A New Governance Model for Independent Regulatory Agencies

Abstract

In a regulatory state the purpose of intervention by any Independent Regulatory Agency (IRA) is not only regulation in the strict sense but also the supervision of the activity of institutions providing a specific service, particularly the utilities. However, given the evolution of most market economies, namely in transition countries, it is necessary to design new governance arrangements that enable an effective, transparent and truly independent intervention of IRAs. The objectives of this study are a) to analyse of the institutional-design chosen for some independent regulatory agencies and its regulatory framework, namely in northern economies, and b) to suggest the need to strengthen governance arrangements to effectively guarantee regulatory independence, transparency and accountability, therefore promoting a true sunshine regulation in southern economies. The authors conclude that strengthening accountability arrangements is the most important mechanism to avoid regulators capture from the government and regulated organisations. It is also concluded that the way regulators have chosen can also influence the way IRA conducts its activity. Therefore, it is suggested that board accountability can be enhanced by the generalization of the principle of the public contest of regulators.