In any democracy, a balance must be struck between promoting government agencies impartial, expert, and autonomous action and limiting lawless, unaccountable agency behaviors. Getting that balance right has proven to be unsurprisingly complex and contentious.
In the United States, the ‘Chevron deference‘ (1984) was, until recently, a defining principle in administrative law. This doctrine required courts to defer to federal agencies’ reasonable interpretation of ambiguous statutes within their jurisdiction, aiming to prevent unelected courts from making policy decisions under an undemocratic judicial veto.
The doctrine faced criticism for enabling an unchecked administrative state. What does happen when regulators are free to self-regulate? Agencies have been persistently accused of overreach – creating regulation in areas tangential to their jurisdiction. As such, they were deemed to operate not only without authority but also without relevant competencies, undermining Congress’ legislative intent.
A global perspective seems to reinforce this perspective – noting that sources are rare and may be politically biased. In ‘Chevron Abroad’ (2020) published in the ‘Notre Dame Law Review,’ the authors compare how democracies like the UK, Germany, Italy, Canada, and Australia balance agency discretion and judicial control. They found judicial deference to agencies essentially rejected outside the US, with Canada adopting the closest approach to a Chevron doctrine.
This year, the US Supreme Court struck down Chevron deference. In its ruling, SCOTUS argued that ‘a statutory ambiguity does not necessarily reflect a congressional intent that an agency, as opposed to a court, resolve the resulting interpretive question.’ Declaring that ‘agencies have no special competence in resolving statutory ambiguities. Courts do’ put a nail in Chevron’s coffin.
The implications for business are wildly debated. Proponents of the ruling predict leaner regulation and greater regulatory visibility, with a favorable impact on economic productivity.
On the other end of the spectrum, critics foresee a rise in regulatory uncertainty and complexity. For instance, the authors of ‘The End of the Chevron Doctrine is Bad for Business’ (2024), published by the Harvard Business Review, warn that prolonged litigation over statutory ambiguities will further complicate compliance. By failing to provide visibility on the regulation of emerging technologies (including artificial intelligence), the ruling could stifle innovation and favor incumbents.
Chevron’s demise could also fragment regulatory standards – a risk seen in the context of a secular decentralization trend discussed in these notes. Federal agencies, stripped of deference protections, may struggle to implement uniform regulations, leaving States to fill the gaps. This fragmentation poses particular challenges across several areas, including labor standards, healthcare, and land use, without forgetting corporate disclosure and environmental protection, where statutory ambiguities are common and coordinated federal action has historically been essential.
The net impact of Chevron’s death on regulatory certainty appears to be itself uncertain. What is certain is that the topic will implicitly or explicitly influence the boardrooms of companies operating in the United States for years to come.
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