Gold-plating and double banking: an overrated problem?

Voermans, W.J.M.; Snijders H.J., Vogenauer S.

Citation
Voermans, W. J. M. (2008). Gold-plating and double banking: an overrated problem? In V. S.
Snijders H.J. (Ed.), Content and Meaning of National Law in the Context of Transnational Law
(pp. 79-88). Munich: Sellier European Law Publishers. Retrieved from
https://hdl.handle.net/1887/14019

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Gold-plating and double banking: an overrated problem?

Prof. Wim Voermans

Published in: Henk Snijders, Stefan Vogenauer (eds.), Content and Meaning of
National Law in the Context of Transnational Law. Sellier European Law Publishers;
Munich 2009, p. 79-88.

1. The red tape reduction mantra: strict interpretation of EC Law as a source of

administrative burden

In the last decade business and industry throughout Europe have complained bitterly
about the administrative burden imposed by legislation. Administrative requirements
resulting from domestic or EU legislation are an important determinant of the
business environment, since businesses across the EU are obliged to spend
considerable amounts of time filling in forms and reporting on a wide range of issues.
In 2007 the costs thereof were estimated to amount to 3.5% of the GDP in the EU.1
Obviously burdens like these impede economic growth, and inevitably throw up
obstacles when trying to achieve the Lisbon targets the EU has set itself for the year
2010.2 Reducing administrative burdens – or ‘cutting red tape’ 3
as it is also
commonly labelled - has therefore become topical: it ties in well with economic
policies, and has become a very popular electoral promise Europe wide. Red tape
reduction is at the heart of a great deal of the regulatory reform projects that have


Professor of Constitutional and Administrative Law, Faculty of Law, Leiden University. President of
the Dutch Association for Legislation and vice-president of the International Association for
Legislation (formerly the European Association for Legislation), Steenschuur 25, P.O. Box 9520 2300
RA Leiden, the Netherlands. The research in this contribution constitutes part of the research
programme Trias Europea.
1
Communication of the Commission COM (2007) 23 final, Action Programme for Reducing
Administrative Burdens in the European Union, p.4.
2
In March summit of 2000, the EU Heads of States and Governments in Lisbon agreed to make the EU
‘the most competitive and dynamic knowledge-driven economy by 2010’. From the outset these targets
have seemed somewhat overambitious. At present (2008) it is obvious that the targets set in 2000 will
not be met by far. Seer for a sobering 2005 overview of the targets and the amount of (then) 25 that
have met these targets. http://prawo.uni.wroc.pl/~kwasnicki/EkonLit1/the_quatifiable_lisbon.pdf.
3
The origin of the term is not quite clear but it is generally held that ‘red tape’ refers to the 17th and
18th century English practice of binding documents and official papers with red tape. Another
explanation holds that the 19th century records of US Civil War veterans were bound in red tape, which
was particularly difficult to remove.

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spread like wildfire throughout many EU member state countries.4 The European
Commission itself has embarked on a Better Regulation strategy aiming for a
reduction of administrative costs by as much as 25% by 2012. This would – it is
believed - have a significant economic impact on the EU economy – and an increase
in GDP of about 1.5% or around € 150 billion.5
Typically red tape reduction policies try to reduce administrative burden by
way of screening the legislative stock and cutting away excessive burdens. In many
EU countries however, one also aims to prevent disproportional burden from arising
when drafting legislation. In this respect European legislation, especially EC
Directives, come in to focus. EC Directives are believed to be a source of a great deal
of red tape, both in themselves and indirectly. Businesses and industry in the UK and
the Netherlands alike – until recently – believed that in the act of transposing a
Directive, governments and government agencies were rather inclined to do more than
what was strictly required by the Directive. Exceeding the strict terms of EC
Directives governments and agencies were suspected – wilfully6 or unconsciously - to
“tag on” additional national measures on the back of European Directives, resulting in
unnecessary burdens and competitive disadvantages for domestic businesses. In the
UK these national add-ons are commonly referred to as gold-plating.7 Burdens as a
result of the transposition of EC directives into national law are not only kept in check
by limiting the burden to the bare minimum required, but also by requiring a keen eye
for the coordination of the regimes required by EC law and existing national regimes.
So called ‘double-banking’, i.e. the situation when European legislation covers the
same ground as existing domestic legislation, and where the two regimes have not
been made fully consistent or merged into one, also needs to be avoided in order to
circumvent unnecessary burdens for businesses and industry.

1.1 Gold-plating, double banking and the interpretation of law

4
At present 23 Out of 27 EU Member states have regulatory reform projects underway
http://www.administrative-burdens.com.
See for the EU-regulatory reform programme (the administrative burden reduction part).
http://ec.europa.eu/governance/better_regulation/admin_costs_en.htm.
5
See the Commission’s Working Document, COM(2008) 35 final, Reducing administrative burdens in
the European Union 2007 progress report and 2008 outlook.
6
In Italy this technique of piggybacking a Directive is believed to be often used as a device to pass
through controversial measures and to ensure a lower degree of parliamentary scrutiny.
7
The Dutch wording for this is: ‘nationale kop’.

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For our present object of study ‘Interpretation of National Law in the context of
transnational law’ the phenomena’s of gold-plating and double banking are very
interesting. First, because transposition of EC directives is – to a very large extent –
an act of interpretation. Under article 249 of the EC Treaty directives are binding as to
the result to be achieved, but they leave national authorities a choice of methods. This
allows the Member states a double margin of discretion: first, states are, within certain
confines,8 free to choose form and methods, integrating EC legislation in the most
optimal way into domestic legislation. Secondly the Member state needs to interpret
the result to be achieved. Even though they are under the scrutiny of the European
Commission, and ultimately the European Court of Justice (ECJ), as regards their
interpretation, in most cases they have a significant margin of appreciation. The very
nature of EC Directives as instruments of EC policymaking is such (at least originally
the meaning was) that it allows member states to adjust their national regimes to the
Directive as they see fit. This means that some room to manoeuvre must be left to the
national authorities; an element of subsidiarity is present in the Directive instrument.
Not that they are always used as such: a great deal of the present day Directives are
cemented shut. That is why the Interinstitutional Agreement on Better Lawmaking
20039 in its points, and specifically point 13, calls upon the institutions not to use a
Directive as if it were a regulation. This, as well as the tendency to over detail
provisions, denatures the character of a Directive.
Second, gold-plating and double banking are interesting because they are
relative concepts. The bite of gold-plating, for instance, only becomes painful when
one Member state is overzealous in relation to another member state. A competitive
disadvantage will present itself if this is the case.
Third, these phenomena are interesting in view of our present theme. When we
discuss the interpretation of law (be it national or transnational) we tend to focus on
judiciary interpretation. We study the way national judges interpret national law with

8
There is a host of case law of the European Court of Justice as regards the proper forms and methods
to achieve the results required.
9
Point 13 of the Interinstitutional Agreement on Better Lawmaking OJ C 2003, 321, p. 1 reads: The
three Institutions recall the definition of the term ‘directive’ (Article 249 of the EC Treaty) and the
relevant provisions of the Protocol on the application of the principles of subsidiarity and
proportionality. In its proposals for directives, the Commission will ensure that a proper balance is
struck between general principles and detailed provisions, in a manner that avoids excessive use of
Community implementing measures.

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an eye for what is happening at the transnational level (e.g. the doctrine of directive
conform interpretation), or what is happening in other member states, or countries.10
However, it is not only judges that interpret the law, and not every interpretation of
national law in view of transnational law is subject to judicial scrutiny.
Implementation of both national and transnational law requires interpretation of
national (administrative) authorities. As regards the interpretation and implementation
of EU legislation, national authorities tend recently to communicate and cooperate in
formal and informal networks to learn from one another.11
Fourth, gold-plating and double banking are very topical, but were – until
recently – not well researched. They were more or less “buzz” words popping up in
public debates on red tape reduction. Everyone had an example, but no one quite
knew how big the problem was.

1.2 This contribution

In 2006 and 2007 both the United Kingdom and the Netherlands – the vanguard
countries of regulatory reform – decided to see whether the emperors of gold-plating
and double banking actually wore clothes. On either side of the Channel, two teams
were asked to review the existence and effect of these practices. This contribution
deals, in a comparative way, with the reports that resulted from the reviews. The
contribution especially focuses on the element of interpretation of EC Directives as a
source of gold-plating. In conclusion this contribution will consider how gold-plating
by way of interpretation can be controlled.

2. The gold-plating conundrum in the UK: the Davidson review

Ever since the 1990’s British businesses – spurred on by OECD-reports on the

damaging effects of legislative burden – have been deeply concerned about the effect
of red tape in respect of their competitiveness. This concern resulted in the

10
See for instance Eyal Benvenisti (2008), Reclaiming Democracy: The Strategic Uses of Foreign and
International Law by National Courts, American Journal of International Law, Vol. 102.
11
A very well known one is The European Union Network for the Implementation and Enforcement of
Environmental Law (IMPEL) is the network of the environmental authorities of EU Member states.
This network provides a framework for policy makers, environmental inspectors and enforcement
officers to exchange ideas, and encourages the development of enforcement structures and best
practices. See http://ec.europa.eu/environment/legal/implementation_en.htm.

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establishment of an independent body, the Better Regulation Task Force (BRT) in
1997, whose mission was to advise government - on request or on its own accord – on
matters pertaining to (unnecessary) regulatory and administrative burdens. The task
force threw some heavy stones in to the pond when it estimated the total cost of
regulation of the UK economy to be 10-12% of the GDP, or £100 billion, taking into
account the related policy work. Already in its first reports the BRT targeted EC
legislation as a possible source of red tape. It was at the very moment when the BRT
was replaced by a permanent body, the Better Regulation Commission, on 1 January
2006 that the Lord Chancellor of the Exchequer decided to take a more in-depth look
into the existence and effects of gold plating and double banking. Lord Neil Davidson
Q.C.12 was commissioned to conduct an independent review into the UK’s
implementation of EU legislation, focusing on the issue of ‘over-implementation’.
Over-implementation was used as an umbrella term for gold-plating, double banking
and “regulatory creep” denoting over-zealous enforcement due to lack of clarity
about the objectives or status of regulations and guidance.13
The first item on the review agenda was to get to grips with the definitions of
gold-plating and double banking (we will – for reasons of brevity - not deal with
regulatory creep). As it happened, the UK Transposition Guide – a guide for policy-
makers and lawyers responsible for transposition issues in the UK14 – held a common
definition for the two concepts. The Davidson review built on that and defined gold-
plating – in very broad terms - as the process of when implementation goes beyond
the minimum necessary to comply with a Directive, by:
• extending the scope, adding in some way to the substantive requirement, or
substituting wider domestic legal terms for those used in the directive; or
• not taking full advantage of any derogations which keep requirements to a
minimum (e.g. for certain scales of operation, or specific activities); or
• providing sanctions, enforcement mechanisms and matters such as burden of
proof which go beyond the minimum needed (e.g. as a result of picking up
the existing criminal sanctions in that area); or
• implementing early, before the date given in the directive.

12
Created a life peer on 22 March 2006 as Baron Davidson of Glen Clova.
13
See Davidson Review (2006), Implementation of EC Legislation, Final report, p. 3.
14
Cabinet Office (2005), Transposition guide: How to implement European directives effectively.
London 2005 (revised in 2007).

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 The first two points in particular are interesting in light of the interpretative
perspective we have chosen.
Double-banking – according to the definition of the Davidson Review - can
occur when European legislation covers the same ground as existing domestic
legislation, though possibly in different ways and to a varying extent, effectively
resulting in a double (extra burdensome) regime – both European and domestic.

2.1 Findings of the Review

In order to find out whether the UK tends to gold plate (and double bank) more than
other EU countries – as was suggested by some commentators15 - the Davidson
Review adopted a multi-stage approach. In line with its terms of reference, the
Review first launched a public call for evidence in the spring of 2006. The call asked
businesses, organizations and the general public whether they thought over-
implementation was a significant issue for the UK and if so, what should be done
about it. Subsequently it invited the addressees of the call to come up with examples
of what to their mind were clear cut cases of over-implementation. This generated 160
written responses from a wide range of respondents. These responses in turn were
used as input for the selection of significant cases of potential over-implementation to
be studied in more detail. Governmental departments, comparative insights, and
external stakeholders assisted to the case study selection.
The Review debunks the idea that the UK is a systemic over achiever when it
comes down to the transposition of EC Directives, as in the past some critics have
argued, on the basis of comparison of transposition ratios (dividing the number of
words in the national implementing legislation by the number of words in the original
directive). The Review dismisses this simplistic and misconceived approach to
assessing gold-plating: it totally fails to take account of whether elaboration of
directives increases or reduces burdens for those being regulated.
In addition, the Review did not find any compelling evidence that the UK is
systematically over-implementing. Over-implementation is an elusive concept, the
Review noted, and there are as many myths as concrete examples. The Review

15
See Davidson Review (2006), p. 4.

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certainly found that assessing whether a particular piece of European legislation had
been over-implemented and whether that over-implementation was justified is not
straightforward: it requires careful research into the background and context.
The Review did find some examples of gold-plating and double banking. The
Insurance Mediation Directive (2002/92/EC) for instance has been gold-plated by
extending the scope of the rules on sales of insurance so that they apply to sales by
direct insurers as well as sales by insurance intermediaries. At the time of
implementation (2002) this extension was widely supported by stakeholders,
including the insurance industry, but at present the same industry has withdrawn its
support because they think the regime is expensive and difficult to comply with, and
is not really designed to deal with direct sales by insurers. Under the same Directive
the national legislation also extends the scope to all motor warranties (where the
Directive allows an exception for contracts costing less than 500 euros a year). The
UK did not use the exception in order to avoid market distortions. This is widely
accepted and the Review received no complaints about this. National implementation
of the Insurance Mediation Directive, as well as that of the car safety test of the
Ministry of Transport (commonly known as the MOT-test), 16 provide examples of
gold-plating by imposing higher standards than the Directive itself imposes. Directive
91/328/EC on the approximation of the laws of the Member States relating to the
roadworthiness test for motor vehicles and their trailers imposes a regime that –
basically – allows for a bi-annual test of seasoned cars, while the UK regime requires
an annual test. At face value this is over-implementation by way of gold-plating but
the Review then asks itself the question whether the over-implementation is justified
and whether it creates a competitive disadvantage. The Review concludes that in the
recent past other EU countries, notably Luxembourg, the Netherlands and Slovakia
have had the same testing pattern as the UK, but that the Netherlands in 2008 were
moving toward the minimum regime of the Directive, which, making the UK case of
MOT testing in turn – a relative – example of problematic gold-plating.

The Davidson Review gives still more examples of gold-plating and some of
double banking (Consumer Sales directive, Fisheries regulation, Waste and IPPC

16
The MOT test is an annual test of car safety and roadworthiness aspects applicable to most vehicles
over a certain age in the United Kingdom if they are used on public roads.

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regulation, Unfair Terms in Consumer Contracts directive) but – on the basis of the
evidence – holds that even the few examples (out of the 160 reports) expressing
inappropriate over-implementation may not be as big a problem – in absolute terms
and relative to other EU countries – as is sometimes believed.17 A number of factors
seem to indicate that over-implementation is not all that serious a threat.

First of all a great deal of the respondents answering to the call of evidence
complained about issues which were not about over-implementation in the UK, but
about EU legislation itself. In general many of the allegations regarding over-
implementation are misplaced and often represent concerns about other issues. Even
when some over-implementation does occur, it is sometimes beneficial for the UK
economy to maintain regulatory standards rather than the minimum requirements of
European Legislation. Many businesses that operate across Europe reported that
differential implementation across Member States, thereby undermining the single
market, matters more than whether there is over-implementation in a particular
country. The idea of over-implementation and rigorous enforcement of the UK in
relation to other EU Members States is persistent in business and industry, although
the Review did not come across any hard evidence to support these assertions.
Perceptions of under-implementation of other countries are widespread however –
even in the Netherlands, Denmark, Spain and Germany, countries that were also
involved in the Reviews research.18 The World Bank and the OECD in 2007 reported
that the UK has one of the most favourable regulatory environments of doing business
in the EU, which does not support the idea or suspicion that the UK overburdens
business on a large scale when implementing EU legislation.

The Davidson Review gives a well balanced portrait of gold-plating and double
banking, demonstrating how the process of elaboration of national law in order to
implement EU legislation sometimes results in gold-plating or double banking, but
not as a systemic process nor as a general intent. In most of the 160 reported cases no
over-implementation as such was found and where it was found it was in most cases
for good reason. The Review however does recommend that to undo some gold-

17
Davidson Review (2006), p. 4.
18
Davidson Review (2006), p. 15.

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plating and double banking, the central one (i.e. the EU country with the biggest
economic yield) be encouraged to change the MOT testing pattern bringing it back to
bi-annual testing.

3. The search for golden rims in the Netherlands – the Europe-Asser Institute-
report
Parallel to the Davidson Review a similar review was held in the Netherlands. In 2005
and 2006 the Ministry of Economic Affairs commissioned a research project into
over-implementation in the Netherlands. A group of researchers and experts from
Leiden’s European Institute and the Hague-based Asser Institute analysed 119 reports
of alleged over-implementation.19 The Dutch team used an approach comparable to
the Davidson Review but deployed a less sophisticated working definition of over-
implementation. Over-implementation occurs according to the Europe-Asser Institute
when:
An EC-directive has been transposed correctly into Dutch Law and the Dutch
regulatory regime goes beyond the minimum requirements imposed by the
Directive.
Like the definition of the Davidson Review the definition is inspired by a common
definition stemming from drafting guidelines (the Dutch Drafting Guidelines). 20

As a result of better regulation initiatives of the Balkenende-II and –III

administrations21 a first call for evidence of over-implementation had already been
issued in 2005. It yielded some 105 reports of potential over-implementation. On
request of the Dutch House of Representatives (Tweede Kamer van de Staten-
Generaal) – who wished to secure that all possible over-implementation came to the
surface - a new inventory was drawn up assisted by the European-Asser Institute
groups. The second call yielded 119 reports. These reports were analysed and
screened by the Ministry of Economic Affairs. In more than a third of the reports (42)

19
See P.J. Slot, W.J.M. Voermans, S.F. Blockmans, M.K. Bulterman, M. van der Harst, S.A.L.
Josaputra, B. Platell, P. Willemsen, A. Cuyvers, S.H. Romein, M. Park, H. Park (2007), Nationale
koppen op EG-regelgeving (Over-implementation of EC Legislation), Leiden/Den Haag.
20
Aanwijzingen voor de regelgeving (Dutch Drafting Guidelines 1992). Article 347 of these Guidelines
– in the somewhat criptic official translation - reads: ‘No other rules will be included in the
implementation rule other than necessary for the implementation.’
21
See W. Voermans, The Sisyphus paradox of cutting red tape and managing public risk. Utrecht Law
Review, 4 (3), pp. 128-144.

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it was directly apparent that they did not constitute any over-implementation. The 77
remaining reports of alleged over-implementation were handed over to the research
team for closer study.

Like the Davidson Review the Dutch report did not find conclusive evidence of
widespread or deliberate over-implementation. In fact only 18 cases of outright over-
implementation were found and 11 debatable ones. Again, as with the Davidson
Review, most of the true cases of over-implementation were justified and not very
serious or damaging to the competitiveness of Dutch industry or businesses.

As regards our current topic of ‘interpretation’ the Dutch team encountered some 10
cases of over-implementation. Two of these examples resulted from widening the
scope of the Directive underlying the implementation. The first concerns the
implementation of EC Directive 2003/54/EC concerning common rules for the
internal market in electricity, in which Dutch legislation effectively protects private
consumers at the cost of the supplier where the Directive does not. The second
concerns Regulation 561/2006/EC on the harmonisation of certain social legislation
relating to road transport. The regulation imposes a regime for truck driving and
resting hours for vehicle categories with a permissible mass over 3500 kg. Dutch
legislation equally applies this regime to vehicle categories between 500-3500 kg,
thus constituting over-implementation.

4. Golden plates and red herrings: a common heritage

Gold-plating and double banking have become catch phrases in the regulatory reform
debates throughout Europe. They convey the evocative notion that over zealous
governments are systematically hurting domestic business and industry by over-
implementing EC legislation, where other member states are not. Recent research in
both the UK and the Netherlands shows that – although over-implementation is
elusive and hard to assess – no wide spread or systematic practices of over-
implementation exist. What is apparent from both projects is that perceptions of over
implementation in one’s own country and suspected under-implementation in other
countries are widespread and tenacious.

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Although over-implementation is not wide spread it does occur, only with less
damaging effect to business and industry than is commonly believed. Businesses and
industries that operate throughout Europe seems to suffer more from differentiated
implementation in different countries than from over-implementation at home. In
most cases over-implementation is – even to the present day – justifiable. In view of
this evidence one might wonder whether the discussion on over implementation is not
a red herring. To our minds, this would be a hastily conclusion: there may possibly be
a deeper point to the complaints voiced in the over-implementation debate. Over-
implementation has an absolute aspect to it (doing more than is strictly necessary) but,
as the Davidson Review reveals, a relative aspect too (are we doing more than other
EU countries). When implementing, EC member states may well keep within the
margins of over-implementation (avoiding gold-plating, double banking etc.) but the
implementing domestic legislation may be suboptimal for business and industry
anyway in view of what other countries are doing. The Davidson Review hinted at
this by comparing the MOT-regime to that in other Member States. Along these lines
business and industry may have a lot to gain by comparing the way their domestic
legislature has implemented EC legislation to that of other member states. Best
practices of implementation may prove to be the future goldmines of regulatory
reform. They are to be preferred over the tar pits of suspicion of neighbourly under-
implementation.

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