"We Extend Again" Sunset Clause on Regulations... "Australia Abolishes Unconditionally After 10 Years"

FKCCI raises concerns over effectiveness of sunset system for formal regulations like large mart entry restrictions

[Asia Economy Reporter Kim Hyewon] The restriction on large discount store openings under the Distribution Industry Development Act was temporarily introduced from 2010 to 2013 due to concerns over trade friction with the Korea-US Free Trade Agreement (FTA). It was intended to be abolished after three years. However, the regulation remained in place with a three-year sunset period extension until 2015, followed by another five-year extension until 2020. At the end of last year, the sunset period was extended again until 2025, effectively making the regulation permanent.

Voices have emerged calling for a fundamental improvement of the regulatory sunset system, which is currently operated only formally, as exemplified by the large discount store opening restriction regulation. On the 10th, the Federation of Korean Industries (FKI) raised concerns about the effectiveness of the current regulatory sunset system and stated that improvement measures should be prepared, such as automatically abolishing regulations after 10 years of enforcement, as is done in Australia.

The regulatory sunset system includes two types: the expiration type, which automatically loses effect after a certain period, and the review type, which examines whether to extend the regulation based on environmental changes and performance analysis after a certain period. Statistics related to expiration-type sunset regulations were excluded from this FKI analysis.

According to the FKI’s review of the Regulatory Reform Committee’s examination results of review-type sunset regulations from 2015 to 2020, only 2.9% (266 cases) out of a total of 9,200 cases were abolished. The remaining 93.4% (69.2% continued as existing regulations, 24.2% improved) were effectively extended.

Sunset regulations undergo a procedure where the relevant ministry conducts a self-evaluation, followed by review by the Regulatory Reform Committee, and then the revision of legal provisions is pursued. However, this process is operated in a way that simply extends the regulation without substantial impact assessment, leading to criticism of being a formal or inadequate review. Information related to the operation of the sunset system is also not properly disclosed. It is difficult to access lists of sunset regulations and review results, and only overall statistics and major revision cases are announced through the Regulatory Reform White Paper. An FKI official stated, "Even members of the Regulatory Reform Committee who review whether to extend sunset regulations do not know the details of individual regulation reviews but still vote to extend the sunset period."

There are many cases where regulations are easily introduced on the premise of sunset, then extended and re-extended, effectively making the expiration period meaningless, and cases where the sunset setting is lifted are not uncommon. Among the 8,589 review-type sunset regulations decided to be maintained or improved from 2015 to 2020, 21.7% had their sunset settings lifted.

The regulatory sunset system is a statutory system stipulated in the Framework Act on Administrative Regulations. The expiration-type sunset system was introduced with the enactment of the Framework Act on Administrative Regulations in August 1997, and the review-type sunset system was introduced through a legal amendment in 2013. The Prime Minister’s directive, "Guidelines for Administrative Regulation Handling to Reduce Public Burden," stipulates that newly established or strengthened economic regulations should, in principle, be set as expiration-type sunset regulations. However, most regulations currently set with sunset are review-type. Over 98% of regulations, by number or article basis, are set as review-type.

Australia, recognized by the Organisation for Economic Co-operation and Development (OECD) as a model country for post-regulatory impact assessment, stipulates in its legislation that regulations are automatically abolished on the first April 1 or October 1 after 10 years from the effective date. If the same or similar regulations are still needed, they must be replaced through re-legislation procedures such as establishing new regulations. If the parliament does not approve regulations made by the government, those regulations immediately lose effect, and regulations with the same content cannot be re-legislated within six months.

The Australian government’s post-implementation evaluation report of the sunset system assessed that the sunset system acts as an important mechanism for reducing regulations. According to the report, among sunset regulations with expiration dates from April 1, 2012, to October 1, 2018, 34% were abolished without replacement legislation, 28% were abolished before the sunset date, and only 38% had replacement legislation enacted.

Yoo Hwan-ik, Director of Corporate Policy at FKI, emphasized, "To promote regulatory reform that all citizens can feel, it is necessary to fundamentally improve the system by applying the expiration-type sunset system as a principle and transparently disclosing information related to the sunset system to the public."

This content was produced with the assistance of AI translation services.