In all the buzz of ‘smart’ transformation, we pay less attention to the legal framework in which they develop and more to the technological progress these solutions can drive.
Let’s not forget that, at the end of the day, regulations are the most important instrument that allows technologies to grow. During the transformation towards smarter cities, legal advisors play as important a role as public authorities and investors. By getting things right from a regulatory perspective we can provide the platform for successful smart city projects. We interviewed Kamil Blažek, Partner, Kinstellar and head of the firm-wide Infrastructure & Projects practice area on the legal aspects of smart city development. Kamil shed some light on the legal frameworks that help in the development of a smart city strategy, the importance of regulation and green bonds.
What are the main legal challenges for authorities when preparing their smart city strategy?
For the authorities, the process of preparing a smart city strategy is connected with several issues among them: (i) competence and supervision issues, (ii) delays in internal approvals, (iii) political and public support issues, (iv) budget limitations, (v) procurement rules and (v) identification of funding sources and state aid rules.
When preparing smart city strategies, public authorities may face conflict of competence with one another as well as legal restrictions in areas that are more strictly regulated, such as the energy market, procurement, competition and state aid rules. A smart city strategy, like any other such project, has to pass through the standard and long-lasting bureaucratic process, during which the strategy runs the risk of amendments or even dismissal. During the process of strategy development, the basic plan to finance the respective projects has to be found. This includes a review of the possibilities for financing (i.e., private (e.g. bank financing, capital markets, PPP projects), public (local / EU funds or cross-border financing)) adjusting the terms of the project to fit its financing program.
What are the main legal limitations for smart city development?
The concept of a smart city is connected with usage of a vast amount of data as well as with the development of technology and innovations. One cannot overlook the laws on the protection of personal data as well as IT/IP regulations.
A smart(er) city will produce more data than ever; the type and vast amount of details collected (e.g., identification of private space or habits of an individual) will enable a solid picture of a given individual to be formed. This may be seen as a breach of privacy and other rights to freedom. One cannot exclude issues with data management, their storage, and leaks, or the abuse of such data (e.g.) at the level of market competition. All this gives rise to the question whether current regulations are sufficient to meet future challenges or whether new, stricter, regulations will be necessary.
IP and ownership rights to the outcomes of smart solutions call for equal attention. Real estate issues, EU internal market regulation limitations, including security and reliability of the smart solutions and responsibility issues must also be taken into consideration.
Which sector’s regulations are most helpful for smart development?
From the legal perspective, the smart city concept touches on a vast majority of areas of regulation. The most relevant among these are:
- Regulation of innovation and communication technologies (e.g. personal data and profiling, smart buildings, cyber security, cloud services)
- Energy regulation (e.g., internal market liberalisation rules, renewable energy support schemes, unbundling requirements, smart grids, energy efficiency and energy storage)
- Environmental legislation (e.g., EIA, emission allowances, waste management)
- Procurement rules (e.g., public procurement rules, concessions and PPP projects)
- Banking/Finance (e.g., banking and public funding, capital markets (MIFID a MIFID II) regulation and project financing)
- IP regulation (Right of intellectual, industrial property and copyright)
What can you say of green bonds and their accessibility on the European market?
Currently, green bonds do not represent any significant part of the bond market; however major growth is expected. According to the EU, there is huge potential for further growth, which will bring further resources to achieve the EU’s 2030 climate and energy objectives and to meet the commitments under the UN’s Sustainable Development Goals. At this stage, the insignificant share of green bonds on the market is caused by a lack of market demand (and of the aspect of social responsibility) rather than by the insufficient legal regulation of the trade. We expect that after the first emission of sovereign green bonds in December 2016 in Poland, investors might change the way they look at the green bonds.
What are the future trends for smart city development regulations?
We expect to see further regulations, e.g., in energy regulation (e.g., the development of smart grids, energy efficiency, and energy storage regulations) or waste management regulation as well as EU’s commitments on the elimination of greenhouse gasses, energy production from renewable sources will support smart city development.