Although it can often cause headaches for clients and their advisors, regulatory uncertainty is not necessarily a negative thing, says an Auckland lawyer.
According to Edward Willis, regulatory uncertainty is a key component of the way regulation works.
Willis was recently awarded the Honourable Rex Manson Prize for Excellence in Legal Writing for his article,
On Regulatory Uncertainty. He is also a doctoral candidate at the
University of Auckland Law School where he is researching New Zealand’s unwritten constitution.
“Discretion is really important to a regulator, it's fundamental to what they do because regulation needs to adapt to quite often changing markets circumstances and quite often changing political circumstances,” he said.
In his view, while it is important that regulators remain flexible, if the boundaries of a regulator’s power, or the way a regulator might exercise their discretion is unclear, regulatory uncertainty can be problematic.
Because the term is used colloquially so frequently, Willis believes that it can make it difficult to raise important regulatory uncertainty issues, as organisations use it to attract media attention to a negative outcome.
“It’s an easy catchphrase for people to jump to when they have a problem with regulation. A business who has just faced an adverse decision by government or by a regulator can jump to the term, ‘regulatory uncertainty’ in the media or even in private conversations or in engagement with regulators as a bit of a catch cry to say this is a bad result that we don’t like,” he said.
Willis says that lawyers need to get better at advising clients on regulatory uncertainty. He says that lawyers could look at the bigger picture rather than focussing on an issue they think they could influence a decision on.
“Lawyers, because they tend to help their clients, I think they often jump to a single legal issue that they think will be able to pressure a regulator one way or another. If you really want to help your clients, you want to improve the regulatory system as a whole,” he said.
