Monday, 22 December 2008

Will think tanks get away with boycotting the register?

The director of the Centre for European Policy Studies (CEPS) Staffan Jerneck told lobbyists at the recent European Agenda Summit he had “never thought" about registering his think tank in the Commission's register of interest representatives. His audience found his comment amusing, but it was also remarkable given that the Commission has stated very clearly that it “takes a broad view of 'lobbying', including public affairs consultancies, corporate lobbyists and law firms to NGOs and think tanks.”

The Commission deserves praise for taking a broad definition of lobbying and including think tanks in the register.

Think tanks are one of a broad range of tools used by large corporations to influence EU decision-making. In a recent article, the Dutch newspaper NRC Handelsblad pointed out that there are now more than 40 think tanks in the EU quarter, effectively carrying out lobbying work. Lobbying is often seen as a dirty word, but exercising influence through a think tank is far more respectable. The Commission estimates there are 63 Brussels-based think thanks that ought to register.

But Jerneck's comment reflects the reality: none of the major think tanks in Brussels have yet registered. Most of the nine think tanks that have currently registered are not based in Brussels and are not actually think tanks at all but would be more at home in other categories.

One of the very few real EU-focused think tanks in the register is the Lisbon Council, which from its offices in the Residence Palace promotes free-market reforms. It has voluntarily declared that it received 110,000 euros in EU funding and 358,500 euros in donations in 2008. Its corporate backers include Accenture, Allianz, Google, IBM, ING group, KBC group, Lehman Brothers, Morgan Stanley, Oracle, Philips, Royal Dutch Shell, Schlumberger Carbon Services, Siemens and Tesco.

Considering how very little information is actually requested by the Commission, it is astonishing that high-profile Brussels think tanks like the European Policy Center, Friends of Europe, Center for European Policy Studies and Bruegel simply seem to ignore the register. These large think tanks are all heavily depending on corporate donations and sponsorship, but also now publish much of this information on their websites.

Less surprising is the non-registration by the growing category of radical free-market think tanks in the Brussels EU quarter, most of which run their activities on more discreet corporate donations. In 2005 and 2006 when CEO carried out surveys to assess the financial transparency of EU focused think tanks, bodies like the Centre for the New Europe, the European Enterprise Institute, Institut Economique Molinari, Institut Thomas More Brussels and the International Council for Capital Formation were among the think tanks that refused to disclose their funding sources. That they are not on the register is no surprise.

Only a mandatory register with sanctions for non-compliance would make these think tanks disclose their corporate backers.

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Monday, 10 November 2008

Glass half empty?

Four months after the launch of the register, two of largest Brussels-based lobby consultancies have now entered some details.

Burson-Marsteller, one of the top-five biggest 'public affairs' firms in Brussels, indicates it had a total turnover on lobbying of 6,963,000 euro in 2007.

The other big fish is KREAB, which recently acquired Houston Consulting Europe (registered separately); their combined Brussels team consists of more than 40 lobby consultants, probably only a little smaller than Burson-Marsteller. We can only guess at exactly how many, as the Commission regrettably decided not to include names in its register.

If KREAB and Burson-Marsteller are indeed of a comparable size, then why are their turnover figures from lobbying so different?

KREAB does not disclose a precise figure (>= 1000000 euro in 2007 plus 750000 - 800000 euros for Houston Consulting), but if we put it at 1.8 million euro, then that is just 25% of Burson-Marsteller's turnover. It could be that KREAB's consultants work for a lower fee than their competitors, but an average annual turnover of 45,000 euros per consultant seems very low for a profit-seeking company...

The real reason for the difference lies in a different interpretation of what "lobbying" involves, resulting in different calculations. At a conference in Brussels last week Catherine Stewart from Interel, another large lobby consultancy firm, said that in her view only 20% of the fee should be counted as lobbying! The problem is that the Commission has failed to provide clear guidelines and definitions, which enables consultancies to use whatever interpretation of the figures they choose. And the result is, of course, a register where figures cannot be compared, causing confusion rather than clarifying who lobbies for who, on which issues and with what budget.

Unlike KREAB, Burson-Marsteller chose to disclose a precise figure for its lobbying turnover, but at the same time all 65 clients listed have been put in the category "turnover below 10 %". All this tells us is that none of these clients paid Burson-Marsteller more than 696,300 euro for lobbying on their behalf. Clearly this is not a meaningful form of financial disclosure.

Burson-Marsteller's clients include pharma giants such as Pfizer and Novartis, Microsoft, the Republican Party of Armenia, controversial mining firm Gabriel Resources, among others. These clients may have paid Burson-Marsteller a few hundred euros or perhaps close to 700,000 euro in 2007. The conclusion is clear: the Commission, when designing its register, has allowed the lobby consultancy firms to escape meaningful financial disclosure.

The burning question, however, is whether all the clients are included in the registrations. Jose Lalloum, of lobby consultancy federation EPACA, has indicated that his members would not disclose clients to whom they have promised confidentiality. At last week's conference, several lobby consultants mentioned that they have asked each and every client for permission to add their name to the register. Promising secrecy to corporate clients may seem logical for lobbyists-for-hire but it is entirely unacceptable from a democratic point of view.

The Commission's spokesperson last week acknowledged that the register remains "half empty". In fact however, the situation is far worse than that. The register contains no names of lobbyists and only a tiny minority of lobby consultancies, law firms, corporations and thinktanks have registered. Those lobby consultancy firms which have joined the register disclose flimsy and misleading financial data about their lobbying turnover and what their clients pay them. The disclosed clients' lists might be seriously incomplete. At this stage, the register can best be described as a distorting mirror which may or may not be reflecting lobbying activities. The image is so confused, it is hard to tell.

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Friday, 17 October 2008

Law firms remain in the shadows

Among the 431 entries in the European Commission's lobby disclosure register today, there are only four law firms. That is remarkably few, considering that the Commission expects all law firms that are lobbying on behalf of clients to register and disclose both their lobbying turnover and their clients’ names.

The role of law firms in corporate lobbying is often underestimated. In the US, the top-5 biggest lobbying firms are all law firms. In Brussels, law firm lobbying is also a booming business, partially because of the expansion of US law firm giants and the arrival of new European 'lobbying law firms' like Alber & Geiger. Law firms provide strategic lobbying advice, draft legislative wording for their clients to present to decision-makers and engage in direct lobbying on their clients’ behalf. In providing such services, law firms are often competing directly with Brussels-based public affairs consultancies.

The European Public Affairs Directory includes no less than 110 “law firms specialising in EU matters”. Not all of these law firms offer lobby consultancy services to corporate clients, but many do and prominently so, as a look at the websites of the Brussels offices of DLA Piper, Mayer Brown and WilmerHale makes clear.

During the three years of debate that led to the launch of the Commission's voluntary register, law firms vigorously opposed lobby disclosure obligations. They claimed that such transparency would harm 'client privacy'. Will these law firms do what the Commission asks them and voluntarily disclose which clients they lobby for and details of their budgets? There is no reason for optimism.

In September, CEO and Friends of the Earth Europe wrote to three Brussels-based law firms asking them to list all the clients they were representing as lobbyists. The three law firms had all recently headhunted high-level European Commission officials involved in shaping EU anti-trust policies. The three law firms, however, all flatly rejected disclosing the information. This makes it impossible to judge if these revolving doors cases constitute a conflict of interest.

Clifford Chance, which headhunted Michel Petite, head of the Commission’s powerful Legal Service from 2001-2008, replied that they “owe a duty of confidentiality towards our clients, and data on our clientele cannot be disclosed”. Howrey, which earlier this year recruited Lars Kjølbye, the previous head of the energy and environment antitrust unit at the European Commission’s DG Competition, explained that “ work that we undertake for our clients is privileged and confidential and as such it is impossible to provide you with the information you have requested.” Hunton & Williams, the new employer of Robert Klotz from DG Competition’s energy and water unit, argued that “it is our Firm policy not to respond to such query as yours.”

The experience from the US strongly suggests that mandatory transparency rules are the only way to get law firms to get out of the shadows by disclosing who they lobby for.

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Monday, 29 September 2008

Meager harvest: just 5-10% of EU lobbyists now registered

It is now more than three months since the Commission launched its online register for lobbyists, and there are just over 370 entries. Exactly how good or bad that is in terms of compliance rate is difficult to judge, but it probably represents merely 5-10% of the total. The Commission has carefully avoided estimating the number of “interest representatives” (firms, industry lobby groups, NGOs, think-thanks, etc.) involved in lobbying the EU who should register. This, however, is crucial in judging how effective the voluntary approach is for securing transparency around EU lobbying.

The European Parliament’s Directorate-General for Research has estimated that in the year 2000 “about 2,600 interest groups had a permanent office downtown Brussels”, of which pan-European industry lobby groups made up one-third, individual corporations and national business groups each 10% and commercial consultants one fifth. The report estimated that 10% of the offices were run by NGOs. Today, eight years later, the total number of Brussels-based lobby entities is likely to have increased substantially beyond 2,600. And lobbyists targeting EU institutions from offices in London, Paris, Berlin and other capitals across the EU obviously should register too.

Actually a remarkable share of those who have registered in the first three months do not have a Brussels office. Among the 29 lobby consultancy firms currently in the register, only 12 say they have a Brussels office. On its register website, the Commission states that “all entities engaged in ‘activities carried out with the objective of influencing the policy formulation and decision-making process of the European institutions’ are expected to register”. With such a broad definition and without an exemption for those groups that only rarely engage in EU lobbying, the number of lobby entities outside of Brussels required to register is huge, but also virtually impossible to estimate precisely. This, clearly, makes it very hard to judge the level of compliance with the voluntary register. In the US and Canada, by the way, there are thresholds which secure that citizens, community groups and others that clearly are not professional lobbyists are exempted from disclosure obligations.

Numbers aside, there is every reason for the European Commission to start worrying about the willingness of commercial lobbyists to register voluntarily, let alone to disclose relevant details. The EUobserver revealed on September 16th that a number of Brussels-based lobby consultancies plan not to disclose the names of clients who don’t want to be identified. Jose Lalloum, who heads the commercial lobbyists’ club EPACA, said that: “if the contract with the client stated somewhere that they did not want their name to be disclosed to the outside world, then the [company] cannot do so." If the Commission accepts this line of argument, it will create a loophole through which lobby consultancies can hide any client they would prefer not to disclose. They could even make non-disclosure a standard clause in their contracts. Just one of EPACA’s 29 members has registered so far – Athenora, one of the smaller consultancies in Brussels. It remains to be seen whether and when lobby consultancy giants like Weber Shandwick, Burson-Marsteller or Gplus will register, but also whether they will actually disclose which clients they lobby for and with which budgets. The most burning question is: will the Commission let them get away with hiding the very information which the register was set up to bring into the public domain?

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Thursday, 28 August 2008

Slow and shaky start for EU lobbying register

It is now over two months since the European Commission’s voluntary lobbying register was launched and so far 285 organisations have registered.

What do these early entrants show?

Until now, only a few large corporations have registered and there seems to be wide variation in their reported lobbying costs. The Spanish telecoms firm Telefónica for example reports that its EU lobbying costs in 2007 were 950,000 €, while French car maker Renault says it spent between 200,000 € - 250,000 €, and Air France KLM reports 50,000 € - 100,000 €.

Do these figures reflect real differences or are they just the result of the Commission’s failure to provide clear and unambiguous guidelines for calculating lobbying expense? Instead of improving lobbying transparency, the register appears to be creating confusion.

Trade associations and other professional organisations that lobby on behalf of an industry or groups of similar businesses have shown themselves most enthusiastic in registering. Most of those that have registered are small and not well known. One exception is Foratom, the nuclear industry lobby, which declares a lobbying budget of 1,634,500 €.

None of the larger lobby firms are currently on the register. EPACA, the European Public Affairs Consultancies Association, has announced a members' meeting on 10 September, to discuss registration issues.

Only two smaller law firms involved in lobbying consultancy work have registered; it remains unclear if larger law firms will do the same.

None of the major think-tanks have registered.

Fifty four organisations have registered as “NGOs”, most of them smaller organisations, with UK charity Christian Aid the biggest. It has declared its total budget on the register - as requested - but given that most of the 138,400,000 € is presumably spent on aid and development, this tells you very little about lobbying.

Summer in Brussels is traditionally quiet, so perhaps it is not surprising that so few bodies have registered so far (there are well over 2,000 lobbying bodies in Brussels, and probably many more). But if early indications are anything to go by, the register is not going to reveal very much about what is really going on in Europe’s lobbying capital.

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