Regulation in the COVID-19 pandemic and post-pandemic times: day-watchman tackling the novel coronavirus

Maciej M. Sokołowski (Faculty of Law and Administration, University of Warsaw, Warsaw, Poland and Graduate School of Public Policy, University of Tokyo, Tokyo, Japan)

Transforming Government: People, Process and Policy

ISSN: 1750-6166

Article publication date: 16 November 2020

Issue publication date: 23 June 2021

567

Abstract

Purpose

While fighting with the novel coronavirus will not be the main goal of sectoral regulators, different regulatory authorities join the struggle by providing a regulatory response. The purpose of this paper is to address this regulatory response in pandemic gathered around eight thematic areas.

Design/methodology/approach

This paper discusses the regulatory response in pandemic gathered around eight thematic areas, namely, the objectives, rules and standards, authorization and permits, procedure, monitoring and surveillance, enforcement, accountability and an institution presenting regulatory actions to tackle coronavirus (COVID-19) in reference to day-watchman type regulation.

Findings

Tackling the COVID-19 pandemic should be a knowledge-based approach (taking as much as possible from best available practices with respect to the novel coronavirus) with a framework of rules, standards, authorization, permits and guidance, monitored and enforced in a way adjusted to conditions of the pandemic, being as safe (as non-physical, as online) as possible, with suspended or extended deadlines, free of unnecessary administrative burdens. In this way, regulation should be pragmatic and flexible, as under the day-watchman model.

Research limitations/implications

In a post-pandemic regime, in the short run, the regulators should try to minimize the social and economic challenges faced by consumers and entrepreneurs. Among them, one may find scaling back, at least temporarily, the rules developed in non-disaster contexts. However, in the end, the post-disaster reforms tended to strengthen regulators’ hands, also under the deregulated government. The day-watchman type regulation balances both, as a middle ground approach, being a bridge between “a total subordination” and “a complete release.”

Practical implications

The disaster management (including public law regulation) provided by public authorities when tackling the effects of hurricanes, earthquakes or tsunamis can be a benchmark for regulatory responses to the COVID-19 pandemic. This concerns the support offered to entities and individuals affected by the negative consequences of reducing or stopping their businesses and staying in isolation.

Social implications

The day-watchman approach, visible in certain examples of public response to COVID-19 may serve as a framework for establishing a regulatory regime that would automatically take effect in case of another pandemic, limiting delays in regulatory actions, reducing non-compliance and accelerating recovery.

Originality/value

This study provides an analysis of different theories on public regulation addressing the notion of regulation using the day-watchman theory, which could be applied in regulatory actions during a pandemic. The paper discusses concrete steps taken by regulatory authorities worldwide, bringing examples from the USA, Canada, the UK, France, China, Japan, Australia and New Zealand. It juxtaposes the regulatory experiences derived from different catastrophes such as hurricanes, earthquakes or tsunamis with the regulatory response in a pandemic.

Keywords

Citation

Sokołowski, M.M. (2021), "Regulation in the COVID-19 pandemic and post-pandemic times: day-watchman tackling the novel coronavirus", Transforming Government: People, Process and Policy, Vol. 15 No. 2, pp. 206-218. https://doi.org/10.1108/TG-07-2020-0142

Publisher

:

Emerald Publishing Limited

Copyright © 2020, Emerald Publishing Limited


1. Introduction

Since appearing, the pandemic coronavirus disease COVID-19 has been posing a threat to lives, health, jobs and budgets of many throughout the world. The degree of public response to coronavirus varies from country to country; however, some similarities can be observed worldwide. This concerns rules for quarantine, self-isolation, closing borders, limiting public contacts, suspending production and services, moving business operations and education online, etc. However, these actions, in many ways, affect countries and deteriorate the situation of entrepreneurs and consumers. Even in the short-run, they may generate a wave of bankruptcies and layoffs with a scale of crisis comparable to (if not greater than the) global financial crisis of 2007–2009 (Claessens et al., 2010; Herrero, 2020). To prevent negative consequences, the lockdown rules are followed by active movements of government action aimed at stimulating the economy (Wnukowski, 2020).

2. Approach: theories on public regulation and regulatory practice in a pandemic

Besides the steps undertaken by national parliaments/governments establishing/utilizing legal frameworks to offer tax holidays, direct grants or preferential loans to affected by pandemic, one may wonder about the role of regulatory authorities. The latter are covered by this paper aimed at discussing the position of sectoral regulators not directly – like health-care administration – involved in fighting the effects of the COVID-19 pandemic. These are, among other things, regulators responsible for energy, telecommunication, finances, railroads, aviation, etc. As mentioned above, the paper does not discuss governmental policy actions such as national antivirus shields, post-COVID19 recovery strategies and economic stimulus programs together with adopted legislation dedicated to the novel coronavirus.

In this context, the study provides an analysis of different theories on public regulation addressing the notion of the day-watchman, which could be applied in regulatory actions during a pandemic (Sections 3 and 4). Then, the paper evaluates areas ranging from regulatory objectives, powers and duties to institutions (Section 4). The paper also discusses concrete steps taken by regulatory authorities worldwide, bringing examples from the USA, Canada, the UK, France, China, Japan, Australia and New Zealand (Section 4). The two last elements of the list (vii-viii) are analyzed in the context of regulatory experiences of catastrophes such as hurricanes, earthquakes or tsunamis (Section 5). Finally, the conclusion recapitulates issues discussed in the paper offering further comments on the regulation of a day-watchman type and post-pandemic regulatory regime (Section 6).

3. Regulatory state and a day-watchman

A regulatory regime provides a framework for understanding state action. Under it, the challenges (like the pandemic) justify control over certain activity – state’ institutions adopt regulatory agenda and a set of policies is being introduced to tackle issues (Harris and Milkis, 1989, p. 25). Although regulation is a complex word of different meanings (Barton, 2006, p. 11; Marshall, 2012, p. 11), one may find its narrow and broad sense. Under the narrow approach, regulation is a set of rules adopted under binding legislation under the statute. In contrast, the broad approach covers any mechanism of social control and influence (Barton, 2006, p. 12). Besides being an attempt to change someone’s behavior according to defined standards or purpose (Black, 2002), regulation can be understood as a way to correct market failures (Prosser, 2010, p. 1; Ogus, 1994, pp. 4–5).

Nevertheless, in all of the addressed aspects of regulation, it is an action to adjust, “tune in” a social or economic issue to satisfy policy needs. In many ways, it derives from an assumption of market inefficiency where the state wants to adjust it with different power and possibilities – this derives from the adopted socio-economic system and the regulatory regime/s applied (Sokołowski, 2016, p. 52). These regimes have different forms, ranging from a “public ownership regime” with public monopolies and governments holding power to make and set the rules to a “private competition regime” where suppliers are private entities and regulation is established to ensure fair and effective competition (Thatcher, 2002, pp. 869–870).

On their borders, one may delimit extreme points: “a total subordination” and “a complete release” (Sokołowski, 2013, p. 309). Under the first the Leviathan state adopts laws, exclusively executes them and manages the economy with the use of subordinate entities (state enterprises, state monopolies), a strong centralized hierarchy occurs and every type of behavior is regulated by the state’s strict interference via direct influence – commands (Hazard and Orts, 2001; pp. 80–82; Sokołowski, 2016, p. 52). The second is characterized by a high degree of competition in the market, no entry barriers, and freedom of market activity with the domination of private property and individual rights (Sokołowski, 2013, p. 310; Hazard and Orts, 2001, pp. 80–82).

The total subordination and the complete release are rooted in market-based and state-based approaches that establish a public-private dichotomy (Sikor et al., 2008, p. 4). Their extreme nature demarcates a space filled with a mixed economy, which brings regulation among its elements (Sokołowski, 2018, p. 598). In this way, it is a “regulatory zone” with the regulator – a day-watchman (Sokołowski, 2013, 2016; 2018; 2020a; 2020b). This position derives from a model of neither an active state’s participation in the market nor a complete resignation from participation (Sokołowski, 2016, p. 89). A regulator – day-watchman is a vigilant observer; however, under the states’ power, he/she creates the rules of the market game, provides information to the market players and enforces the rules through the use of sanctions (Sokołowski, 2013, p. 318; 2016, p. 89). However, the rules for this game are set by the state. Therefore, the day-watchman acts under the state’s command – but – serves both the states’ and markets’ needs.

Furthermore, one can personalize actors of this relation with the notions of a “householder” and “guests” (Sokołowski, 2020b, p. 175). In this context, the day-watchman model provides a balance between the market and the state, between public and private interests, between active and passive participants of the market-play (“guests”). They appear, disappear or reappear in the market game offered by the state (“householder”). Being a middle-ground approach a day-watchman model – if appropriately adopted – can build a bridge between the extremes of total subordination and complete release (Sokołowski, 2018, p. 598; 2020b, p. 175). Let us now apply this model to the regulation during pandemic.

4. Regulation during a pandemic: a day-watchman approach

To discuss the regulator’s approach to tackling the coronavirus and act in a pandemic/post-pandemic era, it is useful to refer to the theoretical context of regulation elaborated on by Barton (2006, pp. 19–20). This background concerns the eight pillars addressing different elements of regulation. The first pillar includes an objective or objectives brought by the enacted legislation on the concrete regulatory authority. Objectives may have general or specific character ranging from access to infrastructure, environmental impact, to consumer protection.

Should tackling the coronavirus or ensuring epidemiological safety be set as one of the objectives of the abovementioned sectoral regulators? It seems that both from the formal and problem-based points it is not needed. The sectoral regulators are not on the front line fighting the novel coronavirus. However, they are responsible for their fields, which are affected by the coronavirus. This concerns, e.g. energy security, competition, consumers, air traffic. The regulatory duties imply action in an emergency and specter of danger. If e.g. a pandemic could deteriorate competition, harm the environment or threaten the operation of regulated entities, the regulatory authority should act. If this already happened, regulatory action is even a clear obligation – the regulatory authority must act.

What, then, should the regulator do? This leads us to the second and third pillars, the powers: to make rules and standards, as well as to grant authorization and issue permits (accompanied by a power to adopt guidance). Both powers give the regulator the possibility to have an impact on the entities under the regulator’s jurisdiction (Sokołowski, 2018, p. 594). Under them, the regulator may provide a rules-based regulation establishing detailed instructions or a principle-based regulation setting the general principles – rules/principles offering the legal standards (legal tests) which must be met or passed, and standards establishing minimum requirements to follow (Sokołowski, 2016, p. 78; Sokołowski, 2018, p. 594). Besides rules, standards, authorizations and permits, the regulator may use guidance concerning, e.g. the process by which applicants for a license are selected (Sokołowski, 2016, p. 78).

The second and third pillars give regulators the opportunity to act in the face of a pandemic. Although their scale and strength depend on the regulator’s legal position, this does not change the fact that much of the regulatory arsenal is found in these pillars. So how should regulators work during and post-pandemic? First, actions must be based on knowledge and relevant information. Public officials (both directly and not directly involved in the response process) must have a clear understanding of what to expect in disaster situations (Schneider, 1992, p. 143). Nevertheless, due to branch specialization, epidemiological knowledge is not within the traditional scope of areas covered by sectoral regulation. Therefore, building activity on this basis requires cooperation with relevant entities possessing knowledge and experience – health-care administration, health-care experts, epidemiologists and virologists. Policymakers could also rely on advisory groups consisting of experts from all relevant areas (OECD, 2020, p. 2).

Knowledge should be applied in sectoral regulation via a system of rules, standards, authorizations, permits and guidance adopted by the regulators. This may entail, e.g. applying guidance established by the World Health Organization (WHO) – if national standards are not adopted – and adjusting them to sectoral needs. The regulatory action should cover providing safe and secure activity of regulated industries, including individuals covered by this regulation. As the WHO (2020, p. 2) underlines:

[p]ublic health measures can slow the transmission and spread of infectious diseases. These measures can take the form of personal protective equipment, environmental, physical distancing and travel-related interventions. […] Public health interventions are and will continue to be an important tool to reduce transmission and prevent the spread of COVID-19.

Naturally, the regulatory areas where there is a significant accumulation of people moving from all parts of the world (aviation) or traveling long distances (railways) should be assessed with more attention than those industries where automation and remote operations can be applied. However, this in no way detracts from the actions that should be taken by sectoral regulators in the field of safety due to the epidemiological threat. Actions could cover such basic elements as hygiene (recommendations or obligations imposed on regulated entities in aviation and rail to provide alcohol hand sanitizers or masks for use in aircraft and train by crews and/or passengers) or health (obligations/recommendations for industrial facilities to install temperature measuring devices, provide enough space to keep distance, assess conditions of ventilation systems, conduct decontamination frequently, etc.). In justified cases like a sudden increase in the incidence of COVID-19 followed by deaths, these may even be regulatory orders to close specific installations or to limit or cease operations. Of course, these decisions will not always depend only on sector regulators – in practice, other entities may act in this respect, mainly the health-care administration. However, the safety and security measures related to the novel coronavirus should be in the visual field of different regulators. Seen in this light, one can imagine a regulator ordering the regulated entity to undertake specific antivirus steps even at the licensing stage. Finally, when the pandemic is over or its effects fall below the critical threshold, actions taken during the crisis (e.g. under the accelerated procedures) should be carefully reviewed (OECD, 2020, p. 2).

Before moving to the fourth pillar (procedure), let us reorder Barton’s list discussing here the fifth and sixth pillars. Monitoring and surveillance (v) cover detection of misconduct of regulated parties by applying control powers, including collecting data and screening them to define possible abuses, conducted to achieve the desired goals (Ogus, 1994, p. 2; Sokołowski, 2016, p. 79). Accompanied by mitigating and sanctioning – enforcement (vi) with a possible sanction – enable to induce or force regulated parties to perform in line with set rules, standards or guidance, granted authorization, issued permits or law in general (Sokołowski, 2018, p. 594). In this way, enforcement enables compliance by signaling the threat of punishment, warning that non-compliance would not be tolerated and it could result in a reprimand or more severe consequences (Macrory, 2008, p. 38).

These two pillars play an important role in a pandemic. Monitoring and surveillance together with enforcement should be used for detecting and preventing misconduct regarding those binding elements of regulator’s activities like rules or standards (if the latter are binding), authorizations and permits (guidance and recommendations are usually without enforceable effect). What is important, the monitoring itself – if having physical elements – like inspections in place (in facilities operated by the regulated entity) should be minimized. Controls should be conducted only in situations identified as presenting extreme risks related to critical safety issues (Visvizi and Lytras, 2020), to reduce possible virus exposure for inspectors and controlled individuals (OECD, 2020, p. 3). If conducted, inspections should comply with the antivirus approach offered by the regulators. In this way, the regulators should establish standards for inspections in a pandemic and post-pandemic environment. This could cover, among other things, methods of conducting them with the application of physical distance, limiting person-to-person contacts, use of personal protective equipment (masks, gloves, goggles, etc.). Moreover, besides general sanctions for non-compliance, one can imagine the separate antivirus sanctions in regulators’ toolkits established to tackle COVID-19. This idea derives from sanctions currently established worldwide, covering the behavior of entities and individuals violating assembly bans, travel restrictions, stay-at-home orders or obligations to cover faces. It could be a separate regulatory approach dedicated to anti-COVID-19 standards established and enhanced by the regulator.

This leads to the fourth pillar (procedure). It highlights a legal orientation of public regulation where the regulators’ decisions fall under particular legal standards (Sokołowski, 2018, p. 594), including those provided by the supreme law like a constitution. The procedure also covers enforcing issuing decisions and challenging them in an appeal (Sokołowski, 2016, p. 77). However, how should regulators respond to procedural issues during a pandemic?

First, they should consider moving the traditional paper process online, utilizing big data and artificial intelligence (OECD, 2020). The electronic process not only accelerates and facilitates business activities (currently carried out by many remotely) but also it lacks physical contact, a cause of the spread of COVID-19. This concerns, e.g. conducting online consultations or offering mobile applications (OECD, 2020).

Second, deadlines for ongoing proceedings should be extended as many of the regulated entities struggle with personnel problems. They should be given more time to prepare the relevant documentation (e.g. regarding license extension, new tariff, etc.). If the deadlines have expired, they should be renewed. However, the legal system does not always allow regulators to make their own decisions in this respect – sometimes this may require changes at the legislative level.

Let us stop the pillar review here and refer the discussed framework to concrete actions undertaken by the national regulators in their response to the novel coronavirus. Leaving those directly related to combating the effects of the COVID-19 pandemic (like declaring a state of emergency by the government) and financial assistance provided to affected entrepreneurs, e.g. by enacting tax reliefs (Tolan, 2016), some of the examples of regulatory actions undertaken worldwide are presented below in Table 1.

Seen in this light, the Federal Reserve will focus on monitoring and outreach to help financial institutions to understand the challenges and risks of operations in pandemics, allowing companies to address heightened risks and assist consumers, granting additional time to resolve non-critical existing supervisory findings. In the UK, if companies can demonstrate that any compliance issues have resulted from prioritizing efforts to protect customers and security of supply during a pandemic, Ofgem will take full account of this in any decisions it takes. Similarly, under the pragmatic approach to enforcement, Ofcom recognizes that the impact of the novel coronavirus can result in non-compliance with regulatory obligations. However, the industry should make decisions that support critical services, vulnerable consumers and those who are relying on communication services – where those decisions are in the interests of consumers and businesses they would be supported. As juxtaposed in Table 1, besides this flexibility, other regulatory activities cover providing extra time, suspending inspections, monitoring the regulated areas, etc.

5. Findings: disaster regulatory experience, regulatory institutions and overregulation

To a certain degree regulatory responses to the COVID-19 pandemic – those related to support offered to entities and individuals affected by negative consequences of reducing or stopping their businesses and staying in isolation – could be compared to disaster management provided by public authorities when tackling the effects of hurricanes, earthquakes or tsunamis. This concerns the public ability to respond to calamities, the policy-making under extraordinary conditions (Schneider, 1992) or the solutions (ex-post disaster assistance or ex-ante regulation), to reduce exposure to the loss (Priest, 1996, p. 219) or to mitigate the effects of a disaster (Malawani et al., 2020). Like the current COVID-19 crisis, after hurricanes Katrina and Rita, which seriously damaged the Gulf Coast of the US in 2005, the federal regulatory agencies have recognized that due to extraordinary circumstances flexibility in the application of rules was required (Gruenberg, 2007, p. 68). The federal regulatory agencies encouraged financial institutions to cooperate with borrowers by postponing (or skipping) repayments, restructuring existing and easing conditions for new loans, as well as granting short-term loans to cover living costs until insurance proceeds were paid (Gruenberg, 2007, p. 68). Similarly, after the 2009 Morokot typhoon competent authorities of Taiwan were given the possibility to simplify administrative procedures at all levels (Gao, 2015, p. 8). In this line, to facilitate the recovery of areas affected by the 2006 hurricanes, the federal regulatory agencies modified procedures, e.g. by simplifying several applications and filing requirements (Gruenberg, 2007, p. 68).

Just like today, yesterday’s cataclysms resulted in certain regulatory reliefs offered to professionals needed in disaster response or recovery. Under the declaration of a disaster or state of emergency in the US, the governors used their powers to adjust the state’s licensing requirements (Abbott and Luk, 2016, p. 191). In some states, the governors have the ability to freeze the state’s licensing or inspections. E.g. in 2006, New Orleans temporarily suspended inspections permitting licensed electricians to inspect the electrical work themselves while Florida relaxed occupational licensing requirements following disasters (Chamlee-Wright and Storr, 2008, p. 9; see Skarbek, 2010, p. 80).

Past public responses to crises also had institutional dimensions. To coordinate the 2004 Indian Ocean tsunami emergency management, Indonesia formed the Tsunami Rehabilitation and Reconstruction Board (Djalante and Garschagen, 2017, p. 43). After the 2011 Tohoku earthquake and tsunami to coordinate and promote the rebuilding and revitalization of the damaged Japanese regions a reconstruction agency was established (Kingston, 2016, p. 377). Following the 2005 hurricanes, under the state law, the Louisiana Recovery Administration was created; it was a new public authority to distribute funding to assist in revitalization efforts, granted a wide authority to plan and implement the redevelopment goals, including the power to issue guidelines for other agencies and organizations (Gotham and Greenberg, 2014, pp. 112–13). Also, at that time, the federal financial regulators formed the Katrina Working Group to address supervisory policy issues emerging from the disaster (Gruenberg, 2007, p. 68).

In the context of institutions established after major natural disasters, let us come back to pillar review discussion by bringing pillars seventh – accountability and eight – institution, both closely combined with the regulatory authority and the position of regulators in the legal system. Accountability concerns links between the regulator and regulated entities – industry and society, as well as actors over regulators – the government with authorized representatives (ministers, secretaries, etc.). The seventh pillar also answers the question of what power should regulators have regarding independence, i.e. whether the regulator should be supervised or controlled by other authorities, should have judge-like independence or be a minister-regulator with dual accountability, both legally and politically (Sokołowski, 2016, pp. 79–80). In this way, it brings the last pillar, an institution. Regardless of its name (board, commission, council, etc.), equipped with the power to make rules and standards, authorization and permits, acting under the procedure, having monitoring, enforcement powers, as well as determining accountability, the regulatory institution (in a regulatory state) is necessary to provide an effective public regulation (Sokołowski, 2016, p. 81).

Referring both pillars to a pandemic, one should distinguish the relation of sectoral regulators and health-care administration. In a natural way, the latter is at the forefront of the fight against a pandemic; however, the first do no less important work – they ensure compliance with the law and standards, safeguard transparency and clarity of rules regarding consumers and competition in unusual times. In their accountability, for many reasons, independence is becoming a desirable model for regulators – often sectoral regulators are only referred to as “independent regulators,” with independent management, finances and organization and competence (Gilardi and Maggetti, 2011, p. 203). Regardless of independence, fighting the pandemic shows that well-functioning coordination mechanisms are necessary; coordinating policies can make crisis response more effective (OECD, 2020, p. 2). Especially, this concerns cases where an increased role is played by central government – global examples of actions in the COVID-19 pandemic show that often this role overshadows the activity of regulators (but also other entities, e.g. local authorities). However, this must not lead to the regulators’ role being replaced.

The last pillar, the institution, should be perceived in a similar way. If a separate anti-pandemic authority would be established, e.g. an agency responsible for tackling COVID-19, it should not take away the duties and powers granted to sectoral regulators. Hence, the centralization of actions in the fight against the pandemic should not destroy the autonomy of decisions based on field expertise. Although seemingly and temporarily, at the first stage such actions may prove to be effective, in the long run, they will fail. In practice, coordination mechanisms are much more effective. What can combine both approaches is the selection (creation) within the structure of public administration of a coordinator of activities related to COVID-19 and the novel coronavirus. At this point, the potential of self-coordination of private actors comes to the force; if copied by public actors (state) it could bring positive competition of institutions and reciprocal self-observation for the purpose of introducing learning capacity into public governance (Ladeur, 1999, pp. 20–21).

Moreover, coordination can help in avoiding overregulation. This negative consequence of regulation is characterized by the overproduction of law and legal overweigh. The first concerns inflation of law with too many existing rules, too many passed laws by relevant authorities, too many imposed standards, too many issued decisions – which create a network of overlaps, regulatory conflicts, self-exclusive statements and opinions with the legal quagmire of too many different rules (Sokołowski, 2018, p. 596). The second results from the severity of the regulatory measures where regulators are heavily armed with a wide variety of regulatory tools, can impose severe punishments and make decisions concerning many aspects of the activities performed by the regulated entities (Sokołowski, 2018, p. 596). In practice, the space for flexibility for market players is limited, and a little room is left for the market itself which seems to be squeezed between the walls of a narrow corridor of regulatory decisions – which besides that could be arbitrary and non-transparent (Sokołowski, 2018, p. 596). There is a risk that during a pandemic, addressed under the laws of the state of emergency or another extraordinary framework (as happened in many countries), such overregulation could occur.

6. Originality: a post-pandemic regime

The varied actions conducted worldwide in response to COVID-19 and the novel coronavirus have a regulatory dimension, including the action of regulatory authorities. The regulator’s approach in the pandemic, gathered around eight thematic areas discussed in this paper, shows that tackling the coronavirus or ensuring epidemiological safety is and will not be a primary goal of the sectoral regulators. It is because they stand behind the frontline of fighting the novel coronavirus. Nevertheless, by being responsible for their fields, which are affected by the coronavirus and COVID-19, their regulatory action is needed. This could cover the knowledge-based approach resulting in adopting a system of rules, standards, authorization, permits and guidance, dedicated to the COVID-19, taking as much as possible from best available practices. These should be accompanied by monitoring, surveillance and enforcement adjusted to conditions of a pandemic, being as safe (as non-physical, as online, etc). as possible, with suspended or extended deadlines, free of unnecessary administrative burdens. If something can be postponed, let it be postponed; if something can be supplemented, let it be supplemented, etc. In this way, regulation could be pragmatic and flexible, as under the day-watchman model.

How could this regulatory dimension look post-pandemic or at least be limited in its negative consequences? Regarding the regulatory action, in a post-pandemic regime, in the short run, the regulators should try to minimize the social and economic challenges faced by consumers and entrepreneurs. Among them, one may find scaling back, at least temporarily, the rules developed in non-disaster contexts, as well as being clear about which rules will stay in force and which (and for how long) the regulators intend to relax (Chamlee-Wright and Storr, 2008, p. 10). However, in the end, the post-disaster reforms tended to strengthen regulators’ hands, also under the deregulated government (Almond and Esbester, 2019, p. 99).

Seen in this light, when deregulation imposes reregulation, then the choice would not be “deregulation versus regulation,” but rather “weak regulation versus strong regulation” (Lane, 2000, p. 172). The idea behind the day-watchman type regulation balances both, as a middle ground approach, a bridge between “a total subordination” and “a complete release” (Sokołowski, 2018, p. 598). If one could create an allegory of the enforcement provided under the two discussed types of states, the Leviathan and minimal government, this would be a story of two sheriffs. The first of them, an “overzealous sheriff” (under the Leviathan-state) breaks into an office and searches for evidence of illegal business activities, even though no search warrant was issued, while the latter, “a night watchman” (of the minimal government-state) sits in relative darkness, occasionally twirls a baton or revolver (when not asleep) and waits, warding off potential intruders, just by being there (Sokołowski, 2020b, p. 174). In comparison, the regulator – day-watchman, the active observer, but not the active participant, works in both daylight and overnight, keeping the baton or revolver on hold, being awake and observes (Sokołowski, 2020b, p. 181).

The presented balance-approach is particularly important today, as different extremes come to the fore in global politics, thus affecting policies, law and economy. Complex phenomena such as the COVID-19 pandemic could be tackled by a strategy of cooperation of institutions, which have the intention of searching for a global “best practice” (Ladeur, 1999, p. 21). The day-watchman approach, visible in certain examples of public response to COVID-19 may serve as a framework for establishing a regulatory regime that would automatically take effect in case of another pandemic, limiting delays in regulatory actions, reducing non-compliance and accelerating recovery (Chamlee-Wright and Storr, 2008, p. 10). For sure, the experience from the current struggle with the novel coronavirus would serve as a benchmark for future actions – if a similar crisis occurs.

Should the WHO lead this move? After a wave of criticism that WHO faced, it seems that many depend on independent scrutiny over the organization’s response to the COVID-19 pandemic and its relations with the USA which in July 2020 formally notified the United Nations of a withdrawal from the WHO (effective July 2021). Solving this situation (together with regaining trust) may be one of the main problems of the organization in the near future (however, the 2020 US presidential election may resolve this matter by itself). These issues can limit the organization’s capacity to react when a future crisis occurs – therefore, some changes may be needed, ranging from the WHO’s structure to creating a new model of international health-care cooperation. As discussed in the paper, the day-watchman state approach offers a solution also with this respect.

Selected regulators’ actions in response to the novel coronavirus and COVID-19

Regulatory field Institution (country) Specific action
Monitoring and surveillance US Federal Reserve Board Temporarily reduction of examination and inspections (any examination activities will be conducted off-site), placing a focus on monitoring efforts
US Nuclear Regulatory Commission Ensuring the NRC construction resident inspectors continue to monitor NRC-regulated activities and perform their duties remotely
Australian Prudential Regulation Authority APRA’s supervision priorities largely suspended until at least 30 September, particularly where they involve intensive engagement with regulated entities; refocused supervision effort involves frequent communication with entities, monitoring key financial settings, conducted virtually, unless absolutely necessary, continued as long as necessary
Rules and standards, authorization and permits China Securities Regulatory Commission Providing a fast track to the registration of private equity funds and venture capital targeted at the medical and health-care industries
US Federal Energy Regulatory Commission Deferring by three to six months
the implementation of certain Reliability Standards
US Nuclear Regulatory Commission Issuing general enforcement guidance on how the agency will examine COVID-19-related potential violations of NRC regulations
Transport Canada Temporary extension of the validity period of flight simulator certificates and flight training device certificate – until 31 October 2020 or cancellation of the exemption
National Commission on Informatics and Liberty, France Guidance on processing personal data in a pandemic: employers must refrain from collecting from employees and their relatives the health data which would go beyond the management of suspected exposure to the virus
Enforcement Office of Gas and Electricity Markets, the UK Focus on compliance to ensure that companies protect consumers from immediate harm, particularly vulnerable customers or where customers are at risk of going off the supply
Office of Communications, the UK A pragmatic approach to enforcement
Procedure Australian Securities and Investments Commission Extension of the deadline for unlisted entities to lodge financial reports by one month
Financial Services Agency, Japan Application for an extension of the submission deadline for reporting
Office of Communications, the UK Suspending all existing consultation deadlines and information requests and putting on hold new consultations, decisions and information requests
Financial Markets Authority, New Zealand All Financial Markets Conduct Act reporting entities with balance dates up to and including 31 July will have a further 2 months to provide audited financial statements, if their ability to produce financial statements is legitimately impacted by COVID-19 (this extends the current relief from balance dates up to 31 May)

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Acknowledgements

This paper was completed during a research stay in Japan under the Mobility Plus funding received from the Ministry of Science and Higher Education of Poland.

Corresponding author

Maciej M. Sokołowski can be contacted at: mm.sokolowski@wpia.uw.edu.pl

About the author

Maciej M. Sokołowski is a Visiting Researcher at the University of Tokyo and Assistant Professor at the Faculty of Law and Administration, the University of Warsaw. He is the author of books “Regulation in the European Electricity Sector” (Routledge, 2016) and “European Law on Combined Heat and Power” (Routledge, 2020), as well as numerous papers on administrative, energy and environmental law.

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