Canada Proposes Regulatory Sandboxes Amid Safety Concerns

Canada's federal government has introduced a regulatory modernization bill, allowing federal regulatory bodies to set up regulatory sandboxes and incorporation by reference mechanisms. The bill has raised concerns about its potential impact on public health, safety, and the environment.

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Nitish Verma
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Canada Proposes Regulatory Sandboxes Amid Safety Concerns

Canada Proposes Regulatory Sandboxes Amid Safety Concerns

The Canadian federal government has introduced a regulatory modernization bill that aims to grant federal regulatory bodies the power to set up regulatory sandboxes and incorporation by reference mechanisms (IBR). The proposed legislation, currently in consultation with various stakeholders, has raised concerns about its potential impact onpublic health, safety, and the environment.

Why this matters: This bill has far-reaching implications for the balance between corporate interests and public welfare, as it may compromise safety standards and environmental regulations. If passed, it could set a precedent for other countries to follow, potentially leading to a global erosion of regulatory oversight.

Regulatory sandboxeswould allow companies to try out different regulatory approaches that aren't fully compliant with existing regulations. Incorporation by reference mechanisms permit federal regulators to refer to another document created outside the standard regulatory framework with the same force as the original regulations, without needing to amend them each time the document is updated.

However, the latest bill does not mention how these regulatory loopholes will impact the protection of public health, safety, and the environment. Experts argue that the deregulation efforts of the past four decades have compromised public safety at times with devastating consequences.

"As I write in my book Corporate Rules: The Real World of Business Regulation in Canada, the private sector has lobbied relentlessly with help from government enablers to reduce or eliminate regulations that adversely affect profits," said Bruce Campbell, Adjunct Professor at York University's Faculty of Environmental and Urban Change.

Canada has been on a 40-year deregulation trajectory, leading to strained resources in regulatory agencies, increased pressure to offload regulatory responsibility to companies, and a lack of oversight. This vicious cycle has resulted in devastating consequences like the 2013 Lac Mégantic rail disaster.

The federal government first introduced a recurring annual regulatory modernization bill in 2019, covering all regulatory agencies, including energy, agriculture, transportation, health, and telecommunications. The House of Commons Standing Committee on Government Operations is currently conducting a study of the government's regulatory modernization initiatives.

The 2021 Auditor General's report on rail safety concluded that Safety Management Systems have become a paper exercise focused on checking off the regulatory boxes, not on reducing the risk of accidents. As the government moves forward with its regulatory modernization agenda, it remains to be seen how it will address the concerns raised about the potential impact onpublic safety and the environment.