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It’s traditional for corporate counsel to advise a company on the nature of regulations and enforcement. Regulatory uncertainty and differences in regulations are headaches that corporate counsel must address on a near-daily basis. Recently, new issues have arisen as areas of concern among law department leaders.
ALM Intelligence and law firm Morrison & Forrester drafted the 2018 General Counsel Up-at-Night Report. They highlighted changes in regulations and differences in regulations across jurisdictions. There are two areas of significant concern with respect to regulation and enforcement.
Nearly 70% of respondents cited either regulatory uncertainty or concerns over jurisdictional variance as a primary obstacle in this area of their work.
Regulatory uncertainty refers to changes in the language or enforcement of existing regulations. It also considers greater regulation, or the removal of regulations. This can also encompass legal, regulatory, and political developments, as well as uncertainty around those areas. One example is the uncertainty caused by changing rules, regulations, and interpretations of federal and state agencies. In addition, other government entities can contribute to the maze. Litigation can also create change and uncertainty. For example, public authorities sometimes sue companies to enforce regulations in new or unique ways.
According to the survey, regulations and enforcement are a big challenge for legal departments. This is evident in highly regulated industries like financial services, pharmaceuticals, and healthcare, along with consumer protections. Added to this is an ever-increasing global business environment that means more and different regulatory requirements across jurisdictions. Corporate counsel must think globally to maintain a culture of compliance no matter what the company’s geographic footprint. They must also act locally and establish policies and procedures to ensure corporate action meets local regulatory standards.
Jurisdictional Variance in Regulations and Enforcement
Jurisdictional variance includes concerns about regulation and enforcement differences across jurisdictions. These include state versus federal preemption and application in different states. There are significant difficulties ensuring compliance in cross-border transactions.
For example, one study found New York had the most regulatory restrictions in its administrative code: over 300,00. In contrast, Arizona had fewer than 65,000 restrictions.
One reason for this difference is that every state has unique characteristics. These characteristics span geography, natural resources, and demographics. They also include historical operations of business, commerce, and industry. Corporate counsel must consider this when facing issues of regulation and enforcement.
Emerging Technology Regulations and Enforcement
Another wrinkle in the area of regulatory enforcement is the potential for regulations and enforcement with respect to evolving technology. A major player in this area is artificial intelligence (AI), which may have an impact on all types of industries, commerce, products, and services.
It is already evident that people can and will abuse artificial intelligence. And if there’s abuse, there will be legislation and regulation to address the problem from Congress, state legislatures, and/or agencies. This will have a significant effect on how AI develops and companies apply it. Facial recognition technology has been the subject of some debate in 2020, for example.
In fact, the San Francisco Board of Supervisors voted in May of 2019 to block a tool law enforcement agencies had started to use as a way to locate criminal suspects. Civil liberty groups and other opponents expressed reluctance for the technology and its potential abuse. Activists claim that facial recognition technology is less accurate on dark-skinned people, which has played a role in the wrongful arrests of Black men in New Jersey and Michigan. Oakland, California and Somerville, Massachusetts have followed suit and banned AI facial recognition in their cities.
Right now, there’s no federal law addressing the commercial uses of facial recognition, but several states have privacy protections in place for consumers. This is a vivid example of how corporate counsel should be aware of trends in technology and be prepared to education their executives about how regulations may impact company operations.
The One-Two Punch
The survey noted that one of these major obstacles is often compounded by the other, making this a one-two punch for corporate counsel. In a global economy where political and economic unrest has resulted in the removal of the politicians and ruling governments linked to maintaining the status quo, the survey noted that wild swings in economic and regulatory policy will likely continue for the foreseeable future.