He Institute of Economic Studies, IEE, has prepared an opinion report to highlight the importance of the institutional quality of a country, especially in the areas related to legal certainty and the adequacy of the regulatory framework, as an influential element in its long-term economic performance and, therefore, in the generation of wealth and welfare for society. There is a close relationship between an institutional context characterized by the use of good regulatory practices and the economic development of countries. This positive correlation is intense regardless of whether the institutional environment is close to the variable of legal certainty and regulatory quality.
A regulatory and institutional framework that configures the appropriate incentives for the different economic agents will favor the allocation and accumulation of capital in profitable, productive and innovative investment projects. This will have a positive impact on productivity, and therefore on the long-term growth of the economy. When legal security is broken, good regulatory practices are violated and an environment of uncertainty is generated in which the companies affected postpone or paralyze their investment decisions, with the consequent impact also in terms of employment. The negative consequences are also noted, on the side of the financing of these investments, by increasing the risk premium demanded by investors, and therefore increasing the capital costs for these companies.
The institutional framework in Spain, regarding governance indicators related to regulatory quality and compliance with the Law, has recently been analyzed by the World Bank in its publication ‘Worldwide Governance Indicators’. The situation in Spain is online, but somewhat below the EU average.
The analysis of the qualitative indicators related to regulatory quality and legal certainty shows that, in order to be at the same level as European countries with best practices, it is necessary to improve our economic policy in these aspects, to incorporate, as an explicit objective, the improvement of regulatory quality and legal certainty.
In this context, our country must bet on an institutional framework that guarantees compliance with what is considered the principles of best regulatory practices, which are specified in:
• Legal security, stability and predictability. This does not mean that norms cannot and should evolve over time to adapt to the realities of each moment, but that these changes should be gradual, and avoiding urgent procedures. In addition, the actions must be predictable, in the sense that they do not involve drastic changes with respect to the previously existing regulation.
• Accessibility and participation in the regulatory process. A basic principle for good regulation is to encourage the participation of agents in the sector. It is convenient that the decisions to be taken are preceded by consultations, and followed by a participatory dialogue, both for companies and for business organizations, so that the different points of view can be contrasted and analyzed transparently. consequences that a possible regulatory change may have on the activity.
• Efficacy, orientation, proportionality and justification of the normative proposals. The analysis and preparation of new standards should be done as responses to a previously detected need. In that sense, continuous and collaborative monitoring within the sector can help identify existing, present and future needs, which may lead to possible regulatory changes.
• Consistency, credibility, simplicity and transparency. The new regulatory norms that are elaborated, as well as the decisions of the regulatory bodies, must be consistent with each other and avoid contradictions with other existing norms. In addition, the legislation should be simple, orderly and transparent, to facilitate its proper understanding by all agents. Therefore, it is convenient to avoid excessive complexity or the abundance of norms that hinder their understanding.
Legal certainty is one of the main pillars of the rule of law, so it is protected by the 1978 Constitution, it is included within the individual's guarantees against the arbitrariness of public powers and is based on three principles: knowledge of the current regulations, technical quality in the development and stability of the legal system. To this must be added the protection of Community law through the principle of protection of legitimate expectations, a principle that has been developed in different judgments of the Court of Justice of the European Community stating that the public authority cannot adopt measures that are contrary to the hope induced by the reasonable stability in the decisions of that one, and in function of which the individuals have adopted certain decisions. And it is that legal certainty aims to consolidate a system in which it is reasonable to foresee the economic consequences of the actions of individuals and public authorities, which is essential for economic progress..
View Report 'Good regulatory practices'.