Everything You Wanted to Know about the Law of Fundamentals of Regulation

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In Israel, there are frequent complaints about over-regulation, burdensome bureaucracy and inefficient law. On the other hand, many acknowledge that there are areas where regulations are lacking or out of date. IDI experts weigh in and explains the proposed new law that are set to reform Israel's regulatory framework.


What is Regulation?

Regulation is used as the general term for actions taken by government agencies to guide the behavior and activities of individuals and nongovernmental entities—whether by means of legislation, rules, administrative directives, or licensing provisions that the government is empowered to enforce. Its purpose is to protect the social, economic, and environmental interests of society and of the national economy.

What is the Regulatory Authority about to be anchored in legislation?

The establishment of the Regulatory Authority is being advanced today as part of the Arrangements Law for the 2021–2022 State Budget. The new authority would oversee the procedures followed by ministries in issuing regulations, so as to optimize the process of developing new regulations or to revise or trim back excessive ones. Its establishment would institutionalize the work of the Regulatory Optimization Unit in the Prime Minister’s Office and endow it with various powers. The bill seeks to anchor in law various principles intended to guarantee that ministries follow procedures which will make it possible to devise the best possible regulations; which include examining alternatives and relating to the entire set of considerations, analyzing data, and engaging in public discussion.

Is Israel over-regulated or under-regulated?

The business community and manufacturers frequently complain about a heavy bureaucratic burden, excessive regulation, inefficiency, and sometimes even contradictions between different regulatory demands. These assertions are supported by a number of international indicators, including the OECD’s Product Market Regulation index (PMR) and the World Bank’s (ease of) Doing Business Index, which ranks Israel 35th out of 190 countries.

On the other hand, in various sectors we hear repeated claims that there is not enough regulation, or that regulation is outdated, or not enforced. These assertions are also backed up by OECD data, such as its Inventory of National Rankings (IREG). So despite the use of the term “overregulation,” much of the Israeli discourse on regulation deals with its quality rather than its volume or scope. For this reason, many countries, including Israel, are now placing the emphasis on improving the quality of new regulations, by means of methods aimed at improving decision-making procedures. These methods are based in part on risk-management tools and analysis of the anticipated system-wide impact of changes in regulations. These procedures are referred to as RIA (Regulatory Impact Assessment)

Why is it important to maintain a balance between the Regulatory Authority and current regulators and avoid the creation of a “super-regulator”?

Ministry regulators enjoy professional expertise and have a legal obligation to preserve, protect, and promote the interests for which they are responsible. The main task of the new Regulatory Authority, like similar bodies around the world, should be to ensure that procedures are characterized by a balanced consideration of all relevant interests: protection of the regulators’ field of responsibility, but also of broad public, social, economic, and environmental interests, and consideration of long-term implications and the welfare of future generations.

Details of the powers that would be granted to the new authority are currently being debated by the Knesset Law, Constitution, and Justice Committee.

The Israel Democracy Institute and other civil society organizations attribute great significance to streamlining regulation, improving its quality, and reducing the burden of excessive regulation, as a means to improve the business climate, increase labor productivity, and boost the capacity to compete. At the same time, IDI believes it essential to guarantee that the new authority will not turn into a “super-regulator” that weakens the regulators. Quite the contrary: it should seek to bolster their professionalism by providing them with guidance and assistance in improving the regulatory procedures for which they are responsible.

Does the bill meet international standards?

Regulatory processes in Israel, including the proposed Fundamentals of Regulation Law, are guided by a methodology developed by international organizations, notably the OECD, and applied in many countries. The OECD attaches great significance to optimal regulation, and tracks countries’ implementation of its recommendations. According to the principles it has formulated in recent years, optimal regulatory procedures are meant to balance the specific interests for which each regulator (such as the Electric Power Authority, defense and security agencies, the Health Ministry, the Environmental Protection Ministry, and the Supervisor of Banks) is responsible against broader public interests, such as the creation of a congenial business environment for small and mid-sized businesses, employment, equal opportunity, quality of life, competitiveness, lowering the cost of living, as well as the rule of law, safety, and security.


Link to the full Hebrew report.