KLRI : KOREA LEGISLATION RESEARCH INSTITUTE

Ⅰ. Backgrounds and Purposes

○ The Regulatory Sandbox is a system originally introduced for the purpose of providing an experimentation for innovative financial services in the UK. It is a ‘safe space’ in which businesses can test innovative products, services, business models and delivery mechanisms without immediately incurring all the normal regulatory consequences of pilot activities.

○ The Regulatory Sandbox is no longer confined to the financial sector, but is rapidly spreading across almost all innovation sectors. It is rapidly developing in various forms depending on the situation and strategy of each country.

○ The Korean Regulatory Sandbox was introduced for the purpose of flexible and quick response to innovative new technologies or services. It consists of Expeditious Processing, Test-Bed, and Temporary Permission.

○ The legal basis for the Regulatory Sandbox is not regulated by a single law, but is scattered in various individual laws. This structural feature has caused inconsistency between individual laws on the Regulatory Sandbox.

○ For the development of the regulatory sandbox system, which has been in force for more than one year, legal research should be carried out at the theoretical level.

○ This study, which applies the principle of system coherence to the Regulatory Sandbox legislation, aims to present the direction of development of the related legal system.

 

Ⅱ. Major Content 

▶ General analysis on the System Coherence

○ The principle of system coherence generally means the principle that legal norms should not conflict or contradict each other in terms of normative structure or content. As a control rule of the Constitutional Court, it has the significance of being a minimum screening standard and an important legislative guideline as a code of conduct for legislators.

○ The principle of system coherence is based on the principle of the rule of law and the principle of equality. It is a complex principle that is closely related to principles such as the conformity of results and trust protection, etc.

○ The main contents of the principle of system coherence are the inner system that states that legal rules should not contradict each other in the existing legal order system, and the external system that legal rules require mutual relations so that the contents can be easily understood.

○ System coherence has limitations that have been discussed mainly in the fields of criminal punishment-related regulations, tax law, and social security law. The application of the system coherence principle in the field of ​​regulatory law needs to be dealt with in more depth in the future.

▶ Preliminary discussion on the System Coherence of Regulatory Sandbox

○ It is necessary to precede an analysis on whether the current system of the Regulatory Sandbox can be viewed as a legal system.

○ Although the Regulatory Sandbox is scattered with individual laws, it is likely to be identified as a legal system in light of the legislator's intention, the identity of the subject of discipline, and the conditions of administrative practice.

▶ Analysis on the System Coherence of Regulatory Sandbox

○ The legal framework for the Regulatory Sandbox can be divided into three types(Project-type regulatory sandbox, Zone-type regulatory sandbox, Service-specific regulatory sandbox).

○ Since the specificity of each type should be recognized, it is necessary to avoid simply integrating these laws based on the principle of system coherence.

○ There are considerable differences in the details of the definition of terms, application requirements, procedures, follow-up measures, etc. in terms of Expeditious Processing, Test-Bed, and Temporary Permission.

○ In addition, the relationship between Framework Act on Administrative Regulations and the individual laws does not reveal an explicit connection, thus showing a limitation in driving the practical effect of the regulatory sandbox.

▶ Necessity to ensure the System Coherence in the Regulatory Sandbox

○ Since the regulatory sandbox has its essential nature to recognize exceptions, there is a great need to ensure minimum system coherence between regulatory sandbox laws.

○ In order to minimize the gap between legal norms on the Regulatory Sandbox and administrative practices, it is necessary to ensure systematic consistency of the Regulatory Sandbox.

○ In order to enhance the effectiveness of the Regulatory Sandbox and maximize its performance, it is necessary to ensure the systematic consistency of laws related to the Regulatory Sandbox.

▶ Legislative improvement for the system consistency of Regulatory Sandbox

○ Considerations for improving the Regulatory Sandbox include goals, specificity, exceptionality, relevance to existing legal systems, dynamics, and characteristics as a legal system.

○ For the improvement of the Regulatory Sandbox, this report proposes three options, a plan to utilize the 「Framework Act on Administrative Regulations」, a plan to individually supplement laws related to the Regulatory Sandbox, and enact a separate general law for the Regulatory Sandbox.

○ In order to secure the systematic consistency of the Regulatory Sandbox, it is proposed to supplement the definition provisions on key terms, and to improve the 「Framework Act on Administrative Regulations」 and individual laws.

 

Ⅲ. Expected Effects

○ This report will contribute to the performance of the Regulatory Sandbox system by providing research data for improving the legal system in the long term.

○ Through a research method that applies the principle of System Coherence to the regulatory sandbox, this report helps to solve the legal problems emerging in the Regulatory Sandbox.