Conference Agenda

This paper explores how governments can ensure impartiality when issuing permits for projects they initiate themselves.

Central to this is the ‘no conflict of interest’ principle outlined in Directive 2011/92/EU. The Dutch and Flemish implementations are compared: the Netherlands applies internal organisational separation, while Flanders the competent authority shifts when the municipality is both the developer of a project and the permit-granting authority.

Finally, the paper examines whether this principle could be broadened into a general principle of good administration for cases where the government acts as both initiator and decision-making authority.

The bias of public authorities is analysed in the literature mainly in the context of individual administrative decisions. However, the phenomena could be even significant in the field of the protection of autonomous bodies, especially municipalities. These authorities have wide autonomy within the public administration, guaranteed by the tools established by the constitutional and administrative law. However, as we have mentioned, they are part of the administrative systems, therefore, they activities are supervised by the central government or by its agencies. These supervision activities are regulated by the national constitutions and by the regulations on municipal administration. However, their main task is to ensure that the municipalities perform their duties, and to protect the local democracy and the local assets, they could jeopardise the local governance, as well. The flexibility of the regulatory framework which could be an important element of the resilience could cause a misuse and could result administrative bias, especially in new democracies, where the legal guarantees have greater importance than the democratic traditions and the democratic local ecosystem.

Our analysis will focus on these threats, based on the example of a new democracy, Hungary, which has started to rebuild its local government system after the Democratic Transition in 1989/90. Our paper will focus not only on the regulation on the legal control and supervision of municipal activities and its transformation after 1990 (especially the paradigmatic changes after the new constitution – the Fundamental Law of Hungary – and the new municipal code in 2011), but we would like to examine the practice of these activities, especially the actions issued by the supervisory authorities to the Constitutional Court and later to the Curia, the Supreme Court of Hungary. We would like to analyse whether extra-legal (political, etc.) considerations have been introduced in this practice. As part of this analysis, we would like to examine the extension of the supervisory activities, especially the supervision of local economic decision. This regulation offers discretionary powers to the central government and its agencies, and even if the judicial review of these decisions is regulated, it is difficult to apply, because of the general clauses on these issues. We will analyse the practice of these decisions as well, whether this possibility has become a reality in Hungary and whether the practice has justified the above-mentioned legal-dogmatic objections.

Thus, our presentation will mainly focus on the analysis of the regulatory framework, but we will add an analysis of the legal practice. The approach and methods of administrative sciences will be applied, as well, especially during the analysis of the impact on administrative bias.

Many question whether a truly “impartial” administration is merely an illusion. It appears that, from a practical standpoint, a degree of prejudice is essentially unavoidable, as it is inherent in the individual officer’s conscience. In practice, it is often materially impossible to determine when a decision is genuinely impartial, since bias remains concealed within the decision-maker’s discretion.

In such terms, significant issues arise the independent authorities or autonomous agencies ("IAA"). The impartiality of decisions should be ensured by the neutrality of the powers exercised (independent from political influence); however, it is substantially challenged by a presumption of technical correctness of the decisions made by the authority, which possesses specialized expertise in a particular field.

The theoretical assumption is that the provision of specific procedural safeguards should enable a procedural recovery of substantive legality where the separation of powers is overruled. By emphasizing adversarial proceedings between the public and private parties (emulating those in judicial proceedings) and assigning the decision-making function to a different body within the same public entity, the aim is to ensure the elimination of any bias in the final decision. Furthermore, the focus on the final decision within the administrative procedure should imply judicial self-restraint, precluding full jurisdiction that would disregard the administration’s discretionary assessments.

As a complex jurisprudential development centered on Article 6 of the European Convention on Human Rights, and various constitutional principles, such theoretical model appears to withstand the test of principle-based law.

However, the aim is to scrutinize the validity of this model against law-in-practice and its concrete effects. For at least two decades – certainly in Italy – the actual dynamics of power exercised by the authorities have revealed systemic flaws that do not always ensure appropriate procedural and judicial review that is truly “neutral”, i.e., devoid of negative prejudices against those facing public powers.

Evidence of this includes: the systematic confirmation of the proposed decisions by the competent decision-making bodies; the extremely low success rate of litigation initiated against IAAs; the judiciary’s reluctance to use procedural instruments for a proper reconsideration of the case at stake (primarily, through technical expert opinions).

In general, it appears that the principle of impartiality could still employ certain available tools to neutralize the risk of decisions influenced by systemic administrative biases. This paper aims to analyze which instruments can be adopted to this end, considering both national and European systems.

Moreover, in the same sector impartiality is also threatened by conflict of interest in the relationships between regulators and regulated entities. It may generate not only decisions contrary to the public interest but, more importantly, decisions contrary to the principle of equal treatment and non-discrimination (which is a manifestation of impartiality).

By investigating the existing legislation, it is necessary to understand whether the instruments adopted to solve specific problems – e.g., the “revolving door” issue – represent a sufficient and proper answer to the well-known unsolvable question: “quis custodiet ipsos custodes?”

According to Rosanvallon, independent authorities contribute to a legitimacy of impartiality needed in a democracy. Recent independent authorities have been created in the realm of national public finances such as the Belgian Federal Planning Bureau (one of the very oldest such authorities dating back from the post WWII period), the Belgian High Council of Finance, the French High Council of Public Finances, the German Independent Advisory Board to the Stability Council, the CPB Netherlands Bureau for Economic Policy Analysis, the UK Office for Budget Responsibility, or the USA Financial Stability Oversight Council for instance.

The factors behind the proliferation of these independent fiscal authorities are multiple: economic theories favour independent expertise for managing public funds; market investors seek independent information on the risks they take when lending money to states; international organisations such as the IMF and the OECD have adopted recommendations about the independence of fiscal authorities; the EU also encourages their use especially with the adoption of the new economic governance in 2024 strengthening preexisting independence requirements (Regulation 2015/759).

Despite the apparent circulation of an administrative model through international and European instruments, the national implementation exhibits a high degree of differentiation. This paper will analyse how five independent fiscal authorities (the Belgian High Council of Finance, the French High Council of Public Finances, the CPB Netherlands Bureau for Economic Policy Analysis, the UK Office for Budget Responsibility, and the USA Financial Stability Oversight Council) are regulated to protect their independence and limit the risks of bias. It will distinguish two types of bias: conflict of interest and heuristic shortcuts. Both types can affect deeply how independent fiscal boards advice their government and parliaments. This paper will argue that heuristic shortcuts are however more endemic in public finances than in other regulated sectors, so that it is not enough for lessons from regulated sectors to be transplanted, but that due consideration need to be given to behavioural economics in this field (going back to Herbert Simon’s ideas).

Decentralisation has many advantages compared to a single, central government. The performance of public tasks by many decentralised public bodies is deemed to be more flexible and efficient, guarantees independence where necessary and makes it possible to involve experts with specialized knowledge. On the other hand, one of the disadvantages of decentralisation is that it could give rise to sophisticated principal-agent problems, including conflicts of interest. Especially the fact that public officials tend to wear several hats, gives rise to situations of functional (or institutional) conflicts of interest.

These type of conflicts are regulated very differently across legal fields (public law, private law, company law, etc.). Depending on the (public/private law) structure of the decentralised public body, different rules can be applicable with different approaches to functional conflicts of interest. For example, Belgian company law rules on conflicts of interest usually do not apply to functional conflicts of interest, even though they appear to be relevant in case law regarding other – more public law – spheres (e.g. the rules for mayors and councillors). This schism becomes even more problematic, when taking into account the many ‘hybrid’ public bodies, showing characteristics of both public and private law, in particular when a clear conflict of interest rule is absent.

This paper examines the different types of interests targeted by public, private and company law rules on conflicts of interest in Belgium and the Netherlands. Within public law, the focus is on the municipal level, as both Belgium and the Netherlands have a lot of case law and legal scholarship on this topic. For private law, the rules on representation and sale of goods (e.g. by directors or public officials) are the centre of discussion. Finally, company law is extremely relevant as well, for example for semi-public companies. The aim of this paper is to explore the similarities and differences in the regulation of conflicts of interest. It seeks to provide explanations for these variations by considering both the underlying rationale of the rules and the specific characteristics of the bodies to which they apply. Additionally, the paper examines whether certain divergences in approach align with the objectives of the relevant rules and the nature of the institutions involved, while also identifying potential areas for improvement and refinement.