Regulating against Conflicts of Interests - ALTER-EU's vision
The Alliance for Lobby Transparency and Ethics Regulation in the EU (ALTER-EU) was launched 19 July 2005. It brings together over 160 civil society groups, trade unions, academics and pro-transparency public affairs firms. ALTER-EU was launched shortly after Commissioner Kallas had first announced the European Transparency Initiative (ETI), an ambitious drive to improve visibility around the role of lobbyists in EU decision-making as well as transparency around EU funding flows and other areas. The coalition was established to support what we see as a tremendously important initiative, the oldest move to improve transparency and ethics in the EU institutions to date. The ALTER-EU groups strongly agreed with Kallas' analysis that lobbyists play a powerful role in EU decision-making, but remain far too invisible. Nobody knows how many professional EU lobbyists there are: 10,000, 15,000 or 20,000- Nobody knows how much is spent on lobbying to shape EU policies; estimates vary from 60-90 million up to over 1 billion euro per year.
ALTER-EU has three key demands:
- Mandatory EU lobbying disclosure rules for lobbyists working to influence EU decision-making, including financial disclosure (who lobbies who, on whose behalf, with which budgets)
- Terminating cases of privileged access and undue influence
- Regulating against conflicts of interest
I will focus mainly on the third point, but in ALTER-EU-s vision these three types of issues are in many ways connected. A state-of-the-art lobbying disclosure system can help identify ethics problems, including scandals. This became very clear in the US some years ago where the Abramoff scandal was discovered through the information which top lobbyist Jack Abramoff was legally obliged to disclose due to the US lobbying Disclosure Act. This eventually led to the conviction of Mr. Abramoff, two White House officials, a US representative and nine others; lobbyists and Congress staff.
I am not saying there are similar hidden scandals like this in Brussels, but the importance of lobbying disclosure as a tool to detect small and large ethics problems is clear.
This is one of the reasons why ALTER-EU is deeply disappointed with the register which the Commission plans to launch on June 23rd. After three years of discussions about the ETI, we think the register which the Commission is about to launch is far too limited ad will not achieve the objectives outlined in the Green Paper and the various Communications about the ETI. When you create a lobbyists- register, you must do it well and the Commission has made a number of wrong choices. Let me highlight three problems:
- The Commission chose for voluntary, not mandatory, registration. With weak incentives, this is likely to result in low levels of compliance. Experience elsewhere in the world where voluntary lobby disclosure has been tried (and failed) indicate that compliance levels will be low.
- The decision for a voluntary register has been known for a year or so, but earlier this year we found out that the Commission has chosen to exclude the names of lobbyists from the register. It will only include firms, NGOs and associations, not the names of those who lobby. This seriously undermines the value of the register. We will not come any closer to knowing how many lobbyists there are, but without names there is also little possibilities for tracking revolving doors cases and other conflicts of interest. Names of individual lobbyist are needed for that.
- Financial disclosure is included, but the actual reporting requirements are so inaccurate that it will show very little of substance about who spends what on influencing EU decision-making and to 'follow the money trail'. This is another missed opportunity.
In early May, the European Parliament voted with overwhelming majority for a mandatory register, with names of lobbyists and with detailed financial disclosure. After the summer the Parliament and the Commission will begin talks in an Inter-Institutional Working Group about creating a single register for both institutions and if possible for the Council too. We hope this process will improve the register.
In addition to advocating effective lobby disclosure rules, ALTER-EU has over the last three years consistently encourage the European Commission to take determined action to prevent or discourage conflicts of interests. Among the main problems we would like to see addressed is 'revolving doors', including the introduction of cooling-off periods. When Commission officials move to new jobs in commercial lobbying (whether for lobby consultancy firms, private companies or industry associations), the clearest conflicts of interests are when they move to work on the same dossiers they worked on in the Commission. The problems here are clear, including the abuse of insider information. But when going directly to a new job in commercial lobbying on a different dossier, without cooling-off period, there are concerns as well. An OECD report identifies why this is problematic, including the need:
- “Discourage inappropriate use of personal influence”
- “Avoid suspicion of rewarding past decisions which may have benefited a prospective employer”
I cannot agree with Kristian Schmidt when he claims that there is 'no reason for concern' about revolving doors in the European Commission. It is certainly true that the phenomenon is much smaller in Brussels than in Washington DC, but at the same time it is growing and these are problems that must be taken seriously and dealt with.
It is a fact that there are public affairs firms and law firms with lobby consultancy services who have a clear strategy of hiring Commission officials, sometimes to work on the same issues they covered in the Commission. G-plus and Alber & Geiger are examples; they advertise their former Commission staff as reasons for clients to choose them over other public affairs firms. The Commission is assessing requests for moving to new jobs, but from ALTER-EU-s perspective the cases we've identified show that the Commission-s criteria for approving requests are too loose.
The Commission has for quite a while claimed that it has everything under control concerning revolving doors. In March, however, it became clear that 33 lobbyists, many from industry, were working in the Commission, as 'seconded national experts', on the payroll of private firms. This was revealed by two German journalists in the book “Der Gekaufte Staat”. From ALTER-EU's perspective, some of the 33 cases are extremely problematic. Take the example of a lobbyist employed by a German coal producer working as a Commission official, involved in writing a Commission strategy paper on the future use of coal. This is a clear conflict of interest and in our opinion a real scandal. Commissioner Kallas immediately announced he would phase out this practice and change the rules. This is good, but does raise the question how this could continue for so long, until revealed in the German book. Did Commissioner Kallas not know? Did the Commission know and where the 33 lobbyists assessed and approved before taking up their functions in the Commission? If so, which criteria and screening procedures were applied?
On the background of this shocking discovery, we are also eager to find out more about Commission officials going on time-unlimited sabbaticals. There may or may not be conflict of interest problems, but it is important for us to know. In 2007, 381 Commission officials announced they went on sabbatical leave, 40% of these went to the private sector. The Commission keeps names and functions confidential, referring to “protection of personal data and the private character of certain information”. This leaves us with many unanswered questions.
Concerns about conflict of interests are not limited to Commission officials, but also applies to non-officials in powerful advisory roles. In March 2007, the Commission for the first time ever released a list of 'Special Advisers' working for Commissioners. The list included 55 names, some paid, some unpaid. One of the 55 'Special Advisers' had already been scrapped from the list: Rolf Linkohr, the former MEP, who was a Special Adviser to energy Commissioner Piebalgs. Linkohr also runs a Brussels-based lobby consultancy firm, working for large energy firms, a role which creates clear conflicts of interest. The Commission decided to terminate his status as Special Adviser when he failed to respond in time to a request for a statement declaring that he had no conflicts of interest. ALTER-EU congratulated the Commission with this decision.
Among the 54 remaining Special Advisers were Etienne Davignon, former European Commissioner and now Vice-President of water and energy giant Suez. Davignon, the list revealed, advised Development Commissioner Michel on African development issues. ALTEr-EU felt that these roles not be compatible and asked the Commission for clarification: what exactly is Davignon advising the commissioner on, are some areas off-limit, are there safeguards in place against conflicts of interest? Can we be sure Davignon has no say over EU aid spending on infrastructure projects, an area where Suez has direct commercial interests? The Commission's answers were far from clear. One year later it remains unclear to us on which basis and with which criteria the decision was made. In the end of 2007, the commission introduced new rules for approving 'Special Advisers', with more elaborate checks-and-balances. What is still missing, however, is a clear definition of conflicts of interests.
This brings me to the Commission's Communication on ethics presented in March 2008. On the positive side, the Communication announces measures to help officials identify situations of actual or potential conflict as well as a revision of rules regarding outside activities and provisions for officials who have left the service. ALTER-EU, however, was disappointed with the Communication, for a number of reasons:
- we had expected more concrete measures
- the Commission treats ethics rules as an internal matter
- it chooses for continued self-regulation instead of clear rules combined with independent monitoring
ALTER-EU has argued consistently for independent monitoring and for cooling-off periods to avoid post-employment conflicts of interest; none of this is reflected in the communication. The Commission seems to choose exclusively for the integrity approach (of encouraging and assisting staff to avoid conflicts of interest), whereas ALTER-EU believes the compliance approach cannot be disregarded. The advantage of clear rules combined with independent monitoring is that it brings visibility and it is verifiable, which would enable more trust in the Commission approach. We will continue to make the case for this in the coming months and – if needed - years.
ALTER-EU published a critical response to the study “Regulating Conflicts of Interests for Holders of Public Office in the European Union”. Our main concerns were:
the study is too negative about stricter forms of regulation and its recommendations for regulating conflicts of interests are too weak
an assessment of the effectiveness of various forms of regulation is missing
On the other hand, we very much agree with the report on a lot of issues:
The Commission-s self-regulatory approach is inadequate and credible monitoring and control mechanism- is needed (independent monitoring officers)
The Commission should regulate post-employment conflicts of interest
The European Parliament is the most under-regulated EU institution – stronger rules and enforcement is needed against a whole range of conflicts of interest problems.
The European Parliament in many ways resembles the US Congress more than national parliaments in EU member states. As in the US, party discipline is weak in the European Parliament: MEPs often do not follow the party line when voting. MEPs from the same political group often submit amendments independently from each other, frequently with contradicting positions. The role of lobbying in European Parliament decision-making is very strong, comparable to the US. It is for instance very common that amendments are written by or heavily inspired by lobbyists. A study by Scottish academic Mary Craig shows that a very large share of amendments in the parliament's voting on the REACH dossier were written by industry lobbyists or strongly resemble the positions of these same lobbyists. For some political groups this concerns 20-40% of the amendments.
Examples of problems caused by the weak regulation and low priority given to ethics and integrity are manifold. In the last week Conservative MEPs Chichester and Dover were forced to resign after it was revealed that they had used the European Parliament's system of reimbursement of expenses to channel enormous amounts into family firms. And this is only the beginning. 15 out of 28 Tory MEPs employ their wifes or other family members. Liberal MEP Chris Davies described the situation as “fraud and embezzlement on a massive scale”. But there are many other forms of conflicts of interests at the European Parliament. The European Parliament allows MEPs to have side-jobs, even when these raise major questions about their ability to act in the public interest. An example is German MEP Klaus Heiner Lehne, who in 2003 became head of the "regulatory affairs" department of Taylor-Wessing, a law firm specialised in patent law. Lehne took a very active role in the Parliament's decision-making on EU software patents rules, causing many critics to ask whether he was acting as a lobbyist for software corporations. Last month Lehne ran into controversy when he submitted an amendment intended to help law firms escape lobbying disclosure obligations. Scottish MEP John Purvis is a partner in Life Science Capital LLP and at the same time one of the most influential MEPs shaping the Parliament's stance on biotechnology issues. Purvis is also non-executive chairman of Belgrave Capital Management, involved in hedge fund management. The same Purvis was rapporteur on the Parliament's report on hedge funds, supporting a “light-handed EU-wide regulatory regime”. Despite these conflicts of interest, Purvis remains the vice-chair of the powerful Economic and Monetary Affairs Committeee.
There are also other serious problems in the European Parliament when it comes to MEPs engaging in a little too close liaisons with commercial interests. Numerous MEPs are involved in industry-funded cross-party groups (some of which are registered as official Intergroups, many are not), another seriously under-regulated area. the cross-party group phenomena came to Brussels from the UK. Whereas transparency and ethics rules have been introduced in the UK to prevent predictable problems, the European Parliament has till now failed to act. These groupings are lobbying vehicles vehicles for special interests and in many cases gifts, paid travel, hospitality and other perks are part of the package offered to MEPs. The before-mentioned MEP Chichester is the chair of the European Energy Forum, which is funded by large energy corporations. These firms also sponsor excursions for MEPs, such as the one to the Norwegian Barents sea when a Norwegian oil company wanted to convince MEPs that its drilling plans in sensitive nature areas was nothing to worry about. Chichester himself gladly accepts corporate hospitality and for instance went to Valencia for the America's cup race, paid by nuclear producer Areva. Chichester, meanwhile promotes positions favourable to the energy giants that dominate the European Energy Forum. Malcolm Harbour, another Tory MEP and chair of the Forum for Automobile and Society, has been loaned 18 cars since 2004, attended grand prix races and other events, all paid by car producers. At the same time Harbour is a staunch promoter of the interests of these firms in European Parliament decision-making.
Ethics problems around side-jobs, cross-party groups and paid travel and hospitality are the result of practices emerging from EU member states and become part of the melting pot on the EU level, but without the rules that have been developed on the national level for at least some of these problems. The European Parliament must act fast and move away from its current lowest-common-denominator approach to ethics regulation. It must overcome the resistance to change which stems from a mistaken belief that addressing conflicts of interests will harm the image of the institution and boost euroscepticism. The absence of effective rules is a huge liability.
The Commission has for quite a while claimed that it has everything
under control concerning revolving doors. In March, however, it became
clear that 33 lobbyists, many from industry, were working in the
Commission, as 'seconded national experts', on the payroll of private
firms.Olivier Hoedeman looks at the issue and argues that action must