With this Act, the Federal Ministry for Economic Affairs and Climate Action aims to implement an important component in creating an innovation-friendly policy environment for regulatory sandboxes. The Act is intended to enable simpler and more frequent use of regulatory sandboxes in many areas of innovation. In doing so, it addresses key challenges like inconsistent and restrictive approval processes, a lack of opportunities to network and exchange with others and failure to transfer of insights gained to the bodies charged with legal regulations. The Act thereby supports innovation-friendly guidance for decision-making in the approval process so that regulatory sandboxes can be approved with greater frequency. It also lays out various procedural requirements, such as appropriate deadlines and extensions for testing in regulatory sandboxes. Various measures also promote the transfer of knowledge as a core element of regulatory learning, in order to ensure that successful regulatory sandboxes also lead to legal framework adjustments and that successfully tested innovations can be approved for widespread use. The Regulatory Sandboxes Innovation Portal is also anchored in the Act, and assumes duties to consult, provide information and facilitate networking in addition to important duties regarding the implementation of the Act.

The creation of an Act on Regulatory Sandboxes also assists in the implementation of the Federal Government’s Digital Strategy, Startup Strategy, Strategy for Social Innovations and Social Enterprises, and Future Research and Innovation Strategy.

The Act is accompanied by a series of further measures:

• New spaces for testing innovations:
  
  In addition to drafting the Regulatory Sandboxes Act, the Federal Ministry for Economic Affairs and Climate Action is also working intensively with other ministries to anchor new legal opportunities for regulatory sandboxes into various subject-specific laws in the form of new experimentation clauses.

• Review of need for experimentation clauses in legislative processes:
  
  In the future, all legislative drafts submitted by federal ministries will be examined to determine whether the implementation of further subject-specific experimentation clauses is necessary to create new opportunities for testing. The obligation to examine will apply from April 2025, when the digital checking assistant will be available in the federal government's internal e-legislation platform for a low-bureaucracy check. In addition, the PDF version (in German only) of the scheme for the examination can already be used. In addition, the Federal Ministry for Economic Affairs and Climate Action has provided a guide for formulating experimentation clauses (in English) in a legally sound and highly effective way. A digital assistant is also available for this in the government's internal e-legislation platform.

• Development and pilot run of Regulatory Sandboxes Innovation Portal:
  
  The development of an Innovation Portal for Regulatory Sandboxes started in November 2024. It will primarily serve as a digital first point of contact for involved parties, providing them with information and consultation while also promoting stakeholder networking and the transfer of knowledge from regulatory sandboxes into the legislative process. The pilot run of the Portal, which will last a maximum of four years, will begin in May 2025.

This package of measures supports innovators on the entire journey, from the idea phase to the regulatory sandbox and from there into the market. It is based on a comprehensive public consultation from 2023, the results of which were incorporated into the draft legislation and accompanying measures. The Regulatory Sandboxes Green Paper (in German only) served as the basis for the consultation.

The Act also incorporated results of a research report on the legal possibilities for legally anchoring standards for regulatory sandboxes, which was conducted at the behest of the Federal Ministry for Economic Affairs and Climate Action. The report can be found here (in German only).

In order to strengthen regulatory sandboxes, the Federal Economic Affairs Ministry is pursuing three objectives:

1. Regulatory sandboxes need regulatory leeway

A core goal of the regulatory sandbox strategy is to shape the legal framework in a way that simplifies and enables the testing of innovative technologies, products, services and approaches.

Experimentation clauses: more room to breathe

If we want to ensure that regulation does not lag behind innovation, we will need more flexibility and “breathing space” in the future. Experimentation clauses are a key component for shaping the legal framework in an innovation-friendly and future-oriented way. This instrument must be strengthened. One goal of the regulatory sandbox strategy is therefore to give new laws and regulations more flexibility and to improve existing ones through the increased use of experimentation clauses.

It is vitally important that the possibility of experimentation clauses is included in the creation and amendment of laws from the outset, and that the need for and opportunities to implement them are reviewed on a consistent basis. All draft legislation submitted by federal ministries will therefore in future be subjected to a mandatory review of whether or not the inclusion of experimentation clauses would be able to give more space for innovative ideas to thrive (see above for more on the package of measures accompanying the Regulatory Sandboxes Act). The Federal Ministry for Economic Affairs and Climate Action has also made assistive materials available to support the formulation of experimentation clauses. The guideline describes five steps for the development of an experimentation clause and offers a concrete "toolbox" of assistive materials to guide the drafting process. It is based on a comprehensive expert report (in German only) by the law firm Noerr on behalf of the BMWK. In 2024, this guideline was updated and expanded on the basis of a supplemental report (in German only) produced by Noerr on behalf of the Federal Ministry for Economic Affairs and Climate Action. On this basis, the Coordinating Office for Regulatory Sandboxes is working closely with relevant ministries to create new experimentation clauses and to improve existing regulation.

Experimentation clauses have recently gained further importance in German law and are already anchored into various regulatory areas. Well-known examples in national law include rules for testing new types and methods of passenger transport (section 2(7) of the Passenger Transportation Act) and self-driving vehicles (section 1(i) of the Road Traffic Act compared with section 16 of the Autonomous Vehicle Approval and Operation Ordinance), as well as for testing supply services in the postal sector (section 23 of the Postal Act) and testing new materials in the fertiliser sector (section 4 of the German Fertiliser Ordinance).

International Pioneers and the European Framework

European law also often plays an important role for regulatory sandboxes. During Germany's Council Presidency, the Council of the European Union adopted conclusions on regulatory sandboxes and experimentation clauses on 16 November 2020. For the first time, the EU member states have created a common EU-wide understanding of what regulatory sandboxes and experimentation clauses are and what opportunities they offer. Regulatory sandboxes are also a key measure in the New European Innovation Agenda, as the European Commission is often also called upon when there is a need to improve the legal bases on which regulatory sandboxes rest.

Regulatory sandboxes and experimentation clauses have thus been and continue to be anchored in various legal acts, such as the EU AI Act, the Net-Zero Industry Act, the Industrial Emissions Directive and the Interoperable Europe Act.

Regarding the use of artificial intelligence, the European Commission has laid out a framework for this in its AI Act, which came into force on 1 August 2024. The AI Act contains regulations for what it refers to as AI regulatory sandboxes which create space to test out innovations. The Act also intends extended legal possibilities for data usage in AI regulatory sandboxes and close supervision from the responsible authorities. Overall, more consideration is devoted to the interests and needs of small and medium-sized enterprises (SMEs) and startups. Regulatory sandboxes are crucial to the ability of SMEs and startups in particular to test and develop new AI systems in a legally secure way.

The expert report “Regulatory sandboxes - Overview of international regulatory approaches and their transferability into German law” (in German only) shows which legal approaches to experimentation are used and examines approaches from France, Denmark and Japan in detail to see if learning from these might help to advance German law.

2. Transfer of expertise and networking

We need to reduce uncertainties, fill gaps in information and improve networking and the exchange of information between industry, science and public administration. In the context of many ongoing and planned projects, the same questions are being raised: Is this legally possible? Who should I contact? Where can I find potential project partners? What do I have to consider with regard to state aid and competition law, and what about questions of liability and insurance? Who can support me?

Finding answers to these questions takes a lot of time and effort, which is often a reason why innovative and promising ideas are not put into practice.

Regulatory Sandboxes Innovation Portal

As part of the package of measures surrounding the Regulatory Sandboxes Act, the Regulatory Sandboxes Innovation Portal will serve as a central point of contact for consultation, information, networking and knowledge transfer on regulatory sandboxes from early 2025 onwards. The digital platform is to make the planning, implementation, conducting and evaluation of regulatory sandboxes in practice more easily accessible and less bureaucratic in practice, and to transfer the insights gained in regulatory sandboxes to the bodies responsible for the relevant legal regulations. This will allow the rules for innovations to be adjusted in a streamlined manner, achieving faster approval and scaling of innovations that have successfully emerged from regulatory sandbox testing.

The Regulatory Sandboxes Innovation Portal has been anchored in the Regulatory Sandboxes Act and is to undergo initial testing with a pilot run lasting no more than four years. The development of the Regulatory Sandboxes Innovation Portal started in November 2024.

Network for Regulatory Sandboxes

The Network for Regulatory Sandboxes, which has been in place since 2019, will be integrated into the Regulatory Sandboxes Innovation Portal when the latter is launched. The consultation service offered by the portal will play an important role in facilitating contact to practitioners from the network who can answer specific questions about various topics. The existing network will expand to include features such as topic-specific groups for experts and will offer a mentoring programme comprised of voluntary mentors for regulatory sandboxes. The network can also serve to bring together project partners, for example a startup with an innovative idea with stakeholders who are keen to experiment. The network now has over 1000 members.

Handbook for Regulatory Sandboxes

Our aim is to fill gaps in information, use synergies and avoid duplication of work. To this end, the Economic Affairs Ministry developed “Making Space for Innovation: The Handbook for Regulatory Sandboxes” in 2019, which seeks to enable the relevant stakeholders to ask the right and necessary questions and to help them find answers to them. At the same time, the handbook provides information on legal issues and gives examples of best practices. Updates to the Handbook for Regulatory Sandboxes are planned based on information garnered from the pilot run of the Regulatory Sandboxes Innovation Portal, in order to offer the most user-tailored support possible.

Data protection in regulatory sandboxes

Implementing the data protection requirements is often challenging for regulatory sandboxes. However, many may be unaware that data protection law provides those subject to it with a range of flexible instruments that allow digital innovations to be tested in compliance with the law. The Federal Ministry for Economic Affairs and Climate Action therefore provides a practical guide to data protection in regulatory sandboxes (in German only), which was published in 2021 and highlights the most important data protection requirements for testing innovations in Regulatory Sandboxes and advises companies on how to deal with them successfully. The practical guide is based on an extensive expert report (in German only) produced by the law rm Noerr on behalf of the Federal Ministry for Economic Affairs and Climate Action.

Interministerial Working Group on Regulatory Sandboxes and Federal/Länder Working Group on Regulatory Sandboxes

The concrete fields of application for regulatory sandboxes are diverse and extend far beyond the responsibilities of the Federal Ministry for Economic Affairs and Climate Action. Close collaboration between the ministries and with the Länder is therefore a key requirement in order to both design and continually improve upon an innovation-friendly policy environment for regulatory sandboxes.

To simplify the exchange, the “Interministerial Working Group on Regulatory Sandboxes” was formed and has been convening regularly since 2019. Since May 2023, a Federal/Länder Working Group on Regulatory Sandboxes has been in place to ensure and facilitate the involvement of the Länder in establishing the Regulatory Sandbox Act and accompanying measures. There is a broad consensus among ministries and Länder that regulatory sandboxes represent an important and necessary instrument to further develop the regulatory framework and enable innovation in Germany to progress in times of digital and sustainable transition.

3. Testing regulatory sandboxes in practice

We want to link the testing of innovation and regulation more closely with actual practice and lead the way with positive examples, thereby showing that regulatory sandboxes can and do make a valuable contribution to innovation in Germany.

Regulatory Sandboxes Innovation Prize

Making regulatory sandboxes visible, acknowledging innovative ideas and encouraging the establishment of new regulatory sandboxes – these are the goals of the “Regulatory Sandboxes Innovation Prize” competition, which the Federal Ministry for Economic Affairs and Climate Action (BMWK) presented for the second time on 31 May 2022 at an award ceremony in Berlin with around 300 guests.

The innovation prize is open to any technologies and innovations and is divided into three categories: “Outlooks” for ideas for regulatory sandboxes, “Insights” for regulatory sandboxes currently in implementation, and “Retrospects” for completed regulatory sandboxes.

More information about the Regulatory Sandboxes Innovation Prize and the winning projects and nominees can be found here (in German only).

Funding opportunities for your regulatory sandbox project

The Regulatory Sandbox Strategy does not encompass dedicated financial funding instruments, but rather targets improvements to the legal policy environment for regulatory sandboxes. However, a diverse array of funding opportunities is available from other bodies, some of which also provide financial resources for the implementation of regulatory sandbox projects.

A key overview of available funding at Federal, Länder and EU level can be found in the Federal Government’s funding database. Services focused on consultation are also on offer, such as the Federal Government’s “Research and Innovation” funding advice, The Federal Ministry for Economic Affairs and Climate Action also offers funding and financial advice, with staff advising on current funding programmes and assisting with questions on application procedure, points of contact and conditions for funding programmes. Moreover, individual Länder also have their own consulting bodies in some instances. At European Union level, the Funding & Tenders Portal of the European Commission offers more information about various EU funding vehicles.

If you are interested in the “Regulatory Sandboxes of the Energy Transition” funding format available as part of the 8th Applied Energy Research Programme, you can find more information on the website https://www.energieforschung.de/en/home.

There will continue to be opportunities to receive information and engage in dialogue on funding within the Regulatory Sandboxes Innovation Portal.

Are you interested in regulatory sandboxes or have you come into contact with this topic in your administration, company or within the scope of your scientific work? Would you like to be kept informed about further developments and exchange ideas with other experts and practitioners?

If so, we would be glad to have you become part of our community: please join our regulatory sandbox network and help to facilitate the creation of regulatory sandboxes and to strengthen Germany’s position as a centre of innovation! Today, our network already consists of over 1000 members. As a member, you’ll be kept up to date about new network meetings and expert workshops. The expertise present in the network will also be actively incorporated into the work of the Regulatory Sandboxes Innovation Portal.

If you have any questions or suggestions, or you would like to join our network, please do not hesitate to contact us by email at reallabore@bmwk.bund.de.