Thursday, 8 December 2011

That revolving door just keeps on spinning ... yet the Commission seems unwilling to do anything about it

A couple of weeks ago, the Alliance for Lobbying Transparency and Ethics Regulation (ALTER-EU) launched a new campaign to block the revolving door. Alongside numerous cases of officials, often at the very highest levels in the EU institutions, who have gone through the revolving door to join Brussels' lucrative lobby industry, there was a comprehensive analysis about why the current rules (contained in the Staff Regulations) don't work. In short, they are often ignored, contain loopholes, and aren't properly enforced anyway. And ALTER-EU politely pointed out to Commissioner Maroš Šefčovič that, as the Staff Regulations were already being reviewed, wouldn't it be a good idea to look at the revolving door rules at the same time?

Unfortunately, the response from the Commission has been disappointing, to say the least.

The Commissioner's spokesperson has said that there are already very “strict rules” already in place, although that is hard to believe when the ALTER-EU report pointed out a number of officials who have ignored the rules (and gotten away with it, without sanction), or were not covered by the rules (because of the loophole which excludes staff on temporary contracts from systematic consideration under the rules). Together with the fact that there is only one known case of an official actually being prevented from taking a job under these so-called “strict rules”, the Commission's record in this area seems pretty poor.

Instead, it seems perfectly acceptable for the EU's top officials (and by top we mean Directors-General, advisers to Commissioners and Heads of Cabinet) to go through the revolving door to work for Brussels lobby firms where their corporate clients have a huge interest in hearing the insights of, and benefiting from the personal networks of, such senior officials.

As for Commissioner Šefčovič himself, he might need to do a bit more homework on the revolving door issue. He told an event last week, that EU Commissioners have the longest cooling off period in the world when it comes to the revolving door. But in fact, there is no cooling off period at all for Commissioners; they have a notification period of 18 months during which they must notify the Commission of their new proposed jobs and gain authorisation. This is not the same thing!

But the Commissioner did say one encouraging thing: “We should work hard to avoid conflicts of interest and privileged information. We cannot track what thousands of pensioners are doing but if there are individual cases we will look at them”.

In this case, perhaps the Commissioner could start with looking at the revolving door cases which CEO has listed on its new RevolvingDoorWatch tool. Amongst other cases, RevolvingDoorWatch features Pablo Asbo from Spain, a DG Competition case handler for six years, who is now Associate Director for Competition at Avisa Partners, a Brussels lobby consultancy. At least one of Avisa's current clients was party to a case that Asbo dealt with whilst at DG Competition. Eline Post from the Netherlands was also a case handler at DG Competition and she is now a senior consultant for competition, also at Avisa Partners. Neither Post nor Asbo had authorisation for these moves until CEO raised these cases with the Commission, which constitutes a clear breach of the rules. CEO has submitted complaints about both of these cases.

RevolvingDoorWatch will continue to be updated in the coming weeks as we find new cases, or update current cases. Unfortunately the revolving door problem is not going away for Commissioner Šefčovič...

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Monday, 5 December 2011

Swedish MEP lobbying row underlines need for rules on parliament-industry forums

Swedish environment minister Lena Ek last week came under fire for her role in the European Energy Forum (EEF), a cross-party group of MEPs which is funded by large corporations such as Shell, Nord Stream and Vattenfall. Ek, who acted as vice-chairman of the EEF during her time as an MEP, had failed to formally withdraw from her EEF role when she became environment minister. In an article headlined “Environment minister in controversial lobby group” Svenska Dagbladet, one of the largest newspapers in Sweden on 25 November argued that the corporate members of the EEF buy access to MEPs. The EEF's corporate members pay a fee of least 7,000 euro per year for participating in the EEF's dinner debates. The newspaper quoted Social Democratic MEP Marita Ulvskog who declined the invitation from the EEF on ethical grounds, to underline her “independence from such interests”. Green MEP Carl Schlyter commented that the EEF “is very clearly an industry-funded activity. The goal is not to have an open debate about Europe's future energy supply. They want to influence”.

In an article the following day environment spokesperson of the Social Democrats in the Swedish parliament, Matilda Ernkrans, stepped up the pressure on Ek: “I think it is very serious if Sweden now has an environment minister with very close ties to the nuclear and oil lobby”. Ernkrans suggested that the prime minister should intervene on the matter. The controversy also resulted in Svenska Dagbladet publishing a background analysis article looking into the growing lobbying pressure from industry towards MEPs, not the least from the energy and chemical industries hoping to weaken environmental regulation.

Five days after the story first broke, Lena Ek broke the silence in an interview in Svenska Dagbladet. “I understand the discussion, there are obviously problems”, EK said, but went on to argue that the EEF has a balanced programme that is approved by its MEP members and even claimed that “the politicians set the agenda”. A look at the EEF's website gives the impression that its programme is heavily industry-led, including dinner debates on 'the Finnish way' in expanding nuclear power (with the CEO of a Finnish nuclear company as speaker) and on greater gas consumption as part of climate policy (with a speaker from gas giant GDF Suez), although the programme also features corporate speakers on solar and wind energy. The EEF has also this year organised MEPs visits to the oil sands of Alberta, Canada and to a nuclear power plant in France (“at the invitation of AREVA and EDF”). The next dinner debate, in the coming week in Strasbourg, features a Eurelectric lobbyist on “Improving the Energy Efficiency Directive“. Eurelectric is lobbying heavily for weakening the directive.

Responding to what her approach was to handle the heavy lobbying which MEPs are faced with, Ek relied: “by being open about who you meet with and trying to organise it in a transparent organisation that follow the rules of the parliament”. If this refers to the EEF, then Ek's remarks are unjustified. The EEF is not a recognised Intergroup and therefore does not actually fall under any European Parliament rules. This is a serious loophole in the European Parliament's transparency and ethics rules. As shown in a May 2011 report by Corporate Europe Observatory, the EEF is one of least 15 unregulated cross-party groups that are “acting as 'submarines of industry', bringing together MEPs and industry under the radar of Parliamentary rules to achieve policy and legislative changes that benefit industry”. Unfortunately cross-party groups were not included in the Parliament's new code of conduct for MEPs that was approved last week. The debate in Sweden shows that strong rules are needed. Such rules should include a mandatory transparency register as well as ethics obligations.

The EEF has in the meantime updated its website so there is no reference to Lena Ek anymore.

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Friday, 25 November 2011

Block the revolving door!

Brussels bubble watchers might remember the names of Verheugen, McCreevy, Ferrero-Waldner, Kuneva – all former EU commissioners who left public service and went through the revolving door into lobby jobs or other jobs which provoked conflicts of interest with their former work. Their cases caused a furore and led to the development of a code of conduct for commissioners and some (slightly) tighter rules.

The names of Carl, Dethomas, Lönngren, Taylor, Westrup, are not well-known, but these EU officials have also gone through the revolving door between the institutions and the Brussels lobby industry. Some of them were at the very highest positions within the EU, yet none were the subject of a cooling-off period which would have prevented them from accepting these lobby jobs. These individuals are symbols of a major, but largely unrecognised phenomenon, and one which is at the heart of the privileged access to EU decision-making process which corporate interests enjoy.















This week, the ALTER-EU coalition, of which Corporate Europe Observatory is a steering committee member, has launched a brand new report and campaign aimed at getting new rules which would block the revolving door between the EU institutions and the lobby industry. The report makes clear that the current rules are weak, not properly applied or enforced, and contain numerous loopholes.

Take the cases listed above: Mogens Peter Carl, the former Director-General at DG Trade and then DG Environment moved to lobby consultancy Kreab Gavin Anderson just six months after leaving the Commission. Kreab represents ICI and Scania, amongst others.

Bruno Dethomas, the former Head of the European Commission’s Eastern Partnership Taskforce (looking at relations between EU and non EU states including Russia) retired in December 2010, joining lobby consultancy G+ Europe in March 2011. G+ Europe’s clients include Gazprom Export and the Russian Federation.

Thomas Lönngren was Executive Director of the European Medicines Agency (EMA) until December 2010. In January 2011, he set up his own consultancy and joined the NDA group, which specialises in advising the pharmaceutical industry. EMA only imposed limited restrictions on Lönngren after NGOs complained about the conflicts of interest provoked by these new jobs.

Derek Taylor, a senior energy adviser working for DG Energy moved to lobby consultancy Burson-Marsteller to work as an energy adviser within weeks of retiring from the Commission and without receiving authorisation. Burson-Marsteller's clients include Suez Environnement and ExxonMobil.

And finally, Mårten Westrup, an official at DG Enterprise moved to BusinessEurope, Brussels' most powerful lobby organisation, to advise on climate change issues, before returning to the Commission, to work at DG Energy. As he worked on a consultancy basis for the Commission, he was considered exempt from the revolving door rules.

These moves through the revolving door by these officials raise profound questions about conflicts of interest. Considering the likely extent of these guys' contact books, policy know-how, and insights into EU decision-making, it is no wonder that the lobby companies that now employ them are proud to trumpet them on their websites.

There is no doubt that when officials go through the revolving door, it's the lobby firms, and their clients who benefit. The officials themselves do pretty well out of it too. Some say that top EU officials can earn up to 500 euro per hour in the lobby industry. Nice work if you can get it.

And the point is that it is all too easy for these officials to get this work - the EU institutions do not appear to take the revolving door issue seriously. One immediate step they could take would be to publish a list of all revolving doors cases and what response the institutions have made to each one. Something similar already happens in the UK, but the EU appears to resist such a proactive approach to transparency. ALTER-EU also wants to see a cooling-off period of at least two years for all EU staff from becoming lobbyists and new rules to regulate lobbyists who join the EU institutions.

Join ALTER-EU to block the revolving door!

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Wednesday, 9 November 2011

Gifts, shares and other loopholes – the MEP code of conduct

If a week is a long time in politics, then it appears that seven months is a veritable aeon. That's how long it has been since the Sunday Times exposed the cash-for-influence scandal which engulfed three MEPs and caused some soul-searching in the EU's only elected institution. But the shock and embarrassment that this caused seems to have faded into the distant past, at least for some Members.

MEPs on the Parliament's constitutional affairs committee are getting ready to vote on the new code of conduct, which was drafted as a response to the scandal and which is supposed to usher in a new wave of transparency and accountability among MEPs. Yet judging by some of the amendments which have been tabled, the original good intentions appear under threat.

Several problematic amendments have been tabled by Charles Tannock MEP, a British conservative. He proposes diluting the requirement on MEPs to declare shareholdings so that they would only need to declare those which consist of 15 per cent of the issued shares or where the shares' value exceeds one year's salary. An MEP earns about 84 000 euros a year, so this would potentially allow some Members to avoid declaring significant financial interests. Tannock's amendment significantly weakens the original text which calls upon MEPs to declare any shareholding which had “potential public policy implications” which presumably would cover practically all shareholdings.

But Tannock's interest in this amendment makes more sense if you look at his current declaration of financial interests. This was updated on 19 October and Tannock makes clear that, in addition to his previous declarations of unpaid directorships at the 3Legs group of companies, he also is a shareholder at 3Legs Resources (an oil and shale gas exploration company). Tannock does not reveal the value of these shares.

Tannock has tabled a further amendment, similar to that drafted by another British MEP, Andrew Duff, which would exclude hospitality from the definition of gifts. Under the new code, MEPs would be banned from accepting gifts worth more than 150 euros. The Tannock/ Duff amendments would mean that MEPs could continue to accept accommodation and other hospitality without limit. Yet hospitality in the form of good dinners and nights away are an important instrument in a lobbyist's toolbox.

Tannock himself declared an all-expenses paid trip to Taiwan (May 2011) paid by the Taiwan government office in Brussels, and a three-night stay in Jerusalem (February 2011), paid by European Friends of Israel. Under the Tannock/ Duff amendments these would be allowed; under the original, MEPs would no longer be able to accept such largesse.

Duff argues that, without his amendment, the 150 euro limit would deter MEPs from attending conferences because hotel rooms tend to cost more than this. But for important conferences, MEPs' official allowances could cover the costs, with the benefit that MEPs would not be seen to be 'indebted' to the organisation that had picked up their tab.

There are other amendments which also seek to weaken the draft code of conduct. A group of Italian MEPs have tabled amendments which would delete huge swathes of the code, on the grounds that the current rules which apply are adequate enough. But judging by the scandal in March, this is patently not true.

But even the amendments tabled by Tannock and Duff would break the cross-party consensus which agreed the draft code back in July, and would weaken it significantly. Elected MEPs should be open and transparent about their outside financial interests and they should be held to account over their conflicts of interest. The proposed code of conduct for MEPs is not perfect, but it does represent an important step forward in terms of ethics regulation within the Parliament.

At a time of falling public confidence in the EU institutions, MEPs should be doing all that they can to promote transparency and accountability. Some MEPs may have forgotten the cash-for-influence scandal in March, but European voters may have better memories.

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Wednesday, 26 October 2011

European Public Affairs Awards Showcase Worst Lobbyists?

Voting closes today for the European Public Affairs Awards, the self-congratulatory awards organised by Brussels lobby consultancy firms and their lobby groups EPACA and SEAP.

Categories for the EPA Awards include 'Consultancy of the year', 'Rising Star of the Year' and 'Think-tank of the Year. As in previous years, it is astonishing to see that the EPA award organisers have shortlisted several nominees that would fit much better as candidates for the Worst EU Lobbying Awards.

There's no lack of examples of dubious lobbying undertaken by global lobby consultancy giants of Burson-Marsteller, Edelman or APCO, but the example that stands out this year is Aspect Consulting. Aspect is one of three nominees to win the 'Consultancy of the year' award and an Aspect lobbyist is nominated as 'Consultant of the year'. Aspect was nominated for the Worst Lobbying Award a few years ago and despite being an active player in EU lobbying, the company continues to boycott the EU lobby transparency register. Indeed just last week The Guardian exposed Aspect Consulting for its role in assisting biotech lobby group EuropaBio in preparations for a public relations offensive to overcome public opposition to GM food. The plan was to recruit high-profile "ambassadors" to lobby EU decision-makers on GM policy. Leaked documents show Aspect Consulting claiming to have "had interest" from Sir Bob Geldof; the chancellor of Oxford University and BBC Trust chairman, Lord Patten; former Irish EU commissioner and attorney general David Byrne, "potentially" the involvement of former UN secretary general Kofi Annan and writer and campaigner Mark Lynas. All the celebrities mentioned have since denied showing interest. UK MP Caroline Lucas described the lobbying efforts as “insidious behind-the-scenes manoeuvring”.

The winners of the European Public Affairs Awards will be announced on November 9th at an event in Brussels.

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Thursday, 20 October 2011

UK lobby scandal: lessons from Brussels

UK politics has over the last weeks been shaken by a lobbying scandal that led to the resignation of Defence Secretary Liam Fox. Fox allowed a close friend, Adam Werrity, access to government meetings at the highest level. There are strong indications that Werrity used his access to these meetings to promote the interests of undisclosed industry clients, likely including defence firms. Werrity acted as an advisor to Mr. Fox but had no official status whatsoever, which is a clear violation of the UK ministerial code.

The scandal has lead to wider questions being raised about Prime Minister Cameron's cabinet, who was elected on a platform that involved curbing the power of lobbyists. In particular it has led to renewed calls for introducing a statutory lobby transparency register. Such a register was part of the coalition`s June 2010 programme for government but appeared to have been stalled as a result of opposition from lobby consultancies.

Several Members of the European Parliament (MEPs) have commented on the UK scandal. A fairly bizarre comment came from firebrand Tory MEP Roger Helmer who tweeted that the problem is not big business lobbying, but “those well-heeled, EU-Commission-funded environmental NGO”. It is hard to see how the UK scandal could lead to this conclusion! Liberal Democrat MEP Diana Wallis argued the UK could "learn important lessons” from the European Parliament and the commission regarding the introduction of a lobby register. "The European parliament now has a leading position amongst European national parliaments with its joint lobby register for the commission and parliament”, Wallis told Parliament magazine. "Alongside clarifying who they are and their policy interests, lobbyists also have to disclose an amount of financial information, although there is always room to develop this aspect further”, Wallis added.

The lessons to be learned from Brussels, however, are both positive and negative. Serious mistakes have been made by the EU institutions in the process of designing a lobby transparency system. The most fundamental mistake was to launch a register that is voluntary, making it optional for lobbyists to join or stay in the shadows. And instead of deciding upon a register that delivers a reliable and complete overview of who is lobbying and with which resources, EU decision-makers gave in to lobbying pressures from vested interests and created major loopholes. The implementation of the register and oversight was left to Commission officials with very limited political will to secure genuine and comprehensive transparency. The clear conclusion is that lobby registers should be designed to be mandatory from the start, with broad and clear disclosure requirements, alongside effective enforcement. Politicians should resist pressures from lobbyists to do something different.

But there are also lessons for Brussels to be learned from the UK. The Guardian newspaper this week reported that Cameron's ministers met with corporate representatives on 1537 occasions in the first 10 months of government. There were far less meetings with NGOs and trade unions, leading to the conclusion that corporate interests are given privileged access by the Cameron government. The Guardian analysis was made possible by a policy of pro-active transpareny introduced by the previous government. All UK departments are expected to publish online records of meetings with lobbyists. In practice there are numerous problems with the implementation of the policy (departments are too late with publishing the records, and some records are very imprecise), but it is clearly an important contribution to transparency around the role of lobbying in decision-making. The website whoslobbying.com makes the information available in a searchable format. The European Commission should introduce pro-active transparency around its meetings with lobbyists as soon as possible.

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Tuesday, 11 October 2011

Banker and MEP – an unhappy combination

In the latest dramatic episode in the escalating eurocrisis, the troubled Dexia bank has been dismantled and split up into smaller bits (including a large 'bad bank'), most of which have been nationalised and now belong to the French and Belgian governments. Dexia shares had dropped from 20 euro to less than one euro when trading was terminated last week.

In assessing the collapse of the bank, Belgian media have paid a lot of attention to the role of Jean-Luc Dehaene, the chair of Dexia's board. The veteran Christian Democrat politician, who is also a member of the European Parliament, became number two in the bank's leadership team after a previous almost-collapse in 2008. The Belgian government wanted Dehaene in the post to counter-balance Dexia's CEO Pierre Mariani, who is a close ally of French President Nicolas Sarkozy. Newspaper commentators have concluded that Dehaene's performance as a banker has been a failure. While Dehaene initially expressed his intention to change Dexia, refocusing it on traditional consumer banking instead of the high-risk speculative banking which the bank had embraced before the financial crisis, there has been little to show for it in terms of real change. Dehaene repeatedly ran into controversy when he defended paying out large bonuses to the Dexia leadership, in a situation where the bank was clearly still in trouble.

Dehaene is a very busy man who, until recently, was also a board member of four other corporations. According to one newspaper, these jobs earned him 257 500 euros per year, on top of his salary as an MEP, which was estimated at 134 000 euros. In March this year Dehaene was reported to have resigned from board posts at AB InBev, Lotus Bakeries and Umicore, leaving him with the jobs at Dexia and biotech firm Thrombogenics.

Interestingly there has been little focus on Dehaene's job as a member of the European Parliament. Dehaene, a former prime minister of Belgium, was elected in 2004 and successfully ran for re-election in 2009. He clearly did not consider the job of MEP as incompatible with heading a large bank. Dehaene ranks among the least active MEPs in recent years, having drafted one Parliamentary report, given four plenary speeches and tabled just one question since 2009.

While the report and speeches were not on issues directly of interest to Dexia, Dehaene has on dozens of occasions voted on issues of interest to Dexia in the European Parliament's plenary sessions, such as on banking regulation and eurocrisis measures, including most recently the so-called 'six-pack' of measures that are likely to result in a deepening of austerity policies across Europe.

The conflicts of interest arising from a director of Dexia voting on these issues can only lead to the conclusion that MEPs should not have second jobs as bank directors. The case of Dehaene also shows that being an MEP should not be treated as a side-job.

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Tuesday, 27 September 2011

Visit Brussels – the heart of lobbying

Have you noticed the new VisitBrussels promotional video campaign springing up around the city in the last couple of weeks? So far, we've spotted it at Gare du Midi and Place Flagey. Among the glossy photos and promises of fun-filled weekends, is the following image:




It's bizarre to think that these particular statistics would encourage anyone to come to Brussels. There again, as Brussels gains parity with Washington DC as the lobbying capital of the world, perhaps it is not surprising that VisitBrussels aims to induce yet more lobbyists, with their generous expense accounts, to visit.

But what is more interesting is where do these figures actually come from?

Corporate Europe Observatory has contacted VisitBrussels by phone and email, but so far they've been unable to confirm the source of their figures. In particular, it would be interesting to know where the claim of 6000 accredited lobbyists comes from.

The register of European Parliament access pass holders numbers 3478 lobbyists, not 6000. A look at the Commission/ Parliament lobby transparency register shows that 4415 organisations are listed. But this register is not mandatory and does not require organisations to list their lobbyists by name (although this is good practice that CEO adopts for its own registration). Organisations are invited to give an overall number of staff employed who undertake lobbying activities, yet no guidance is given on how this should be calculated. As a result, the register cannot be the last word on the numbers of individual lobbyists active in Brussels.

Whatever the true figure, the VisitBrussels video does help to demonstrate the huge gap between the total number of active lobbyists and the number who are transparent about their lobbying activities. There remains a major problem with the lobby register as certain categories of organisations, notably think-tanks and law firms, continue to boycott it, arguing (wrongly) that they do not conduct lobbying activities. Other lobby organisations do register but substantially under-report their spending on lobbying activities, adding to the opacity of lobbying in Brussels.

Mind you, the Commission and Parliamentary authorities do not make life easy for those who do register. At least one NGO was temporarily de-registered the other week, not through any fault of their own, but because of a glitch in the register's electronic system.



But back to VisitBrussels. CEO is also interested in their 25 000 figure. For a long time, commentators in the Brussels bubble have talked about 15 000 – 20 000 lobbyists here, which is calculated from figures contained in a 2003 European Parliament report. But no one in Brussels would doubt that in the eight years since, an increasing number of lobbyists have focussed their efforts at the EU institutions as more and more policy decisions and legislation originates at the European level.

Last week CEO launched a new guide to lobbying in Brussels - the Lobby Planet; we refer to 15 000 – 30 000 lobbyists active in Brussels. Of course it is hard to be precise about this, but reports earlier this year talked about 30 000 lobbyists currently accessing the the European Parliament every year.

So all in all, we conclude that VisitBrussels could be under-stating the real number of lobbyists active in Brussels, but over-stating the numbers who have officially registered.

Perhaps its another image from the promo video which best sums up the overall situation of lobbying in Brussels:



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Thursday, 7 July 2011

The new MEP code of conduct – the final reckoning

On numerous occasions over the last few months, this blog has focused on the cash-for-influence scandal in the European Parliament and its aftermath – specifically the process to develop a code of conduct for MEPs. Corporate Europe Observatory (CEO) has blogged about MEPs and their second jobs which provoke conflicts of interest, MEPs and their illegible financial interest declarations and former MEPs going through the revolving door into industry lobby jobs. We’ve shown how, in many ways, the Sunday Times' exposé was a scandal waiting to happen and we've also, at times, expressed our frustration about the code of conduct process itself.

But now that the final code has been approved and published, we can begin to assess what progress has been made – and whether the code will really make a difference to the way that the Parliament conducts its affairs.

Top of the list of demands for the code from both CEO and the ALTER-EU (Alliance for Lobbying Transparency and Ethics Regulation) coalition, was tough action to ban MEPs from having paid second jobs which provoke conflicts of interests with their work as an MEP. Our analysis is that as many as one in seven MEPs might have such paid jobs, and of course, it was the willingness of Strasser, Severin and Thaler to accept lucrative jobs and table amendments from those paymasters which was at the heart of the scandal.

The code does not ban such problematic second jobs outright, which is a huge missed opportunity, but it does outlaw “soliciting, accepting or receiving any direct or indirect financial benefit or other reward in exchange for influencing, or voting on legislation, motions for a resolution, written declarations or questions tabled in Parliament or any of its committees”. This, together with a subsequent clause which demands that MEPs “immediately take the necessary steps to address” conflicts of interests, should require those who have second paid jobs as lobbyists, corporate board members, lawyers etc to decide between these and their role as an MEP – and to take action accordingly.

Also on our list were improvements to declarations of financial interests. The code will now require MEPs to give far more detail about their outside interests, including their income from second jobs, and their shareholdings. With this new information, monitoring potential conflicts of interest should prove much easier for citizens and activists in the future, especially if the Parliament sticks to its commitment to publish these declarations “in an easily accessible manner”. One can only hope that this will mean a ban on the publication of (illegible) handwritten declarations!

MEPs who leave Parliament and go on to become lobbyists will, under the code, have to surrender their access passes to the European Parliament. Instead they will have to join the lobby transparency register like everyone else. And MEPs will be banned from accepting paid trips, expensive gifts and other perks, or at least those valued at over 150 euros.

So far so good.

And yet, there are also some glaring gaps in the code too. MEPs failed to introduce a cooling off period for former Members who go through the revolving door into industry lobby jobs, seemingly nervous about their legal powers to regulate ex-MEPs (even though those same MEPs may receive a generous transitional allowance after the end of their term in office).

MEPs also ducked out of creating an independent ethics committee to monitor and enforce the code. Instead a handful of MEPs will form an 'advisory committee' and will judge their own colleagues, with only the option to consult outside experts. This is a particular disappointment as, at the parliamentary hearing into the code of conduct at which ALTER-EU gave evidence, this was an issue where there was unanimity among the witnesses.

MEPs have also failed to address the issue of cross-party groups and specifically the unregulated forums which bring together MEPs and industry representatives. These forums provide an opportunity for under-the-radar lobbying and need to be regulated at the earliest opportunity.

So all in all, the issue of transparency and ethics regulation in the Parliament is 'work in progress' but there are some obvious next steps which could tighten up what is already there:

1. The Bureau (the EP President and the vice-presidents) now need to come up with implementation measures for the code. This will be key as the code is only a framework and how it works in practice needs further elaboration. As part of this, the Bureau should develop a complaints mechanism to allow MEPs, the media, NGOs and citizens to submit evidence when they perceive a breach in the rules. Critically, the Bureau must devote the required budget to ensure that the authorities have the capacity to implement and enforce the code. Even in these fiscally-straightened times, it is not hard to make the case for extra funds to be dedicated to cleaning up conflicts of interest in the Parliament.

2. The President and the new advisory committee will need to be vigilant in enforcing the rules. They should take independent advice and be prepared to launch investigations whenever serious allegations of wrong-doing are made.

3. It is expected that the legislation which governs MEPs' conduct (the Members' statute) will need to be updated in the light of the code. This would be an opportunity to introduce a full ban on second jobs which provoke conflicts of interest, a cooling-off period for former MEPs entering lobby jobs, and tougher sanctions for breaches of the rules.

But perhaps most importantly of all, the new code should challenge all MEPs to take a look at any outside interests and, where necessary, to make decisions to ensure that they act wholly within the spirit and the letter of the code.

"Members shall be guided by and observe the following general principles of conduct: selflessness, integrity, openness, diligence, honesty, accountability and respect for Parliament’s reputation”.

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Wednesday, 22 June 2011

A critical week for European ethics

This is a crucial week for European ethics, not least with an important meeting of the Buzek working group to look at a draft MEP code of conduct and the launch of the joint transparency register between the Parliament and the Commission. So it's very timely that, new draft lobbying legislation will also be launched this week in Austria, massively strengthening the law there as it relates to lobbying and conflicts of interest.

The fall-out from the cash-for-amendments scandal has been profound in Austria, the home country of Ernst Strasser MEP, one of those at the heart of the scandal, who subsequently resigned. The new draft law in Austria is dubbed 'Lex Strasser' by some, indicating at least part of its 'inspiration'.

Crucially, the new Austrian law will introduce a ban on all paid lobbying by public officials, including members of the Parliament, civil servants and ministers. This ban is directly linked to Strasser who, before being caught on tape accepting bribes, was involved in lobbying for industry clients.

In fact Strasser was brazen in his defence of his multiple financial interests, telling the undercover Sunday Times reporters: “Right now I have an excellent opportunity to get to know people, to build a network and use this for my company.” About being an MEP and a lobbyist at the same time, Strasser said: “Of course I am a lobbyist … This is a very good combination. I see it now after one year: there are many people that are competing and who need something. And when one is there as a Parliamentarian this can open doors.” Whilst an MEP, Strasser had a range of paid jobs which involved lobbying: he co-owned the consultancy firms CIN and CCE-Consulting, was employed by PR agency Hochegger and had lobbied for companies including Rail Holding and Group4Securior.

This one case shows just how vital it is that the Buzek working group which is developing a code of conduct for MEPs includes a full ban on MEP second jobs which involve lobbying or which provoke conflicts of interest. On Monday, ALTER-EU (the Alliance for Lobby Transparency and Ethics Regulation) and Transparency International held a joint press conference to put forward our common recommendations for such a code, including in the area of second jobs.

But in addition to the ban on lobby jobs, 'Lex Strasser' will be robust in other ways too. There will be a compulsory register for all lobbyists, which particularly focuses on regulating lobbying consultancies working on behalf of third parties. They must publicly state the number of clients and the total revenue earned from lobbying contracts. In a non-public part of the register, they will need to store the actual contracts signed between themselves and their clients.

Other companies must register as well, if they have their own lobbying division in-house and so must law firms and interest groups. It is compulsory for lobbyists to register and fines could be between 10 000 – 20 000 euros for non-compliance, a sum which will increase for repeat offences. In fact, unregistered consultancies that lobby would see their earnings confiscated by the state!

In the week that the European Parliament and Commission launch the new joint transparency register, much could be learnt from the Austrian proposals. New research by ALTER-EU reveals the extent of 'under-reporting' by industry lobby groups where lobbyists fail to declare their full expenditure on lobbying in an attempt to look smaller than they really are. A particularly ludicrous example is that of Fertilizers Europe which declared only 400 euros of annual lobbying expenditure from an annual budget of four million!*

Speaking about the new proposed legislation in Austria, academic and ethics expert Hubert Sickinger in an interview in der Standard said, “Anyone who does not play by the rules will be sanctioned.” And while the Lex Strasser law is not perfect, he concludes: “In continental Europe there have been mostly voluntary registers only. The Americans are stricter. But in the European context this will certainly be a law that we can be proud of”.

* Following the publication of ALTER-EU's report, Fertilizers Europe notified ALTER-EU that they had updated their entry in the register. They claimed the original entry declaring €400 expenditure on lobbying was a mistake due to a technical problem in the Commission's register.

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Friday, 17 June 2011

Will the European Parliament stay bottom of the league?

As the Buzek working group to develop a code of conduct for MEPs following the cash-for-amendments scandal Corporate Europe Observatory starts to wrap up its work, it could do worse than look at a recent academic study which shows that the European Parliament has one of the weakest regulatory regimes for lobbying in the world.

Based on the comments and questions from MEPs when ALTER-EU recently gave evidence to the Buzek working group, it seemed clear that there was not a consensus on how far the group should go with its recommendations. The group seems to be divided between those who consider that the recent Sunday Times' expose revealed a 'few bad apples' that some tighter guidance will tackle, or whether there needs to be an overhaul of rules and regulations to tackle corporate lobbying and conflicts of interest within the Parliament.

For those in doubt about which direction the Buzek working group should go, a recent academic study provides good food for thought. “Regulating lobbying: a global comparison” claims to be the first book of its kind to compare and contrast different lobbying systems around the world.

Having looked at the level of lobbying regulations in 70 jurisdictions including US states, Canadian provinces, European countries and others, it give the European Parliament the lowest score of all when it come to assessing how strongly it regulates lobbying. One of the areas it looks at is the issue of the 'revolving door' where former parliamentarians become lobbyists, and an area where Corporate Europe Observatory produced a new report last week. On this issue, the EP receives 'nil points' as there is no 'cooling-off period' before former MEPs can take up a lobbying role. By contrast, Lithuania, the US and Canada, amongst others, do have such a provision. Other issues considered include how much information registered lobbyists must declare and what penalties there are for non-compliance.

The study is salutary reading and shows just how far the Parliament (and indeed the European Commission which also scores poorly) has to go before its lobby regulations can be said to be robust – and in step with other parts of the world.

The book concludes by saying that the system of lobbying regulation took over 100 years to develop and that this occurred almost exclusively in the US. MEPs may be unwilling to accept that the US has anything to teach us here in Europe – but in the area of lobbying regulation, this would be narrow-minded. Either way, the Buzek working group has an ideal opportunity to show European citizens that we will not have to wait 100 years for adequate regulations to be introduced here.

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Friday, 3 June 2011

Back to business as usual for MEPs?

Concerns about excessive bureaucracy, or arbitrary limits being placed on gifts which MEPs can receive, or fears for the careers of MEPs at the end of their term in office, were just some of the disappointing responses when the ALTER-EU coalition gave evidence on the new proposed code of conduct for MEPs on Tuesday night.

As a result of the Sunday Times' cash-for-amendments expose earlier this year, a working group of 10 MEPs, chaired by European Parliamentary President Jerzy Buzek MEP has been working to develop a code of conduct for MEPs.

Unfortunately, there is little information publicly available about the work of this group: there is no public website hosting meeting agendas, minutes and drafts, for example. However, earlier this week, the working group did invite the ALTER-EU coalition and others with an interest in these issues to comment on a whole range of questions posed by MEPs about the code. ALTER-EU was represented by Paul de Clerck of Friends of the Earth Europe.

ALTER-EU's key recommendations to the group included:

- A ban on MEPs holding paid second jobs that require representation or lobbying
- A cooling-off period for former MEPs accepting lobbying jobs to stop 'the revolving doors' syndrome
- An ethics committee with external representation to police and enforce the code of conduct

Not surprisingly perhaps, there was a lot of commonality between ALTER-EU's position and that of other participants such as Transparency International and the International Press Association. The European Ombudsman who was also present and made a statement also agreed that it would be in the interests of the Parliament to have an independent mechanism to govern the code of conduct.

Indeed one of the remarkable things about the hearing was the degree of consensus amongst those giving evidence - and when we are talking about ALTER-EU and business lobbying associations, that's not something that can often be said!

For example, the European Public Affairs Consultancies' Association agreed that it was a good idea to have a cooling-off period for MEPs and that MEPs should not be lobbyists as a second job. Meanwhile the Society of European Affairs Professionals supported the need to have external involvement in the ethics committee.

But while there was a broad consensus amongst those giving evidence, there was little consensus evident amongst the MEPs present.

One MEP argued that the special nature of being an MEP precluded external intervention in their affairs and that setting a financial limit on gifts and hospitality would be arbitrary. Others were concerned to avoid excessive bureaucracy, or worried about the legal basis upon which to regulate former MEPs, once they have left office. And while we can all agree that MEPs might need more guidance on some of these issues, in and of itself, guidance will not be enough.

Our concern is that as the initial shock of the Sunday Times' scandal dwindles, these MEPs feel under less and less pressure to put in place solid rules which will avoid a repeat of such a scandal in the future. Meanwhile, Adrian Severin, one of the Members caught by the Sunday Times, continues to shamelessly operate 'business as usual' as an MEP.

The Buzek working group has set themselves a tight timetable to complete their work by late June. Based on the evidence from this hearing, coming up with a code of conduct upon which all members of the working group can agree - and which is truly robust - could be a very tall order.

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Friday, 20 May 2011

Industry lobbies step up spin on cash-for-amendments scandal

After the intense debate and media attention in the first weeks after the European Parliament's cash-for-amendments scandal broke, it has become very quiet in the last weeks. Discussions about transparency and ethics reforms in the wake of the scandal take place in secrecy in a working group of ten MEPs, led by Parliament President Buzek, in weekly meetings behind closed doors. There are apparently no plans for public hearings or even announcements before the recommendations are completed in the end of June. It's questionable whether this is the right approach: the cash-for-amendment scandal exposed a number of deeper problems in the relations between MEPs and lobbyists that should be cause for soul-searching by the full Parliament. Without a broader debate, I would argue, it is less likely that effective reforms will be endorsed by the Parliament.

Meanwhile, Brussels bubble industry lobbyists, who were very silent in the first weeks after the scandal broke, are now getting more vocal. At a Brussels debate earlier this week, two industry lobbyists commented on the scandal that it had involved only MEPs and journalists ("not a single lobbyist”) and that the journalists had violated professional ethics. This echoes previous statements by lobby consultancy coalitions EPACA and SEAP, who claimed that EU lobbying is highly ethical and that the scandal should not lead to stricter rules for lobbyists. In a remarkable and somewhat absurd 'debate' broadcasted on Romanian TV last week, three Brussels lobby consultants were like clones, repeating each other in declaring the absolute innocence of Brussels industry lobbyists. During this debate, shot in a studio inside the Parliament, Robert Mack (Burson-Marsteller and EPACA) went into overdrive claiming that "ethics is probably the most important part of what we do". A remarkable claim considering the many examples of unethical lobbying on behalf of industry and government clients which Burson-Marsteller has been involved in over the last decades. Only last week it was revealed that Burson-Marsteller US had run a highly deceptive PR attack on Google, on behalf of Facebook. Jose Lalloum of Logos claimed that EPACA's Code of Conduct is strictly enforced. A look at EPACA's website shows that there has not been a single investigation since 2006 (when an NGO and an MEP submitted complaints that were rejected by EPACA). Clearly this form of self-regulation is not a proof of absence of unethical behaviour.

Was the sting operation by the Sunday Times journalists unethical? Such claims are categorically wrong. The investigation by the Insight team was an excellent example of investigative journalism uncovering power abuses that were already going on outside of public scrutiny. Austrian MEP Strasser, to mention one example, was already covertly working for five other industry clients before the Sunday Times caught him on tape and exposed this scandalous behaviour. Journalist ethics codes endorse these types of investigations when done in the public interest and to uncover evidence that cannot be obtained otherwise. The journalists have done the European Parliament and EU citizens a great service and should be congratulated. Strasser's example also shows that there were actually lobbyists involved in the cash-for-amendments scandal. Strasser himself was operating as a lobbyist for several consultancies working for large corporate clients. And beyond Strasser's double roles, the scandal exposed a wider problem of at least a number of MEPs being far too close to industry lobbyists, relationships that can lead to corruption, but also other forms of undue influence.

Despite the flawed nature of the spin which corporate lobbyists attempt to put on the cash-for-amendments scandal, there is reason to fear that they might succeed in undermining the momentum for long overdue transparency and ethics reforms. This would be tragic as it would leave the Parliament unprotected against further scandals shaking its credibility. It is worth mentioning that the Austrian government takes the scandal very serious and is preparing a new law on lobbying (dubbed Lex Strasser) which foresees fines of up to 60,000 euros for non-registration and rule-breaking by lobbyists.

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Thursday, 19 May 2011

Bothered and bewildered – my first week in EU-land

I just started work at Corporate Europe Observatory last week as Lobbycracy campaigner. The complex and secret world of the EU institutions is not new to me: afterall I used to work on European trade policy so I'm used to seeing untransparency in action and how corporate lobby interests dominate the thinking of EU institutions.

But in my first few days in Brussels, my attention has been much more focussed on the European parliament. In the aftermath of the Sunday Times' cash-for-amendments story a couple of months ago, there has been renewed focus on MEPs' financial interests, especially where they have second jobs which bring a clear conflict of interest with their function as an elected representative.

MEPs have to submit an annual financial declaration which become publicly available and can help to highlight where an outside interest might conflict with their work as an elected Member. As an example, Slovenian ex-MEP Zoran Thaler resigned from the Parliament following his recent exposé by the Sunday Times for accepting money from undercover journalists in return for tabling amendments to legislation. He denies any wrongdoing. According to his financial declaration from 2009, he already had links with a consultancy firm (although no details of the work or the clients were provided).

So, if I wanted to assess how many MEPs have significant outside financial interests, it would be easy to check the declarations to see who has a second job and who hasn't – right?

Oh dear – how wrong I was. Ever since I and colleagues in the ALTER-EU coalition started this exercise, we have been wading through a mass of uncollated, illegible, untranslated, unclear, inconsistent and quite frankly bewildering financial declarations. And some of the problems we have encountered are really basic.

For example, the vast majority of MEP declarations that I have looked at have been hand-written (or scrawled) as opposed to typed. This has required deciphering skills beyond our capability and as an example, I will offer a prize (well an email saying thank-you) for anyone who can decipher this declaration by Spanish MEP Alejandro Cercas.

Meanwhile this one by French MEP Philippe Juvin took me, my two French colleagues and the nice woman who works at our building's reception to translate.

And while our office is pretty multilingual, in the absence of staff speaking Polish and other European community languages, there have been whole nationalities of MEPs' declarations that we have not been able to read. This is because the Parliament does not translate the information into one or two common languages.

Nor does the Parliament collate the information centrally into a database, so you need to individually click on the MEP's name on the website, and then onto their individual declaration to access a scanned PDF (of varying quality). For 736 individual MEPs, that can be a lot of clicks on the mouse! Why not give it a go?

From what I can see, there seems to be no one actively policing the system or checking that MEPs keep to the few rules that do apply to financial declarations which specify, amongst other things that “the declarations in the register shall be made under the personal responsibility of the Member and must be updated ever year”.

Therefore, a ludicrously high number of MEPs seem to get away with maintaining out-of-date declarations, many of which date back to 2009. Rough calculations show that 22 per cent of Spanish MEPs do not have an up-to-date declaration; for the UK it is 15 per cent; for the Netherlands 24 per cent; Ireland 33 per cent...

And of course, all of these concerns are to say nothing of the quality of information that MEPs are posting (once you've deciphered, translated and collated what is there). For example, is it clear what is a paid post and what is not? Not really. Is it clear that all declarations are full and complete? No, and in fact we know of several MEPs who appear to make glaring omissions in their declarations.

But more on these issues another time.

So why does all this matter? Personally I think this whole situation creates a bad impression in the minds of EU citizens who are already rather bemused about what the Parliament is for and why we need MEPs. And the MEPs who do not act in a fully transparent way, as well as the Parliamentary authorities who fail to enforce the rules, do a great disservice to those Members who do make full and transparent financial declarations.

But most importantly, as EU citizens, surely we all have a right to expect that our elected MEPs (who afterall are well-remunerated for their efforts at about 8000 euros (or £7000) per month, before tax) are honest and transparent enough to at least abide by the rules?

It would not need the application of rocket science to sort this situation out. ALTER-EU believes that it is pretty simple for the Parliament to set-up an easy-to-access register with data provided as searchable text and translated into English. Disclosure requirements must be increased in order to cover all direct and indirect financial interests of MEPs. Critically, the declarations should be verified by independent auditors to make sure the information is correct and up-to-date.

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Monday, 4 April 2011

McCreevy strikes back, ridiculing Commission's rules

Former internal market Commissioner Charlie McCreevy waited just one week after the requirement that he informed the Commission of his professional activities expired, before he signed a contract to join the board of a bank.

McCreevy stepped down as a Commissioner in 10 February 2010. In October 2010, he became the first former Commissioner ever to be banned from a job by the Commission when he was told to resign from the board of the London based bank NBNK Investments. Former commissioners must inform the Commission of new roles for 12 months after they step down – and during this period the Commission can object to new positions if there is a conflict of interest.

Commission officials justified the decision regarding his post at NBNK Investments saying: “The ad-hoc committee signaled a direct link with the portfolio of the former commissioner, privileged information to which he has had access in his mandate, the risk of conflicts of interest and the risks of compromising his obligation of discretion.”

“For us, it’s clear that a former internal market and financial services commissioner can’t work in an investment bank.” Asked if there was any period after which it could be deemed appropriate for a former internal markets commissioner to join the board of a financial institution, the spokesman said commissioners make a “lifetime commitment” after they join the EU executive to observe the treaties.

On February 18 2011, however, McCreevy joined the Bank of New York Mellon, specifically its department dealing with clearing derivatives. As a Commissioner, McCreevy was scandalously late in initiating regulation for these highly speculative products, which played a major role in the financial meltdown in the US in 2007. He set up two working groups that were entirely dominated by the derivatives industry, and which promoted self-regulation. This self-regulatory approach failed to curb speculation in government bonds, contributing to the Eurozone crisis in 2010. McCreevy’s legacy permeates in the very weak regulation of derivatives markets that is currently under way in the European institutions.

As well as his job with BNY Mellon, McCreevy also works for Ryanair – a post that was approved by the European Commission despite controversy - and he has also joined sportswear company SportsDirect. His overall payment from these posts is unknown, but if does not exceed 20,000 euros per month, McCreevy will still be entitled to his post-employment allowance from the European Commission which is supposed to “guarantee his independence” for three years.

The case highlights very clearly the lack of ambition in the revision of the code of conduct for Commissioners currently under way. In the draft from December 2010, the notification period is only extended from one year to 18 months. McCreevy is clearly abusing the confidence of the institution. His new role contravenes the principle of the regulations, but as he no longer has to report to the Commission, he feels he can get away with this.

Throughout last autumn’s media controversy surrounding the Commissioners’ revolving doors, the Commission’s spokespeople have highlighted the importance of Commissioners remaining loyal to the Commission “until the end of their career”.

But this case shows the Commission has no means to defend itself from irresponsible behaviour as exhibited by McCreevy. It also shows the European Parliament is making a mistake in accepting the Commission’s weak draft for a new Code of Conduct. While reinforcing its own rules, the Parliament should also insist on a three-year cooling off period for Commissioners.

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Wednesday, 30 March 2011

Cash-for-amendments scandal just the tip of the iceberg

New rules needed to curb power of corporate lobbyists in the European Parliament

Unleashing one of the biggest lobbying scandals in EU history, the Sunday Times has in the last two weeks exposed four MEPs who had agreed to table amendments to change an EU law in return for promised payments. In a sting operation, undercover journalists from the UK newspaper posing as lobbyists for industry clients approached 60 MEPs inviting them to join the advisory board of a fake lobby consultancy firm and assist with influencing decision-making in the Parliament on behalf of the lobby firm’s clients. No less than 14 MEPs agreed to meet with the fake lobbyists to discuss the 100,000 euro per year offer. Video footage released by the Sunday Times strongly suggests that Romanian MEP Adrian Severin, Austrian MEP Ernst Strasser, Slovenian MEP Zoran Thaler and Spanish MEP Pablo Zalba Bidegain accepted the offer. Thaler and Strasser resigned following the revelations, but Severin and Zalba have so far refused to do so. The Christian-Democratic PPE, the Parliament’s largest group, has defended Zalba, arguing he “did not accept money or compensation.” The video released by the Sunday Times shows that Zalba was planning to take up the offer and that he tabled an amendment that the ‘lobbyists’ had given him.

The Parliament President Jerzy Buzek has started an internal investigation, and Transparency International has called upon the Belgian Public Federal Prosecutor to take the lead and prosecute all four cases. The scandal has sent shockwaves through the European Parliament and kick started a debate about corruption and ethics, and also about the Parliament’s weak rules around financial interests and relations with lobbyists. Buzek told MEPs last week that the Parliament must “strengthen its code of conduct” for such cases and introduce “a legally binding code of conduct for lobbying in EU institutions”.

The European Parliament does indeed urgently need a sweeping overhaul of its rules on ethics and conflicts of interests, which are absurdly weak. In the past, many MEPs have been hostile to stronger rules in this field. This has led to bad habits, some of which have now been exposed by the scandal. The extent of the problem is underlined by the fact that 14 out of 60 (almost 25%) of the MEPs approached by the undercover journalists agreed to meet, apparently willing to take the offer seriously.

Many MEPs have a far too close a relationship with corporate lobbyists which results in undue influence for industry. Ernst Strasser, one of the accused MEPs, was covertly earning hundreds thousands of euros lobbying for industry while an MEP. All this was happening before the Sunday Times’ sting operation. He co-owned the consultancy firms CIN and CCE-Consulting, was employed by PR agency Hochegger and has lobbied for companies including Rail Holding and Group4Securior. This last company, ironically, handles security in the Parliament and so was responsible for sealing Strasser’s office to allow an investigation to be carried out. Austrian media reported in February that there were rumours that Strasser was using his role as an MEP to arrange meetings at the Commission for industry clients. Strasser denied this at the time, but the Sunday Times report suggests the rumours may have been true. Strasser was caught on tape saying: “Right now I have an excellent opportunity to get to know people, to build a network and use this for my company.” About being an MEP and a lobbyist at the same time, Strasser said: “Off course I am a Lobbyist”. “This is a very good combination. I see it now after one year: there are many people that are competing and who need something. And when one is there as a Parliamentarian this can open doors .”

There are no rules to stop MEPs having other jobs – and many MEPs do. A recent in-depth report published by Reuters exposed several examples of prominent MEPs with other jobs that appear to create conflicts of interest. The German MEP Klaus-Heiner Lehne is a partner at law firm Taylor Wessing, where he continues to work one day per week. Another German MEP Anja Weisgerber has a second job with another law firm, GSK Stockmann. Both these firms are involved in EU lobbying. MEP Edward Scicluna is the non-executive chairman of two Maltese investment funds linked to global bank HSBC. Veteran MEP, Elmar Brok is on the pay-roll of media giant Bertelsmann.

Many other examples could be added to this list. The Parliament’s lack of ethics rules even allows MEPs with such jobs to serve as rapporteur on legislation on issues where there are clear conflicts of interest. In the previous Parliament, the UK MEP John Purvis acted as a rapporteur for the Economic and Monetary Affairs Committee on a report on hedge funds, which argued for an industry-friendly, “light-handed [...] regulatory regime”. Purvis was also directly involved in the hedge-fund sector as Chair of the London-based recruiting arm of a Swiss company investing in hedge funds.

The Parliament clearly needs a strong ethics code to regulate against second jobs and other conflicts of interest. The ALTER-EU coalition, Transparency International and others have in the last weeks urged the European Parliament to “act to solve these problems once and for all”.

After leaving the Parliament in 2009, Purvis joined lobby consultancy Cabinet DN where he chairs the Financial Future Forum that is run from the consultancy’s Brussels offices. He is one of a growing number of MEPs and MEP assistants developing a second career in industry lobbying, often straight after leaving the Parliament. Other recent examples include Christian Rovsing (Conservatives, Denmark) who is also at Cabinet DN, Gary Titley (Labour, UK) joined lobby consultancy Hume Brophy; Glyn Ford (Labour, UK) now works for Gplus; Finnish MEP Piia-Noora Kauppi (Conservatives, Finland) went to the Federation of Finnish Financial Services and the European Banking Industry Committee (EBIC); former MEP Karin Riis-Jørgensen (Liberal Party, Denmark) now works for Kreab Gavin Anderson; and Jules Maaten (Liberal Party, the Netherlands) joined Public Matters.

Hubert Pirker, Strasser’s replacement following the scandal, is also a former MEP-turned-lobbyist, who will now return to the European Parliament. After leaving the Parliament in 2009, Pirker has run EU-Triconsult, a lobby consultancy, with offices in Vienna and Brussels.

This revolving door with the lobbying industry raises general questions about the ability of MEPs to defend the public interest while in office, but also is a source of possible conflicts of interest and corruption. Future employment contracts may have been agreed – formally or informally - while the MEP was still in office. Such offers could be a reward for favours delivered while in Parliament.

Clearly, rules are needed to prevent MEPs from going straight through the revolving door into industry.

Another area where the Parliament is far behind in regulating against conflicts of interest concerns the gifts and hospitality received from lobbyists.

In the wake of this scandal, many MEPs have expressed support for mandatory lobby transparency, but also other complementary proposals for improving transparency and ethics have been made. The Dutch MEP Dennis de Jong called for a ban on gifts worth more than 50 euro. Thijs Berman, another Dutch MEP, demanded that all MEPs should on a regular basis publish lists of meetings they have had with lobbyists. Swedish MEP Carl Schlyter proposed “a register of every email sent to an MEP with the intention of changing a policy or a law, allowing the public to see where amendments originate.”

Schlyter’s proposal refers to the very widespread practice of MEPs submitting amendments written by industry lobbyists, for free. Even when there is no payment, this is an appalling abuse of the democratic system which frequently results in the absurd situation that the majority of amendments for important EU laws voted on in the Parliament are written not by MEPs, but by lobbyists.

This happened with the rules on testing and approval of chemicals a few years ago, for the new rules for hedge funds in 2010, and with the regulation on speculation in government bonds just last month. Too many MEPs seem to assume that what’s good for big business lobbies is good for Europe as a whole - a flawed assumption that helps big business distort important EU legislation. There’s a lot at stake. An amendment approved can mean millions of euros of earnings or savings for a firm or industry. It can also mean thousands more people suffering from health problems caused by unregulated toxic chemicals or economic misery caused by inadequate rules on banks and investment firms.

Another aspect of this problem is that a large share of the 736 MEPs are involved in cross-party groups, used by industry as vehicles for lobbying. There are dozens of such “MEP-industry forums”, funded by and frequently run by Brussels-based lobby industry groups and consultancies. Examples include the Forum for the Automobile and Society (FAS), the European Parliamentary Financial Services Forum (EPFSF) and the European Energy Forum, to mention a few. These forums are currently not bound by transparency and ethics rules, in contrast with the officially recognised “Intergroups” for which some very limited rules exist.

A growing number of MEPs are speaking out against the excessive influence of big business lobbies and against the MEPs that enable industry to capture EU decision-making. The Parliament should assess the broader problems revealed by the cash-for-amendments scandal. It is high time for some critical self-reflection and for action to curb the power of corporate lobbyists over decision-making in the Parliament.

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Monday, 14 March 2011

Industry inspired amendments defeated

On March 7, MEPs in the Parliament's economic affairs committee voted down the vast majority of the amendments inspired by the derivatives industry. This was thanks to the compromise amendments proposed by the rapporteur Pascal Canfin.

The MEPs proposed specific measures to stop the irresponsible practice of trading naked sovereign debt instruments (including CDS) opposing what was proposed by the Federation of European Securities Exchanges and other lobby groups linked with the derivatives industry.

The derivatives lobby may have had influential friends such as London conservative Syed Kamall and Swedish Liberal Olle Schmidt and others but they failed to delay the proposals to introduce sanctions against traders who fail to settle their payments - as had been proposed by the European Central Securities Depositories Association (ESCDA) and other financial lobby groups.

MEPs appear to be moving in the right direction, checking the excessive influence that has been exercised by the financial industry within the European institutions. This excessive influence resulted in the current inadequate regulatory and supervisory structure which brought us into the current economic crisis paid today by the vast majority of citizens but yet not by those who created it.

MEPs will have another opportunity to demonstrate their break with the culture of ''big finance knows best'' on April 20 when they will vote on the regulation of Over the Counter (OTC) derivatives - they must vote in the interests of the citizens they represent.

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Thursday, 3 March 2011

Will MEPs vote for amendments written by the derivatives lobby?

On March 7, the European Parliament's economic affairs committee will vote on amendments to the Commission's proposals to regulate one of the most controversial derivative financial products, Credit Default Swaps.

The London MEP Syed Kamall (European Conservative and Reformist group) has tabled 14 amendments that are identical to those tabled by Swedish MEP Olle Schmidt (Alliance of Liberals and Democrats for Europe) or have the same result in the legislation and/or the same explanation text (ten identical and four almost identical ones). [1]

Several MEPs from the European People’s Party – Markus Ferber, Burkhard Balz, Alfredo Pallone, Herbert Dorfmann and Corien Wortmann-Kool – and Sharon Bowles MEP (Liberal), who chairs the committee, have also tabled identical amendments either with Schmidt or Kamall and sometimes with both of them.

So, eight MEPs from different political groups and different countries have tabled tens of identical amendments. This heavily suggests that these amendments have come from outside of the Parliament, presumably from lobbyists for the derivatives industry.

In at least two cases, CEO has obtained text written by financial lobby groups which is identical with the amendments submitted by the MEPs.

The MEPs who have tabled these industry amendments appear to be working with industry to defeat the efforts of the rapporteur, Pascal Canfin, - to strengthen the regulation on credit default swaps and ban naked trading in CDS. These highly speculative financial products are widely recognised as having a destabilising role in the continuing Eurozone crisis. The Commission's proposal already lacks teeth, and if approved the amendments would undermine attempts to introduce even basic regulation and transparency in the derivatives industry.

For example, the amendments include:

1. Traders should give less accurate information about their position in the market [2]

2. They oppose trading venues publishing a daily summary of the volume of transactions [3]

3. Preserve the irresponsible practice of trading non-existing sovereign debt instruments (including naked CDS). [4] This amendment was emailed to MEPs by the Federation of European Securities Exchanges (FESE) but may have come from a number of lobbies as the financial industry shares common views on this.

Explanation: in the Commission's proposal, it says that in order to trade a product the trader should have an arrangement with a third party under which that third party has confirmed that the share or sovereign debt instrument has been located and reserved for lending. The amendment, which is identical to text emailed to MEPs by industry and tabled by six MEPs, says that it would be sufficient if the trader has a 'reasonable expectation' that the product he is selling can be located and reserved.

4. Postpone the establishment of any sanctions against traders who fail to settle their payments.[5]Identical text to these amendments has been sent by email to the MEPs by the European Central Securities Depositories Association (ESCDA). It may have come from some other financial lobby group, since many share these views. Schmidt’s office claims it didn’t receive this text from ESCDA.

Sharon Bowles explained that amendment 402 makes it clear that instead of deciding now on the sanctions, the EU should wait the advice of an industry expert group formed by the European Commission: the Harmonisation of Settlement Cycles Working Group (HSCWG which is a sub-group of the industry dominated CESAME 2). This matches with the position of the Federation European Securities Exchanges. This working party focuses on the competitiveness of the derivatives industry.

5. Further limit the scope for banning short selling as already provided for in only exceptional circumstances by the Commission’s proposal. [6]

Explanation: if this amendment goes through it will not be all naked CDS that will be prohibited in exceptional circumstances but only some of them. The justification of the amendment submitted by the MEPs say clearly: ''Powers to ban short selling in exceptional circumstances should be restricted to a defined set of financial instruments and to defined types of transactions in order to allow market participants to plan properly for the rapid implementation of emergency measures''

6. To introduce an automatic expiry for any ban of three months. This is how the amendment text reads: ''If the measure is not renewed after that three-month period, it shall automatically expire''[7]

7. Olle Schmidt goes as far as proposing a 20-year confidentiality clause for business or operational conditions [8]

You can find all the amendments here.

Olle Schmidt’s office told CEO that Schmidt had not met with ECSDA and that the amendments were not proposed by ECSDA. His assistant said he did meet with stakeholders and also the Swedish government.

“Mr Schmidt or me as his assistant did not meet ECSDA. Those amendments that you refer to were not proposed by ECSDA to mr Schmidt.’’ [9] He nevertheless failed to specify their origin saying that he “will not comment on specific amendments’’. On article 13 for instance he “has the same view as the Swedish government’’ which happens to agree with the derivatives lobby. [10]

MEP Schmidt’s office didn’t give a convincing explanation as to why 14 almost identical amendments were tabled both by Schmidt and Kamall. He only said that they had cooperated with ECR also among other political groups to prepare the amendments and that in some cases like Articles 6 and 12, ‘Mr Schmidt shares the same ideological point of view with Mr Kamall’.

They both seem to share the same ideological views as the Federation of European Securities Exchanges – which has the financial interests of its members to defend.

Syed Kamall declined to comment.

Last year a cross-party alliance of around 80 MEPs took an initiative to counter the ‘threat to democracy’ posed by the unopposed domination of financial lobbyists in the Parliament. Their colleagues in the Parliament should support them rather than siding with the stooges for the greedy and self-serving derivatives industry and vote down these amendments.

[1]Identical amendments Kamall - Schmidt: 1) 140 - 141, 2) 156 - 157, 3) 248 - 249, 4) 267 - 270, 5) 432 - 433, 6) 453 - 454, 7) 455 - 456, 8) 457 - 458, 9) 467 -468, 10) 481 - 482. Almost identical text with the same justification and / or the same result in the legislation: 11) 188 - 189 (fines or penalties not to be included in this legislative piece), 12) 337 - 338 (sovereign debt instruments out of the scope), 13) 441 - 442 (disclosure restricted to shares), 14) 485 - 486 (identical justification)
[2]Amendments 248, 249 by Kamall and Schmidt in Article 3
[3]Amendments 267 - 270 by Kamall, Schmidt, Ferber, Bowles and Wortmann-Kool in Article 6
[4]Amendments 351 - 355 by Kamall, Schmidt, Bowles, Pallone, Dorfmann and Woortman in Article 12
[5]Amendments 188, 189 by Kamall, Schmidt, Bowles in Recital 16, amendments 375 – 378 in Article 13 by Kamall, Ferber and Balz and amendments 402, 403 by Schmidt and Bowles
[6]Amendments 453, 454 by Kamall and Schmidt in Article 17
[7]Amendments 485 – 486 by Kamall and Schmidt in Article 20
[8]Amendment 502 in Article 29
[9]Email from Olle Schmidt's office, 28/02/2011 14:59
[10]Email from Olle Schmidt's office, 04/02/2011 12:48

(this posting has been updated on 07/03/2011)

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Monday, 21 February 2011

MEPs corner the Commission on expert groups

MEPs from all sides of the political spectrum last week attacked the Commission's failure to act against the industry dominance of many of its advisory bodies, the so-called expert groups. The Commission came under fierce criticism from more than 15 MEPs who took to the floor during a debate in the European Parliament’s plenary hall, demanding solutions to the expert group problem and insisting that Parliament should be involved in the decision making process.

The conflict came about after the Commission finalised new rules on expert groups at the end of 2010 - without any dialogue with MEPs or civil society. The new rules fail to solve a number of widely-recognised problems with expert groups, which include a lack of transparency and the dominance of industry lobbyists in many groups (see ALTER-EU's statement). The United Left group summed up the mood in their press release which declared “MEPs furious at Commission over shady expert groups”.

Setting up expert groups is the main way in which the Commission seeks technical, scientific, legal and policy advice. Members of these groups are often given the privileged opportunity to influence upcoming legislation long before any public or democratic debate takes place. Representatives from big business dominate more than 100 expert groups and are by far the biggest constituency in expert groups, with the exception of those representing national governments. To add insult to injury, many of the supposedly 'independent experts' that pledge to act on behalf of the public interest are in fact on the payroll of large corporations and their lobby groups. Shockingly, this is the case for over 190 lobbyists advising the Commission on financial regulation .

Monica Macovei MEP from the European People’s Party group slammed the Commission for allowing this to happen. She highlighted the lack of procedures to detect conflicts of interests, pointing out that it was not enough to simply ask expert group members to sign a declaration of commitment to the public interest. She demanded safeguards against the corporate capture of expert groups, stressing that small and medium-sized companies (SMEs) and NGOs are not properly represented.

Hans-Peter Martin
MEP (Independent) demanded sanctions against expert group members who claimed to be independent while they were actually on the pay-roll of corporations.

Michael Cashman
MEP from the Socialist Group (S&D) criticised the fact that the Commission’s new rules limit transparency around documents discussed in expert groups. According to the new rules, expert group members (including corporate lobbyists) have access to classified documents, but it is unclear if and how they will go through the clearance procedures provided for the Commission’s own staff members. (Rules for Commission, p. 19) The Commission is trying to avoid the publication of all expert groups’ documents in the relevant public register.

Corinne Lepage
MEP from the Liberals (ALDE) demanded a change in the criteria used to select external experts to prevent the marginalisation of civil society.

Pascal Canfin MEP from the Greens said he found it “completely surrealistic” that the Commission was mainly consulting investment bankers including American ones such as JP Morgan and Goldman Sachs on how to change rules on banking after the economic crisis, through the expert groups dealing with financial regulation.

Dennis de Jong MEP from the United Left group last year offered his advice to the Commission on new rules for expert groups but his input was ignored. Like other MEPs, he asked the Commission to guarantee that the Parliament would be consulted on expert groups’ rules. He said he had spoken with many civil society stakeholders who said they didn't feel reassured that a balanced composition would be guaranteed by the Commission. Eva Britt Svenson, also from GUE/NGL published a statement on the matter.

The ‘responses’ from Commissioner Siim Kallas, who replaced Commissioner Maroš Šefčovič in the debate, confirmed that the Commission lacks political will. He recognised that expert groups were ''covered in obscurity'' until 2005, but argued that transparency had improved. This is in fact true given that until 2005 even the names of the expert groups were secret. It took to the Commission four more years to publish the names of the members of the groups. But the Commission seems to think that transparency should stop here and is not providing full transparency on expert group documents. And the Commission has so far failed to address the issue of industry capture of expert groups.

Kallas previously tried to hide behind the fact that expert groups don't make formal decisions, ignoring the fact that these groups are highly influential. He also questioned who could judge whether an expert group was really balanced. Yet this is entirely possible. ALTER-EU has proposed clear common criteria that all Commission departments should follow prohibiting any interest category (business, unions, NGOs or others) from having a majority in any group.

As parliamentary pressure is also growing over the revolving doors cases involving ex-Commissioners (and the resulting conflicts of interest), perhaps the time has come when the Commission will finally recognise the need to act to show that it is an independent institution, not the just the tool of corporate influence.

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