Brussels acts to avoid Abramoff-style lobbying scandal

27.01.2006 - 16:00 CET | By Andrew Rettman

EUOBSERVER / BRUSSELS - The European Commission hopes its new transparency initiative can prevent an Abramoff-type lobbying fiasco in Europe, but EU institutions face suspicion under the current system.

"The commission is taking steps to avoid a European Abramoff scandal," administration commissioner Siim Kallas stated on Thursday (26 January) at a seminar in Brussels.

He added that public opinion of EU financial management is "negative, to put it mildly" with anecdotes flying around that "decisions are made under the influence of invisible hands."

US lobbyist Jack Abramoff three weeks ago pleaded guilty to bribing US officials and politicians in what the Washington Post called "the biggest political corruption and bribery scandal in a generation."

"If we have the same scandal, it would be extremely bad just to react," Mr Kallas indicated. "We cannot stop bad things from happening, but we can say, look, if something happens, we have preventive measures, we have reaction mechanisms."

He said most internal commission cases handled by OLAF, the EU anti-fraud watchdog, relate to public procurement and foreign aid while the volume of common agricultural policy (CAP) probes is "quite small."

Mr Kallas also showed concern that MEPs are introducing amendments and voting in line with corporations, stating that some members represented "the interests of particular ports" in the recent defeat of an EU port services bill.

Meanwhile, the head of the commission's professional ethics unit, Donatienne Claeys-Bouuaert, said her staff is merely "human" and it is hard to say if, for example, the "petits cadaeux" given by lobbyists at the end of the year should be declared or not.

"To offer a bottle of wine or ten bottles of wine is not necessarily corruption," the official, who gives mandatory ethics classes to new administrators, said.

Light on new measures
Mr Kallas’ new transparency measures aim to: get all member states to disclose end-recipients of EU farm and cohesion aid; create a common code of conduct for all EU institutions and create an EU-wide register of lobbyists to show "who is doing what on behalf of whom."

The timetable for the project is unclear.

He hinted the lobbyists' register will be purely voluntary, saying "mandatory legislation, heavy bureaucracy is not in our plans so far."

Mr Kallas indicated the measures have met with internal hostility with "people in several circles saying we don't need additional transparency, everything is OK, what's the problem?"

The commissioner added that the UK and Denmark's revelations in 2004 and 2005 that most CAP funds go to big firms and royal families rather than struggling farmers "initiated an electric debate about the rationality of the European subsidy system."

The transparency project is the third major ethics push in Brussels since the Eurostat scandal of 2003 and the Santer commission’s resignation in 1999.

The subject got extra attention after revelations last Spring that commission president Jose Manuel Barroso took a free yacht holiday from a shipping baron friend.

EU Abramoff impossible, lobbyists say
Brussels lobbyist association SEAP claims an Abramoff-type EU scandal is impossible however.

SEAP founder Rogier Chorus explained that unlike Europe, US politicians woo lobbyists to mobilise funds for policies, with a lot more money sloshing around in Washington than in Brussels.

US firms spent €2.4 billion on lobbying in 2004, while the closest thing to an estimate of the Brussels sector is a commission figure that Brussels lobbying firms generate income of €60-90 million a year.

Mr Chorus said that in SEAP's eight year history the association’s voluntary code of conduct has never been broken and that he does not know of any Brussels lobby fraud cases outside SEAP either.

"There is no scandal to talk about, in fact we are talking about things which are not there," he said.

Transparency International Belgium director Francois Vincke remarked that "We all know by now that having a code of conduct is fine, but implementing it is another matter."

Another Brussels lobby association, EACON, also painted a less rosy picture.

EACON partner Soren Haar said Brussels has several lobbying cultures: the British work via individual companies and PR consultancies; the French and Germans rely on trade federations while southern and Mediterranean countries use "informal networks, persons you know, even families."

Mr Haar indicated new member states sometimes display a "lack of lobbying culture" behaving in Brussels along similar lines as under the former communist regimes. - Brussels,Belgium

Brussels lobbyists agree to registration regime

By Andrew Bounds in Brussels - Financial Times - London,England,UK
Published: January 27 2006

Brussels’ biggest lobbying firms have agreed to a US-style regulation regime as the fall-out from the Jack Abramoff scandal sweeps across the Atlantic.

The European Public Affairs Consultancies’ Association has dropped its longstanding opposition to registration and public disclosure of clients as pressure builds in the wake of the criminal case against the Washington lobbyist.

John Houston, chairman of Epaca, said on Friday: “We have no problems with declaring our clients and registering. As to whether fees should be declared, we have an open mind.”

Under the US system lobbyists must file details of their clients and how much they are paying. Lobbyists in Brussels are unregistered and operate self-governing codes of conduct that cover only a fraction of their number.

Epaca, whose 31 members include global companies such as Burston Marsteller and Weber Shandwick, represents 600 of the estimated 15,000 lobbyists in the EU capital. The true figure is unknown because of the lack of regulation.

Mr Houston said other groups that lobbied, such as lawyers, accountants, non-governmental organisations, think tanks and trade unions, should follow suit.

While the European Commission has been leading the drive for greater transparency in how its decision-making is influenced, Mr Houston also called on it to tighten rules for staff dealings with lobbyists. “It is our feeling there is too much discretion for officials over contact, and there is a need for a little more clarity.”

There are numerous cases of officials leaving the EU executive and immediately turning their knowledge to lucrative use for consultancies. They need only seek the Commission’s permission, which is rarely denied.

Erik Wesselius, of ALTER-EU, a coalition of 140 groups advocating reform, welcomed Epaca’s change. “They have moved much further and faster than we expected,” he said. His group would now discuss with the Commission and Epaca a common code and the setting up of an independent European Public Affairs Council.

Siim Kallas, European administration commissioner, who will next month publish a consultation paper on lobbying and transparency, has said he prefers a compliance-based regime to a rules-based one. “A European Abramoff affair would be catastrophic in terms of public perception. The Abramoff affair also shows that mandatory rules alone are potentially worthless.”

Pressure will now grow on the European parliament. Many MEPs and their researchers have close ties to companies that are not always declared when drawing up legislation.

Analysis: "Lobbying is outdated" - Brussels,Belgium

In this analysis Dr. Stefan Schepers from the European Institute of Public Administration (EIPA) shows how lobbying has evolved historically.



Since time immemorial, people have sought to bring their points of view to those in power, in the hope that they will take account of  it when taking decisions which will affect them. Even in authoritarian forms of government, lobbying exists, albeit more hidden. In liberal democracies, it is a fundamental right of citizens, and of all social and economic actors, to be heard by public decision makers. Moreover, it is a necessity, because the complex realities of today require as much knowledge as possible to manage them effectively.


Lobbying as we know it today is closely linked to the nature and the development of the modern state, from the late 18th  - early 19th till the late 20th century. The modern state emerged out of  the market regulatory needs of the industrial economy, and its basis in science, technology and trade. It was based on the rationalist philosophy of Enlightenment, which envisaged the possibility of determining the public interest in a way not unlike scientific research in order domains, through analysis, linear cause and effect  determination and choice of instruments for problem solving.


As long as the role of the state was limited, this method of government served industrial progress well. Lobbying was limited, and of a pre-modern kind, through social networks within the ruling political and economic elites. An increasing role of the state led inevitably to more complex decision making, hence the need for involvement of more social actors, in order to understand the issues and to provide solutions which would find a social consensus. Still, until the middle of previous century, it remained an activity without much professionalism, in the old fashioned social networking mode and an occasional public campaign.


But Keynes’s view of the role of the state as a more interventionist manager of the economy and the provider of social welfare to all, made necessary not only by the political danger of the social instability, but also by the needs of a consumption based economy, would change this. Governments started to interfere in ever more societal fields, and all sorts of civic actors felt a need to lobby for their views and interests, the more so since the political system started to emulate more and more the offer and demand approaches of the economic market. Gradually, a new profession would emerge, focussed on influencing law making on behalf of those affected by its future implementation.  


This profession found its origins in the law making profession, which tried to add influencing law making into its traditional role of application of rules; and in the public relations business, where public affairs became a specialist branch, focussed on communication with the political and civil service class, and using methods copied from commercial communication. The two continue to mix, but since a couple of decades, public affairs has become a profession of its own, seeking increasing professionalism through research and specialist publications. It is not,  however, a formally recognised profession, because it lacks the specific academic and regulatory requirements.


Lobbying as practiced today is still much influenced by the dichotomist view of the state and the market, itself a result of  the conceptual foundations of the modern state (the abstract public interest as distinct from private interests) and of the ideological views of the role of governments in society (more or less market oriented).


But Europe is changing rapidly. The post-industrial economy has given rise to a post-modern state, which has returned a large number of economic tasks to the market (privatisation of state owned companies), and which is focussing on the mechanisms of attribution of resources and redistribution of wealth typical of the welfare state, and as the guarantor and regulator of market functioning. It has transferred a significant number of competencies to the European Union, whose semi-federal nature is in essence a form of collective execution of a limited number of the Member State’s tasks, in particular its key market regulatory roles.


In particular, the EU has become the strategic policy making system for its Member States, which depend for their welfare state functions on the successful management by the EU of the  commercial market functions. But the scientific and technological and economic advances of the last decades, and the deep social paradigm changes which have taken place, require also fundamental innovations in the way supra-national and national governance systems operate.


New long term common political objectives, such as sustainability, or fair trade, or research and innovation, and many others, all require a new approach to policy making, both conceptually and procedurally. The traditional bureaucratic and hierarchical approaches must give way to consensus and compromise building. This requires collective public-private learning processes, negotiation, market mechanisms, public and private (voluntary) rules, in order to widen the scope of policy-making from a narrow analytical one to the multi-dimensional scenarios of the real world.


In these rapidly emerging, new political and economic realities, lobbying in the antagonistic style, that is marketing a particular view or interest, often backed up by public campaigns and spin doctoring, will have to give way to a new approach. There is a need today of a broker function between the public interest and the private one, facilitating the collective learning processes with both public authorities and private interests, in order to reach solutions which combine the public objectives with the requirements of a competitive market economy and of liberal democratic societies.


Just like the networking style of lobbying has gradually withered away, the time has come for a new qualitative step. Lobbyists should become a sort of management consultants, seeking new methods for collective learning and compromise building, in a permanent bridge building role, combining (instead of opposing) public and private interests. In order to achieve a sustainable economy and to maintain its competitiveness, two official goals of the EU, governance systems have to adapt again, as they did at earlier historic shifts, and those operating at the public-private crossroads have to change in parallel, or become irrelevant relics of a bygone system. The next few years of incremental systemic change will tell if they are up to the challenge, like their clients and public authorities themselves. But there is a win-win situation for Europe if these transformations succeed.     


Dr Stefan Schepers, Hon. Director General

European Institute of Public Administration, Partner EPPA © EBA, 2006.

EU probes Luxembourg tax breaks for multinationals

Friday, February 10, 2006

BRUSSELS - Reuters

  The European Commission said it was launching an investigation into a law that has helped to make leading financial center Luxembourg a tax haven for multinationals.

  The law giving tax breaks to multinational companies' units that deal with financing, licensing and management has been partly responsible for drawing some 180 banks from 25 countries to the Grand Duchy of just 450,000 people.

  The European Union's executive arm is concerned that such tax exemptions could constitute state aid that does not benefit economic development, the commission said in a statement. "It is time to review this old-fashioned regime favoring multinational groups setting up their financial activities in Luxembourg, as it appears it may unduly affect the functioning and competitiveness of the EU's financial industry," Competition Commissioner Neelie Kroes said.

  The Luxembourg government said it had already agreed to end tax measures that could be harmful to corporate tax competition by 2010.

  "Now we understand the commission is only looking at this on the grounds of state aid, which is obviously a completely different thing from corporate tax. We will look into it and give an appropriate response," a government official said.

  The 1929 law was originally established with the aim of distributing profits within a multinational company without it incurring multiple taxation.

  The commission believes "the globalization of financial markets and modern regulatory framework for financial services have rendered the 1929 legislation obsolete."

  "Now it's 2006 and it's high time it was stopped," Kroes' spokesman Jonathan Todd told reporters.

  The Luxembourg Bankers' Association says the sector employed 29,000 people, or about 10 percent of Luxembourg's national working population, at the end of 2004.

  The sector accounts for more than 25 percent of the Duchy's economic activity and 40 percent of tax revenues, the lobby group says on its Web site.

  This is the first step in a formal infringement procedure by the commission that may eventually lead to court action if Luxembourg decides to dispute the commission's viewpoint.

  The commission had already presented recommendations to Luxembourg to review the tax, after a three-year preliminary investigation, but the small Benelux country rejected the measures. - Brussels,Belgium Jan. 30, 2006

Analysis: Transparency for lobbyists: "Should Europe import a Little American Sunshine?"

Steven Billet, Chief of Staff at the Grad School of Political Management at the Georgetown University, outlines the advantages and deficiencies of the American lobbying disclosure system and discusses how applicable it is for the EU.

Steven Billet, argues that "it would be folly to suggest that the EU regime for transparency in lobbying might work well if it simply imported the principles and particulars developed in the US over the last several decades" due to difference in culture, values and institutional systems. 

The author explains that, on the one hand, "Americans embrace the general notion that the public's business should be conducted in full sunshine". On the other hand, he points out that the US system still has weaknesses, despite its lobbying disclosure rules, as recent scandals such as the Abramoff affair demonstrate. 

In this context, Steven Billet differentiates three types of weakness in his article and discusses what the EU can take from all this. 


The EU Transparency Regime for Lobbyists: Should Europe import a Little American Sunshine?

Dr. Steven Billet

It would be folly to suggest that the EU regime for transparency in lobbying might work well if it simply imported the principles and particulars developed in the US over the last several decades.  The most superficial consideration quickly exposes the misalignment of values, culture and institutional details between the jurisdictions.  No doubt too, that the US system is far from perfect.  The recent wave of scandal centered on the abuse of congressional gift rules demonstrate that America’s tightly constructed gift rules were of little value when lobbyists and politicians consciously set out to evade, subvert and contravene the very laws they passed.  But the US has had lobbyist registration for ten years and the strengths and deficiencies of their system might have heuristic value for any government considering its own system.

Philosophy and Rationale

US rules for lobbyist registration are largely contained in the 1995 Lobbying Disclosure Act.  Three principles underpin the system.

·        All lobbyists are required to register

·        Lobbyists must list their employer (or clients) and the issues they work

·        All information is a matter of public record

The rationale is fairly simple and makes sense in political settings committed to openness and transparency. 

·        Government officials are public servants.  

·        Citizens have a right to know what interest groups are doing with public officials. 

While the right of individuals and groups to petition their government is protected (as it is in nearly every democratic setting), this protection is not and should not include a right to conduct their activities in a surreptitious manner.  Americans embrace the general notion that the public’s business should be conducted in full sunshine.


The US lobbying disclosure regime has a number of shortcomings, however.  First, is the fact that it does not require that all of the activities associated with modern iterations of lobbying and advocacy be reported or that the people conducting these activities be registered.  This is most notable for “indirect” lobbying techniques like grassroots campaigns, Internet advocacy and many forms of activity that fall under the rubric of public relations. These activities, often critical elements in more comprehensive advocacy campaigns, were exempted from the requirements of the Lobbying Disclosure Act for reasons too involved to chronicle here.  Grassroots and other indirect lobbying activities are generally intended to mobilize significant parts of the population that then communicate directly with public officials, petitioning lawmakers in favor of their positions.  These grassroots petitions are often quite effective since the mobilized individuals are perceived by lawmakers as the most precious of US political commodities, voters.

A second deficiency in the regime results from the lack of an effective regulatory body.  Lobbyists register with, and report twice annually to the Clerk of the US House of Representatives and the Secretary of the US Senate.  Yet these two bodies are little more than collectors of documents, having no independent authority to sanction or prosecute violations.  In cases where transgressions are suspected, the Senate and House organizations simply refer the cases to the United States Attorney for investigation.  The lack of an independent regulatory authority produces other problems.  Neither organization, for instance, has ever issued definitive rules that prescribe formulas for calculating and attributing expenses associated with the operation of lobbying offices in Washington.  Some very basic questions are left to the creativity and imagination of lobbying organizations.  For example, is it necessary to include all or a part of the cost of operating the mailroom of a large corporate public affairs office?  If so, what percentage should be attributed since some of the activity conducted there has nothing to do with lobbying?  The result, I’m afraid, is that every lobbying organization comes up with its own particular formula to calculate its expenses.  It may or may not use the same formula in consecutive reporting periods, making comparative analysis impossible both within and between reporting organizations.  

A final problem with the US lobbying disclosure rules relates to the frustrating lack of detail provided in the reports. The issues of concern to the group are listed, but their relative importance is not. No breakdown of how much is spent on each issue is provided.  One can make an educated guess about which members of Congress were lobbied based on a reading of the issues, but there is no record provided of exactly which members and staff were seen or how often they were contacted. A listing of registrants is normally included in the report, but little or no detail of their activities is provided.

Of course, lobbying registration is only one part of the Washington political landscape.  Other sets of regulations and laws address important parts of the relationship between lobbyists and public officials.  Anti-corruption gift rules, focus of the recent Abramoff scandals, and campaign finance regulation are important parts of the Washington regulatory regime, defining and further conditioning the nexus between lobbyist and politician in critical ways. There is no real coordination among these arenas and this too weakens the US transparency regime. 

What might the EU take from all this?  As much or little as it likes.  Certainly, the lack of an effective regulator limits the effectiveness of oversight and investigation efforts in the US.  This regulatory shortfall should be understood and avoided.  At the same time, the principles that guide the US system, grounded in a commitment to openness and transparency, might have value in any jurisdiction where citizen engagement and the credibility of public institutions is important.

Dr. Steven Billet is the Chief of Staff at the Grad School of Political Management at the George Washington University where he teaches courses in international advocacy and PAC management.  During his previous career at AT&T, he lived in Brussels and served six years as the regional public affairs director for Europe, Africa and the Middle East. 

'Analysis' documents are commentaries by external contributors. EurActiv - as a neutral platform - does not state policy positions of its own. Any opinions in 'Analysis' documents are those of the author only.

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