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Task 7: Identify and recommend improvements before exploring one-stop-shop solutions

This section includes assessment of the priority permits identified under First Progress Report. A total of 29 central public administration permits, 7 local public administration permits and 46 licenses were selected for exploring one-stop-shop solutions. The priority permits are assessed to identify and recommend improvements (streamlining) before suggesting one-stop-shop solutions. The approach and results of assessment are presented below.

Approach

The ‘guillotine 2+’ law (Law 160) is prescribing 9 principles for regulation via permits of business activity. Certain principles deal with the process of drafting regulations, in a transparent and predicable way, for introducing new permits and are not relevant for revision of the existing stock of permits. Other principles deal with justification of need for permits. To conclude whether permits comply with principles dealing with justification, one needs to carry out a kind of regulatory impact assessment for each permit. Given that more than 400 permits were assessed under this assignment, carrying out a RIA for each of them was not possible within the time limitations of the assignment. The issue of justification will be addressed if public authorities decide to carry out any amendments to their permits or to bring into legal space permits which are not included into Law 160, proposing amendments to legislation. At that stage, they ought to carry out regulatory impact assessment and discuss it, including defending the need for legal amendments in front of private sector representatives and National Working Group on Regulatory Reform.

According to TOR, we carried out the assessment of the extent to which permits comply with the following principles from Law 160:

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  material and procedural regulation via legal acts of conditions and procedures of regulation via permits of business activity;
  
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  charging fee for issuing permit only in cases when its value is set expressly in a law or can be calculated based on provisions included into a law.
  

To reach the maximum effect of streamlining permits, we assessed permits also according to the following principles of good regulations:

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  if a permit is a confirmative act, based on provisions of Law 161 it cannot be required, entrepreneur being allowed just to declare its content. Often, confirmative acts can be replaced by declarations from applicants and/or by getting confirmative act by public authority which requires it. Moreover, many confirmative acts can be excluded without causing substantial risks;
  
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  proportionality principles, which has two slightly different definitions in Law 235 and Law 160:
  
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    proportionality of state intervention in general (the number of intervention means – by permits, licenses, inspection, official registration etc. – has to be proportionate to the aim pursued, to avoid excessive, burdensome and useless interventions). This principle is primarily applied to identify overlap of assessed permit with other regulatory measures dealing with risks;
    
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    proportionality of intervention by permits (any permit has to cover a specific set of risks not to overlap with other permits in terms of objectives pursued by permit). This principle is applied to identify overlap of assessed permit with other permits.
    

From the perspective of proportionality of intervention and of costs a special emphasis was put on cost savings for the entrepreneurs if applying the aforementioned principles. Therefore in practical terms the aim was to reach the following solutions, by changing the procedures and requirements:

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  decreasing the number of visits
  
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  decreasing the number of interactions (of the entrepreneur with public authorities)
  
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  increasing the period during which the permissive act is valid
  
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  by understanding the whole risk arias that a permissive act is covering, shrink as much as possible the type of entrepreneurs and activities to fit this exact aria and thus make this permissive act mandatory only for risk bearers.
  

Law 160 on regulation through authorization of business activity does not cover permits issued by local public administration. However, given that the abovementioned principles are set in Law 235 as well, the Law covering all kind of regulations, except for banking and non-banking financial sectors, our experts applied the same principles for local permits.

Law 160 does not cover licenses. However, almost the same principles are set in Law 451 on licensing and in Law 235, which apply to licenses. Therefore, in revision of licenses, we applied the following principles set in Law 451 and Law 235:

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  material and procedural regulation via legal acts of conditions and procedures of regulation via permits of business activity;
  
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  charging fee for issuing permit only in cases when its value is set expressly in a law or can be calculated based on provisions included into a law.
  
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  The license is justified in case when one of the below first two criteria is met in combination with the last criteria:
  

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  Involvement of use of limited state resources;
  
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  Need to set specific requirements for business activity, as well as to check the compliance with requirements during business activity, in order to exclude prejudicing rights, interests and health of citizens, environment and state security.
  
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  Licensing does not overlap with other regulatory procedures in dealing with limited state resources and prejudice of rights, interests and health of citizens, environment and state security.
  

Results of Assessment

Priority central and local public administration permits

Following the thorough assessment of 36 permits (29 central public administration and 7 local public administration permits), according to abovementioned approach, the following conclusions have been made:

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  Elimination of permits or turning it into notification (merging it with other acts, turning it into notification, elimination as confirmative act, elimination as overlap with other mechanisms /permits). A total of 9 permits (25%) have been proposed for elimination or turning it into notification.
  

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  Reducing application area (fewer types of activities or fewer types of businesses authorized). In case of 5 permits (14%) it was recommended to reduce the area of application.
  

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  Increasing the validity of permits. For 3 permits (8%) increase in term of validity was proposed.
  

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  Simplifying procedures for application and issuing (non-involvement of applicant in checking documents, clearances and coordination between authorities with the aim of issuance of permits). For 14 permits (39%) simplification of procedures was proposed.
  

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  Technical simplification of the application, the decision making process and issuance (electronic single window for application, payment system and services of receiving permits remotely). For 25 permits (69%) technical simplification of procedures was proposed.
  
  
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  Shorter list of documents attached to the application (based on the connection between authorities and confirmatory character of some documents). For 15 permits (42%) it was proposed to reduce the number of documents attached to application.
  
  
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  Proposals to supplement the legal framework to comply with existing regulatory principles (tacit approval, withdrawal of permit by court decision, supplementing with missing material and procedural rules). For 21 permits (58%) proposals to comply with certain principles of regulation were proposed.
  

All priority permits, except for Registration of sole proprietorship, require improvements before implementing technical OSS solutions. The summary of analysis for each of those 36 priority permits is presented in Annex 2. The detailed analysis and recommendations for each permit is included into the individual passports of permits presented in Annex 9.

Licenses

Licenses are regulated by separately, by the Law on Licenses. These have their own principles of better regulation, many of which resemble the ones set for general permits under Law 160. Licenses have been assessed for compliance with the principles explained in the approach section above.

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  13 licenses, which represent 28% or licenses were identified as incompliant with the better regulation principle “material and procedural regulation via legal acts of conditions and procedures of regulation via permits of business activity”. Recommendations to bring licenses in compliance with this principle were included into the passport of each license.
  
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  2 licenses, which represent 4% of licenses, were identified as incompliant with the better regulation principle “charging fee for issuing permit only in cases when its value is set expressly in a law or can be calculated based on provisions included into a law”. Recommendations to bring licenses in compliance with this principle were included into the passport of each license.
  
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  26 licenses, which represent 57% of licenses were identified as incompliant with the better regulation principle “proportionality of state intervention”, which is about existence of other measures to deal with the risks covered by concerned permit. Recommendations to bring licenses in compliance with this principle were included into the passport of each license.
  
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  13 licenses, which represent 28% of licenses were identified as compliant with the abovementioned principles.
  
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  In conclusion 72% of licenses are incompliant with at least one better regulation principle.
  

The summary of the analysis of licenses is presented in Annex 3. The detailed analysis for each license is included into the individual passports of licenses presented in Annex 10.

General conclusion on conformity with principles for regulation through permits of business activity set in Law 160:

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  Requirements and procedural norms for issuing and applying for most of the permits form Law 160’s Nomenclature of Permits are not set in laws. Moreover, for certain permits requirements and procedures are missing in regulatory framework or are included in technical documents not published in Official Gazette. It is necessary to bring the regulatory framework of permits in compliance with principle of regulation set in Law 160, particularly by setting completely conditions and procedural norms for getting permits at the level of laws.
  

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  In many cases when requirements and procedural norms for getting permits are set in laws, they are not exhaustively and clearly described. Most often encountered deficiency is lack of clear differentiation between requirements related to business activity and necessary documents in applying for permits. This can lead to request of exaggerated and unjustified documents in getting permits. Legal framework needs to be revised to indicate exhaustively and precisely applied requirements and procedures.
  

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  The Nomenclature of permits in Law 160 includes fees for permits or indicates which permits are free of charge. Regardless of this, many permits do not comply with the principle of transparency of costs, not all direct and indirect costs related to getting permits being indicated, as required by article 9 in Law 160. Respectively, in Nomenclature only the official fee for issuing permit is being included, whereas there are other direct and indirect fees involved in getting permits, such as certain services related to permit, obtaining required documents etc. It is necessary to review the regulations related to permits to comply with the mentioned principle from Law 160 and exhaustively and clearly indicate the direct and indirect costs related to getting permits.
  

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  During analysis we revealed certain regulatory mechanism that overlap with assessed permits in dealing in reaching the state objectives (covering certain public risks), thus failing to comply with principle of proportionality of state intervention through permits. Therefore, regulations and regulatory mechanisms should be revised to eliminate overlaps and/or exaggerated state intervention in addressing certain public risks.
  

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  In most of the cases the declaration of self-responsibility of applicant on compliance with permit requirements is not provided in regulations that establish permits. This is hindering the implementation of one-stop-shop mechanism as prescribed by Law 161. Therefore, it is necessary to consider for each permit the opportunity of introducing of declaration of self-responsibility on compliance with permit requirements.
  

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  Many permits do not include the mechanism of tacit approval as well as the obligation to seize permit validity or withdraw permits through court decision, as prescribed by regulatory reform principles. Therefore, it is necessary to consider for each permit the opportunity of introducing of the mechanism of tacit approval and obligation to seize permit validity or withdraw permits through court decision.
  

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  Law 160 requires implementation of one-stop-shops, however, following the preliminary assessment we have not identified properly designed one-stop-shops, the way they are prescribed in Law 161. Although many public authorities initiated implementation of one-stop-shop mechanism, these are still incomplete. With few exceptions, most of the one-stop initiatives result in adoption of a regulation on one-stop-shop which regulate in a more efficient way internal processes of permit issuing authorities, applicants still having to collect from other public authorities on its own and submit other permits and or documents required for issuing permit. It is recommended to carry out additional research on costs and administrative burden of permits for businesses, as prescribed by article 7 in Law 161, to identify cases when one-stop-shop mechanism is necessary.
  

General conclusions and recommendations for amending Law 160

Following the conceptual analysis of how the authorities get to regulate business through permissive documents and how they develop and come with adjustments and additions to the legal framework in this sense, the following conclusions and recommendations can be made:

1. Overall Law 160, although it is about how regulation through permits is supposed to set, provides only a set of rather general principles and does not contain clear rules for public authorities on how to develop normative acts and approach for regulation of business activity through permits. It is recommended to supplement the Law 160 with rules for regulators on how and within which limitations the regulator can propose regulation of business activity through permits. In this way the regulator will have certain clues not just on approach related to the process of regulation through permits but also on the process of reengineering/review or regulation to be carried out periodically to make it more efficient for permit applicants. These recommendations have been drafted as supplements to the principles in Law 160.

2. In many cases the public authorities abuse the mechanism of regulation through permits of business activity. It is not being applied always primarily to protect citizens from certain risks. Sometimes a major purpose of it is collection of extra revenue, agencies being usually self-funded. Thus, in certain cases permits are used primarily as fiscal instrument for collection of some fees and “hidden” taxes. This phenomenon reduces considerably efficiency and importance of permit mechanism and causes as well unjustified burden for businesses. It is recommended to set up clear rules in law, according to which the regulator should not use permits as a fundraising tool for its budget. Thus it is necessary that all fees collected from permissive documents to be submitted to the state budget and also to establish clear rules that the amount of fees should be strictly within the limits of the costs incurred in issuing the permit. In this regard it is proposed additions and amendments to the Law no.160, stipulating that payments collected from the issuance of permits shall be paid into the state budget.

3. A number of existing permits proved to be disproportionate and excessive, since there are already similar regulatory mechanisms or permits or permits tend to cover public risks in excess to what would be necessary to achieve its objective. It is recommended establishing general rules of proportionality of the permit, which is being proposed for approval, under which abuses and excessive regulation could be avoided. Such rules would be: a) When new permits is proposed, it is mandatory to explore and propose elimination of one or several existing permits, issued by the same regulator or permits which cover entirely of partially the same risks, regulatory domains and/or same business activity.
b) Permit represents a means of intervention which need to be used by the authority in an equivalent manner with other means and techniques of intervention of public authorities taking into account the principle of proportionality. Establish a permit necessarily have to be related to one or more risks that this act can cover and which are not addressed by other means of intervention of public authorities, including other permissive acts.

4. Once Guillotine 2+ was not carried out until the end, not the whole legal framework being adjusted and completed in regard to material and procedural rules related to permits included into the Nomenclature to established by special laws, currently a constant violation this principle is being observed and needs to be fixed. In addition to the constant need for revision and completion of the sectoral legal framework related to each permit, it is necessary in parallel to establish the general rule of procedure for regulators that proposal supplementing with a new permit the Nomenclature of permits in Law 160 should be accompanied by adjustments required to the legislative framework in force with sufficient procedural and substantive provisions to make it compliant with the above-mentioned principles. Such required was proposed to be included into Law 160.

5. In cases where the authorities included into the necessary laws the material and procedural rules for permits, still often these rules are vague and incomplete. This lack of completeness and clarity of the regulatory framework lead to potentially abusive situation when rights and obligations under the permissive act are detailed and/or decided by issuing authority. It is necessary to set up in the Law no.160 and to implement in special laws the following rules:
a) The emergence of rights and / or obligations confirmed by a permissive act takes place only by virtue of the applicant meeting conditions and requirements set by the law expressly and exhaustively. The will expressed by the public authority issuing the permit may not constitute a base for the appearance of rights and obligations, it only confirms meeting the requirements and conditions set in law, unless the law expressly grants given attribution to public authority concerned. Equivalently, the issuing authority may refuse to accept the application, to issue the permit or to initiate proceedings to terminate the validity and/or withdraw the permit unless the applicant meets the conditions expressly set out in the law. b) Authority cannot use the right to terminate validity and/or withdraw (and to refuse accepting the application) with the aim of penalizing the applicant for not complying with certain conditions or not paying certain obligations which do not fall into the list of the specific requirements and/or conditions set by the law.

All the above-mentioned recommendations were formulated as amendments to the Law 160 and are presented in Annex 4.

Conclusions and recommendations for revision of Nomenclature of Permits attached to Law 160

Following the analysis of all permits provided in the Nomenclature of Permits attached to Law 160, the following conclusions have been made:

a) It was found that the nomenclature was not always adjusted with changes in legislation. Thus there are now a number of permits that have been repealed in sectoral laws and permissive documents that proved inapplicable as declared by the issuing authority (also as no legal basis for this was created other than the Law 160).
b) The list does not reflect the exact issuing authority, while in the meantime a number of institutional reorganizations happened, resulting in changes in names and responsibilities among institutions in issuing permits.
c) Certain permits are being issued without involvement of applicant (with application of certain one-stop-shop elements), and therefore, following the definition set in Law 160, these do not qualify as permits. Therefore need of such being included in the Nomenclature is questionable.

d) Certain confirmative acts are included into the Nomenclature, whereas this is not allowed by Law 161.

e) Following the analysis, it was recommended that certain permits turn into notifications.

The above conclusions require revision of the Nomenclature. Therefore, we developed the revised version of the Nomenclature, which is presented in Annex 4. The new version of the Nomenclature is based on the results of the assessment of permits presented in the passports of permits included into the annexes to this report and Progress Report 1. In Annex 4 a list of permits proposed for exclusion from the nomenclature of law 160 is presented.

Identify the risks and concerns in reforming permits and implementing one-stop-shop solutions

The analysis revealed that there are numerous better regulation principles in legislation, but they are not being complied with by permit issuing public administration bodies. The assessment under First Progress Report concluded that 92% of central permits, local permits and licenses do not comply with better regulation principles. This was caused, one on side by poor capacity and understanding of those principles, and on the other side by insufficient enforcement of legal provisions. The recommendations proposed for supplementing and amending Law 160, explained in sections above and presented in Annex 4, are supposed to address the issues with poor understanding reform provisions and better enforcing them.