Regulations and Enforcement Corporate Counsel
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Regulations and Enforcement Concern Corporate Counsel

Advising a company on the nature of regulations and enforcement has been a traditional role for corporate counsel. But some new issues have arisen as areas of concern among law department leaders. However, regulatory uncertainty and differences in regulations are headaches that corporate counsel must address on a near-daily basis.

ALM Intelligence and the law firm Morrison & Forrester drafted the 2018 General Counsel Up-at-Night Report. They highlighted changes in regulations and differences in regulations across jurisdictions. These are the 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 entails questions as to changes in the language or enforcement of existing regulations. It also considers greater regulation, or the removal of regulations. It can also encompass legal, regulatory, and political developments and uncertainty. The most common example is the uncertainty arising out of changing rules, regulations, and interpretations of federal and state agencies. Other government entities contribute to the maze. There is also change and the uncertainty brought about by litigation. Public authorities sue companies to enforce regulations in new or unique ways.

Regulations and enforcement are a big challenge for legal departments, according to the survey, and it’s readily apparent in highly regulated industries such as financial services, pharmaceuticals, and healthcare, along with consumer protections. Added to this is our ever- increasingly 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… plus, they must act locally in establishing policies and procedures to ensure corporate action meets local regulatory standards.

Jurisdictional variance includes concerns about the differences in regulations and enforcement across jurisdictions. These include state versus federal, preemption, and application in different states. The difficulties ensuring compliance in cross-border transactions are significant.

Regulations and Enforcement Jurisdictions
Regulations and Enforcement Jurisdictions
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For example, one study for the New York had the most regulatory restrictions in its administrative code. There were more than 300,000 restrictions. On the other end or the scale, Arizona has the least with fewer than 65,000 restrictions. “Only” this number makes up its state administrative code.

One reason for this vast difference is the fact that every state has unique characteristics. These characteristics span geography and natural resources, demographics. They also include historical operations of business, commerce, and industry. Corporate counsel must consider all of this when facing issues of regulation 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 evidence that people can and will abuse artificial intelligence. And if there’s abuse there will be ensuing legislation and regulation to address the problem. Congress and state legislatures and agencies will continue to enact and propose legislation and regulations. These will have a significant effect on how AI develops and companies apply it. As one notable example, facial recognition technology has been the subject of some debate in 2020.

In fact, the San Francisco Board of Supervisors voted in May of 2019 to block a tool that law enforcement agencies had started to use as a way to locate criminal suspects. Civil liberty groups and other opponents have expressed reluctance for the technology and its potential abuse through government regulations and enforcement. 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 and Somerville, Massachusetts have followed suit in banning AI facial recognition in their cities.

Right now, there’s no federal law addressing the commercial uses of facial recognition, but three states have privacy protections in place for consumers.

But this is a vivid example of how corporate counsel will have to be aware of trends in technology and be prepared to education their executives about how regulation may impact company operations.

In addition, the survey noted that one of these major obstacles is often compounded by the other, making this a very concerning one-two punch for corporate counsel. Plus, in a global economic system 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 the trend of wild swings in economic and regulatory policy will likely continue for the foreseeable future.

Ryan Carpenter serves as Attorney and Managing Director of Carpenter Wellington. Ryan advises clients across a broad set of corporate and commercial matters.