Moving Towards a Principles Based Approach

The advantages and challenges of transforming a rules-based regulatory regime into a more principles-based regime…

Over the past decade and especially in the past few years, Delsys Research and its associates and colleagues have completed a number of consulting assignments as well as their own research and papers on the advantages and challenges of transforming a rules-based regulatory regime into a more principles-based regime.  Our experience, ideas and insights on a successful transition process are contained in an Issues Note which was presented to the Community of Federal Regulators in Ottawa on November 7 2014.  The note and presentation offered five major arguments and lessons.

  1. On balance, the principles-based regulation approach offers many advantages over rules-based regulation for many regulatory authorities and regimes.
  2. The challenges, constraints, costs, effort and time associated with moving from a rules-based to a principles-based regime should not be minimized.
  3. Most regulatory regimes are to varying degrees a hybrid, which encompasses a combination of broader principles and more specific rules in areas where greater precision is needed.  When a hybrid approach is being assessed, regulators and stakeholders should consider a range of options including: legislation, regulations, guidance documents of various kinds, and jurisprudence.
  4. In assessing and selecting the most appropriate instruments for achieving greater precision, regulatory authorities need to work closely with regulatees and others in order to ensure that the hybrid regime incorporates the best rather than the worst of the both regulatory worlds.
  5. While moving to a principles-based approach is broadly consistent with and supportive of regulatory reform and modernization and deregulation, this should not be viewed as a panacea for an under-performing regulatory regime; and as a method for regulatory authorities to contribute to government expenditure and deficit reduction policies through reductions in regulatory budgets, resources and capabilities.
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