The role of norm-referenced regulation and indirect methods in optimizing law and reducing regulatory risks

Trofimov Egor Viktorovich ORCID: 0000-0003-4585-8820 Doctor of Law Deputy Director for Science, St. Petersburg Institute (Branch) of the All-Russian State University of Justice 199178, Russia, g. Saint Petersburg, 10-ya liniya V.O., 19, lit. A, kab. 36 diterihs@mail.ru Other publications by this author

1. Introduction

In administrative and legal science, a categorical and conceptual apparatus has been developed, which includes a number of legal abstractions of a high level of generalization, which have become the result of serious theoretical research and accumulated ideas of legal regulation that are important in a certain paradigm. The fundamental categories of the administrative-legal regime and the method of public administration (the method of public administration) have become a common place in any administrative law course and are known to any law student. However, the semantic load of these concepts seems to be very capacious, it is in systemic connection with many legal phenomena and processes, with development trends and goals of legal regulation.

The categories of the administrative and legal regime and the method of public administration were developed under the domination of an ideologized and formalized normative approach to law. Today, these categories, in the form in which they are positioned in the administrative and legal literature, need to be updated in the light of the realities of public life, developing social values and modern challenges of theoretical and practical jurisprudence. Issues arising from the ongoing Fourth Industrial Revolution are increasingly on the agenda of modern law, which sharpens many problems that seemed to have been solved long ago.

The formation and dissemination of digital culture with its specific artifacts assumes collaboration, creativity, and product sharing as the basis of social practices ^[1]. The basis for the production of tangible and intangible goods is innovation, customization (individualization), flexibility (adaptability), resource conservation and holism ^[2]. Due to this, along with the obvious fact of the transformation of society under the influence of digitalization and cyberphysical ideas, researchers come to the conclusion about the priority importance of human capital in Industry 4.0 ^[3] and the basic nature of creativity, intuition and thinking in the process of the Fourth Industrial Revolution ^[4].

The integration of economic and legal paradigms as the basis for modernizing processes in the digital economy is recognized as one of the tasks of modern jurisprudence ^[5]. The observed increase in the importance and value of human capital is becoming a factor in the development of the economy, and therefore of law. The need for legal regulation of human capital is being actualized not only in the public, but also in the private sector in order to realize a balanced range of public and private interests.

In this context, the correlation of direct and indirect methods in administrative and legal regulation seems to be a significant scientific problem. Indirect methods focused on the value-motivational sphere are associated with human capital, which, both in itself and in the aspect of its development (human capital management), is also most closely related to motivation mechanisms and value attitudes ^[6].

The purpose of this study is to develop an approach to the applicability of indirect methods in administrative and legal regulation in the context of the transition to Industry 4.0.

2. Methodology

The complexity in the study of high-level theoretical structures, such as the administrative and legal regime and the method of public administration, is determined by the strong abstraction of those legal phenomena and processes that are formalized in scientific categories. The definition and general understanding of the scientific category is strongly influenced by the scientific paradigm, within the framework of which a theoretical understanding of scientific results was carried out in the process of abstraction from the private, accidental and insignificant in the studied reality. The unavoidable limitation of the methodological approach to the object and subject of research for any scientific research leads to a partial loss of the complexity of formalized phenomena and processes in determining scientific categories. In the further scientific use of the formulated categories, the connections of phenomena and processes excluded from the definition can only be supported conventionally, otherwise the discrepancy between the extensional and the intensional will require a revision or reassessment of the content and meaning of the scientific category.

Actualization of the meaning of a scientific category in the changed realities seems to be a difficult task, and its expedient solution is associated with a change in the angle of view on the existence and functioning of the described phenomena in some predetermined context. In this study, such a context is the growth of human capital as a factor in the existence, development and functioning of the legal system of society, built over certain basic systems (political, economic, social, cultural, ideological, etc. — depending on the supported paradigm), undergoing transformation under the influence of the Fourth Industrial Revolution.

The correlation of the legal system of society (or, more narrowly, the system of legal regulation) with the basic systems requires the use of the method of system analysis, which ensures the implementation of an interdisciplinary approach to poorly structured scientific problems of a complex nature ^[7]. The scientific results obtained in this way should be subjected to a formalized assessment by the traditional dogmatic method for jurisprudence in order to ensure the integration of the results obtained into the system of existing doctrinal views and practical approaches to legal regulation.

3. Results

3.1. Delegated non-governmental regulation

A long-standing discussion about the limits of state regulation continues both in Russian science ^[8] and abroad ^[9]. But if centuries ago the idea of limiting government intervention was interpreted in favor of economic freedom and lack of regulation as such, then with the practical embodiment of Keynesianism, even the absence of state (administrative and legal) regulation of the market already means lack of regulation. This regulation is carried out by the economic entities themselves due to the public law requirements for economic activity, which are designed to balance public and private interests within the framework of the mechanism of restriction (definition) of economic freedoms.

Globalization and digitalization as harbingers of the Fourth Industrial Revolution, and then it itself led to the transformation of approaches to understanding non-state regulation. The concept of private regulation is being actively discussed in world science. Various models of such relationships in the G2B format are proposed:

nonstate market-driven governance systems (NSMD-systems) ^[10];

regulatory standard-setting schemes ^[11];

private management organizations ^[12];

transnational private regulation ^[13];

private transnational governance ^[14];

private governance ^[15].

The idea of regulation decomposition is common to this concept. The state delegates the regulatory function to the private sector, and the latter implements it in both collective and individual forms ^[16]. The former include primarily self—regulation, and the latter include local regulation.

Delegated private regulation is characterized by three key features:

1) formulation of procedural and/or substantive rules and standards by non-governmental entities of the commercial and non-profit sectors (companies and NGOs);

2) monitoring and ensuring compliance with these rules through the same or other entities;

3) preferential treatment for entities that comply with the rules and standards of private regulation (growth of goodwill, access to commodity markets, pricing opportunities, access to financing, etc.) ^[17].

Thus, non-state regulation not only includes rulemaking and control, but also requires incentives.

3.2. The process approach

The process approach to public law regulation is closely related to the economic sphere. The recognition of the process approach led to the establishment of administrative reform as a modern public law phenomenon and historically became its first stage. It is believed that the first introduction of the process approach is associated with the US Law on Administrative Procedure of 1946.^[18] This law, which was developed since the late 1930s, was a reaction to the expansion of competence and opacity of the activities of public administration during the presidency of F. Roosevelt ^[19], i.e. it was closely associated with the Keynesian model of state influence on the economy, but had far-reaching consequences not only for countries with a market economy model, but also for socialist countries. The development of administrative procedure law and legislation has become a common phenomenon all over the world.

The process approach to government regulation received a new impetus in the 1980s, when the achievements of W. E. Deming were recognized in the United States, who not only justified the concept of quality management and the idea of defect-free production, but also participated in their widespread implementation in post-war Japan. Legal and technical regulation (sometimes the line between them is very mobile) has begun to transform into the field of processing, since achieving high quality regulated activities is difficult by setting requirements only for the results of such activities.

The standard regulatory scheme has become the introduction of state (legal) requirements for production results, production processes and production resources. But the choice of specific practices to meet these requirements and, ultimately, to create a defect-free production is within the competence of the organization (the owner of the process). Based on external requirements (states, SROs, etc.), organizations are independent in the design, implementation, implementation, control and modification of production (including management) processes, and external evaluation (states, SROs, etc.) is limited to evaluating compliance with established requirements for production results, processes and resources. Many modern legal institutions have been built on such principles, including the legal regulation of state and municipal services of functions and services ^[20].

The specific features of such regulation is that it includes a quality management function and is based on the principle of zero error, including the Poka Yoke method ^[21]. Quality management in the process dimension is achieved through the PDCA ideology, focused on improving performance, and risk-based thinking, directing efforts at risks and opportunities. Processing requires not to hide risks and defects, but to identify them, respond to them and improve activities ^[22]. To do this, the idea is being introduced that any discrepancy is a consequence of an inadequate process, and not the actions of a particular employee. A different approach leads to disruption of the improvement process.

Thus, the detection of a defect (nonconformity) is the norm, but bringing to responsibility for the identified defect (violation) is not.

3.3. Regulatory risks

The concept of the administrative-legal regime as a system of administrative-legal means is associated with the identification, identification and assessment of the conditions that such means create for the activities of legal entities. Each administrative and legal means carries not only the potential to achieve administrative and legal goals, but also risks for the development of public relations, systematically (sometimes implicitly) related to the regulated subject area.

In the context of the Fourth Industrial Revolution, the certainty of traditional legal means is blurred, their connections with legal goals become ambiguous, and legal goals themselves are being rethought in the context of a new social reality and the values of digital culture.

Established patterns of legal regulation do not provide the expected level of legality, balance of interests, effectiveness and efficiency for new, complex, dynamic and insufficiently meaningful subject areas. And since innovation is becoming a general trend, something fundamentally new appears in all spheres of public life, calling into question the entrenched view of state (legal) regulation of the subject area.

This forces us to turn again and again to the problems of legal regulation in certain areas and to look for new ways and approaches to solving complex problems, where law should accumulate a deep understanding of the subject of regulation and ensure its directed progressive development by non-trivial means at the junction of formal norms and real public life.

There is a certain contradiction in this, since modern law is based on law and legality, which require stability and certainty in regulation. Although the content of the principle of legal certainty itself does not have strict formalization ^[23] and has a high degree of cultural labeling ^{[24, p. 108]}, it is intuitively clear that legal certainty allows avoiding arbitrariness, guaranteeing subjective rights and legitimate interests, making their actions understandable and predictable. It is also important that the principle of formal certainty is valuable not in itself (as an attributive feature of law from a normative point of view), but because it is focused on the effective operation of law ^{[25, p. 87]}.

In conditions when the legal field turns out to be new or changed phenomena and processes, which, due to their innovative nature and the differences in objective and subjective factors of their existence and course, are rapidly transformed in a changing conjuncture. In such subject areas, even the subjective (intuitive) perception of activities and their results as appropriate or inconsistent with law, criteria of social justice, public benefit, etc. becomes problematic. In such an uncertain situation, it becomes extremely difficult to develop legal regulation aimed at the consensus of society and progressive development.

The subject of law-making does not always have the opportunity to quickly navigate changing social conditions and create a detailed balanced regulatory framework, since the process of law—making is scientifically retrospective, information is needed for it, and in the current situation, data is needed, as well as adequate means and methods of processing them. The subject of modern law-making is not always fully aware of social reality, does not have enough of it, and never manages to keep up with its transformation and innovation. Legal regulation remains incomplete, incomplete, framework, contains a number of exceptions, reservations and poorly formalized legal means (blank rules, discretionary powers, etc.), and in such a suboptimal state itself carries risks, for example:

bringing to responsibility for socially useful or harmless activities;

avoiding responsibility for socially dangerous activity;

unjustified avoidance of restrictions;

unfair demand for state support measures;

the indiscriminate and discriminatory action of the law;

law enforcement arbitrariness;

getting carried away with the formal side of the case to the detriment of real results.

Thus, the fulfillment of legal obligations does not guarantee protection from the negative reaction of the state, nor is the achievement of public benefit considered a valid reason for non-compliance with the formal requirements of the law. The more detailed the legal regulation becomes, the less social value it has and the more it carries threats, risks and costs.

3.4. Indirect methods

Government regulation is not an end in itself. Its result should be the creation of conditions for the development of progressive social phenomena and processes and the containment of negative ones. Direct legal regulation in areas where it is ineffective and in itself generates threats and regulatory risks should be replaced by indirect methods of public administration.

In order to develop law-making decisions, it is necessary to have an adequate understanding not only of public phenomena and processes, but also of the activities of private individuals (citizens and organizations). Great successes of the state in legal regulation are achieved as a result of a synergistic effect, when non-state actors (business, NGOs and the population) show interest in achieving the goals set by the state, or in fulfilling legal obligations, requirements or procedures formulated by the state. At the same time, persuasion and coercion have proven to be bad methods in those G2B and G2C relationships where the state does not have high-quality information about the current situation or effective ways to change it (for example, in production processes or marital and family relations). In such situations, the indirect method of public administration is a more proven tool.

Regulation as an end in itself (or, almost identically, a legal, religious, or ideological-moral goal) quickly outlives itself under the pressure of social reality, which is fundamentally determined not by the legal system of society at all, but by political, economic, social and cultural systems. Regulation is effectively implemented only when it allows solving a very specific positive task, and the state, business, the non-profit sector and the population are ready to spend their own resources on solving this problem. Regulation should be based on a conscious basic (most often economic) interest related to the current activities of the public, commercial and non-profit sectors, as well as the population.

As practice shows, the interest in not being held accountable due to its abstractness is very weak and almost always gives way to a closer and more pressing interest. In fact, the interest in not being held accountable is not even an interest, but a regulatory risk, which, in conditions of legal uncertainty, loses the properties of predictability and computability, and therefore effectiveness. Regulation should be supported by such an interest, which is in the field of the main activity of the actor, and, as a rule, it is an interest of an economic nature. Economic interest is at the root of the tree of goals of the commercial sector and largely determines the tree of goals of the non-profit sector and the population.

In the sciences of administrative law and public administration, the division of administrative methods into direct and indirect has long been known ^{[26, p. 14]}. Indirect methods exclude direct coercion, provide an economic entity with freedom to choose behaviors and influence its interests indirectly (through tax, budgetary, financial, credit policy, subsidies, government orders, etc.), making such actions of an economic entity beneficial that are desirable for the state ^{[27, p. 92]}. Indirect economic methods involve the creation of conditions that can influence the motivation of certain economic behavior ^{[28, p. 53]}. By applying indirect methods, the state does not directly interfere in the decision-making process of economic entities, but only creates prerequisites for subjects to gravitate towards those options that correspond to the goals of state policy when making an independent choice ^{[29, p. 74]}, therefore, the basis of economic methods is stimulation ^{[30, p. 167]}.

A group of methods of indirect state regulation relies mainly on economic levers, defines the "rules of the game" in the market economy and affects the economic interests of business entities ^{[31, p. 112]}. At the same time, indirect methods of influence can also take the form of legal regulation, although they do not take the form of a binding decision or direct instruction ^{[32, pp. 147-153]}.

Direct methods of influencing non-state actors ensure the formal implementation of legal norms and are most often accompanied by a declaration of the accession of management facilities to state goals, although in practice economic entities may not only not see their interest in sane or imposed activities, but also apply practical measures to counteract the implementation of state goals, limiting themselves to fulfilling the letter of the law.

Thus, the solidarity of non-state actors with state goals is achieved, as a rule, on the basis of strong economic interest, which must be involved at the local level in order to strengthen the activity of companies, NGOs and citizens on a daily basis.

3.5. The mechanism of regulatory guidance

Regulation based on indirect methods of public administration has been called regulatory-oriented (corrective) regulation. It has been used for quite a long time, for example, in the poorly formalized field of competition support (antimonopoly regulation) to stimulate the economic activity of business entities ^{[33, p. 184] [34, p. 113] [35, p. 20]}, complementing direct methods of influencing the economy.

Normative-oriented (corrective) regulation is based on the following ideas.

Firstly, in the areas of dynamic development of public relations, especially those under the influence of digital culture, when the state does not have operational information or effective means of influencing the situation, direct (especially detailed) legal regulation loses social value and the ability to balance public and private interests and increases threats, risks and costs.

Secondly, in such cases (if regulation is really required), the focus shifts from state to non-state regulation (self-regulation or local regulation). Non-governmental regulation is independently developed, implemented, maintained, monitored and adjusted by the commercial or non-profit sectors on the basis of poorly formalized legal means (principles, goals, requirements, etc.) established by the state, as well as relevant, reliable and sufficient information about the state and activities of non-State actors that is inaccessible to the state.

Thirdly, the solidarity of non-State actors with legal goals, principles and requirements in the field of activity of interest to the State is achieved at the expense of the economic interest of non-State actors in the field of activity of interest to themselves. This interest is satisfied by non-state actors through the use of stimulating legal means by the state, which include the possibility of obtaining tangible or intangible benefits and values (orders, loans, subsidies, benefits, etc.) or exemption from costs, burdens, risks or threats (restrictions on financial and economic freedom and independence, compliance with regulatory requirements, inspections, The criterion of access of non-State actors to these benefits, values or exemptions in the field of activity of interest to non-State actors is the recognition by the State of their activities in accordance with legal goals, principles and requirements in the field of activity of interest to the State, which is the essence of indirect impact.

Fourthly, the state cannot establish a trigger for the incentive mechanism of the defect-free activity of interest to the state. It is equally unacceptable to be held accountable for the facts of violations themselves that arise in the process of self-regulation and local regulation. Indirect methods ensure the formation of motivation among non-State actors to improve their activities, which is inevitably associated with the conscientious identification of threatening factors, risks and violations arising in the course of such activities and responding to them, without which it is impossible to improve activities and achieve defect-free performance. The integrity of non-state actors in assessing their compliance with state requirements and deciding whether to hold these entities accountable (within the framework of activities of interest to the state) and in assessing the validity of obtaining benefits, values and exemptions (within the framework of activities of interest to these subjects) is not a formal qualification on the part of an official, but an expert opinion based on special knowledge, and independent justice based on the reasonableness and inner conviction of the judge.

At the same time, negative consequences for persons who violated the norms of self-regulation or local regulation (for example, for employees or contractors of the company), of course, are not excluded. Equally, negative consequences for non-State actors who acted contrary to the meaning of the goals, principles and requirements of the State or did not use the necessary and sufficient resources (including information) to optimize processes and quality management are not excluded.

4. Conclusion

Regulatory guidance involves the State's refusal to attempt to provide detailed legal obligations related to activities of interest to the State. Practice shows that when such responsibilities are imposed, companies and NGOs formally create appropriate regulation, but management is not inclined to support its practical implementation, since there is no organizational and, ultimately, economic interest in this.

Normative-oriented regulation will lose its meaning even when the state evaluates a self-regulating or locally regulated system either only by process or only by result. Shortcomings in the process that were not accompanied by violations should not have negative consequences for business and the third sector. On the other hand, an optimized process in which systemic improvements are recorded can and should lead to the identification of threats, risks and violations, since without their identification it is impossible to respond and improve the quality of the process. In other words, the ideology of state control (supervision) itself, when using indirect methods of public administration, should be radically different from direct control (supervision), and state intervention (restrictions, liability, compensatory measures, etc.) is permissible only in case of unfair quality management that has led to systemic violations.

Being non-systemic manifestations of production (management) processes, such violations by employees (other agents) of companies and NGOs, which can be qualified as accidental, isolated (non-systemic), extremely risky and atypical violations by employees (other agents) of companies and NGOs, should also not lead to negative consequences for self-regulated and locally regulated entities. NGOs,

Regulatory guidance imposes the choice of necessary and sufficient measures (in the specific conditions of the functioning of a given organization) on the organization itself, which bears regulatory risk, depending on the adequate identification and assessment of threats, risks and violations, as well as response to them. Such regulation presupposes the differentiation of spheres of responsibility between the state, business, NGOs and citizens, according to the level at which specific regulatory functions can be carried out most effectively. Outside of their zone, businesses and NGOs cannot bear negative consequences and cannot be subject to any assessment and profiling.

In the context of the transition to Industry 4.0, the spheres in which dynamic development, innovation and the dominance of digital culture are observed will only expand, and the state will be forced to transfer regulatory functions to the private sector with appropriate human capital for self-regulation and local regulation with indirect influence and control from the state.