Affairs, Family and Health (food controls). Interview conducted on 13 March, 2014. Interviewee F9, official of the European Commission (DG Sanco). Interview conducted on 13 March, 2014. Interviewee F10, official of the FVO, former official in food controls in Bayern and Hesse. Interview conducted on 13 March, 2014. Interviewee F11, official of the Hessian Ministry for the Environment, Climate Protection, Agriculture and Consumer Protection (food controls). Interview conducted on 17 March, 2014. Interviewee F12, official of the BMELV (Federal Ministry of Consumer Protection, Food and Agriculture). Interview conducted on 17 March, 2014. Interviewee F13, official at the FSA (food controls). Interview conducted on 19 March, 2014. Interviewee F14, official of the BVL (Federal Office for Consumer Protection and Food), food controls. Interview conducted on 4 April, 2014. Interviewee F15, official of the Ministry for Climate Protection, Environment, Agriculture, Nature and Consumer Protection of North-Rhine-Westphalia. Interview conducted on 9 April, 2014.

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5.4   Conclusions This chapter has demonstrated that UK and German authorities proactively support EFSA’s work by providing staff to its scientific panels despite the lack of formal provisions requiring them to do so. Moreover, national risk assessors and EFSA have developed extensive structures for the coordination of their scientific output that surpass what is formally demanded of them. Both are critical to building EU regulatory capacity, which would not be possible without the engagement of high capacity national regulators. The case study shows that they do so because the involved authorities perceive their support to add value to their own work: they operate in a context of high scientific uncertainty in which the authoritative nature of the science they provide is persistently questioned by NGOS, political actors, and the media. The public voicing of diverging scientific opinions by national authorities and EFSA is seen to undermine confidence in their work, as a result of which they value the coordination of their scientific output in the forum of EFSA. In their view, this helps them to maintain the authority of the scientific advice they provide and doing so remains a key regulatory challenge they face. This drives their proactive engagement with the coordination of scientific outputs, which, in turn, supports the scientific work of EFSA. Despite strategic support of EFSA by national regulators, however, the chapter also demonstrates that some national regulators, including the German BfR, contest the sustainability of the de facto resource transfer from them to EFSA. Some large capacity authorities perceive their cooperation with EFSA to be one-sided and would prefer a networked system in which the contribution of national officials is institutionally recognised. It is likely that the research-intensive nature of the BfR as an institution contributes to this perception of its resources being used by EFSA without appropriate recognition in the current system. Indeed, the similarly research intensive French authority ANSES takes a largely similar position to the BfR in this respect. The UK FSA, which does not carry out research in-house, has been less vocal in this regard. The chapter also demonstrates that in contrast to the maritime safety case (see Chap. 4), the inspections of an EU regulatory body (the FVO in this case) do not result in contestation on part of regulatory actors in the UK and Germany. Rather, German and British authorities perceive the FVO visits to their countries to add value to their own work. They perceive FVO inspections to provide them with a tool for improved coordination and control over highly decentralised administrative systems. This provides

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us with an excellent point of comparison to maritime safety, where the UK and German authorities contest capacity building through inspections by EMSA. This can be understood in the light of the different key regulatory challenges regulators face in these two sectors: in the case of maritime safety, the authorities in the UK and Germany evaluate EMSA’s inspection task from the vantage point of the international regime that they are highly engaged with, and which they perceive to be the most effective way to tackle the regulatory challenges emanating from a highly global industry. In the case of food control authorities, on the other hand, authorities in the UK and Germany assess the value of FVO inspections from a context in which they face the challenging responsibility of overseeing a very complex, decentralised industry and administrative apparatus. Different sets of regulatory challenges hence represent different bases from which national authorities assess the perceived worth of their support of EU bodies.

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DG SANTE. (2017). Country Profile: Germany. Brussels: Directorate-General for Health and Food Safety. EFSA. (2004, October 1). Adopted Minutes of the Tenth Meeting of the Advisory Forum. Rome. EFSA. (2006a, December 19). Strategy for Cooperation and Networking Between the EU Member States and EFSA. Parma: EFSA. EFSA. (2006b, November 30). Draft Minutes of the Nineteenth Meeting of the Advisory Forum. Helsinki. EFSA. (2008a). Focal Points Activities Report. Parma: EFSA. EFSA. (2008b, November 20–21). Minutes of the Twenty Ninth Meeting of the Advisory Forum. Copenhagen. EFSA. (2008c). Interim Review of the Strategy for Cooperation and Networking. Parma: EFSA. EFSA. (2008d, April 10–11). Minutes of the Twenty Sixth Meeting of the Advisory Forum. Rome. EFSA. (2008e, June 12–13). Minutes Twenty Seventh Meeting of the Advisory Forum. Oslo. EFSA. (2008f, September 18–19). Minutes Twenty Eighth Meeting of the Advisory Forum. Paris. EFSA. (2009a, November 25–26). Minutes of the Thirty Fourth Meeting of the Advisory Forum. Athens. EFSA. (2009b, February 18–19). Minutes of the Thirtieth Meeting of the Advisory Forum. Ljubljana. EFSA. (2012a). Technical Report: Information Exchange Platform (IEP), Annual Report 2012. Parma: EFSA. EFSA. (2012b). Technical Report of EFSA, BFR, FLI: Solving a Divergence of Scientific Opinions with Germany on the “Assessment of the human and animal BSE risk posed by tallow with respect to residual BSE risk”. Parma: EFSA. EFSA. (2013a). Minutes of the 49th Meeting of the Advisory Forum. Vilnius: European Food Safety Authority. EFSA. (2013b). Minutes of the 50th Meeting of the Advisory Forum. Parma: European Food Safety Authority. EFSA. (2014a). Minutes of the 53rd Meeting of the Advisory Forum. Venice: European Food Safety Authority. EFSA. (2014b). Minutes of the 54th Meeting of the Advisory Forum. Parma: European Food Safety Authority. EFSA. (2015a). Annual Report. Parma: European Food Safety Authority. EFSA. (2015b). Minutes of the 55th Meeting of the Advisory Forum. Parma: European Food Safety Authority. EFSA. (2015c). Minutes of the 60th meeting of the Advisory Forum. Utrecht: European Food Safety Authority. EFSA. (2016). Annual Report. Parma: European Food Safety Authority.

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EFSA. (2017). Minutes of the 65th Meeting of the Advisory Forum. Tallinn: European Food Safety Authority. EFSA (European Food Safety Authority). (2003, March 6, 7). Minutes of Inaugural Meeting of the Advisory Forum. Brussels. Ernst and Young. (2012). External Evaluation of EFSA: Final Report. EFSA and Ernst and Young. Ernst and Young (2017). External Evaluation of EFSA: Final Report. EFSA and Ernst and Young. ESCO (Scientific Cooperation Studies). (2008). Prepared by the EFSA Scientific Cooperation Working Group on Fostering Harmonised Risk Assessment Approaches in Member States. Question No EFSA-Q-2008-389. Issued on 3 December, 2008. European Commission. (2000). White Paper on Food Safety. Brussels: COM (1999) 719 final. European Commission. (2006). Better Training for Safer Food: Annual Report. Luxembourg: Office for Official Publication of the European Communities. European Commission. (2009a). Report from the Commission to the European Parliament and to the Council on the overall Operation of Official Controls in the Member States on Food safety, Animal Health and Animal Welfare, and Plant Health. Brussels: COM(2010) 441 final. European Commission. (2009b). Better Training for Safer Food: Annual Report. Luxembourg: Office for Official Publication of the European Communities. European Commission. (2012). Report from the Commission to the European Parliament and to the Council on the overall Operation of Official Controls in the Member States on Food Safety, Animal Health and Animal Welfare, and Plant Health. Brussels: COM(2012) 122 final. European Commission. (2013). Report from the Commission to the European Parliament and to the Council on the overall Operation of Official Controls in the Member States on Food Safety, Animal Health and Animal Welfare, and Plant Health. Brussels: COM(2013) 681 final. European Parliament. (1997). Report on alleged Contraventions or Maladministration in the Implementation of Community Law in Relation to BSE. Temporary committee of inquiry into BSE, rapporteur Manuel Medina Ortega. Brussels, A4-0020/97. Friends of the Earth. (2004). Throwing Caution to the Wind: A Review of the European Food Safety Authority and Its Work on Genetically Modified Food and Crops. Brussels: Friends of the Earth. FSA. (2011). Multi-annual National Control Plan for the United Kingdom January 2007 to March 2013: Progress in 2011 towards Implementation—Report for the European Commission. London: FSA. FSA. (2013). Food Standards Agency Annual Report and Consolidated Accounts 2012/13. London: FSA.

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FSA. (2016). Annual Report and Consolidated Accounts 2016–2017. London: Food Standards Agency. FSA. (2017). Annual Report and Consolidated Accounts 2016–2017. London: Food Standards Agency. FSA (Food Standards Agency). (2003, May 8). Minutes of the Open Board Meeting. Cardiff: Marriott Hotel. FVO. (1999). Annual Report. Grange: FVO. FVO. (2004). Annual Report. Grange: FVO. FVO. (2007). Annual Report. Grange: FVO. FVO. (2010). General Report of a Mission Series carried out in six Member States in the period November 2006 to March 2010 in order to gather Information regarding the Application of the Hygiene Regulations in Small Establishments producing Meat and Meat Products of Mammals and Dairy Products. Grange: DG Sanco, 2010-6150, MR final. FVO. (2012). Country Profile—The organisation of Food Safety, Animal Health, Animal Welfare and Plant Health Control System: United Kingdom. Grange: DG Sanco/2012/6424 Final. FVO. (2015). Country Profile: United Kingdom. Grange: Food and Veterinary Office. FVO (Food and Veterinary Office). (1999). Annual Report. Brussels: FVO. Groenleer, M. (2009). The Autonomy of European Union Agencies: A Comparative Study of Institutional Development. Delft: Uitgevererij Eburon. James Report. (1997, April). Food Standards Agency Report—An Interim Proposal by Professor Philip James. London. James, P., Kemper, F., & Pascal, G. (1999, December). A European Food and Public Health Authority: The Future of Scientific Advice in the EU. Lodge, M., & Wegrich, K. (2011). Governance as Contested Logics of Control: Europeanized Meat Inspection Regimes in Denmark and Germany. Journal of European Public Policy, 18(1), 90–105. Rothstein, H. (2006). From Precautionary Bans to DIY Poison Tasking: Reform of the UK Food Safety Regulation Regime. In C. Ansell & D. Vogel (Eds.), What’s the Beef? The Contested Governance of European Food Safety (pp. 153–179). Cambridge, MA: MIT Press. Vincent, K. (2004). ‘Mad Cows’ and Eurocrats—Community Responses to the BSE Crisis. European Law Journal, 10(4), 499–517. Vos, E. (2010). Responding to Catastrophe: Towards a New Architecture for EU Food Safety Regulation? In C.  F. Sabel & J.  Zeitlin (Eds.), Experimentalist Governance in the European Union: Towards a New Architecture (pp. 151–176). Oxford: Oxford University Press.

CHAPTER 6

Building an Integrated Banking Market While Containing Cross-Border Risks

Unsound banks pose a risk to financial stability, and thus societies as a whole. Increasingly, the inherent risks in this sector have taken on a cross-­ border nature. The most recent and clearest example of this is the global financial crisis of the late-2000s, which not only almost resulted in a breakdown of the global financial system, but has also had an impact on the real economy in many countries. This crisis exemplified that the societal burden of covering the costs of bank bail-outs remain a crucial problem in this regard (for example, Davies and Green 2008, p. 15f). Failing banks, however, are far from being a novel problem, and national regulatory regimes have traditionally attempted to mitigate risks emanating from banks (cf. Moran 1991; Braithwaite and Drahos 2000, pp. 81–142). The increasing cross-border nature of risk in the financial system became apparent in the failure of Herstatt Bank, a German bank that went bankrupt on 26 June 1974. On the same day, banks in other countries had released the payment of Deutsch Marks in exchange for US dollars (to be delivered in New York) to Herstatt. As the involved banks were operating in different time-zones, Herstatt ceased its operations between these payments. Consequently, the counterparty banks did not receive their US Dollars in exchange for their earlier payment. The incident marked the beginning of international regu-

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latory efforts in the field.1 It also triggered the first activity in the sector at the European level in order to implement the novel international regulatory agreement.2 The international regime has since remained a crucial driver of EU regulatory reform. However, cross-border issues of banking regulation and supervision are magnified in the European context: while the majority of banks in the EU are only active at the national (or even local) level, around 40 of the approximately 8000 credit institutions operating in the EU have large-scale cross-border operations (for example, see CEPR 2011), which, in turn, account for more than two thirds of the assets of the European banking sector. Hereby, banking supervisors of the original ‘home’ country and of the ‘host’ countries of subsidiaries of a given cross-border bank (such as HSBC or Deutsche Bank) need to collaborate if they want to obtain a picture of the health of this financial institution. In the EU, then, shared rules and practices of banking supervision are seen not only as a driver towards leveling the playing field in an integrated market, but also as a means to achieve greater safety in a context in which banks can freely operate across borders without restrictions, whilst regulatory and supervisory regimes remain fragmented. In order to promote the convergence of practices in banking supervision and to enhance more coordinated supervisory efforts of cross-border groups the Committee of European Banking Supervisors (CEBS) was established in 2003. A key task of this committee—consisting of representatives of national banking regulators and supervisors—was to agree on guidelines based on legislation in the field, especially with regard to the Capital Requirements Directive (CRD), which is based on the agreements struck in Basel. Aligning practices and intensifying coordination in order to enhance safety became a more pressing priority in the aftermath of the financial crisis, which revealed cooperation failures amongst supervisors. Hence, the EU-level involvement has become more formalised through the establishment of the European Banking Authority (EBA), which has taken over the tasks of CEBS, whilst its output—technical standards—has 1  The G-10 countries formed a committee as part of the Bank of International Settlements as a consequence. This was the beginning of the Basel Committee on Banking Supervision. For a comprehensive overview of the development and substance of the international framework (see Tarullo 2008). 2  Please note that this chapter is concerned with the management of prudential risk and does not focus on financial conduct and consumer protection since the former is the more pressing cross-border implications.

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taken on a legally binding role for national supervisors. Moreover, the EBA has attained more formal responsibilities to further coordination of cross-border banks in so-called ‘supervisory colleges’. While this chapter focuses on capacity building through the EBA, it is crucial to highlight that, since 2014 the European Central Bank (ECB) has taken on direct supervision of the largest cross-border banks in the Eurozone in the so-­ called Single Supervisory Mechanism (SSM), which has also been complemented by a Single Resolution Mechanisms (SRM) for failing cross-border banks as part of the building of a European Banking Union (Howarth and Quaglia 2013). National regulators, however, continue to play crucial roles in both, the SSM and the SRM. In order to facilitate the effective regulation of cross-border risks, the EBA brings together national banking regulators in order to agree on common technical rules, and to carry out shared supervision of cross-­ border banks (in case of countries outside the Eurozone since the introduction of the SSM). The EBA is a particularly small EU agency with around 150 staff members. Nevertheless, it has been tasked with the drafting of hundreds of technical regulatory standards, especially after Basel III was passed into EU legislation. Surprisingly, it has managed to live up to this responsibility (see Sect. 6.1). The EBA’s ability to deliver a staggering amount of output despite severe resource constraints is only explainable by the large amounts of work done by national regulatory officials in working groups and sub-working groups that are not part of the EBA’s formal structure. National banking regulators, meanwhile, are stuck between a rock and a hard place in the field of banking regulation and supervision: they face the key challenge of supervising cross-border banks (now partly mitigated by the ECB’s new responsibilities in banking supervision). They also necessitate some flexibility to adjust regulation to regulatory challenges that are specific to their domestic banking industry. For German regulators the key challenge is to combine effective oversight of one multinational giant (Deutsche Bank) with supervision of many small local savings banks under the umbrella of one set of regulatory standards. UK regulators, on the other hand, face the challenge of combining effective cross-­border banking supervision with the maintenance of the competitiveness of the City of London and the large financial sector of the UK (see Sect. 6.2). The chapter demonstrates that UK and German regulators are willing to invest considerable time and staff to technical-standard setting pro-

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cesses in the EBA because it provides them with an opportunity to influence outcomes. By doing so, they stand a chance of adjusting technical standards to the particular regulatory challenges they face at home. To retain this opportunity national regulators have indeed been keen advocates of limiting the staff numbers and authority of the EBA. This means that national regulators pursue their own interests while effectively enabling an EU agency to get its work done (see Sect. 6.3). An organisational approach explains why EU agency capacity is being purposefully limited by national regulators in this field, while EU regulatory capacity to manage cross-border risks is built nonetheless.

6.1   Technical-Standard Setting and Cross-Border Supervision in the EBA Increased cooperation in the field of banking in the EU started in the 1970s when the first principles agreed upon by what is now the Basel Committee were transferred into binding EC law.3 In order to ‘ensure the proper implementation’ of this Directive a committee of representatives from the EC Member States and the Commission with advisory functions was set up (the Banking Advisory Committee), to which the European Commission provided a secretariat.4 A major change in this transnational regulatory bureaucracy did not occur until the early 2000s, when the Banking Advisory Committee was superseded by the European Banking Committee which held its first meeting in 2005. Its members where mostly drawn from national finance ministries (and central banks or supervisory authorities in some cases) (see Quaglia 2008, p. 565ff; 2010, p. 48ff for a more comprehensive overview). The other half of the Banking Advisory Committee convened to the Committee of European Banking Supervisors (CEBS),5 consisting of national banking regulators, which held its first meeting in London in 2004. The EBC was responsible for defining broader objectives on the basis of EU banking legislation, and CEBS was to fulfil the responsibility of formulating technical guidelines on the basis of these broader standards. This institutional architecture derived from the Lamfalussy architecture originally adopted in order to drive forward halted integration in the securities sector (cf. European  First Banking Coordination Directive of 1977 (Directive 77/780/EC).  Ibid., Art. 11. It had acted as comitology and advisory committee. 5  Established by Commission Decision 2004/5/EC. 3 4

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Commission 1999; Lamfalussy Report 2000; Quaglia 2008, 2010). It was subsequently decided to adopt this structure in the fields of banking (as well as the insurance sector) in order to enhance the harmonisation of practices across persistently differing national regimes,6 in addition to providing the Commission with an expert advisory body.7 In order to carry out its tasks, London-based CEBS largely relied on national officials to handle the substantive issues in working groups convened from national authorities. High-level officials from national banking regulators and supervisors represented the ‘members’ of CEBS and were responsible for taking decisions on the output of the committee, whereby consensus was the norm, despite the possibility to apply qualified majority voting (Quaglia 2010, p. 49). CEBS members met three to four times a year at the highest level, whilst extensive substantive work in its expert working groups, largely carried out by national regulatory staff, was continuous. CEBS leadership was also drawn from national authorities on a non-full-time basis (the CEBS chair and vice chair), whilst the committee possessed a small number of its own dedicated staff: its London secretariat consisted of a secretary-general, deputy secretary-general, and three bureau members (all appointed from amongst and by the CEBS members, i.e. national authorities’ representatives).8 It hence had a miniscule administrative capacity with an annual budget of around 1.5 million Euros in 2004 and rising to 4 million Euros in 2010, paid for largely by the national regulators. An essential task of CEBS was to issue guidelines and recommendations for the practical application of shared high level standards, especially with regard to the implementation of the Capital Requirements Directive (the ‘CRD’, the implementing text of what was then Basel II).9 It also needed to respond to ‘Calls of Advice’ from the Commission.10 While the resources of CEBS and national authorities participating in it were put under strain by the intensity of output needed to be produced by CEBS, the structure reportedly worked quite smoothly in terms of ‘getting things done’ considering its small number of core staff (CEBS 2007a, b). Despite its small formal capacities, CEBS issued over 50 guidelines over the course of its

 Ibid., Recital 5.  Ibid., Recital 4. 8  Art.1,2 and 7 of CEBS Charter. 9  Art.2, Decision 2004/5/EC; Art.3, Decision 2009/78/EC. 10  Art.2, Decision 2004/5/EC; Art.2, Decision 2009/78/EC. 6 7

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existence, which would not have been possible without the work on these guidelines by national officials. While these CEBS guidelines took a non-­ binding voluntary role at first, a comply-or-explain mechanism was introduced in later years of its operations. Formally speaking the output of CEBS continued to be non-binding. However, Member States now had to be prepared to explain why they had chosen not to implement CEBS guidelines (or other measures).11 National authorities nevertheless continued to see CEBS rules as ‘soft’ in nature, while CEBS also often argued that full harmonisation of rules and practices might increase risk due to a lack of adaption to local circumstances (CEBS 2007a). The tension between effective tools for mitigating risk as opposed to achieving a level-­ playing field was tackled by CEBS in form of a strategy which tried to achieve both through principles-based rules: CEBS aimed to formulate its guidelines as broad objectives, rather than detailed rules (ibid.), attempting to allow for local adaption and a degree of harmonisation. Nevertheless, industry at times criticised these technical guidelines of being too detailed and not conforming with the idea of principles-based regulation, whilst pointing out a lack of convergence of rules and approach across countries in practice (Ipsos Mori 2007). CEBS also made use of its expertise to forge a pioneering role for a transnational body with regard to day-to-day supervision of cross-border banks. The committee carried out far-reaching peer review analysis about the functioning of supervision of cross-border banks in so-called supervisory colleges and drafted a guide of best practices on the basis of well-­ functioning examples of colleges (CEBS 2010). This analysis showed that—amongst other issues—differences in national reporting traditions, different appetites for risk and coordination problems constituted barriers to effective cross-border supervision of cross-border banks. In order to solve such problems in concrete situations, CEBS had already created a mediating role for the committee in earlier years for cases of persistent disagreement between national supervisors.12 Before long, however, the financial crisis of 2008 resulted in institutional change in the EU supervisory structures. The crisis and its handling provoked the feeling that the EU supervisory structures were inadequate,  Art.14, Decision 2009/78/EC.  See Protocol of the CEBS Mediation Mechanism, 25 September 2007. This mechanism then became more formalised in the 2009 reform of CEBS, see Art.19 and Art.21(4) in relation to supervisory colleges, Decision 2009/78/EC. 11 12

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as a result of which in November 2008 the Commission mandated a High-­ Level Group chaired by Jacques de Larosière to make recommendations on how to reform the system. The ‘de Larosière Report’ suggested establishing a ‘European System of Financial Supervisors’ (De Larosière 2009), which started operating in January 2011. It consists of the ‘European Supervisory Authorities’ (ESAs) and the ‘European Systemic Risk Board’.13 The ESAs are three supervisory authorities created for the supervision of each of the financial sectors, which is the European Banking Authority, EBA, in the field of banking.14 While located in London at the time of writing (autumn 2017), it is due to relocate to Paris as a result of the UK’s planned exit from the EU. The EBA represents a continuation of the work done by CEBS, albeit in a more institutionalised manner and with more wide-ranging tasks and authority. The role of the CEBS chair is now performed by a full-time Chairperson. A Management Board—responsible for steering the authority and its budgetary matters and consisting of the Chairperson and six members of the Board of Supervisors in rotating style-15 and a full-time Executive Director fulfil the task of the former CEBS secretariat and bureau.16 High-ranking leadership personnel of national supervisors or central banks form the Board of Supervisors of the EBA that decides on legally binding technical standards. The Board of Supervisors meets at least four times a year;17 however, the degree of deliberation here is limited as many meetings are relatively short teleconferences.18 Yet, at the lower working group levels, (as was also the case in the CEBS system) participants are fewer, especially 13  Regulation 1092/2010. The European Systemic Risk Board (ESRB) is another body charged with analysing risk that transcends national and sectoral boundaries. It is under the responsibility of the ECB, and is entirely concentrated on the task of macro-prudential supervision (whereas the ESAs need to focus on macro-, and micro-prudential, and conduct of business supervision) (Art.3, Regulation 1092/2010). In cooperation with the ESAs and national regulators the ESRB is meant to focus on the identification of systemic risk (Ibid., Art.3, Art.15.). 14  Regulation (EU) No 1093/2010 of the European Parliament and of the Council of 24 November 2010 establishing a European Supervisory Authority (European Banking Authority), amending Decision No 716/2009/EC and repealing Commission Decision 2009/78/EC. 15  Art.45, 47, Regulation 1093/2010. 16  Ibid.Art.51. 17  Art.1.1, Rules of Procedure of EBA Board of Supervisors. 18  See Board of Supervisor meeting minutes. This was also pointed out by interviewees B12 and B13.

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in the sub-working groups as many small authorities do not have the capacity to attend all working groups and send staff to regular meetings in London. The nature of rule-making has changed considerably under the EBA, which agrees on legally binding technical standards as opposed to the softer tools at the disposal of CEBS: a key task of the EBA is the setting of technical standards to specify key pieces of legislation in the field, especially the Capital Requirements Directive and Capital Requirements Regulation. The role of the EBA in this respect is to formulate ‘regulatory technical standards’, which are more detailed versions of the rules contained in the relevant legislation, a pertinent example of which is the definition of capital.19 The EBA also needs to agree on ‘implementing technical standards’,20 which set out how secondary legislation should be implemented, a crucial example of which are standards of formats in which banks need to report various kinds of information to supervisory authorities (ibid.). These draft measures need to be endorsed by the European Commission to become legally binding.21 The Commission can make amendments to the proposed measures in coordination with the agency. The Commission, however, is only meant to suggest changes in exceptional circumstances,22 and in practice it usually voices concerns at the working group level or in Board of Supervisor meetings, rather than when the measure has already been adopted by the Board of Supervisors.23 If a draft of a technical regulatory standard that was adopted by the Commission is rejected by the European Parliament or the Council the measure fails.24 The adoption of implementing technical standards is similar with regard to the interplay of the EBA and the European Commission; however, the European Parliament and the Council are not involved in the adoption of these measures.25 Moreover, draft measures of the EBA now express the decision of a single body—the EBA—rather than of CEBS, in which measures and recommendations could express the diverging views of members. Having taken on a formal character, the stakes for national authorities are now much higher than under the CEBS system. In its entirety the  Art.10, Regulation 1093/2010.  Ibid., Art. 15. 21  Ibid., Art.10, Art.15. 22  Ibid., Recital 23. 23  Interviewee B2 (BaFin official) and B4 (Commission official). 24  Art. 13(3), Regulation 1093/2010. 25  Ibid., Art.15). 19 20

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technical standards adopted by the EBA comprise the Single European Rulebook (or Single Rulebook) for regulatory standards of banking supervision in the EU. The new binding nature of rules also has the potential to lead to more ‘harmonisation’ on the ground, about the absence of which industry complained under the CEBS system (Ipsos Mori 2007). However, it is crucial to remember that CEBS and EBA guidelines/rules are addressed to national supervisors, not individual financial institutions, thus confirming the continued decentralised nature of the current system. On paper, the EBA now has the possibility to address decisions to individual banks if the responsible national authority fails to act in an emergency situation.26 However, at the time of writing it remains unlikely for the EBA to use this power as it remains to be seen what is evaluated to be an ‘emergency’, especially because such a decision would be taken by the Board of Supervisors: this would amount to national authorities deciding to surpass one of their sister authorities, knowing that this could potentially happen to their own authority in future. As the current Chair of the EBA (Andrea Enria) has said the EBA’s emergency powers are to be seen “more as a nuclear deterrent than an actual power” (House of Lords 2011). A similar logic applies to the EBA’s new power to act against a national authority if it has not (correctly) implemented EU law, whereby the EBA identifies implementation shortcomings, attempts to persuade the authority to apply the relevant law and if it fails to do so can submit the issue to the Commission (see Wymeersch 2012, p. 255ff for a detailed overview of the procedure).27 Coordination of supervision of cross-border banks in supervisory colleges has accrued a more formal nature and involvement of the EBA. The former mediation mechanism of CEBS has become formalised under the EBA.28 In order to facilitate an effective functioning of supervisory colleges, the EBA has also been granted the right to participate in college meetings and related college activities, such as joint on-site inspections carried out by national authorities.29 In this respect, the authority can ask a college for further deliberation if a ‘decision would result in an incorrect 26  Ibid., Art.18(4). In order for EBA to hold this power, the Council needs to declare an ‘emergency situation’ and can do so on the basis of a request of the European Commission, EBA or the ESRB (Art.18(1) and (2)). 27  Ibid., Art.17. 28  Ibid., Art.19. 29  Ibid., Art.21(1).

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application of Union law or would not contribute to the objective of convergence of supervisory practices’.30 In many ways, EBA’s work on supervisory colleges represents the pinnacle of EU regulatory capacity building in the field: the absence of a joint-up overview over a given cross-border banks financial health is a key risk when cross-border banks are concerned. The work of the EBA has not only focused on bringing home and host supervisors together in supervisory colleges but also on approximating supervisory practices enough through its Single Rulebook as well as Guidelines in order to enable such joint decisions. To that end it has compiled a ‘European Supervisory Handbook’ that provides guidelines on the joint supervision of cross-border banks. Next to the EBA’s key tasks in the abovementioned fields, it also gathers and analyses data on potential micro-prudential risks, which could endanger the stability of the financial system of the EU. To this end it, for example, carries out a regular stress-­ testing of credit institutions in the EU. While the EBA played a crucial role in facilitating the work of supervisory colleges until 2014, colleges of the largest Eurozone banks have since been superseded by the Single Supervisory Mechanism (SSM), in which the ECB acts as banking supervisor to these banks.31 However, much like in other examples of EU regulatory capacity building covered in this book, the ECB is only able to do this work though cooperation with national supervisors. As a result, the EBA’s focus on creating regulatory capacity through harmonised practices remains crucial and has possibly become even more crucial under the SSM. The SSM has been integrated into the governance structures of the EBA as it participates in EBA Board meetings as largest single banking supervisor of the EU. At the same time, the introduction of the SSM has also given the EBA a role in binding together non-SSM participants (largely non-Eurozone countries) with SSM participants and provides a potential avenue for non-SSM participants to see their interests safeguarded at the European level.32 The EBA’s role in this is particularly crucial given that the majority of crossborder banking groups have establishments within and outside the SSM.  Ibid., Art.21(2)(e).  Council Regulation (EU) No 1024/2013 of 15 October 2013 conferring specific tasks on the European Central Bank concerning policies relating to the prudential supervision of credit institutions. 32  Eurozone countries are required to participate in the SSM, while non-Eurozone countries can opt-in to it. At the time of writing no non-Eurozone member country had opted to do so. 30 31

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Due to the focus of this book on the role of EU agencies in building EU regulatory capacity, this chapter focuses on the role of the EBA, rather than the ECB. However, there is no doubt that the ECB has been absolutely crucial in fostering EU regulatory capacity in relation to the supervision of banks since 2014. Alongside with the SSM, we also saw the introduction of the Single Resolution Mechanism (SRM) in 2014, which has extended the EBA’s work further.33 This EU framework aims to ensure that creditors and shareholders, rather than taxpayers, pay the costs of bank failures of cross-­border institutions by establishing a harmonized framework for how national regulators take decisions on the resolutions of cross-border banks. In order to facilitate this, the EBA was tasked to issue technical standards for harmonising the management of resolutions, as well as granting it a role in resolution colleges. The EBA’s governance structure was also amended to include a Resolution Committee, it consists of the heads of national resolution authorities (often the national banking regulators) and a Chairperson. Its decisions and opinions are passed to the Board of Supervisors. As demonstrated above, the EBA was created with a significant workload, especially in relation to the creation of the Single Rulebook, and its workload has increased significantly over the course of its existence. Probably more so than for any other agency covered in this book, the EBA’s workload far outstrips its capacities (EBA 2012b, 2013, p.  12; 2016a, p. 13). The EBA started its work in 2011 with a budget of 12.68 million Euros and around 100 staff members, and as of autumn 2017 it is funded out of the European Commission budget (40%) and by national banking regulators (60%). By 2016, its budget had increased to €35.6 million and 169 staff members. While this represents a marked increase in resources over time, it is miniscule by most standards and the EBA is by far the smallest EU agency covered in this book in terms of its official resources. Indeed, it is often had to prioritise and delay some of its work due to resource limitations. Nevertheless, it has managed to live up to its tasks (European Commission 2014; European Parliament 2013) and it has produced a staggering amount of output with its miniscule resources. In 2013, for example, it submitted an astounding 57 technical standards 33  Regulation (EU) No 806/2014 of the European Parliament and of the Council of 15 July 2014 establishing uniform rules and a uniform procedure for the resolution of credit institutions and certain investment firms in the framework of a Single Resolution Mechanism and a Single Resolution Fund and amending Regulation (EU) No 1093/2010.

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to the European Commission. It also issued two guidelines, four recommendations to national competent authorities (NCAs) and six opinions to the European Parliament, the Council and the European Commission, which does not include the work it carried out beyond its standard-setting and advisory function (i.e. its analytical work). In 2015, it published 25 technical standards (11 further were delayed due to resource constraints), 19 guidelines, 22 opinions (with a further one delayed), 33 reports (one remained delayed), 2 recommendations, 1 peer review, 1 transparency exercise, 42 consultation papers, 2 discussion papers and provided 24 trainings for national officials (EBA 2015, p. 23). Indeed, by the end of 2016, the EBA had completed 146 technical standards and 64 guidelines in total and was in the process of moving from creating the Single Rulebook to monitoring its implementation. The ability of the EBA to produce this output and to build EU regulatory capacity in the process would not be possible if national regulators were not willing to support the work of the EBA in its working and sub-­ working groups which flesh out technical standards. The support of national regulators in providing staff to its working groups hence remains absolutely crucial for fulfilling its mandate (especially in regard of writing technical standards) (EBA 2012b, p. 9; 2014, p. 10; European Commission 2014; European Parliament 2013). As a UK official has noted “given the range of tasks that the EBA and the other European Supervisory Authorities have been asked to do, the only way they can possibly accomplish them is to continue to bind in the national supervisory authorities into their ­workings” (as expressed in a House of Lords Committee hearing by the then Deputy Chair of the EBA and Member of the Executive Committee of the FSA Thomas Huertas, House of Lords 2011, p. 15). And as stated by Andrea Enria, Chairperson of the EBA: I also have to recognise that we wouldn’t have been able to achieve our objectives without the help of the national supervisory authorities, which have contributed to the technical work and often have positively responded to our calls for support, dedicating experienced staff to work with us. (EBA 2013, p. 10)

National regulators are thus pivotal actors in the building of EU regulatory capacity and this book suggests that they would not be willing to do so if they was not a significant gain attached for them in doing so. Indeed, in the field of banking national regulators have purposively tried to limit the authority and resources of the EBA in order to be able to influence its

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outputs. The wish to limit the workforce of the EBA by some authorities (such as the German and UK banking regulators) is seen as key in order to influence the end result. “The eternal question of the staff” (as a European Commission official put it) needs to be seen in this light.34 The ‘eternal question’ of the EBA’s staff, resources and authority has entered a new phase at the time of writing as the European Commission tabled a proposal to expand the capacities of the European Supervisory Authorities in the autumn of 2017. The EBA has also become more vocal in expressing its frustration about its resource limitations: We have been experiencing excessively tight budget constraints, especially compared to other EU authorities operating in the same field and financed by the industry. These constraints have often hampered the timely delivery of our mandates, also in important areas. Strategic priorities, such as the provision of integrated European training for examiners, with common curricula and certification, have been put on the shelves because of unreasonable budgetary constraints, even when the competent authorities were willing to pay for the service. Therefore, it would be important that the funding structure of the EBA is reviewed either by creating an independent budget line in the EU budget, or by introducing direct funding from the industry. (As stated by Chairperson Andrea Enria, EBA 2016a, p. 13)

High capacity regulators, such as the German regulator, however, remain vehemently opposed to proposals that foresee an expansion of staff and authority for the EBA, while advocating for the EBA to be fully funded through  the EU budget (BaFin 2013, p.  36; 2014, p.  42). In order to understand how and why EU regulatory capacity in banking supervision is built in this cross-fire of bureaucratic politics dynamics we need to delve deeper into the challenges UK and German regulators face (next Section) and into how they interact in the forum of the EBA (the third Section of this chapter).

6.2   Key Regulatory Challenges for UK and German Regulators In the course of its history, the regulation of financial risk has broadly speaking aimed at ensuring the stability of the financial system. This is invariably connected to the aim to protect creditors’ savings in banks and  Interviewee B4.

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to  protect individuals and companies who hold securities or insurance deals from financial loss caused by misconduct or instability of financial institutions. Moreover, the regulation of financial risk has also needed to go beyond the protection of individuals from financial loss since the safeguarding of the stability of the financial system is closely tied to the protection of the real economy. This ‘systemic risk’ connected to the banking, securities and insurance sector means that financial instability can adversely affect people in a much broader way, such as rising unemployment as a result of an economic slowdown caused by a financial crisis. Since the 1930s, the regulation of banks has mostly evolved through bank failures and financial crises. These regulatory and institutional responses to banking failures and financial crises have largely been found at the national level, and these structures indeed remain socially embedded at the national level (for example, cf. Braithwaite and Drahos 2000, p. 103; Müller 2002, p. 167). However, the cross-border nature of financial institutions and of financial markets renders effective regulation through national regulatory regimes difficult. The contagion we observed from American to European banks which were exposed to US subprime lending in the recent financial crisis are an infamous example in this regard (for example, Lannoo 2008, p. 7). This crisis showed that the state of international integration of financial markets was and is not matched in regulatory terms, in which national regimes still matter greatly (for example, cf. Braithwaite and Drahos 2000, p.  103; Müller 2002, p.  167). On the micro-prudential level, banking supervisors of a bank that has cross-border operations cannot fully assess the financial soundness of an institution without an insight into their operation in other countries. Regulators, including the UK and German banking regulators, are hence faced with the challenge of effectively supervising cross-border institutions while safeguarding their national regulatory regimes and practices that are deeply institutionally embedded. Usually they are at least partially specific to the economic importance as well as the risks posed by the domestic banking sector. This section thus elaborates on the deeply embedded regulatory regimes of the UK and German regulators which they aim to defend while also needing to be able to supervise cross-border banks operating in their territory effectively. Unlike in other countries (like the US and Germany), the financial industry was not publicly regulated in Britain until the 1980s. The predominant attitude beforehand had been that the most effective control of banks and the financial industry was achieved through self-regulation by the practitioner community (Moran 1991). The Bank of England at that

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time was a private institution which played the role of a ‘first among equals’ (Roselli 2012, p. 17ff), essentially acting as the protector of the interests of the City of London (Moran 1991). While Wall Street had become the center of the global financial markets, this absence of public intervention in the UK was popular with American firms and thus eventually helped to revive and subsequently sustain London as a major financial center with great importance to the overall UK economy (ibid.). The 1980s then brought ‘codification, juridification and institutionalism’ (ibid., p.  65) to the financial sector, especially through the Financial Services Act of 1986. Over the decades the Bank of England, which was formerly nationalised in 1946, had become more closely intertwined with Whitehall and had gradually moved towards becoming a public institution (ibid., p. 76). The ensuing system still contained a large dose of private oversight (ibid. 1991, pp. 57–61), which was not to change fundamentally until 1997. When New Labour won in 1997 it announced the creation of a single financial regulator, which was to become the Financial Services Authority (FSA, established under the Financial Services and Markets Act 2000). For the first time in its history the UK possessed over an public authority to oversee all aspects of the financial system. As a result of the run on Northern Rock, the subsequent bail-out in 2007, and the bank bail-outs following the 2008 crisis, the public debate on the adequacy of financial supervision in the UK began to re-emerge. The government decided to restore the Bank of England with some responsibility for financial stability in the Banking Bill of October 2008. This route was further pursued when the coalition government which came to power in 2010 decided to disintegrate the FSA and structure banking supervision along the twin-peaks model: as of April 2013, the Financial Conduct Authority (FCA) has been policing financial institutions with regard to conduct of business regulation and the Prudential Regulatory Authority (PRA)—which is part of the Bank of England—has taken up the responsibility for prudential supervision of all financial institutions (i.e. across the banking, securities and insurance sectors). The Bank of England is in charge of macro-prudential supervision through its Financial Policy Committee.35 In Germany, as in other countries (but unlike in the UK), the first comprehensive oversight mechanisms over banks were put in place as an immediate consequence of the 1931 banking crisis (Bruckhoff 2010, p. 189).  See Financial Services Act 2012.

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In 1934 a comprehensive approach to banking oversight was introduced with the ‘Reichsgesetz über das Kreditwesen (KWG)’, which put all banks (with the exception of public financial institutions) under scrutiny by public authorities. Over the following decades, the most controversial aspect in the field was the division of supervisory tasks carried out by the federal level and the role played by Länder authorities, which had traditionally supervised particular types of banks. This resulted in continued conflict between Länder and federal governments, one underlying reason being the very specific banking system of Germany: although much has changed today due to EU legislation, Germany still possesses over idiosyncratic networks of ‘public banks’, such as ‘Sparkassen’, ‘Landesbanken’, as well as specific forms of co-operative banks and ‘Kreditbanken’. Due to the above issues, a reform of the KWG was perceived to be necessary, which resulted in the establishment of a new federal authority for banking oversight (‘Bundesaufsichtamt für das Kreditwesen, BaKred) in 1961. BaKred was hitherto in charge of supervising all financial institutions (ibid. 2010, p. 195). In practice BaKred determined regulatory policy and the newly created Bundesbank carried out on-site supervision of banks (Müller 2002). From 1992 onwards, changes to the BaKred were often driven by EU legislation. The German government (a SPD-Green coalition) announced the creation of an integrated supervisory authority, the ‘Bundesanstalt für Finanzdienstleistungsaufsicht‘ (BaFin) in January 2001. This new institution merged the three existing regulators, BaKred, BaWe (securities regulator), and BaV (insurance regulator) (Westrup 2007, p.  1101). Although BaFin is usually classified as an ‘integrated’ regulator, the authority indeed remains divided along the lines of the three financial sectors. Even geographically the different sections of BaFin remain detached: whereas the majority of the authority is based in Bonn, the securities division is based in Frankfurt am Main. In this sense, hence, BaFin was never truly similar to the FSA in its institutional set-up. The banking division of BaFin is further subdivided into units which oversee different kinds of banks (such as large banks and Landesbanken/Sparkas sen), and a unit devoted to banking oversight principles/policy. The heterogeneity of the German banking system is hence reflected in the regulator’s organisational structure. The banking crisis of 2007 and 2008 sparked a renewed public debate about the model of integrated financial oversight as institutionalised in the BaFin (cf. Lannoo 2008, p.  24). However, no plans of fundamental institutional change comparable to the British reform effort resulted from this.

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The long-standing caricature of the regulatory philosophies of regulators in these two countries usually displays the British way of doing things as ‘light-touch’ as opposed to a strictly rule-bound German regulatory style.36 This picture is perhaps firmly rooted in the past; indeed, the regulatory and supervisory structures for the banking sector in the two countries have become more similar as a result of international and EU harmonisation efforts (see, for example, Lütz 2004) and due to some shared dominant ideas of what constitutes good practice: as already mentioned, both regimes introduced integrated financial regulators around the start of the new millennium, and both became keen defenders of principles-­based regulation. Principles-based regulation uses broad principles—rather than detailed rules—to guide regulatory behaviour (for further discussion, see, for example, Black 2008; Black et al. 2007). Nevertheless, implementation of international and supranational rules necessarily happened under adaptation to specific national circumstances (Lütz 2004). The evolvement of both regimes has been very dynamic and escapes straight-forward classification into ‘light-touch’/interventionist or principles-based/rules-based labels. This is especially so due to the complexity of establishing a predominant regulatory approach or ‘philosophy’ in each country: views of national regulators about how best to manage risks have consistently interacted with and have been shaped by the ideas of other national regulators, especially in the forum of the Basel Committee. At the same time, political pressure on national regulators in this field is significant. This has been particularly visible in the aftermath of the crisis of 2008. In that regard, the discussion about the relative importance of capital adequacy requirements and calculable risk measures on the one hand, and ‘softer’ qualitative risk management tools (i.e. the evaluation of the internal control system of banks, the qualifications of the people in charge etc.) on the other hand has been one of the main issues which exemplify the differing regulatory philosophies of national authorities. The so-called Basel II agreement represented a crucial juncture from its predecessor as it introduced ‘qualitative risk management’ measures (Tarullo 2008; also see Lütz 2004, for a brief explanation). A crucial underlying assumption hereby was that ultimately banks know how to manage their own risks and that supervisors ‘merely’ need to verify the adequacy of their internal control systems. Basel III, on the other hand, has firmly re-established and 36  For an overview of the development of the German and British regimes (see Moran 1991, 1994; Müller 2002).

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expanded the usage of quantitative risk measurements, thereby especially establishing it in the area of liquidity risk measurement.37 In a nutshell (and hence simplifying matters), in the recent past the British approach has been focused on capital adequacy and quantitative measures,38 whereas BaFin has emphasised the importance of non-­quantifiable risks and qualitative risk management approaches.39 The emphasis on new quantitative measures in Basel III (Brzenk et al. 2011) is thereby not necessarily aligned with the BaFin’s risk management paradigm (ibid.; also see BaFin 2013b, p. 11f); whilst, however, these provisions where once again ‘watered’ down in favour of the German—rather than the British approach—in the EU negotiations about the CRD IV (Howarth and Quaglia 2013b). In this context, British and German supervisors have not necessarily agreed on the use of own models and calculations to verify the results delivered by banks’ models and the data provided to supervisors by the industry in this regard. Contrary to its ‘light touch’ image, the FSA engaged in creating its own risk models to verify the results of banks’ internal models after the crisis. In this regard, it was also prepared to demand from a bank to hold more capital if its own model diverged from the results of the bank’s calculations. These practices have become more prevalent over time in the UK model, most clearly expressed in a move away from the reliance on banks’ internal models in Basel III. The PRA is also explicitly following this route, which partly overlaps with its emphasis on capital adequacy (and hence quantitative approaches to the management of risks emanating from unsound banks) and the importance of business model analysis on part of the regulator (cf. FSA 2012; PRA 2013). This approach hence implicitly assumes that in some instances the supervisor is better able to assess the risks posed by the particular business model of a financial institution than this financial institution itself (cf. PRA 2013, p. 17). 37  See Liquidity Coverage Ratio (LCR) and Net Stable Funding Ration (NSFR) under Basel III. Interviewees have at least partly attributed this to the political level which has come to see banks as incapable of managing their own risks after the crisis. 38  Interviewee B2, B5, and B6. Also see FSA speeches, such as Adair Turner’s Mansion House Speech on 20 October 2011, or Hector Sants’ speech at the Cityweek Conference on 7 February 2012. Also see Ferran (2012, p. 18). In this regard, the UK’s approach (especially after the crisis) has been aligned with the US and Switzerland (which is also characterized by a financial ‘giants’ that are very large in relation to the economy of the country as a whole) (ibid.). 39  As, for example expressed in BaFin’s tools in ‘MaRisk’ (‘Minimum requirements for risk management’) which assesses a bank’s risk management processes. See, for example, AK BA (2010, p. 6).

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The BaFin approach has been largely in contrast to this, whereby a driver behind its practices has been the idea that banks are generally better at assessing their own soundness than supervisors. Explicit calculations to verify data provided by banks were only carried out in a focused and targeted way if concrete doubts about the bank’s internal control processes emerged. In this regard, BaFin has taken a process-oriented approach, in which the evaluation of the competence of a bank’s staff and their presumed link to the quality of their internal control systems has been key. This BaFin ‘philosophy’ of how safety is best achieved (i.e. by verifying the internal control systems of banks in a qualitative manner) is hereby intertwined with the qualifications of its own staff and the relationship to the industry: many staff members have a background in legal training and do not have experience of working in the banking sector. Complex modeling and ‘judgment-based’ forms of supervision often require technical expertise and intimate knowledge of business models, which is usually gained by working within the industry. In the UK, it is indeed common to gather experience within the regulator and the industry, and staff might be seconded for this purpose. This is seen as necessary for effective risk management by the industry and the regulator (Black 2012, p.  1046), which is indeed quite different in Germany. The ‘revolving door’ principle is frowned upon in the German context; instead, a clear delineation between governmental authority and the industry is seen as vital (implying that this is seen to be necessary for effective risk management) (for an overview of the historical development in this regard, see Lütz 2004). Whereas transitions from senior BaFin and Bundesbank staff to the industry are not unheard of, the public debate generated by this should not be underestimated and the likelihood of a subsequent move back into the supervisory realm is much lower.40 However, the due to a relative shift towards the principle of the PRA model in Basel III, EU legislation and EBA technical standards, BaFin has come under increasing pressure to move into the direction of this approach. Generally speaking, the PRA has been faced with the challenge of reestablishing the good reputation of the effectiveness of financial regulation 40  For example, when the former head of BaFin’s banking unit (Helmut Bauer) left the authority to work for Deutsche Bank in regulatory affairs, the German media reported on this with a critical angle (see Spiegel Online, 19.01.2008, ‘Pikante Personalie: BankenAufseher wechselt zu Deutscher Bank’). Reportedly, this was also heavily criticised in the German industry as a former supervisor—who is familiar with business models etc. of banks—was going to work for one of their competitors.

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in the UK after the financial crisis, while also safeguarding the competitiveness of the City of London and the financial sector as a whole, which is a crucial contributor the UK economy. It is estimated that the financial sector accounted for around 9% of UK GDP in 2008, having increased sharply from 6% in 1998, while settling back at around 6.5% in 2017 (in comparison, in Germany this figure has been relatively stable at around 4%). BaFin’s regulatory approach, in turn, is also embedded in a very particular industry structure, in which a few ‘giants’ (especially Deutsche Bank) exist alongside many small and mid-sized savings and co-operative banks (see, for example, IMF 2011). Demands of German small local savings and co-operative banks are routinely a key issue at the international and European level negotiations (Quaglia 2010; Tarullo 2008, especially p. 69, p. 115ff, Verdier 2009, pp. 130–143).

6.3   Building EU Regulatory Capacity in the Defence of National Practices The analysis conducted for this chapter finds that high capacity national regulators support the work of the EBA because it helps them tackle the double challenge of creating a system in which they can supervise cross-­ border banks more effectively while allowing them to defend the interests of their banking industry and their regulatory philosophies. They have been adamant to contain the staff numbers of the EBA in order to be able to do so. High capacity regulators—such as the UK and German ones—attempt to exert this influence by supplying high numbers of staff with authoritative expertise on specific matters to the EBA working groups. In EBA working groups, they try to convince each other of the merit of their respective ideas and practices. The first part of this section elaborates on capacity building through technical standard-setting in the forum of the EBA (and previously CEBS). The second part analyses capacity building of cross-border banking supervision in supervisory colleges under the leadership of the EBA. 6.3.1  Building Regulatory Capacity Through Harmonised Standards National regulators staff the working groups of the EBA in order to flesh out technical standards. These, in turn, build EU regulatory capacity by providing for more harmonised practices which can close regulatory loopholes and which facilitate the joint supervision of cross-border banks. The

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role of EBA staff (and previously CEBS staff) in this process is to facilitate the different views represented within this deliberative process in order to ensure that agreement is reached. In this regard, they have adopted an approach of strategic pragmatism to ensure timely and workable solutions. This pragmatic approach underpins the building of EU regulatory capacity building by this small EU agency. Tools used in this regard include an early identification of contentious issues, re-phrasing issues in an uncontroversial manner or the proposition of interim solutions. The EBA has focused on creating consensus, rather than intervening into the on-going debate about the most effective regulatory tools and supervisory approaches. EBA staff make use of the resources at their disposal in order to facilitate consensus, such as their better overview and information of positions across all national regulators. While clearly advocating the benefits of more integrated regulatory and supervisory system in the EU, British and German regulators have been adamant on securing influence on the technical rule-making process in CEBS and the EBA, especially under the raised circumstances of binding technical rules in the EBA regime: In […] CEBS BaFin sings as part of the choir of European supervisors. However, when the accommodation of European harmonisation with German interests is concerned, BaFin sometimes sings an audible solo. (Bafin 2003, p. 3) [The Capital Requirements Directice IV regulation package] is currently one of the most important topics in banking supervision. In the years ahead, the EBA will be having to draft technical standards for all the supervisory processes—for the Capital Requirements Regulation alone, there will be more than 100 of these. We must ensure that legitimate German interests remain safeguarded here [emphasis added]. (BaFin 2012a, p. 28) […] I cannot stress enough the importance of the changes to the European regulatory architecture. The PRA […] [is] now operating as an extension of a broader European policy-making framework. Therefore, the effective engagement with the European process is paramount to their success. Critically, we need to win the argument in Europe that supervisors need to have firm-specific discretion and that regulations need to be tailored towards local circumstance. If this does not happen, the European framework will become discredited.41

41  Speech by Hector Sants, then Chief Executive of the PRA, to the BBA entitled ‘The Future of Banking Regulation in the UK’, BBA Annual Conference, Guildhall 2011.

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In this regard, officials note that technical rule-making in CEBS/the EBA is an arena in which ‘lost ground’ at the Basel or Council level can be attempted to be redeemed, as expressed by a BaFin official: Even if you had to give in when a few broader issues are concerned, you can still make up for that when agreeing on the detailed questions.42

Regulators such as BaFin and the PRA (and previously the FSA) have differing views on how best to manage risk and supporting EBA’s technical standard-setting work provides them with an opportunity to influence them in their favour. National officials report that in order to convince other supervisors of their approach it is vital to present a well-argued, coherent, workable idea. This, in turn, is usually only possible if a national supervisor has particular expertise in an area, for example, due to working on an issue on a national basis before it becomes an issue at the European level. In this regard for example, British regulators could convince others of the idea of using regulators’ own models to verify banks’ internal stress tests in the Basel III negotiations because they were able to show a concrete model they had developed. “Once you present a coherent model, it will be very difficult for anyone else to counter this unless you form an immediate counter coalition”.43 In order to present a coherent idea, interviewees agreed that one needs to write a substantial part of the measure to be adopted: “only he who writes stays in the process”.44 This, in turn, usually requires the need to chair a working and/or sub-working group on the matter. The FSA/PRA and BaFin have made their desire to occupy these positions explicit: Let us be clear: There is no alternative to the European System of Financial Supervisors. Europe is a common economic area for which we will need in due course a common rule book. This is also in the interest of the German financial industry. […] In this connection it is important for us to bring our influence to bear in all ways and to contribute our expertise: for example in the Boards of Supervisors, through working together in working groups in which the technical standards are developed, by occupying top positions and by providing the best possible advice to the chief political negotiators in the

 Interviewee B2.  Interviewee B5. 44  Interviewee B2, the German original was expressed as “wer schreibt, der bleibt”. 42 43

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Council. […] BaFin will assist the work of the ESAs and the ESRB, but will also keep a critical eye on them. (BaFin 2012a, p. 28)45

(Sub-)working group chairmanships are distributed according to expertise of specific individuals or national authorities. While officials from smaller authorities, such as the Dutch, Belgian, Finnish and Swedish authorities (and to a more limited extent the Irish regulator) have been in crucial positions over the years as well (for example, CEBS 2008, p. 32; 2009a, p. 55), officials from the ‘Big Five’ (Spain, Italy, France, Germany and the UK) are the most frequent holders of such positions. This is as result of their large expertise (in turn related to their substantial financial industries) and the related administrative capacities: the expertise expected to chair a working group usually requires the ability to evaluate an issue (such as the definition of capital or a common reporting framework) from various angles, which is often not feasible for an individual. In this regard, officials rely on work conducted by colleagues in their home authority for this purpose. As expressed by a UK official “those Member States […] that are willing and able to put capable staff on the working parties have a considerable opportunity to influence the results” (as expressed by the then Deputy Chair of the EBA and Member of the Executive Committee of the FSA Thomas Huertas, House of Lords 2011, p. 15).). This is usually not possible for smaller authorities. However, it is reported that deliberate attempts are made to give chairmanships to smaller authorities, especially from the ‘new’ Member States (for example, (CEBS 2008, p. 32). Issues of contention are hence identified and resolved through the working group process, during which the text is passed back and forth between sub-groups and working groups. Usually an agreement has hence been struck once the text reaches the potential voting situation amongst the EBA’s Board of Supervisors. If the Commission worries about the compatibility of a measure with EU law it will usually voice its view at the working group stage, rather than when the EBA submits a draft measure to be endorsed by the Commission to become legally binding. CEBS/ EBA staff, in turn, have not been active brokers in this process in the sense of advocating the value of some risk management tools; rather, they have taken a pragmatic approach to establishing agreement between national officials, especially due to the necessity to come to a decision under set 45  Also, see AK BA (2010b, p. 8), AK BA (2011, p. 8) for Germany, and FSA (2010, p. 12) for the UK.

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timeframes: in this regard, areas of contention have, for example, been “re-phrased until the problem disappears”.46 Alternatively, the lowest common denominator has been found or principles broad enough to allow discretion in the tools to be used to reach an end have been formulated. For example, in its Guidelines of Hybrid Capital Instruments (which refers to instruments which have features of equity and debt, hence ­requiring clear definitions of when they are deemed to be capital by regulators) broader principles were agreed upon instead of clearly delineated rules with regard to the ability of hybrids to absorb losses. This decision was justified by a cost-benefit analysis of principles as opposed to ‘rules’, thereby showing a crucial role for CEBS staff and working group chairs (and now the EBA staff) to prompt a reasoned weighting of different options available when controversial issues are concerned without taking an explicit stance rooted in a particular regulatory philosophy. The EBA thus make use of the resources available to it to the foster agreement that is necessary to build EU regulatory capacity under tight resource limitations. A key strategy on part of CEBS and EBA staff has also been to identify contentious issues at the very beginning of the process of devising an output in order to avoid any last minute difficulties in adopting a text, as done in the drafting of the CEBS’s technical advice to the European Commission on options and national discretions, which aimed to identify possible areas in which the granting of national discretions in the CRD could be reduced: the working group started with a thorough investigation of the national discretions in place in all countries in order to identify precisely what the key issues of contentions were from the very beginning.47 This, however, did not succeed in relation to BaFin’s demands with regard to the supposed specificities of the German banking sector: the need to keep a special status for German (and Austrian) co-­ operative banks was a central point of disagreement when CEBS was drafting this technical advice, whereby no agreement could be reached and the German position remained isolated without resolving the issue. The CRD IV now requires the specific needs of co-operative banks to be taken into account in an EBA Regulatory Standard on Own Funds Requirements, which is specifically crucial for BaFin, which has been vocal in advocating a definition of capital which does not disadvantage the specific business

 Interviewee B2.  Interviewee B9.

46 47

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model of its cooperative banks.48 Extensive support of the EBA’s work hence provides value to BaFin by ensuring that it does not have to adopt regulatory practices that are incompatible with the interests and needs of the German banking industry as well as its own regulatory philosophy. Staff of the EBA have also offered guidance and interim solutions in the longstanding unresolved debate amongst experts as to how to define capital (EBA 2012b). Moreover, the EBA has offered interim solutions when a particularly contentious issue is concerned, namely supervisory and financial reporting (for example, see EBA 2011, p. 3).49 The attempt to harmonise supervisory and financial reporting from banks to supervisors across the EU (COREP and FINREP) exemplifies the difficulties of building EU regulatory capacity when different national regulatory paradigms, industry structures and institutionalised norms are involved.50 A key matter in this regard has been the large differences in national traditions in the field of national reporting, which are tied to accounting standards, and an emphasis on quantitative or more qualitative approaches to banking supervision. For example, when CEBS was working on formulating the Guidelines on common supervisory reporting (COREP), the direction that was taken relied on a quantitative approach, which has been seen critically by regulators which favour more qualitative tools, such as BaFin.51 Although agreement on the reporting guidelines could be reached, it needs to be taken into account that decision-making in CEBS still happened under a different pre-text due to the non-binding nature of its output: whereas Guidelines could be agreed upon, implementation across countries varied. The FSA only implemented COREP and FINREP to a very limited extent at the time (CEBS 2007a, especially p.  46) which allowed it to collect significantly fewer data points than other national authorities (FSA 2007, p. 7, p. 24). This was more in line with its overall risk management philosophy at the time (FSA 2006, p. 12f, p. 33). BaFin implemented COREP partially but refrained from making FINREP mandatory for its industry (BaFin 2012b, p. 5), it had especially spoken out 48  See Recital 4 of Regulatory Technical Standard on Own Funds Requirements. Also see AK BA (2009, p. 4), AK BA (2010, p. 6) for German regulatory position. 49  Also, all interviewees pointed this area out has being particularly difficult to come to agreements on. 50  COREP refers to the common reporting of supervisory information, such as the reporting of own funds by banks to supervisors. FINREP refers to the reporting of financial accounting data (including the balance sheet) by banks to their supervisors. 51  Interviewee B12.

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against the heavily prescriptive rule-like nature of the framework as a form of unacceptable “maximum harmonisation” (BaFin 2005, p.  45f). The reform of COREP and FINREP fleshed out in the forum of the EBA has thus required radical changes in reporting practices in countries like the UK and Germany (but much less so in countries such as Belgium which implemented most aspects of these frameworks in previous years). In order to break the deadlock in the drafting of these contentious standards, the staff of the EBA initially advanced a pragmatic interim solution when FINREP was concerned, which permitted the issue to be decided at a later point while the Commission prepared new legislative proposals on the matter (EBA 2011, p. 3f). While the staff of the EBA has pursued a strategy of pragmatism in order to foster agreement on technical standards as a means of building EU regulatory capacity, it has also been willing to challenge the role of national regulators. Its Chairperson Andrea Enria has been vocal in pushing for less discretion in rules and more convergence in practices (for example when the supervisory review process under Pillar 2 of the Basel Agreement is concerned).52 This potentially opens a new fault-line between the EBA staff, on the one hand, and national officials on the other hand. Tasks of the EBA in which the authority acts as a source of expertise in its own right—such as its role in the ‘stress-testing’ of banks— mean that there are possibilities for establishing its ‘actorness’. However, in order to carry out stress-tests of banks the EBA remains dependent on data provided by national authorities, which has contributed to the problems occurring in the first rounds of these exercises. The 2011 stress-test of the EBA was specifically controversial and its results were questioned by the banking sector and experts in the field. As many German banks showed to have a shortfall of capital in the test, the results were especially challenged by the German industry and regulator. The methodology to be used in these stress tests has remained a source of tension between countries favouring stricter or more lenient tests (House of Lords 2011, p. 13). This, in turn, had the effect of lowering the EBA’s reputation as hub of expertise and it took several more rounds of stress-testing to recover these reputational losses. It also resulted in the decision of the EBA to cancel its 2013 stress-test due to differences in national approaches (and hence the data delivered to the EBA to carry out stress-tests) in 52  For example, see speech by Andrea Enria entitled ‘The future of EU regulation’, 29 June 2011, London.

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order to await further harmonisation as a result of recent legislative efforts and the Banking Union. Nevertheless, it has become clear that the authority does not shy away from making use of gathered data to perform its own analyses as a means to further its official objectives (such as harmonisation of practices across countries). This has, for example, been expressed in the exercise of calculating the capital requirements of the same bank by using different approaches as found in the practices of national regulators, thereby showing that these can lead to very different requirements for banks (Enria 2012). Interviewees indeed commented upon the ‘self-confidence’ of the EBA as an actor in its own right. However, cthe restrictions posed on the EBA in terms of resource constraints in a time of high work pressure are likely to restrain potential fault-lines between the European authority and its national counter-parts. Increasing staff numbers for the EBA would be likely to change this, whilst, however, it is doubtful that large national supervisors will change their view on “the eternal question of the staff”.53 After all, national regulators like the PRA and the BaFin support the work of the EBA—which creates EU regulatory capacity in the absence of sufficient formal resources of the EBA—since they can get something out if it: it provides them with a chance to maintain their practices that are attached to institutionalised norms and the interests of their banking sectors. By doing so, they contribute to building EU regulatory capacity to manage cross-border risks. 6.3.2  Cross-Border Supervision in Colleges Next to technical standard-setting, the EBA (and previously CEBS) also has the key task to build EU regulatory capacity by facilitating the coordination of day-to-day supervision of cross-border banking groups in so-­ called supervisory colleges. This was particularly crucial before the SSM was introduced in 2014 but continues to be pivotal since most cross-­ border banks operate in SSM countries (such as Germany) and non-SSM countries (such as the UK). Such operations continue to be supervised in supervisory colleges (albeit with the SSM as one of the main banking supervisors, rather than individual national supervisors). Supervisory colleges have a distinct place in the work of the EBA since all issues arising in EU supervisory capacity building are magnified in their realm: concrete  As expressed by Interviewee B4.

53

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collaboration is needed in order to coordinate the supervision of a cross-­ border bank. In order for capacity to be built, the involved banking supervisors need to supply comparable types of information in the joint supervisory process, they need to have similar understanding as to how to interpret it and when to act on it. Since national authorities need to decide jointly on the adequacy of the capital of cross-border banks within the given college based on a common risk assessment this is particularly important. Generally speaking, supervisory colleges have been riddled with problems even if home and host supervisors have been willing to engage in meaningful interaction. The exchange of information, the reaching of common understandings of how to interpret it, and when to take action have been highly challenging for banking supervisors. Worries about the confidentiality of data (as, for example, it might be leaked to the press) and national data protection laws can be an impediment to free exchanges of information. Also, the use of different reporting standards and risk models can render it difficult for regulators to make sense of each other’s data and overall approach to risk management (D’Hulster 2012, p.  305). In the EU context, all of these constraints on capacity building have been present but first CEBS and then the EBA (and a tightened EU legislative framework) have to some degree counteracted these constraints. CEBS and the EBA have contributed to capacity building through their proactive approach to Supervisory Colleges. Historically, and particularly in the years after the financial crisis, the incentive structure facing national supervisors—the political pressure to avoid the failure of banks—essentially acting against the open sharing of information between home and host regulator (be it in a college setting or on a bilateral basis). On a theoretical level, the home regulator has an incentive to keep information about a potentially deteriorating health of a parent institution to himself for as long as possible due the worry that the host regulator might ring-fence its subsidiary as soon as becoming aware of potential problems, thereby possibly even creating a serious liquidity issue for the overall banking group that might not otherwise have arisen. The host regulator, in turn, has an incentive to exaggerate the risks emanating from the subsidiary in order to trigger a further supply of capital to the foreign operations on part of the parent company (for a detailed analysis, see D’Hulster 2012; Herring 2007). (Banks, in turn, might be able to exploit these incentive differences between home and host regulator, see, for example, Holthausen and Rønde 2004).

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When push comes to shove—meaning the announcement of negative information about one’s own banks—then us national supervisors prefer to keep to ourselves. As host supervisor you can never be sure whether the home supervisor tells you the whole sad truth about the parent bank. That is understandable: the home supervisor always needs to expect that the host supervisor—whom he just informed so extensively on such a collegial basis—will take immediate steps that will endanger the whole banking group, such as a ring-fencing of the host country operations. So a healthy dose of suspicion is the natural mentality.54 What’s tended to happen now is regulators get very nervous about other regulators having the same information that they have because they think they are going to second-guess the decisions that were made.55

In this regard, industry representatives report that in the immediate aftermath of the crisis supervisors were keen to extract information from the given bank directly; i.e. host supervisors approach the parent of the bank directly instead of contacting the home regulator and home regulators contact foreign subsidiaries directly instead of relying on the host regulator’s knowledge about the subsidiary’s health. Where are improvements needed? I have already made public statements reflecting the fact that EBA considers that the level of information exchange between supervisory authorities was not sufficient in recent months, as liquidity stresses in the system increased. The EBA has been clear to supervisors on the need to provide other college members with timely and sufficiently granular information concerning the liquidity and financial position of banking groups so as to ensure that home and host authorities have a clear and current understanding of the risks.56

That national authorities perceive their interest to be the safeguarding of information—and as a result hamper EU supervisory capacity ­building—

54  Speech by Jochen Sanio, then president of Bafin, entitled ‘Die Fortentwicklung der Bankenaufsicht‘, at the Conference ’Corporate Governance bei Banken‘, KPMG Audit Committee Institute, Frankfurt am Main, 28 May 2009. Original in German, translated by the author. Also, see FSA (2009, p. 99), for expression of the same problem from a practitioner’s point of view. 55  Interviewee B1. 56  Speech by Andrea Enria, Chairperson of the European Banking Authority, at the 4th Santander International Banking Conference, Madrid, 18 October 2011.

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can be understood in the context of the link between banks and ‘their’ governments that put pressure on banking supervisors to avoid a potential bank failure at all costs in the aftermath of the financial crisis. The introduction of the SSM and the SRM are meant to counteract these challenges at least to some degree. The work of supervisory colleges in the EU was characterised with difficulties in the past. Pervasive issues in this regard have been problems with effective communication and submission of adequate information, particularly under time constraints. Reportedly, it can be difficult to communicate and jointly take decisions within the strict time limits of EU requirements. An example in this regard was the so-called model validation process, whereby banks can use their own models to estimate some forms of risk if these models comply with certain rules, and if they are authorised by their supervisor: in relation to cross-border banks, all national authorities that are involved in the supervision of the this bank need to agree on whether the model is adequate for the estimation of risk. As a result, BaFin has sometimes gone ahead alone and sought host supervisors agreement to a particular model validation only afterwards, while the FSA sometimes went significantly over the time requirement to be able to communicate with host supervisors (i.e. supervisors which supervise subsidiaries of a bank in their territory) before validating the internal model of a bank (CEBS 2009b). Especially when BaFin is concerned, misunderstandings due to lack of frequent communication have been a problem according to host supervisors (ibid., p. 13). The French supervisor reported that misunderstandings during a joint model validation arose since BaFin was not using the college as main tool for communication in some cases (ibid.). Moreover, according to supervisors, language barriers can be an issue in college work (ibid., p. 11). Also, different supervisory philosophies (and hence different tolerance levels for the failure of banks) and a lack of common terminology render coordination in the day-to-day supervision of banks difficult (D’Hulster 2012, p.  305f). Differences in supervisory approaches lead, for example, to significant differences between risk-weighted assets across similar forms of banks (Basel Committee 2013), showing why exchange between supervisors with regard to the soundness of a given bank can be difficult.57

57  Speech by Andrea Enria, Chairperson of the EBA at the time of writing, at the 4th Santander International Banking Conference, Madrid, 18 October 2011.

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We see these differences in our daily engagement with supervisory authorities across the EU. Our experience in supervisory colleges have, for instance, shown that these differences can range from technical issues such as scoring scales used to measure and categorise risks, to more fundamental distinctions such as in the methodologies used to define capital requirements.58

CEBS initially played a very active role in pushing for the establishment of supervisory colleges (which were called ‘operational networks’ in the forum of CEBS at the beginning) and can hence be seen as a major driver towards the institutionalisation of this cross-border supervision model, thereby playing a pioneering role in this field in global comparison.59 This included a detailed peer review covering 17 colleges to assess whether the CEBS guidelines on colleges were are adhered to, thereby being able to provide evidence-based ‘good practices’ on the basis of the results of the peer review (see CEBS 2010). CEBS thus employed its overview of practices across national regimes to facilitate the functioning of supervisory colleges. Indeed, national officials state that college processes enable them to learn about other authorities’ regulatory approaches. As a BaFin official noted: In general, one also needs to say that the national supervisory review process—so the approach taken to supervision—differ. So you might have a clash between more quantitative and more qualitative approaches. But I’d say in this respect colleges have been a great asset in terms of fostering a better understanding of the various approaches.60

In order to alleviate many of the mentioned problems, the EBA has the ambitious task to facilitate coordination between national authorities in the college setting through more formal means. The mediation mechanism established by CEBS has been formalised and the EBA can now issue formal binding and non-binding mediation opinions when there are ­disagreements in colleges.61 The mediation panel hereby consists of the  Ibid.  See speech by Arnoud Vossen, then Secretary General of CEBS entitled ‘Towards a New Architecture for European Banking Supervision‘, Euro Finance Week 2009, Frankfurt, Germany. The setting-up of supervisory colleges then became compulsory in the revision of the Capital Requirements Directive. 60  Interviewee B3. 61  Art.21(4), Regulation 1093/2010. 58 59

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EBA’s chairperson and two members of the Board of Supervisors (i.e. two heads of national regulators).62 Despite its resource constraints the EBA makes use of this mechanism, in 2014, for example, it oversaw two non-­ binding and two-binding mediations due to disagreements between home and host supervisors, all of which were settled before formal conciliation in the end (EBA 2014, p. 56). Perhaps most crucial have been the large number of formal EBA technical standards relating to colleges, for example on joint decision on capital adequacy and joint decision on liquidity. These have been complemented by less formal guidelines aimed at approximating supervisory practices (see especially SREP Guidelines in this respect). However, the EBA has also tried to facilitate more effective college supervision through a large set of other tools. Some of the methods employed in this regard are the Supervisory Disclosure Process, the European Supervisory Handbook, bilateral meetings with national supervisor, regular feedback to the lead supervisor of a college and ‘peer review’, which aims at enabling national regulators to study each other’s’ practices, thereby providing for an increased understanding of how other regulators approach prudential oversight,. These mechanisms are complemented by trainings conducted by the EBA, the facilitation of staff exchanges on part of the EU authority (initially set up in 2005 under CEBS), the provision of online discussion forums and query systems, and virtual networks of experts, for example to share reporting practice. Crucially, EBA staff can take part in all college meetings and indeed does so in the vast majority of cases when ‘closely monitored colleges’ (which supervise the largest banking groups) are concerned (EBA 2012a, 2017), even though this adds around 50 meetings per year to attend to this resource-constrained agency.63 EBA officials have shown their determination to make a constructive contribution to the functioning of colleges by making use of their observations, such as by publishing a good practices guide relating the joint decision of a group’s capital adequacy (EBA, 2012a, p.  27). Despite limited formal capacities, then, the EBA makes use of its specific form of expertise in order to build EU supervisory

62  See Decision of the European Banking Authority adopting the Rules of Procedure of the Mediation Panel. 63  See Art.21(10), Regulation 1093/2011. Informally, colleges had already invited CEBS Secretariat members to attend some of their meetings before EBA staff was granted this right formerly.

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capacity: the EBA enjoys a bird’s eye view without a direct link to the interests of the respective industries and pressure from governments which provide the ultimate ‘safety-net’ for their banks. Moreover, the EBA has also played a role in providing ‘peer group information’ about large cross-­ border groups in order for supervisors to be able to make more meaningful comparisons. This can be useful for supervisors such as BaFin, as it is essentially only the home supervisor of one large cross-border bank (Deutsche Bank), which renders it difficult to have reference points when making supervisory observations and decisions.64 As a result of the national supervisors’ new obligations as well as willingness to engage with these processes, college interactions and decision-­ making have become more effective year-by-year, in relation to quantity of meetings, the quality of discussions and the justification of decisions (EBA 2015b, 2016b, 2017). Over 90% of colleges had two or more meetings per year in 2016, for example, which the EBA encourages (EBA 2017), and which was a significant increase from 74% of colleges holding an adequate amount of meetings per year in 2015. However, difficulties continue to arise largely due to different practices of national regulators, such as different supervisory methodologies, that make joint decision-making difficult. The building of joint EU supervisory capacities hence reflects the key regulatory challenges faced by national supervisors: they have a shared interest in more effective cross-border supervision, but also have an interest to maintain their deeply embedded practices, tied to industry interests, structures as well as administrative traditions. To name but a few examples: the outcomes of the first round of joint decisions on liquidity were varied with regards to the liquidity measures applied by national supervisors, at least partly due to different national methodologies for quantifying liquidity risk (EBA 2014, p. 55). In 2015, the EBA rated 50% of joint capital decision with ‘improvement needed’ because they were not completed on time as a result of some national supervisors not sharing the required information with college members (EBA 2015, p. 52). According to the judgement of the EBA, colleges improved markedly on these in 2016 (EBA 2017). The proactive approach of CEBS in the past and now the EBA as well as the engagement of national supervisors in College processes have resulted in a significant degree of EU capacity building in cross-border banking supervision. To date, however, this capacity building exercise is  As pointed out by Interviewee B1.

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not without constraints. Communication and decision-making is constrained by the differences in supervisory approaches of national authorities, while the link between sovereigns and banks is likely to continue to influence national supervisors’ behaviour.65

6.4   Conclusions With around 170 staff members the EBA is particularly constrained by its resources. As demonstrated in this chapter, it nevertheless manages to get its work done by issuing an astonishing amount of technical regulatory standards in light of its administrative size, and by facilitating the supervision of cross-border banks in supervisory colleges. This exercise in EU regulatory capacity building would not be possible without the active ­support of national regulators who carry out a large chunk of this work by drafting technical standards in working groups of the EBA. Especially high capacity banking regulators from large Member States, including the 65  The empirical analysis presented in this chapter was supported by the following interviews: Interviewee B1, industry representative (government and regulatory affairs unit at a major bank). Interview conducted on 11 April, 2013. Interviewee B2, official of BaFin (International Policy Division). Conjoint interview with interviewee B3 conducted on 2 May, 2013. Interviewee B3, official of BaFin (International Policy Division). Conjoint interview with interviewee B2 conducted on 2 May, 2013. Interviewee B4, official of the European Commission (DG MARKT), former observer at CEBS. Interview conducted on 2 May, 2013. Interviewee B5, former official of BaFin and the CEBS secretariat. Interview conducted on 2 May, 2013. Interviewee B6, former official of CEBS, the FSA and the European Commission (DG ECFIN). Interview conducted on 3 May, 2013. Interviewee B7, former official of CEBS and the EBA, official of the Dutch Central Bank. Interview conducted on 10 May, 2013. Interviewee B8, former official of the Deutsche Bundesbank (German Central Bank) and representative to CEBS. Interview conducted on 28 May, 2013. Interviewee B9, former official of CEBS and the Dutch Central Bank. Interview conducted on 31 May, 2013. Interviewee B10, official of the EBA, former official at the Bank of Italy. Interview conducted on 27 June, 2013. Interviewee B11, former official of the FSA, BaFin and CEBS, former industry representative. Interview conducted 11 July, 2013. Interviewee B12, official of the EBA, former official of the French Financial Markets Authority. Interview conducted on 17 July, 2013.

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German BaFin and the British PRA, devote many staff members to the drafting of EBA technical standards. Moreover, supervisory colleges cannot function without the active and open contribution of national supervisors. While national supervisors, including BaFin and the PRA, have actively engaged with the college processes, this has been more constrained than their engagement with technical standard-setting. The willingness of the PRA and BaFin to devote their staff to EBA processes to such an extent needs to be interpreted in the light of the regulatory challenges they face in relation to minimising risks emanating from cross-border financial institutions while also maintaining their own regulatory approach to the greatest extent possible. The latter are intimately interwoven with administrative traditions of their countries as well as the interests and the structures of their banking industries, which render changes difficult to carry out, as well as extremely costly. Hence, the UK and German authorities engage with the EBA’s standard-setting task since they value the opportunity to influence the end results in their favour, as well as valuing an enhancement of cross-border supervision. The staff of the EBA tries to pragmatically broker comprises between national officials due to contention rooted in different regulatory practices, philosophies and banking industries. In devoting their staff to these processes and by acting as pragmatic broker, national supervisors and the staff of the EBA build EU regulatory capacity where only very little formal capacity exists. However, the inherent brittleness in this transnational system of regulatory capacity building becomes obvious when considering that BaFin and the PRA, as well as other high capacity regulators, have insisted on keeping the staff of the EBA small, precisely because it allows them to influence decisions to a greater extent. At the same time, they have also essentially provided a ‘double subsidy’ to this EU capacity building exercise by funding the EBA to 60% and by providing their staff time to the fulfilment of the tasks of the EBA. National authorities as well as voices from within the European Parliament have argued that the EBA (and its sister authorities in securities and insurance regulation) should be funded through the EU budget since national authorities also face heavy resource constraints (European Parliament 2013). At the time of writing, discussions about proposals for reforming this  funding  structure are underway. While the funding model may no longer be adequate, questions about the size of the EBA’s resources and staff are bound to be controversial. The findings of this chapter indicate that, ironically, increases to resources and staff could undermine EU regulatory capacity building in this field since the ‘buy-in’

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of national regulators is essential to build capacity (assuming that it is unlikely that resources would increase to a level where they may match large national authorities staff numbers). Although difficult to verify empirically, it is also plausible that the tight involvement and buy-in of national regulators improves the quality of regulatory outcomes since national regulators may be more in agreement with EBA technical standards as well as being able to apply them more effectively if they contain elements of their existing practices. The organisational approach taken in this book hence highlights that the existence of bureaucratic politics between national regulators is not by definition a barrier to EU capacity building and can even facilitate it.

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Brzenk, T., Cluse, M. and Leonhardt, A. (2011). Basel III: Die neuen Baseler Liquiditätsanforderungen. Deloitte White Paper No 37, 6 January, 2011. CEBS. (2007a, November 12). CEBS Contribution to the Lamfalussy Review. London: CEBS. CEBS. (2007b, May 9). Assessing CEBS Progress so far. London: CEBS. CEBS. (2008). Annual Report. London: CEBS. CEBS. (2009a). Annual Report. London: CEBS. CEBS. (2009b). Peer Review on Model Validation Guidelines. London: CEBS. CEBS. (2010, October 18). Report on the Peer Review on the Functioning of Supervisory Colleges. London: CEBS. CEPR (Centre for Economic Policy Research). (2011). Cross-Border Banking in Europe: Implications for Financial Stability and Macroeconomic Policies. London: CEPR. D’Hulster, K. (2012). Cross-border Banking Supervision: Incentive Conflicts in Supervisory Information Sharing between Home and Host supervisors. Journal of Banking Regulation, 13(4), 300–319. Davies, H., & Green, D. (2008). Global Financial Regulation. Cambridge: Polity Press. De Larosière Report. (2009, February 25). The High-Level Group of Financial Supervision in the EU: Report. Brussels. EBA. (2012a). Annual Report. London: EBA. EBA. (2012b, May 22). Minutes of the EBA Board of Supervisors Teleconference. EBA. (2013). Annual Report. London: European Banking Authority. EBA. (2014). Annual Report. London: European Banking Authority. EBA. (2015a). Annual Report. London: European Banking Authority. EBA. (2015b). Accomplishment of the EBA Colleges Action Plan for 2014 and establishment of the EBA Colleges Action Plan for 2015. London: European Banking Authority. EBA. (2016a). Annual Report. London: European Banking Authority. EBA. (2016b). Report on the Functioning of Supervisory Colleges in 2015 and the 2016 EBA Colleges Action Plan. London: European Banking Authority. EBA. (2017). EBA Report on the Functioning of Supervisory Colleges in 2016. London: EBA. EBA (European Banking Authority). (2011, December 7–8). Minutes of the Sixth EBA Board of Supervisors meeting. Enria, A. (2012). Micro-Data for Micro- and Macro-Prudential PURPOSES. Paper prepared for the Sixth ECB Statistics Conference “Central Bank Statistics as Servant of Two Separate Mandates: Price Stability and Mitigation of Systemic Risk”, 17–18 April, 2012. European Commission. (1999). Financial Services: Implementing the Framework for Financial Services: Action Plan. Brussels: COM(1999)232. European Commission. (2014). Report from the Commission to the European Parliament and the Council on the Operation of the European Supervisory

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Authorities (ESAs) and the European System of Financial Supervision (ESFS). Brussels: COM(2014) 509 final. European Parliament. (2013). Review of the New European System of Financial Supervision, Part 1. Brussels: European Parliament, Directorate-General for Internal Policies. Ferran, E. (2012). Crisis-Driven EU Financial Regulatory Reform. University of Cambridge Faculty of Law Research Paper No. 6/2012. FSA. (2007). Integrated Regulatory Reporting (IRR): Certain Investment Firms. Addendum—Impact Analysis of Reporting Changes in Part I and Part II of CP06/11Integrated Regulatory Reporting (IRR): Credit Institutions and Certain Investment Firms. London: FSA, Policy Statement 07/1. FSA. (2009, March). The Turner Review: A Regulatory Response to the Global Banking Crisis. London: FSA. FSA. (2010). The FSA’s International Agenda. London: FSA. FSA. (2012, October). The Bank of England, Prudential Regulation Authority: The PRA’s Approach to Banking Supervision. London: Bank of England and FSA. FSA (Financial Services Authority). (2006). Integrated Regulatory Reporting (IRR): Credit institutions and certain Investment Firms. London: FSA, Consultation Paper 06/11. Herring, R. (2007). Conflicts Between Home and Host Country Prudential Supervisors. In D. Evanoff, J. LaBrosse, & G. Kaufmann (Eds.), International Financial Instability: Global Banking and National Regulation (pp. 201–219). Singapore: World Scientific. Holthausen, C., & Rønde, T. (2004). Cooperation in International Banking Supervision. Working Paper Series Nr 316. Frankfurt am Main: European Central Bank. House of Lords. (2011). The EU Financial Supervisory Framework: An Update. London: House of Lords, European Union Committee, 20th Report of Session 2010–2012. Howarth, D., & Quaglia, L. (2013). Banking Union as Holy Grail: Rebuilding the Single Market in Financial Services, Stabilizing Europe’s Banks and ‘Completing‘ Economic and Monetary Union. Journal of Common Market Studies, 51(S1), 103–123. Howarth, D., & Quaglia, L. (2013b). Banking on Stability: The Political Economy of New Capital Requirements in the European Union. Journal of European Integration, 3(3), 333–346. IMF [International Monetary Fund]. (2011). Germany: Technical Note on Banking Sector Structure. IMF Staff Country Reports 11(370). Ipsos Mori. (2007, November 30). CEBS Performance Assessment Online Study. Research Study Conducted for CEBS. Ipsos Mori. Lamfalussy Report. (2000, November 9). Initial Report of the Committee of Wise Men on the Regulation of European Securities Markets. Brussels.

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Lannoo, K. (2008). Concrete Steps Towards More Integrated Financial Oversight: The EU’s Policy Response to the Crisis. Brussels: CEPS Task Force Report. Lütz, S. (2004). Convergence Within National Diversity: The Regulatory State in Finance. Journal of Public Policy, 24(2), 169–197. Moran, M. (1991). The Politics of the Financial Services Revolution: The USA, UK and Japan. Basingstoke: Macmillan. Moran, M. (1994). The State and the Financial Services Revolution: A Comparative Analysis. West European Politics, 17(3), 158–177. Müller, M. (2002). The New Regulatory State in Germany. Birmingham: University of Birmingham. PRA (Prudential Regulation Authority). (2013). The Prudential Regulation Authority’s Approach to Banking Supervision. London: Bank of England/PRA. Quaglia, L. (2008). Committee Governance in the Financial Sector in the European Union. Journal of European Integration, 30(4), 563–578. Quaglia, L. (2010). Governing Financial Services in the European Union: Banking, Securities and Post-trading. London: Routledge. Roselli, A. (2012). Financial Structures and Regulation: A Comparison of Crises in the UK, USA and Italy. Basingstoke: Palgrave Macmillan. Tarullo, D.  K. (2008). Banking on Basel: The Future of International Financial Regulation. Washington, DC: Peterson Institute for International Economics. Verdier, P.-H. (2009). Transnational Regulatory Networks and Their Limits. The Yale Journal of International Law, 34(1), 113–172. Westrup, J.  (2007). The Politics of Financial Regulatory Reform in Britain and Germany. West European Politics, 3(5), 1096–1119. Wymeersch, E. (2012). The European Financial Supervisory Authorities or ESAs. In E. Wymeersch, K. J. Hopt, & G. Ferrarini (Eds.), Financial Regulation and Supervision: A Post-crisis Analysis (pp.  232–317). Oxford: Oxford University Press.

CHAPTER 7

The Future of Regulatory Capacity Building in the EU

EU agencies build EU regulatory capacity by facilitating the mutual exchange of regulatory expertise of national regulators, by pooling information about regulated cross-border industries and by closing loopholes created by different regulatory practices of national regulators (Bach and Ruffing 2018; Eberlein and Grande 2005; Groenleer et al. 2010; Maggetti and Gilardi 2011). To this end, policy-makers have entrusted EU agencies with a variety of different tasks, including technical-standard setting, scientific evaluation of the safety of products and inspection of the practices of national regulators. The main aim of this book has been to demonstrate that EU agencies have small administrative capacities in the face of the tasks bestowed on them, and that we can only understand how they get their work done if we take into account the ways in which national regulators support EU agencies in their work. Given that EU agencies are potential rivals to national regulators, the book focuses on studying to what extent and why national regulators are willing to support the work of EU agencies. The book advances the argument that understanding the motivations of national regulators is the crux to understanding how EU regulatory capacity is built in the absence of a fully blown supranational bureaucracy. Based on an organisational approach rooted in bureaucratic politics, the book demonstrated that national regulators support EU agencies because it helps them to tackle the challenges they face in their own work.

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Too often, EU agencies are studied as discrete entities without dissecting the inter-organisational relationships between national and EU regulators that form the backbone of the regulatory processes taking place in EU agencies. Previous perspectives have focused on the importance of professional ties between regulatory officials in different countries and levels of government (for example, in so-called ‘epistemic communities’), (perceived) interdependencies between regulators, or hierarchical pressures from the EU level in order to explain why regulatory actors in the EU work together. While these factors are certainly important, this book shows that we need to study how they affect organisational behaviour of individual regulators in order to avoid the pitfall of over overestimating the inevitability of cooperation between regulatory actors in the EU (see Sect. 7.1 of this chapter). The concluding chapter highlights that the different modes of regulatory capacity building that were uncovered in the empirical chapters of the book have a differentiated impact on executive politics in the EU, meaning that capacity building in EU agencies does not inevitably result in the empowerment of the European Commission (see Sect. 7.2). The differentiated nature of EU regulatory capacity building in EU agencies also has implications for the UK’s exit from the EU. While the exit of UK regulators from EU agencies are likely to result in capacity gaps in EU agencies, the extent to which these gaps are likely to be plugged by other national regulators differ from sector to sector. On the whole, capacities of EU agencies and UK regulators alike will suffer from ‘Brexit’, at least in the short-term (see Sect. 7.3 of this chapter).

7.1   Inter-Organisational Relations and the Consolidation of Bureaucratic Authority The theoretical argument that this book developed in Chap. 2 was largely sustained in the empirical analysis presented in the four cases studies throughout the book. The empirical chapters of the book demonstrated the enormous discrepancy between the resources of EU agencies and their regulatory tasks. With less than 200 members of staff, for example, the EBA has been expected to draft hundreds of technical regulatory standards, as well as providing advice to EU institutions, performing analysis of the health of the European banking system, providing training to national staff and overseeing the work of supervisory colleges. While the EBA faces the greatest challenge to meet its objectives of all the EU agencies covered

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in this book, none of them can build EU regulatory capacity without the active participation and support of high capacity national regulators. The EMA, for example, is by far the most well-resourced EU agency studied in this book, with over 800 members of staff. However, the substance of its work, scientific evaluations of medicinal products, is carried out by national officials on its scientific committees. In contrast to other EU agencies, however, the EMA reimburses national regulators for the time their staff spend on its committees. At large, the analyses provided throughout the case studies in Chaps. 3–6 highlight that the extent to which EU agencies are indeed restrained in resources in relation to their tasks differ significantly, while nevertheless all being symptomatic of the EU’s ‘capacity gap’. 7.1.1  Different Modes of EU Regulatory Capacity Building The four case studies show that EU agencies rely on the support of national regulators to build capacity in different ways. In the case of the EMA and the field of pharmacovigilance, the agency relies on national officials to carry out the substantive task of monitoring and evaluating data on adverse drug reactions. This role of national regulators is officially prescribed and recognised in the institutional set-up of the EMA. It has also been complemented by financial contributions from the EMA to national regulators (which has been the case much longer in the field of EMA market authorisations). Although EFSA performs similar tasks since it provides scientific safety assessments, its scientific panels are staffed by ‘independent experts’. However, in practice more than half of these experts are officials from national regulators. In this case, the contribution of national regulators is not formally recognised in the institutional system, much to the dismay of national regulators. At least some of them perceive this to be a subsidy to EFSA and hence the European Commission on their part. EFSA also relies on the proactive engagement of national regulators with its Advisory Forum and in its coordination of scientific output. While this role of national regulators is formally recognised in the regime, the extent to which it has been developed over the years is a result of national regulators engaging in coordination to a much larger extent than formally required of them. The EBA, in turn, is hugely reliant on national officials to flesh out and draft technical regulatory standards in its working and sub-­ working groups that operate below its formal set-up. Quite differently to the case of EFSA, however, national regulators do not begrudge their resources being expended to the fulfilment of a rival agency’s work, quite

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to the contrary. Large regulators in EU Member States have played a fundamental role in limiting the resources and staff members of the EBA, precisely so they can influence technical standards to the greatest possible extent by drafting them in the working groups of the EBA. EMSA and the FVO, on the other hand, are, at face value, far less reliant on national regulators active contribution in order to build EU regulatory capacity: a hierarchical system of inspections of national authorities’ practices backed up by the enforcement mechanism of infringement proceedings of the EU legal system provides for harmonisation of practices by force. However, a more nuanced reading of the findings presented in the respective case studies suggests that national regulators’ (lack of) support of these systems has an impact on their willingness to carefully prepare visits and to go above and beyond in adjusting their practices to the EU body’s suggestions. It also has a large bearing on how willing national authorities are to engage in voluntary training activities provided by EU bodies aimed at the harmonisation of practices. On the whole, then, in the empirical chapters we can observe different modes of EU regulatory capacity building that are characterised by different types of inter-organisational relationships and interactions (see Table 7.1). In pharmacovigilance, capacity is built through epistemic competition: in order to evaluate the safety of drugs that are on the EU market, national officials need to arrive at shared risk assessments in the forum of the Pharmacovigilance Risk Assessment Committee (PRAC) of the

Table 7.1  Different modes of EU regulatory capacity building Bargaining and deliberation

Epistemic competition

Banking regulation

Drug safety

Mutual exchange and adjustment

Food risk assessment Banking regulators Drug safety Food risk assessors attempt to convince regulators compete exchange each other of their to become the information and regulatory approaches dominant model of adjust to each in deliberative data gathering and other’s scientific processes in the exchange to avoid outputs to EBA’s working the costs of maintain their groups to avoid the adjustment. reputation. costs of adjustment.

Hierarchy Food controls Maritime safety The FVO and EMSA (in conjunction with the Commission) define and enforce coordinated practices. Enforcement happens through ‘soft’ persuasion and through ‘hard’ legal enforcement.

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EMA.  However, the EMA does not prescribe how to conduct ­pharmacovigilance or how to evaluate a drug’s benefit-risk balance. It also does not provide ‘best practice’ guidelines or push for harmonisation of practices of national pharmaceutical regulators. In this context, the informal ‘gold standard’ of pharmacovigilance practices that facilitates agreement on shared risk assessments is set through a process of epistemic competition between national regulators. The British pharmacovigilance system has become regarded as ‘gold standard’ amongst pharmacovigilance experts. The staff of the EMA facilitate the interaction between national regulators through their relative lack of prescription for how national regulators should carry out joint risk assessments, which allows the process of epistemic competition to coordinate national regulators’ work. In food safety risk assessment, on the other hand, reputational pressures induce mutual exchange and cooperation among food safety authorities. This coordination of practices through mutual exchange supports regulatory capacity building in transnational food safety risk assessments. The staff of EFSA plays a proactive role in this process and frequently leads on new initiatives for the facilitation of mutual exchange and harmonisation of risk assessments. Moreover, EU regulatory capacity is built through the proactive support of EFSA’s work on part of national regulators that ‘supply’ it with scientists to staff its scientific panels on a voluntary basis. As EFSA would not be able to accomplish its scientific risk assessments without the support of national regulators the ‘supply’ of its staff to EFSA is critical. In the EBA, on the other hand, national officials try to persuade each other of the merits of their proposals for technical standards through a process of bargaining and deliberation, which allows the EBA to build EU regulatory capacity through the harmonisation of standards (and potentially practices). The staff of the EBA facilitates this by acting as pragmatic broker between different regulatory views and approaches that are advocated by national regulators. Capacity building in the above cases rests on direct interaction between national regulators on a horizontal level that is pragmatically facilitated by EU agency staff. In food controls and maritime safety, on the other hand, it rests on vertically enforced mechanisms of hierarchy, in which the EU body inspects the practices of national regulators, backed up by the formal enforcement mechanism of the EU legal system, to induce harmonisation of practices across national regulators. While in both cases EU regulatory capacity building rests on a hierarchical mode, the extent to which capacity building is further facilitated through national regulators embracing

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harmonisation of practices beyond legal requirements differs in the two cases, at least when German and UK regulators are concerned. Food control authorities in Germany and the UK welcome FVO inspections but their maritime safety equivalents are highly sceptical about EMSA inspections. Likewise, the former set of authorities has embraced EU-led training activities aimed at the harmonisation of practices to a greater extent than their maritime safety counterparts. Differences in the levels of enthusiasm, consent and contention about the role of EU agencies, the EU and other national regulators in their field also varied in the three cases in which capacity building rests on horizontal exchanges between regulators. Horizontal exchanges between national regulators in drug safety monitoring and food safety risk assessments are largely characterised by agreement, while banking regulators are in contention with each other to a much larger extent (see Table 7.2). EU regulatory capacity building hence rests on a large variety of different patterns of interactions and inter-organisational relationships between national and EU regulators. On the whole, this shows that the system of inter-­ organisational relationships through which regulatory capacity is built in the EU is highly differentiated; much more so than conventionally recognised. This means that it is too rarely acknowledged just how complex this system is and to what extent it relies on inter-organisational relations between authorities in different countries and at different levels of government. As a result, we are likely to overestimate the resilience of this system while at the same time not being appreciative of the large efforts EU and national officials consistently put into this capacity building exercise. This raises the question why the nature of inter-organisational relationships on which capacity building rests differ and, most crucially, why national regulators are willing to support the work of EU agencies to a large (but varying) extent. Chap. 2 of the book introduced the theoretical approach of this book, which rests on an organisational framework rooted in bureaucratic politics. Inspired by Wilson’s emphasis on the Table 7.2  The nature of inter-organisational relationships

Horizontal exchanges Vertical exchanges

Agreement

Contention

Drug safety monitoring Food risk assessment Food controls

Banking regulation and supervision Maritime safety

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importance of core missions to bureaucratic agencies (2000 [1989]), it was suggested that national regulators are willing to support EU agencies in their work if helps them to the tackle key regulatory challenges they face in their day-­to-­day work. The analytical framework outlined in Chap. 2 put forward that regulatory challenges are linked to the nature of the regulatory task, the nature of the regulated industry and institutionally embedded constraints (for example, on resources) faced by regulators. In line with public policy literature we expected these challenges to be mainly anchored at the sectoral level (Rhodes 1990; Richardson 1982; Sabatier and Jenkins-Smith 1993). This means we were expecting the nature of the regulatory task and the regulated industry, and hence regulatory challenges, to be relatively similar in the same sector across different countries, while, at the margin being constrained by domestic institutions. On the whole, the empirical chapters confirmed the usefulness of this analytical conceptualisation, while also showing the limitations of this theoretical construct. In drug safety monitoring, the key regulatory challenge is a function of the nature of the regulatory information-gathering task that requires the gathering of high quality data on adverse drug reactions and of data that allows testing the causal relationship between drugs and adverse reactions. This challenge, however, is far more pronounced for German than for UK regulators, due to constraints that are embedded in domestic institutions, such as data protection regulations and the nature of the German healthcare system. In the case of maritime safety, the key regulatory challenge experienced by UK and German regulators alike relates to the nature of the regulated industry (the highly international shipping industry). The key challenge in this respect was widely seen to be effective enforcement (i.e. behaviour modification) in an industry that has very low barriers of entry, which enables the industry to evade liability and to select states that do not enforce international standards as flag and port states. In banking regulation and supervision key regulatory challenges were characterised by the necessity to gather information on the financial health of cross-border banking groups, which is difficult due to regulatory practices that are deeply embedded at the national level as well as the links between sovereigns and banks. While the nature of the regulatory task was important in respect of cross-national information-gathering, the nature of the regulated industry was even more crucial. This, however, differed across the UK and Germany: the UK’s banking industry is dominated by large banks

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and the City of London, the German banking industry is characterised by three tiers of different banks, including many small local savings banks. Regulations and regulatory practices have both developed in response to these specific structures and regulators are keen to maintain their own practices and the competitiveness of their banking industry. More so than in the other case studies it also became clear that banking regulators’ practices that they seek to defend in the EBA are rooted in national administrative traditions. In food safety risk assessment the key regulatory challenge was linked to a challenge that is commonly associated with the regulatory task of standard-setting on the basis of scientific expertise, namely to establish the legitimacy of the standard-setting institution. Food risk assessors were keen to cooperate in order to avoid divergence in scientific opinions that could undermine their legitimacy. However, this was not just a function of the nature of the regulatory standard-setting task but also inherently embedded in the legacy of the BSE crisis and deeply embedded public distrust towards food safety regulation. In food controls, the nature of the regulated industry and the nature of the regulatory task played a role, but constraints placed on carrying out this task by domestic institutions was perhaps most crucial: the food industry consists of a large number of highly heterogeneous businesses and food control authorities need to gather information on their compliance with food safety laws (such as hygiene regulation) through inspections. The great number of small food businesses (including, for example, gastronomic businesses) renders this task highly challenging. However, in the perceptions of food control authorities in the UK and Germany the greatest challenge is to ensure that inspections are carried out adequately by the hundreds of local authorities that are in charge of carrying them out. The national administrative structures in food controls in the UK and Germany were hence a crucial part of the challenges faced by central food control authorities in these two countries. While the large number of heterogeneous food business is inherent to the food sector, administrative structures to oversee the sector differ from country to country. Food control authorities in some countries, such as the Netherlands, have more centralised administrative structures. This shows that the book’s conceptualisation of regulatory challenges as rooted in the nature of regulatory tasks, regulated industries and the constraints imposed by national institutions was valuable for understanding

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the challenges faced by German and UK regulators. However, it also shows that the extent to which tasks, industries or institutional constraints matter are highly contingent. The nature of regulatory tasks and the regulated industries both rooted in particular regulatory sectors, shape ­regulatory challenges to a large degree. As a result, the challenges perceived by German and UK regulators were broadly similar in different sectors. However, national institutions can be crucial in enhancing or in alleviating the challenges associated with them. Moreover, in some cases, national institutions and differences in national industry structures were most crucial in shaping regulatory challenges, thus not allowing for a clear cut conceptualisation of regulatory challenges as rooted in sectoral patterns or domestic institutions. Moreover, the perceptions of regulatory challenges of regulators in this study also proved to be more multi-faceted than anticipated. Legacies of regulation in specific sectors, especially in food safety risk assessment, were more important than foreseen. Moreover, although regulatory challenges appeared to be sectoral in nature to a large extent, national administrative structures and traditions were also crucial (especially in banking regulation and supervision and in food controls). Regulatory challenges thus seem to be characterised by complex interaction between the functional imperatives of regulatory tasks, the nature and interests of the regulated industry, the constraining or enabling influence of domestic institutions as well as the legacy of regulatory crises and subsequent reputational pressures on regulators. In all cases, attitudes and behaviours associated with bureaucratic politics—regulators being concerned about their resources as well as their core missions- were clearly present and co-existed with proactive support of EU regulatory bodies. Banking regulators argue that a European agency is crucial and support its work proactively while wanting to limit its influence at the same time. Food safety risk assessors voice unease about the extent to which their resources are depleted through support of EFSA but support its work nevertheless. UK and German maritime safety regulators are deeply sceptical about the added value of EU intervention in this field but still find comfort in the fact that EMSA ensures that other national regulators do not let down the overall regulatory effort through lax ship inspections. It emerged clearly that these considerations also usually have a financial angle for national regulators. For example, British and German maritime authorities explicitly consider which EMSA activities can provide cost-savings to them and approve of those that do (cf. COWI 2008; Le Den et al. 2017). Pharmaceutical regulators agree that they have a very concrete (and material) reason to engage with EMA’s work: national authorities receive money from the European agency if they take over the

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rapporteurship of pharmaceutical company’s market authorisation applications for a new drug and since 2014 they have been receiving funds from the EMA for their pharmacovigilance work. Food control officials were observed to consider the advice of the FVO as ‘free’ expertise that they might otherwise have to pay for from consultants. These patterns of support and contention in inter-organisational relationships demonstrate the importance of an organisational angle rooted in bureaucratic politics to study EU regulatory capacity building. In contrast to other theoretical approaches, this angle helps us to observe the complexities and differences in capacity building modes that have been largely overlooked by other studies. A focus on bureaucratic core missions and regulatory challenges also help us to make sense of these varied patterns of inter-organisational relationships, and the co-existence of contention and cooperation between bureaucratic actors. 7.1.2  The Importance of an Organisational Approach to the Study of EU Regulatory Capacity Building As was outlined in Chap. 1, one strand of literature on cooperation between regulators in the EU focuses on the importance of professional norms (for example, Eberlein and Grande 2005; Majone 1997; Joerges and Neyer 1997). As a result, this literature has tended to focus on the conformities of coordination processes across vastly different policy areas and national authorities as it puts forward that mutual exchange, learning and deliberation are key mechanisms of EU regulatory capacity building across different policy areas and involved authorities (for example, see the analyses of ‘experimentalist governance’ across vastly differing policy areas in Sabel and Zeitlin 2010). In this view, the motivation of national regulators to invest time and resources in supporting EU agencies in their work is mainly determined by peer pressure in their professional communities (Majone 1997, p. 272). While the empirical research conducted for this book also found these to be important in underpinning relations between regulatory officials, restricting the focus to such norms as basis for capacity building tends to neglect the variation in modes of regulatory capacity building and variation in patterns of inter-organisational relationships. The comparison between regulatory capacity building in drug safety monitoring and food risk assessment (see Chaps. 3 and 5 respectively) substantiates this insight: the scientific communities in the two involved cases have relatively similar professional norms, but the coordination pro-

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cesses on which capacity building rests in the two cases differ. In the former case it is characterised by epistemic competition, while being defined by mutual exchange and adjustment in the latter case. Undoubtedly, the processes also bear similarities: in both cases the main interactions occur on a horizontal level between national authorities and the involved actors are seeking agreement, rather than being in contention with each other. Mutual exchange, learning and deliberation and peer dynamics certainly occur in the processes in both cases and the professional norms of the involved actors inform their behaviour in crucial ways. However, the emphasis on professional norms neglects that interactions between regulators in the EU are also shaped by specific concerns of individual regulators that, on an organisational level, face pressures on their own resources. The findings of this book also suggest that the focus on professional norms neglects that on an organisational level the involved national authorities worry about their core missions and the regulatory challenges they perceive to be most crucial in their work: concerns about their reputation among political actors and the public (in case of food risk assessors) and the specific systems of data gathering and evaluation which are deeply embedded in national structures (in case of drug safety regulators) informed national authorities’ perceptions of the value they derive from working ‘for’ EU agencies in these cases. Another school of thought discussed in Chap. 1 emphasises that (perceived) functional pressures determine whether national regulators are willing to engage in cooperation in EU agencies. In this view, the perception of being interdependent with regulators in other countries prompts national authorities to cooperate in the forum of EU bodies (for example, Van Boetzelaer and Princen 2012). Indeed, the empirical chapters of the book find evidence that considerations of interdependence are important to regulators. For example, the UK and German maritime safety authorities’ evaluation of EMSA is shaped by their concern of how to regulate the shipping industry effectively under conditions of interdependence (see Chap. 4). British and German food risk assessors, in turn, clearly perceive themselves to be interdependent with their colleagues with regard to the maintenance of their reputation and this motivates their willingness to cooperate extensively in EFSA (Chap. 5). Such (perceived) interdependencies clearly form part of national regulators’ considerations about how to tackle their core mission and related regulatory challenges. However, we also observe proactive engagement with EU regulatory bodies’ work in cases where national regulators do not perceive themselves to be highly

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interdependent. This is especially true in the case of food controls, where the daily work of UK and German authorities is not dominated by reflections about interdependence with authorities in other countries. ­ Rather, the complexities of overseeing a large network of local control authorities seem to be at the forefront of the minds of officials in the overseeing authorities. Despite the relative absence of concerns about interdependence with food control authorities in other countries, UK and German authorities engage with the FVO inspection process to a great extent and perceive this to be helpful for their work (Chap. 5). Also, we observe a lack of engagement with EU agencies’ work under conditions of perceived interdependence: banking regulators and supervisors perceive themselves to be interdependent in relation to supervision of cross-border banks, but shared supervision in so-called supervisory colleges has still been characterised with problems (Chap. 6). Interdependence with regulators in other countries clearly matter to national regulators but the findings of this book provide evidence that we need to consider how they perceive these interdependencies in relation to their core missions. Chap. 1 of the book also highlighted that there is literature that emphasises that while EU regulatory bodies lack authority and resources, they operate within the legal system of the EU, which casts a ‘shadow of hierarchy’ that can potentially induce EU regulatory capacity building (Eberlein 2008; Héritier and Lehmkuhl 2008; Scharpf 1997). Indeed, the empirical chapters show that cooperation between regulators in the EU can be affected by the institutional framework of the EU: in maritime safety, relations between regulatory actors were shown to be strained by the European Commission’s enforcement of EU maritime safety law (see Chap. 4). Whereas this ‘shadow of hierarchy’ was very explicitly perceived as such by national maritime safety authorities, it did not induce mutual exchange between national authorities. To the contrary, it inhibited mutual exchange in the forum of EMSA due to a fear of being found to have incompliant practices. Acceptance of EMSA inspections and engagement in coordination in its forum was shown to happen despite—not as a result—of the enforcement possibilities of the Commission because the British and German authorities perceived EMSA’s work to add value to their activities by providing operational support and ensuring the overall effectiveness of the European port state control regime. The ‘shadow of hierarchy’ in this case thus constrained capacity building through mutual exchange. Instead, capacity building is largely based on pure hierarchical enforcement of EU law.

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On the whole, the findings of the book suggest that we need to take the consideration that national regulators have their own organisational ­interests at heart when considering whether to support EU agencies seriously. At the same time, the findings suggest clearly that this dynamics is often beneficial, rather than detrimental, to capacity building in the EU. Viewing turf protection dynamics necessarily as hindrance to the fulfilment of policy objectives is thus often too narrow a view of turf-driven behaviour (Heims 2018). Equally, the theoretical approach taken in this book also emphasises that we cannot equate regulators’ interests with the maximisation of financial resources (cf. Niskanen 1994 [1971]), but rather with the safeguarding of their core mission (Wilson 2000 [1989]). In this regard, the theoretical approach of the book puts forward that we need to understand what the regulatory actors perceive to be their ‘interests’ (cf. Wildavsky 1994). This, in turn, is a complex mix of material and non-­ material benefits. The potential costs and benefits—in the widest sense— of supporting EU agencies in their work include such a plethora of aspects that we can only understand them by in-depth study of the regulators’ perceptions of their own key regulatory challenges. This means understanding what regulators perceive to be their core mission, and what problems they encounter in fulfilling objectives that are linked to their core mission. Tackling key regulatory challenges is important for their ability to safeguard their core mission. Core missions, in turn, are usually seen to reflect the public interest. This means we need to be careful in judging national regulators that are sceptical towards EU agencies to be caught up in their own narrow, self-interest at the expense of the larger, ‘European’ interest. Very often, this is a false dichotomy, as the regulatory officials encountered in the course of this project were all mainly interested in the effective regulation of particular industries and the effective management of risks to society. In line with previous research on bureaucratic behaviour, ‘doing their jobs well’ is crucial for EU agency and national regulators alike (cf.  Brehm and Gates 1997). National officials were just not always convinced that the European level of governance is the most appropriate locus for doing so. On the whole, this opens a discussion about whether the building of EU regulatory capacity through the harmonisation of regulatory practices strengthens or weakens the effective regulation of risks and industry behaviour on the ground. It is very likely that the effects in this regard are highly differentiated, depending on the particular regulatory instrument in question and the particular context in which a given national regulator applies this tool. In scholarship this debate

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remains too underdeveloped although it is crucial for our understanding the effects of European integration.

7.2   The Effects of Mutual Capacity Building on Executive Politics Enhanced autonomy and influence of EU and national regulatory actors is likely to alter their relationship to the European Commission, as well as to national ministries and elected leaders. Such altered executive politics dynamics, in turn, have important implications for the accountability and legitimacy of EU and national regulatory agencies. This section demonstrates, however, that the empirical findings of the case studies do not clearly support any of the three strands of literature on the effect of Europeanisation on executive politics: While ‘capture’ of national regulators by the European Commission is observed in some cases (drug safety), national ministries and regulators stay in charge in others (banking and to some extent maritime safety), while ‘double-hatted’ behaviour is also observed (food safety). While we need to take the effect of mutual capacity building on executive politics seriously, then, a more nuanced understanding of this effect is required: the magnitude of changes in executive politics dynamics depend on the level to which national regulators engage with EU agencies as well as in which function they do so. Regulatory capacity building in EU agencies through the support of national regulators raises the question which impact this mutual capacity building exercise has on the dynamics of executive politics in the European Union and its Member States. It raises the question whether these dynamics lead to a strengthening of the European Commission, whether they enhance the power of national regulators and their overseeing ministries or whether they result in both through a ‘double-hatted role’ played by national regulators that work for EU agencies and national ministries alike (Egeberg and Trondal 2009, 2011). In the first scenario the European Commission essentially ‘captures’ the resources (and perhaps even the allegiance) of national regulators through their support for the work of EU agencies. By working with and for EU agencies and by cooperating with sister authorities in other countries, national regulators are able to bypass national ministries (Egeberg and Trondal 2009). A more intergovernmental line of reasoning suggests that national officials’ have a tight grip on EU agencies at the expense of the influence of the European Commission (Kelemen 2002). The third scenario emphasises that national

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regulators do both of these things at the same time, thus acting in a ‘double-­hatted’ manner (Egeberg and Trondal 2009). More recently, it has been argued that there may be a trade-off between better coordination between national regulators and EU agencies and coordination among bureaucratic actors at the national level on the theoretical level. Research has shown that in practice this is resolved through the creation of more specialised units in parent ministries that counter-balance the increase in autonomy of national regulators as a result of transnational coordination (Egeberg and Trondal 2016). While the empirical analysis of this book was not focused on elucidating this debate (it did not, for example, focus on the difference between input into EU agencies from ministry or regulatory officials), its findings nevertheless have implications for this discussion. Most research in this field sensibly focuses on the governance structures of EU agencies (such as Management Boards) and studies to what extent national agency or ministry officials wield power in them as opposed to European Commission and EU agency staff. In this book, however, the focus was on the degree to which national officials carry out the substantive regulatory work of EU agencies, providing a different angle on inter-organisational relationships and power relations. Overall, we observed a great variety of types of interactions that are likely to have differentiated impacts on executive politics. In the case of drug safety monitoring, the European Commission has perhaps co-opted national regulators more clearly than in our other case studies: national regulators formally work for the EMA and receive a payment for doing so. The European Commission in turn formally takes decisions on drug safety on the advice of the EMA. National regulators hence officially work in the name of a Union institution by doing so and they receive direct compensation for it, which provides them with a stream of work and income that is not a direct consequence of the mandates from national ministries. In this area we may be most tempted to speak of a strengthening of supranational power at the expense of national ministries. However, in banking regulation we observe quite a different picture: national regulators (and presumable ministries) have safeguarded their own influence over the work of the EBA by successfully arguing for the limitation of its staff numbers and subsequently manning its working groups to influence technical regulatory standards. It would be difficult to argue that we have observed an empowerment of the European Commission in this case as national ministries and regulators pull on the same rope to maintain domestic power.

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Maritime safety represents a complex case in which national regulators and ministries in the UK and Germany alike have been deeply dissatisfied with the empowerment of EU institutions in their field and they continue to limit their powers where possible (e.g. denying the European Commission voting powers at the International Maritime Organization), while also using them to enhance their own influence. National ministry officials who comprise the Administrative Board of EMSA have, for example, been successful in turning this into a forum of mutual exchange and coordination of positions (required for IMO negotiations) even though the European Commission tried to restrict the use of this board to administrative matters pertaining to EMSA (2012, p.  6).1 The story of food controls adds another level of nuance since central, federal agencies and Länder ministries (in the German case) have been able to use to FVO inspections to enhance their own power vis-à-vis local authorities in their countries. Executive politics dynamics in the domestic context are thus altered through the effects of Europeanisation in this case. Of the cases covered in this book, food risk assessors played the most ‘double-hatted’ role: although not formally foreseen in the institutional set-up of EFSA, national officials staff its independent scientific committees to a significant extent. This provides a de facto subsidy to the European Commission which takes decisions on food safety after being advised by EFSA.  However, national regulatory officials also use EFSA’s Advisory Forum to exchange data and knowledge with sister authorities and to coordinate scientific outputs, thus maximising their own reputational strength at the domestic level. While this may presumable enhance their autonomy vis-à-vis their parent ministries it also enhances their ability to fulfil the mandate granted to them by these parent ministries. While overall there is thus a tendency in which EU regulatory capacity building through EU agencies enhances the power of the European Commission at the expense of national ministries, this does not happen across the board and national regulators and ministries can be successful in curtailing its power (as demonstrated in the banking case study) or to enhance their own influence (as in food controls) as a result of it. The findings of this study hence imply that we cannot easily draw general conclusions about the impact of capacity building in EU agencies on the nature of executive politics. While it is clear that capacity building in EU agencies alters power

1

 Also clearly highlighted in interviews M5, M6 and M7.

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structures among executive actors, it does not necessarily lead to empowerment of the European Commission. In the EU governance literature, ‘networks’ of national authorities are mostly described as a means of the European Commission to use national administrative capacities (Wilks 2005; also see Eberlein 2008). Whilst this view is supported by the empirical evidence presented here to a degree, our findings add another dimension to this issue: the implication of the findings of this project is that national regulators might indeed also be able to use their engagement with the work of EU agencies to enhance their own capacity to carry out their work effectively. Engaging with the work of EFSA, for example, helps British and German authorities, to maintain public confidence in their work. In drug safety, German authorities gain access to additional expertise that they are unlikely to be able to generate within the constraints of their domestic institutions. Food control authorities in Germany and the UK use the FVO audit process to increase control over their own territory. The inter-organisational processes highlighted in this book are thus not just cases of EU agency and EU regulatory capacity building. Rather, they are cases of mutual capacity building of bureaucratic actors (also see Bach and Ruffing 2013). We thus do not observe a straightforward ‘Europeanisation’ of national bureaucracies as such (see Knill 2001), but a more complex interaction of bureaucratic institutions at different levels of government that enhance their own capacities through interacting with each other. In the end, it may not be the most relevant question to ask whether the creation of EU agencies strengthens the European Commission (Kelemen 2002) or the Member States (Kreher 1997). Rather, it arguably needs to be seen to result in an overall strengthening of bureaucracies, and particularly highly specialised regulatory authorities. The concern of governments about the increasing power of EU agencies—such as demonstrated in the Dutch subsidiarity review (Ministerie van Buitenlandse Zaken 2013)—might thus be adequate to the extent that EU agencies have been able to build regulatory capacity beyond the possibilities of their formal resources as a result of the support they have received from national regulators. However, from the point of view of the ministries, ministers and governments that oversee regulators in their own countries, it is questionable whether this concern should merely be focused on the power of EU agencies and the strengthening of the ‘EU bureaucracy’, rather than also being concerned with the strengthening of the autonomy of the national regulators they oversee (Bach and Ruffing 2013; Bach et al. 2015; Danielsen and Yesilkagit 2014; Maggetti 2014).

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On the whole, the severe resource limitations of EU agencies are themselves an effect of embedded executive politics dynamics since they are largely a result of national governments’ unwillingness to increase the budget of the European Commission significantly. While national governments may thus want to be worried about the enhancement of autonomy of EU and national regulators as a result of their interaction in EU agencies, they may equally want to be pleased that EU agencies are able to build capacity despite miniscule administrative capacity granted to them. At the same time, however, this reveals the paradox of this false economy: ‘national’ resources are used to create EU regulatory capacity despite the resistance of national governments to transfer more national resources to the European level. The indirect nature of the resource transfer through national regulators’ support of EU agencies’ work exists largely below the radar as resources as transferred mostly in staff time and expertise, rather than in financial terms. However, national governments need to be aware of this de facto transfer of resources, which in the end have a cost to them. As national regulators in many countries have come under increasingly intensive resource pressure, it is a pertinent question whether the time spent on work for EU agencies comes at the expense of national regulators’ task at the national level that national regulators do not see as their core mission. While the evidence did not point in this direction in the four case studies, there was a frequent concern of national regulators that the engagement with EU agency work is too resource intensive for them. EU agencies and national regulators alike have been put in the uncomfortable position of needing to fulfil public policy objectives with increasingly restricted resources. In the end, capacity building in EU agencies through the support of national regulators is a symptom of shifting difficult political questions about the dispersions of authority and resources across levels of government in the EU to the bureaucratic level. The resulting de facto empowerment of bureaucratic agencies has implications for the legitimacy of the EU policy-making system as well as its accountability structures. It is questionable to what extent accountability structures of EU agencies towards the European Parliament and the European Commission suffice when national regulators and ministry officials (to some extent) play such important roles in delivering their outputs. This is equally true for the accountability structures of national regulators that are usually restricted to national parent ministries. Cross-border and transnational accountability structures, however, could hardly be legitimate in the absence of a

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‘European state’. There are no easy solutions in this respect but a starting point would be a more widespread recognition that -more by accident than by design- policy-makers have created a system of EU administrative capacity building that rests on complex and varied inter-organisational relationships between EU and national regulators. On the one hand, this is a miraculous achievement of integration within the EU. On the other hand, it does not allow for the clear accountability structures that a more supranational or more intergovernmental administration would provide for. On a more practical level, it is also worthwhile considering whether there are differences in the effectiveness of capacity building in our case studies and whether we can draw any lessons from them in this respect. The study did not focus on effectiveness as such, but by studying the inter-­ organisational relationships on which capacity building rests we can draw some general conclusions about the resilience of these capacity building exercises. On a purely functional level, the capacity building system of the EMA is likely to be most resilient since the contributions of national regulators to the system are officially recognised and financially rewarded. This avoids some of the misgivings national regulators have about the resource intensiveness of supporting an EU agency in other fields. The EFSA system in this respect is far more brittle since national regulators’ de facto contribution is not officially recognised. While this is an effect of the deliberate attempt to make EFSA as independent from national regulators as possible, capacity building under these circumstances depends on high capacity national regulators’ voluntary contribution to EFSA’s work. Recognising these contributions in the formal set-up of the regime could safeguard the system from straining the inter-organisational relationships that capacity building rests on. The EBA system has been noted to be based on a tension between allowing national regulators a highly influential role while expecting them to act in the ‘Union interest’ (Busuioc 2013). From a capacity building perspective, however, the extent to which national officials work with each in the working groups of the EBA demonstrate the benefits of this system, which provides for ‘buy-in’ of national regulators. Nevertheless, it is clear that the administrative capacity of the EBA is particularly constrained in relation to its tasks and that a more resilient system should allow for influence of national regulators while also resourcing the EBA more realistically in relation to its task. The resilience of capacity building through the FVO and EMSA is at least in parts assured through the hierarchical enforcement mechanism of the EU. However, a greater

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extent of buy-in of national regulators presumably results in a greater willingness to adjust regulatory practices to European standards, so EMSA and the European Commission would be well advised to accommodate national authorities’ calls for a less stringent EMSA inspection system to receive greater support for the work of EMSA in return. In many ways, however, we run the risk of comparing apples with oranges since the funding models and resource bases of the EU bodies covered in this book differ significantly. For example, in 2016, the budget of the EMA was roughly 8.5 times larger than that of the EBA. The former is funded from industry fees to a large extent; the latter is funded from national regulators’ budgets to a large degree (although this system is currently under review).2 The other EU regulatory bodies covered in this book are largely funded through the European Union budget. This underlines the differentiated nature of the EU administrative order. While a more streamlined EU agency model may provide for more straightforward accountability mechanisms, the findings of this book indicate that EU regulatory capacity can be built through a variety of different modes and interorganisational relationships. The different modes and inter-­organisational relationships in many ways have evolved out of existing relations, preferences and power dynamics. Some concern about national regulators in the EFSA and EMSA system could be addressed through relatively small reforms and even informal changes. The findings of the book imply, however, that larger scale reforms that ‘Europeanise’ all EU agencies and their networks of national regulators to a greater extent should be treated with care. In fields in which national regulators’ resistance to EU agencies’ influence is large, such as in banking and maritime safety, this may have a negative effect on national regulators’ willingness to play proactive roles in EU bodies. Assuming that the creation of an EU ‘super-bureaucracy’ is highly unlikely, EU regulatory capacity would continue to rely heavily on national regulators, even in more a more ‘Europeanised’ system, so ensuring the support of national regulators is vital. The best way forward in this context may be a clear, formal recognition of the contributions of national regulators in fulfilling EU policy objectives through EU agencies. Such recognition can be tied to (higher) financial contributions, however, this is only a realistic possibility for EU agencies that have a large budget that is partially funded from industry fees. However, a formally recognised role and formal workload models that allow national regulators to share work for 2

 Status in March 2018.

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EU agencies in line with their own administrative capacities that are also recognised by their parent ministries are an effective solution short of financial contributions from EU agencies (especially in the case of EFSA). This could also help to ensure that small national regulators get to contribute to (and to influence) capacity building, instead of being dominated by national regulators with the highest capacities. Such a clarification of roles would also be a first step in establishing accountability mechanisms that take into account that the EU administrative order is neither supranational nor intergovernmental.

7.3   The Exit of UK Regulators from EU Regulatory Capacity Building? As the final pages of this book are being written, the UK is preparing to leave the European Union after the referendum about exiting the EU held on 23 June 2016 was won by the ‘leave’ vote.3 The findings presented in this book show that UK regulators have made a considerable contribution to EU regulatory capacity building. The evidence also points at substantial influence of UK officials in EU regulatory bodies. This implies that Brexit is likely to be a lose-lose situation as far as regulatory capacity building is concerned. At the same time, ‘Brexit’ is likely to have an impact on the relationship between UK regulators and ‘their’ ministries as UK regulators lose an external venue for enhancing their autonomy from politicians. While the findings indicate that UK regulators have made a great contribution to EU agencies, they also show the extent to which their exit will impact EU regulatory capacity building will differ from sector to sector. EMSA and the FVO are likely to be impacted the least in this respect. The FVO’s work of inspecting national regulatory practices should not suffer significantly from the exit of the UK. This is similar in the case of the work of EMSA, which due to its agency status, however, will lose the active contribution from  the UK MCA and Department of Transport officials from its Administrative Board and training activities. However, it is unlikely that this will significantly lower the capacity building capacity of EMSA.  UK authorities on the other hand may welcome the ability to ­re-­engage and drive forward the international maritime safety regime, given that they are sceptical about EU’s role in this field. 3

 Status in March 2018.

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This picture differs decisively when the other agencies covered in this book are concerned. The two agencies covered in this book that are based in London at the time of writing -the EMA and the EBA- are highly likely to be affected considerably by the loss of UK regulators on their scientific panels, working groups and governance bodies. While these EU agencies will undoubtedly be heavily impacted by their planned respective relocations to Amsterdam and Paris by the end of March 2019, the implications of the departure of UK regulators from their work is an aspect that is likely to receive the least public, and even scholarly, attention. Since it is not often recognised that these agencies are able to get their work done as a result of the input of high capacity national regulators, this aspect is unlikely to receive widespread consideration. In the case of the EMA, the influence of the exit of the MHRA is potentially far-ranging. Although we do not focus on it in this book, UK leadership in holding rapporteurships for EMA market approval dossiers is well-known and researched (for example, Barroso 2011; Hauray and Urfalino 2009). Chap. 3 of this book highlights that the UK regulator has also held this highly influential and leading role in the pharmacovigilance (i.e. dug safety monitoring) work of the EMA.  While many high capacity national regulators, including the German regulators, will continue to support the work of the EMA after ‘Brexit’, there is no doubt that the EMA will lose one of its key contributors and leading national regulators in the process. Assuming that its workload will not decrease in equivalent terms, other national regulators will be required to make up for this shortfall and the UK’s rapporteurships and co-rapporteurships for market authorisations and pharmacovigilance have already been re-allocated to other national regulators.4 Given that the pharmacovigilance case study that was presented in Chap. 3 highlights that capacity building in this field is characterised by epistemic competition, high capacity national regulators, such as the French, Spanish and German authorities, face a clear incentive to engage with the EMA’s work even more in order to fill the leadership position that will have been vacated by the MHRA. The financial compensation national regulators receive from the EMA is likely to facilitate this further. This means that despite the potential initial adjustment problems, capacity building through the EMA stands a good chance to recover from ‘Brexit’ in light of the findings presented here, and not least due to being financed largely through industry fees, which decreased the financial burden put on other 4

 Status in April 2018.

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Member States to fund the EMA. Nevertheless, Chap. 3 also highlighted the uniqueness of the expertise of the UK regulator and its pharmacovigilance expertise and that its departure will stretch the capacities of other high capacity national regulators considerably. Due to the leadership role the MHRA has played it may not fear the loss of direct access to other national regulators’ expertise through the EMA. However, the impact on the UK regulator of leaving the EU is bound to be significant. The nature of this impact will depend on the nature of the new relationship between the UK and the EU, which is uncertain at the time of writing. If the UK indeed leaves the Single Market as well as the Customs Union, the MHRA will need to approve and monitor products specifically for the UK market, thus possibly requiring more capacity. It will potentially set the EMA and the MHRA up to compete over speed and ease of market authorisations, while, however, pharmaceutical companies may prioritise EMA approval due to the sheer size of the EU’s market. At best, this leads to a duplication of efforts and resources in the EU and the UK, at worst, regulatory standards in the UK could be lowered in this process. As already mentioned, capacity building in the EBA will also be affected heavily by the departure of the UK beyond the challenge of its relocation to Paris. However, the impact will differ from the case of the EMA due to its different tasks and the different nature of the involvement of national regulators. The exit of the UK regulator for prudential matters (the PRA) will remove the expertise and staff time of one the regulators with the highest capacity in the EU from its working group processes. However, the EBA has largely completed the technical guidelines that comprise the Single Rulebook and the departure of the UK also removes one of the most persuasive regulators, thus opening the space for other national regulators to influence technical standards to a greater extent. As these have an incentive to do so, capacity building in relation to technical standard writing may be sustainable, but more resource commitment will be required of national regulators to maintain the EBA system in relation to its funding as well as the drafting of technical standards. While the departure of the UK regulator from the EBA may thus not reduce the ability of this EU agency to build EU regulatory capacity, it is likely to have a negative impact on the building of transnational regulatory capacity building aimed at managing the risks emanating from cross-border banks. Assuming that financial markets and banking operations will remain tightly integrated across borders after ‘Brexit’ it will be vital to safeguard continued participation of the UK regulator in supervisory colleges. As these exit

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outside the EU framework as well, this should not pose a problem as such. However, if regulatory practices in the UK and the EU diverge to some degree after Brexit, effective supervision of cross-border banks will be as problem-ridden as they were in the EU-context before the financial crisis. The PRA meanwhile will lose its considerable influence on technical regulatory standards in the EU market even though it will probably need to comply with them to a large extent. Assuming that the UK will seek to retain the freest access in banking and financial services to the EU market possible, a high degree of regulatory alignment to the EU standards seems inevitable. The staff of the  EBA may be well-placed to monitor and to evaluate the regulatory alignment between the EU and the UK in this context, a role which, no doubt, will put it in the cross-fire of highly politicised debates about a race-to-the-bottom and regulatory equivalence. Moreover, it is unlikely that the EBA would be able to fulfil this role without an increase in resources. EU regulatory capacity building in EFSA is also very likely to be heavily impacted by the departure of the UK. Since the institutional set-up of the agency does not officially account for the role of officials from national regulators on its scientific panels, EFSA cannot reassign work provided and led by UK officials in a comparable manner to the EMA. The loss of the significant contribution of regulatory officials from the UK FSA will need to be partly mitigated by staff from other (high capacity) national food safety risk assessors, which are already over-stretched in this regard (by their own account). To some extent, EFSA has the advantage that scientists on its panels do not need to be drawn from national regulators, so the gap in capacity following the UK’s departure can be filled with scientists from independent institutions. However, given the current importance of national regulatory officials in EFSA this may be challenging and the pool of such experts will be significantly smaller as a result of Brexit. The average number of UK experts in EFSA’s scientific panels is 12%, and in some panels they make up as much as 25%. As a result of this EFSA staff predicts a significant impact on the workload for the remaining national food risk assessors (EFSA 2017, p.  4). The UK FSA has been quick to highlight that the exit from the EU also bears opportunities, for example, for greater influence on global rules and more flexible food safety rules (FSA 2017, p.  12). Crucially, EFSA and the FSA alike will lose out on mutual exchange of scientific expertise and risk assessments that have contributed to mutual capacity and reputation building. In the case of EFSA the mutual loss of the UK’s exit from the EU is thus particularly clear. The

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necessity for more support from the remaining national regulators is also particularly problematic in this case due to the unrecognised role of national regulators that national regulators play in EFSA’s scientific panels. It has been highlighted that this system relies disproportionally on high capacity national regulators (Ernst and Young 2017, p. 115). Brexit will thus strain capacity building in EFSA considerably and it is likely that this problem will only be able to be addressed through a reform of the system aimed at recognising the contributions of national regulators. Overall, then, the impact of Brexit on EU regulatory capacity building will be as varied as the different modes and inter-organisational relationships that comprise this system. Undoubtedly, the impact of ‘Brexit’ on EU agencies and UK regulators alike will depend crucially on the new relationship between the UK and the EU. The discussion presented here has assumed that the UK will become a ‘third country’ upon its exit, based on the insistence of the government of Prime Minister May that the UK will leave the Single Market as well as the Customs Union, and the resistance of the EU-27 to a bespoke, deep free trade deal for the UK. However, while the final sentences of this book are being written, negotiations about the new relationship between the UK and the EU have not begun in earnest. Should the two sides enter into a free trade agreement that is closer and more integrated than any trade deal has been to date, EU agencies could become key actors in the management of this arrangement that would lead all involved countries into unchartered territory. Assuming that regulatory rules in both jurisdictions would have to remain equivalent in many areas, tight cooperation would be required between UK and EU regulators. In this scenario, EU agencies could continue to host UK regulators to ensure cooperation. Given the highly influential nature of UK regulators in the present regimes, it is likely that they could retain clout even without formal voting rights. At the same time, they could continue to bring their expertise to the table and to contribute to regulatory capacity building. EU agencies could also incorporate committees comprising of national regulators of the EU Member States and the UK that could advise the European Commission, Member State governments and even the UK government on the equivalence of regulatory rules between the two jurisdictions. The exit of the UK may thus add to the seemingly impossible workload of EU agencies. In light of the findings of this book, however, they will be able to rise to this challenge as long as the remaining high capacity national regulators are willing to actively support the work of EU agencies.

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Ernst and Young. (2017). External Evaluation of EFSA: Final Report. Last accessed in March 2018. http://www.efsa.europa.eu/sites/default/files/efsa_ rep/blobserver_assets/efsafinalreport.pdf. FSA. (2017). Annual Report and Accounts 2016–2017. London: Food Standards Agency. Groenleer, M., Kaeding, M., & Versluis, E. (2010). Regulatory Governance through Agencies of the European Union? The Role of the European Agencies for Aviation and Maritime Safety in the Implementation of European Transport Legislation. Journal of European Public Policy, 17(8), 1212–1230. Hauray, B., & Urfalino, P. (2009). Mutual Transformation and the Development of European Policy Spaces: The Case of Medicines Licensing. Journal of European Public Policy, 16(3), 431–449. Heims, E.  M. (2018). Why Cooperation Between Agencies Is (Sometimes) Possible: Turf Protection as Enabler of Regulatory Cooperation in the European Union. In T. Bach & K. Wegrich (Eds.), The Blind Spots of Public Bureaucracy and the Politics of Non-Coordination. Basingstoke: Palgrave Macmillan. Héritier, A., & Lehmkuhl, D. (2008). Introduction: The Shadow of Hierarchy and New Modes of Governance. Journal of Public Policy, 28(1), 1–17. Joerges, C., & Neyer, J.  (1997). From Intergovernmental Bargaining to Deliberative Political Processes: The Constitutionalization of Comitology. European Law Journal, 3(3), 273–299. Kelemen, D.  R. (2002). The Politics of ‘Eurocratic’ Structure and the New European Agencies. West European Politics, 25(4), 93–118. Knill, C. (2001). The Europeanisation of National Administrations: Patterns of Institutional Change and Persistence. Cambridge: Cambridge University Press. Kreher, A. (1997). Agencies in the European Community—A Step towards Administrative Integration in Europe. Journal of European Public Policy, 4(2), 225–245. Le Den, X., Lessmann, F., Floristean, A., Blagoeva, T., Poteron, S., Ellegarrd, C., & Sandager Hansen, J.  (2017). Evaluation on the Implementation of the Regulation (Ec) No 1406/2002 Establishing EMSA. Copenhagen: Ramboll. Maggetti, M. (2014). The Rewards of Cooperation: the Effects of Membership in European Regulatory Networks. European Journal of Political Research, 53(3), 480–499. Maggetti, M., & Gilardi, F. (2011). The Policy-Making Structure of European Regulatory Networks and the Domestic Adoption of Standards. Journal of European Public Policy, 18(6), 830–847. Majone, G. (1997). The New European Agencies: Regulation by Information. Journal of European Public Policy, 4(2), 262–275. Ministerie van Buitenlandse Zaken. (2013, June 21). Testing European Legislation for Subsidiarity and Proportionality—Dutch List of Points for Action. Policy note.

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Index1

A Accountability, 10, 21, 206, 210–213 Administrative Board, 49, 86, 94, 95, 97, 100, 101, 208, 213 Administrative capacity, 1–6, 40, 46, 47, 90, 103, 104, 113, 157, 175, 193, 209–211, 213 Adverse drug reaction (ADR), 44, 53, 54, 56–58, 60, 61, 63–69, 71, 72, 74–77, 195, 199 Advisory Forum, 118, 128–130, 132, 195, 208 Autonomy, 9, 21, 28, 29, 31, 48, 105, 206–210, 213 Ayres, I., 34 B Bach, T., 6–8, 10, 11, 193, 209 Banking industry, 20, 46, 155, 172, 177, 187, 199, 200 Bank of England, 166, 167 Basel Committee, 154n1, 156, 169, 182

Basel II, 157, 169 Basel III, 155, 169–171, 174 Behaviour-modification, 32, 34, 199 See also Enforcement Belgium, 100, 135, 144, 178 Benefit-risk balance, 61, 64, 65, 67, 69, 71, 74, 75, 77, 197 Better Training for Safer Food (BTSF), 121, 144, 146 Black, J., 33, 34, 169, 171 Board of Supervisors, 46, 159–161, 163, 175, 184 Bonn Agreement for Co-operating in Dealing with Pollution in the North Sea by Oil, 93, 103n32 Braithwaite, J., 34, 93, 115, 153, 166 Brexit, 21, 194, 213–217 See also UK’s exit from the European Union (the) BSE crisis, 111, 112, 115, 120, 122, 123, 125 Budget, 4, 5, 17, 28, 41, 47, 61, 62, 67, 90, 119, 157, 163, 165, 187, 210, 212

 Note: Page numbers followed by ‘n’ refer to notes.

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Budget constraints, 165 Bureaucratic politics, 11, 27–29, 31, 41, 42, 165, 188, 193, 198, 201, 202 Busuioc, M., 4, 7, 10, 11, 211 C Capacity gap, 1–6, 56, 57, 59, 194, 195, 216 Capital Requirements Directive (CRD), 154, 157, 160, 170, 173, 176, 183n59 Capital Requirements Regulation (CRR), 160, 173 Centralised procedure, 55–57, 70n18 CleanSeaNet, 90, 103, 103n32, 104 Clinical Practice Research Datalink (CPRD), 66–68, 72 Comitology, 13, 97, 114, 115 Committee for Medicinal Products for Human USE (CHMP), 55, 56, 59–61, 63, 69, 74 Committee of European Banking Supervisors (CEBS), 4, 154, 156–161, 158n12, 172–177, 179, 180, 182–185, 183n59, 186n65 Compliance, 33, 34, 40, 56, 96, 98, 100, 121, 128, 136–138, 140, 142, 143, 146, 200 Consumer confidence, 112, 123, 125 Control, 3, 9, 13, 20, 28, 32–34, 45, 46, 49, 55, 58, 65, 67, 71, 74, 84–91, 93, 95, 96, 98, 103–107, 105n37, 112–114, 117, 120–124, 126–128, 136–149, 166, 169, 171, 197, 198, 200–202, 204, 208, 209 Convergence, 154, 158, 162, 178 Co-rapporteurship, 56, 60, 214 Core mission, 9, 19, 27–31, 41, 63, 199, 202–205, 210 Council (of the European Union), 164

Court of Justice, 136 See also European Court of Justice Cross-border risks, v, vi, 2, 3, 8, 9, 15, 153–188 Cross-border supervision, 155–165, 172, 179–187 Cyprus, 100 D Data-gathering, 44, 64, 67, 68, 203 Data-mining, 74 Decentralised procedure, 55–57, 59n7 Deliberation, 12–14, 73, 74, 131, 138, 159, 161, 173, 175, 196, 197, 202, 203, 211 Denmark, 100 DG for Health and Food Safety (DG SANTE), 112 DG SANTE, 113, 114, 116, 120, 126 Dienststelle Schiffssicherheit, 94–97, 104, 105n37 Donaldson Report, 92, 95 Drug Safety Research Unit (DSRU), 66, 66n15 Dunsire, A., 32 E Eberlein, B., 2–5, 7, 12–14, 16, 193, 202, 204, 209 Egeberg, M., 9–11, 206, 207 Enforcement, 32–34, 44, 45, 84, 85n1, 86, 89, 90, 92, 96, 98, 101, 114, 120, 128, 136, 137, 141, 196, 197, 199, 204, 211 See also Behaviour-modification Enria, A., 161, 164, 165, 178, 179 Epidemiology, 71–73 Epistemic community, 12, 44, 194 Epistemic competition, 55, 70, 73, 76, 78, 196, 197, 203, 214 Equivalence, 88, 101, 198, 214, 216, 217

 INDEX 

Erika, 83, 86, 95 EudraVigilance, 58, 59, 62, 74–76 European Banking Authority (EBA) Board of Supervisors, 159–161, 163, 175, 184 budget, 163 staff, 5, 46, 155, 163, 165, 172, 173, 175–178, 184, 186, 187, 196, 197, 216 supervisory colleges, 155, 158, 162, 172, 180 tasks, 162, 163, 183, 211 technical implementing standards, 5, 160 technical regulatory standards, 46, 156, 160 workload, 46, 155, 163 European Banking Committee (EBC), 156 European Central Bank (ECB), 155, 159n13, 162, 162n31, 163 European Commission delegation of powers, 5n1 empowerment of, 194, 207, 209 enforcement, 84, 85n1, 90, 98, 106 funding, 163 infringement proceedings, 87, 97, 106, 121, 142 European Court of Justice, 5n1, 16 See also Court of Justice European Food Safety Agency (EFSA) Advisory Forum, 128, 208 budget, 119 Focal Points, 130, 134 independent experts, 118, 119, 195 scientific opinions, 5, 117, 124, 130, 131 staff, 118, 119, 126, 134, 197, 216 tasks, 113, 117 workload, 119 European Maritime Safety Agency (EMSA)

223

Administrative Board, 86, 94, 97, 100, 101, 208 budget, 90 inspections, 20, 44, 84, 85, 87–90, 96–106, 137, 149, 198, 204, 212 operational services, 87, 104 staff, 90, 99, 100, 104, 106 tasks, 84, 87–89, 96, 103 trainings, 84, 85, 87, 89, 90, 96, 98–100, 103, 106 workload, 97, 101 European Medicines Agency (EMA) budget, 61, 62, 212 Committee for Medicinal Products for Human Use (CHMP), 55, 56, 60, 61, 63, 69 market authorisation, 54–63 Pharmacovigilance Risk Assessment Committee (PRAC), 60, 62, 72, 75, 76, 196–197 Pharmacovigilance Working Party (PhVWP), 60, 61, 63, 69 staff, 55, 60, 62, 76–78, 195 tasks, 44, 55, 56, 84 workload, 61, 63, 78 European Parliament, 6, 14, 55, 57n5, 85n1, 114, 115, 133, 160, 163, 163n33, 164, 187, 210 European Supervisory Handbook, 162, 184 Eurozone, 155, 162, 162n32 Exchange of practices, 98, 99, 103 Executive politics, 194, 206–213 Expertise, 4, 7–9, 19, 33–35, 43, 46, 47, 55, 73–76, 78, 93, 95, 96, 99, 103, 104, 118, 119, 125, 128, 129, 131, 132, 134, 136, 137, 141, 144, 146, 147, 158, 171, 172, 174, 175, 178, 184, 193, 200, 202, 209, 210, 215–217

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F Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht, BaFin), 4, 165, 168, 170–179, 170n39, 171n40, 182, 183, 185, 186n65, 187 Federal Institute for Drugs and Medical Devices (Bundesinstitut für Arzneimittel und Medizinprodukte, BfArM), 67, 68, 75, 77n31 Federal Institute for Risk Assessment (Bundesinstitut für Arzneimittel und Medizinprodukte, BfR), 67, 112, 123–126, 131–136, 148 Federal Office for Consumer Protection and Food Safety (BVL), 112, 123, 126, 138, 139 Financial Conduct Authority (FCA), 167 Financial Services Authority (FSA), 140, 141, 144, 148, 164, 167, 168, 170, 174, 175, 177, 182, 216 Finland, 144 Flags of convenience, 88, 91, 94 Flag state control, 88 Focal Points, 129, 130, 134, 135 Food and Veterinary Office (FVO) budget, 137 inspections, 6, 20, 113, 114, 128, 136, 137, 148, 149, 198, 204, 208, 213 overview reports, 115, 136, 137, 142, 144 staff, 137–139, 141, 143, 144 tasks, 45, 46, 107, 120, 136 workload, 115, 121, 126, 128, 142 Food industry, 48, 112, 122, 200

Food Standards Agency (FSA), 112, 123–127, 131, 134, 135, 138, 140 Food Standards Scotland (FSS), 126, 138 France, 3, 100, 144, 175 G General Food Law, 116 Global financial crisis, 153 GMOs, 117 Groenleer, M., 10, 97, 134, 193 H Harmonisation, 77, 90, 100, 111, 114, 117, 120, 128, 157, 158, 161, 169, 173, 179, 196–198, 205 Health and Food Audits and Analysis Directorate, 45, 112, 114, 116, 120 See also Food and Veterinary Office (FVO) Helsinki Convention on the Protection of the Marine Environment of the Baltic Sea (HELCOM), 93, 103n32 Héritier, A., 16, 204 Herstatt, 153 Hierarchical enforcement, 90, 96, 204, 211 Hierarchy, 16, 48, 121, 136, 138, 139, 142, 143, 145, 146, 194, 196, 197 Home supervisor, 162, 180, 181, 184, 185 Hood, C., 3, 9, 32 Host supervisor, 162, 180–182, 184 House of Lords, 6, 161, 164, 175, 178

 INDEX 

I Incompliance, 89, 142, 204 Industry fees, 61, 212, 214 See also Industry levies Industry levies, 61 See also Industry fees Industry structure, 19, 20, 35, 36, 172, 177, 187, 201 Information-gathering, 32, 34, 37, 57, 66, 74, 199, 200 Infringement proceeding/infringement procedure, 87, 90, 97, 98, 106, 121, 127, 137, 142, 196 Inman, Prof. W.H.W., 66, 66n15, 76 Inspection, 20, 27, 34, 39, 40, 44, 45, 49, 84–91, 88n15, 95–106, 111–115, 122, 127, 128, 136–138, 144, 146, 148, 149, 161, 193, 196, 198, 200, 201, 204, 208, 212 Institutional, 8, 16, 17, 31, 36, 39, 40, 42, 43, 47, 48, 55, 129, 135, 148, 156, 158, 166, 168, 195, 204, 208, 216 Institutionalism, 27, 41, 167 Institutions, 3, 5n1, 6, 13, 28, 42, 48, 112, 115, 126, 139, 148, 154, 161–163, 163n33, 166–168, 170, 180, 187, 194, 199–201, 207–209, 216 Integrated market, v, vi, 2, 3, 6, 15, 111, 112, 114, 153–188 Interdependencies, 10, 12, 15–16, 103, 141, 194, 203, 204 Intergovernmental, 206, 211, 213 International framework, 20, 154n1 International Maritime Organization (IMO), 83, 88, 89, 92–95, 101, 102, 105n37, 208 International regime, 85, 89, 91, 92, 106, 107, 149, 154

225

International standards, 85, 93, 199 Inter-organisational, v, 10, 14, 21, 194–207, 209, 211, 212, 217 Italy, 100, 116, 175 L Legitimacy, v, 3, 21, 29, 33, 100, 200, 206, 210 Lithuania, 144 Lodge, M., 2, 138 M Maggetti, M., 4, 8, 46, 193, 209 Majone, G., 2–4, 7, 12, 13, 202 Marine pollution, 83, 93 Maritime and Coastguard Agency (MCA), 66, 94–97, 104, 105n37, 213 Maritime industry, 84, 92, 94, 102 Market authorisation, 33, 53–55, 57–63, 57n5, 65, 195, 202, 214, 215 Mediation, 46, 56, 61, 143, 146, 158, 161, 183, 184 Medicines and Healthcare products Regulatory Agency (MHRA), 18, 65–71, 65n14, 70n18, 73–75, 77n31, 214, 215 Medina Ortega Report, 114, 115 Meroni doctrine, 5n1, 116 Multi-Annual National Control Plan (MANCP), 121, 137, 142, 144, 146 Mutual exchange, 14, 20, 84, 90, 96, 98–100, 106, 113, 136, 143, 145, 146, 193, 196, 197, 202–204, 208, 216 Mutual learning, 98, 101

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N National Health Service (NHS), 66, 72 Netherlands, 100, 102, 144, 200 Niskanen, W., 17, 28, 41, 205 Non-compliance, 33, 87, 99, 103 Non-governmental organisations (NGOs), 35, 133, 148 O Oil spill, 83, 86, 87, 90, 91, 93, 95, 103 Overview reports, 143, 144, 146 P Pallas Report, 92, 95 Paris Memorandum of Understanding on Port State Control (Paris MoU), 84, 85, 88, 89, 93, 104 Paul-Ehrlich-Institut (PEI), 67, 68, 77n31 Periodic Safety Update Reports, 60, 62 Persuasion, 13, 34, 76, 161, 196, 197, 215 Pharmaceutical industry, 55–57, 59 Pharmaceutical market, 53, 55, 56 Pharmacoepidemiology, 71, 72 Pharmacovigilance, 54–78, 59n7, 65n14, 71n22, 77n31, 84, 195–197, 202, 214, 215 Pharmacovigilance Risk Assessment Committee (PRAC), 60–62, 69, 70, 72, 75, 76, 196 Pharmacovigilance Working Party (PhVWP), 59–61, 63, 69, 70, 72, 74, 76 Political pressure, 94, 169, 180 Politicisation, 36 See also Politicised

Politicised, 122, 216 Pollution, 33, 83, 85n1, 88, 90, 92, 93, 95 Port state control, 85, 85n1, 88–91, 93, 95, 96, 98, 99, 103–106, 105n37, 204 Practocol, 64 Prescription-event-monitoring (PEM), 66, 68, 70, 72 Prestige, 83, 91, 95 Principles-based regulation, 158, 169 Professional community, 12, 13, 146, 147, 202 Professional judgement, 96, 104, 105 Professional norms, 1, 12–15, 17, 202, 203 Prudential Regulation Authority (PRA), 167, 170, 171, 173, 174, 179, 187, 216 Public trust, 111, 115, 122, 125, 127, 130, 131, 134 Q Quaglia, L., 155–157, 170, 172 R Race-to-the-bottom, 216 Rapporteurship, 70n18, 202, 214 Rational choice, 17 Regulated industry, 4, 6, 8, 19, 27, 28, 31–36, 38, 39, 42–44, 53, 64, 85, 91, 199–201 Regulatory alignment, 216 Regulatory loopholes, 3, 45, 84, 86, 114, 172 Regulatory philosophies, 8, 11, 47, 48, 169, 172, 176, 177 Regulatory standards, 2, 4, 5, 20, 44, 86, 92, 155, 160, 161, 186, 194, 195, 207, 215, 216

 INDEX 

See also European Banking Authority, technical regulatory standards Regulatory tasks, 6, 13, 27–29, 31, 32, 34–36, 43, 44, 64, 194, 199–201 See also Behaviour-modification; Information-gathering; Standard-setting Reputation, 12, 13, 17, 18, 20, 28, 125, 133, 134, 141, 171, 178, 197, 201, 203, 208, 216 Research tradition, 70–72 Resource limitations, 5, 42, 163, 165, 176, 210 Resources, 1, 2, 7–11, 13–15, 17, 18, 20, 27–29, 31, 32, 36, 37, 39–42, 46, 47, 61–63, 70n18, 71, 94, 100, 105, 113, 119, 122, 127, 129–132, 134, 135, 143, 146, 148, 155, 157, 163–165, 173, 176, 179, 184, 186–188, 194–196, 199, 201–206, 209–212, 215, 216 Rhodes, R. A. W., 16, 35, 199 Richardson, J., 35, 199 Risk assessment, 29, 37, 45, 49, 72, 111–113, 115–117, 122, 123, 127, 129, 130, 133, 180, 196–198, 200–202, 216 Risk-based, 34, 48, 100, 105 Risk management, 4, 15, 54, 60, 65, 112, 115, 116, 123, 169–171, 175, 177, 180, 205, 215 Ruffing, E., 7, 10, 193, 209 S Sabel, C., 7, 8, 12, 14, 202 SafeSeaNet, 90, 103, 104 Savings banks, 155, 165, 172, 200 See also Sparkassen Scharpf, F., 3, 10, 16, 39, 42, 204

227

Science, 54, 111, 112, 122, 124, 125, 127, 130, 131, 133, 135, 148 Scientific advice, 45, 56, 60, 115, 116, 119, 123, 130, 131, 148 Scientific committee(s), 30, 44, 45, 54, 60, 123, 195, 208 Scientific divergence, 130–132, 135, 200 Scientific panel(s), 45, 113, 117–119, 126, 129, 135, 148, 195, 197, 214, 216, 217 Sector, 17–21, 27, 32, 33, 35–37, 42–49, 84, 86, 91, 95, 101, 106, 111, 118, 125, 143, 149, 153–157, 159, 166–169, 171, 172, 176, 178, 179, 194, 199–201, 213 Shadow of hierarchy, 12, 16–19, 96, 204 Single European Market, 85 See also Integrated market; Single market Single market, 62, 113, 117, 136, 215, 217 Single Resolution Mechanism (SRM), 155, 163n33, 182 Single Rulebook, 161–164, 215 Single Supervisory Mechanism (SSM), 46, 155, 162, 162n32, 163, 179, 182 Slovenia, 144 Spain, 91, 175 Sparkassen, 168 See also Savings banks Spontaneous reporting, 53, 56, 58, 59, 61, 64–71, 73, 75, 78 Standard-setting, 13, 32, 33, 40, 56, 164, 172, 174, 179, 183n59, 187, 200 Stress test, 162, 174, 178 Sub-standard ships, 89, 91, 92, 94, 106

228 

INDEX

Supervisory colleges, 46, 155, 158, 161, 162, 172, 179, 180, 182–184, 183n59, 186, 187, 194, 204, 215 Supranational, 2, 3, 9, 11, 169, 193, 207, 211, 213 Sweden, 76, 100, 135, 144 T Tanker accidents, 83 Technical regulatory standards, 4, 5, 20, 155, 160, 186, 194, 195, 207, 216 Thalidomide, 63, 65, 67, 76 Thetis, 90, 103–105 Torrey Canyon, 83, 92, 93 Trade, 83, 111, 137, 217 Training, 48, 84, 85, 87, 89, 90, 96, 98–100, 103, 106, 121, 136, 143–146, 164, 165, 171, 184, 194, 196, 198, 213 Trondal, J., 9–12, 17, 206, 207 U UK’s exit from the European Union (the), 159, 194, 213–217

V Vioxx, 64 W Waller, P., 44, 58, 63–66, 74, 75 Wegrich, K., 138 Wildavsky, A., 17, 205 Wilson, J.Q., 4, 8, 9, 17, 19, 28, 29, 198, 205 Working group, 1, 8, 18, 20, 46, 60, 100, 101, 118, 140, 155, 157, 159, 160, 164, 172, 174–176, 186, 196, 207, 211, 214, 215 World Health Organization (WHO), 53n1, 54, 63 Y Yellow Card Scheme, 66, 67, 75, 76 Z Zeitlin, J., 7, 8, 12, 14, 202