Improving EU Lobbying Regulations: Lessons from the US and Canada

Written by Oliwia Borek and Edited by Lucia Torlai

Abstract

This article delves into the complex issue of lobbying regulation reform and examines the shortfalls of current regulations found at the EU Level. By contrasting EU lobbying rules to those found in the US and Canada, the article identifies several key areas in which EU regulations can be improved. Accordingly, the article presents concrete suggestions needed to increase the level of transparency and accountability within EU lobbying practices, as well as to reduce the risk of future corruption and malpractice in this area.

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Introduction

The European Parliament established its first set of lobbying regulations in 1996, making it one of the first in the world to impose controls on its lobbying process. Since then, a number of significant developments have been made at the EU level in this area. The European Commission saw the creation of its own lobbying regulations in 2008, and the two institutions reached an Inter-Institutional Agreement (IIA) with regard to regulations in 2011. Most recently, the 2021 IIA saw the significant expansion of lobbying regulation within EU institutions, including the establishment of a mandatory Transparency Register (TR). Also notably, the 2021 IIA was signed by the European Parliament, the Commission and, for the first time, the Council (Kotanidis, 2023). Nevertheless, EU lobbying regulations have consistently faced a significant level of scrutiny within the literature and from the third sector (Chari et al., 2019; Corporate Europe Observatory, 2023),  and the outbreak of a series of scandals (such as the Qatar corruption scandal involving former Parliament Vice-President Eva Kaili) leaves much to be desired.

This article identifies four key areas in which the EU can improve its lobbying regulation, grouped broadly into the two categories of disclosure and enforcement. First, regarding disclosure, the article points out the insufficiencies in the EU’s lobbying requirements concerning financial information and registration obligations for lobbying actors. Secondly, looking at enforcement, the article notes specifically the absence of an independent oversight body for lobbying rules and the lack of substantial penalties for non-compliance by lobbying groups. The article makes concrete suggestions for improvements in EU lobbying rules by comparing these aspects of EU regulations to those found in Canada and the US. These two countries were chosen as a means of comparison as both Canada’s Lobbying Act and the US Lobbying Disclosure Act predate EU lobbying regulations and perform better on global rankings such as the Corruptions Perceptions Index (CPI) (Chari et al., 2019).

Disclosure

The level of transparency achieved by lobbying regulations relies heavily on the quality of information that lobbying entities are required to disclose. Requiring lobbying groups to disclose detailed information about their activities is essential for informing citizens on government practices as well as preventing potential undue influence by undisclosed interests. The availability of accurate and detailed information is therefore crucial for the effective monitoring of relevant actors and as such is a fundamental aspect of these regulations (Porumbescu et al., 2022). This section will outline how the EU’s lobbying rules can be improved by 1) increasing the requirements for financial disclosure and 2) strengthening the registration obligations for lobbying actors.

Firstly, EU lobbying regulation is significantly behind US regulations in terms of financial disclosure. In the US, lobbying entities must submit quarterly reports which include information on any income earned for their lobbying activities and any expenses sustained if the entity lobbies on its own behalf (Holman & Luneburg, 2012). Lobbying groups are additionally required to submit semi-annual reports disclosing any financial contributions made to federal candidates, officeholders, leadership PACs, political party committees, covered legislative or executive branch officials, Presidential library foundations and Presidential inaugural committees (Miller et al., 2016). In comparison, lobbying groups in the EU must submit only one annual report which discloses an estimate of the yearly costs of their lobbying activities, their main source of funding and any donations which exceed 10% of their budget (Kotanidis, 2023).

As noted in the literature, financial details are perhaps the most important information which needs to be disclosed by lobbying groups to improve accountability within the lobbying process. Information on financial contributions and lobbying investments can help the public to determine whether a public official acted based on private interests in a particular policy area, which in turn increases the likelihood that officials are held accountable for their actions(Holman & Luneburg, 2012; Bunea, 2018). Furthermore, more demanding financial disclosure requirements also prove useful for identifying corruption in lobbying practices. Financial information is very often the catalyst for corruption investigations, as suspiciously high lobbying fees or expenses can represent the link to uncovering those responsible for malpractices (Holman & Luneburg, 2012). The EU should therefore increase the requirements for the level of financial information disclosed by lobbying entities, bringing its lobbying rules in this area in line with US legislation.

Secondly, in comparison to both Canada and the US, the EU has substantially weaker registration requirements for disclosing individual employees of lobbying groups. In the EU, organisations must designate a person who is legally responsible for the entity and disclose the number of persons involved in their lobbying activities (Kotanidis, 2023). They are not required to disclose any further detail on these persons (except for naming those given access to EP premises) and information provided on individual meetings does not specify who took part in them on behalf of the lobbying body (Transparency Register, 2023). This differs significantly from the registration obligations in place in Canada and the US. In Canada, each individual lobbyist is listed on the lobby register, as well as the government institutions and subject matters on which they have lobbied. They must also disclose any government funding which they have received in the previous financial year (Lobby Canada, 2023). Similarly, in the US, registered lobbying entities must provide the name of each of their individual lobbyists, their earnings and any issues or bills that they had lobbied on (Miller et al., 2016). Additionally, they are required to disclose if their lobbyists are ‘revolvers’, having moved from the public to the private sector, and provide details of their previous employment if this is the case (Open Secrets, 2023).

By requiring such limited information on individual lobbying actors, EU regulation has been argued to limit the level of accountability faced by lobbyists within its lobbying system (Chalmers et al., 2021). Crucially, non-compliance with regulations may not be tracked to the individual lobbying actor, instead falling entirely on the relevant public official or person legally responsible for the lobbying entity. As a result, EU regulations may provide more incentives for individual lobbyists to attempt malpractice (Woll, 2012). Secondly, in comparison to the US, EU regulation provides significantly less transparency regarding revolving door cases, exposing itself to more abuses in this area (Chalmers et al., 2021). As such, the EU should strengthen its registration obligations with regard to individual lobby employees, requiring more information to be disclosed on their lobbying activities and previous employment.

Enforcement

Developing an effective enforcement mechanism is key to ensuring the lobbying sector is wholly regulated, and subsequently to improving transparency and accountability within the lobbying process (Šimral, 2020). This section will discuss how the EU can improve its lobbying rules in this area by 1) establishing an independent oversight body for enforcement of its regulations and 2) introducing harsher penalties for non-compliance by lobbying entities.

Firstly, the EU does not have an independent oversight body for its lobbying regulation, with both its management board and joint secretariat made up of officials from the three signing institutions of the IIA (Kotanidis, 2023). This contrasts with Canada in particular, where the authority to enforce the country’s lobbying regulations lies with an independent Agent of Parliament appointed as the Commissioner of Lobbying (Chari et al., 2019). The establishment of an independent oversight body is desirable as the aims of lobbying regulations do not always align with the private interests of public officials. This mismatch of interests may result in a lack of enforcement or bias in the process of investigating breaches (Holman & Luneburg, 2012). Notably, the OECD reported that oversight from independent bodies has proved more effective in identifying discrepancies in lobbying rule implementation, as well as in levelling the playing field in terms of who is held accountable under regulations (OECD, 2021). The EU should therefore seek to replace its current enforcement mechanism with an independent oversight entity.

Secondly, lobbying regulations in both Canada and the US contain harsher penalties for non-compliance than those found in the EU. The only penalty threatening lobbying entities who fail to comply with EU regulations is their exclusion from the Transparency Register for a period ranging from 20 days to 2 years. In addition, the joint secretariat can make any measures taken against the lobbying entity public on the register, but on a voluntary basis (Kotanidis, 2023). Moreover, despite these limited penalties, the EU still faces enforcement problems: watchdog organisations have identified numerous cases of lobbying entities facing no sanctions for the under-reporting of annual lobby expenditures and failing to disclose information regarding lobbied actors or funding sources (Bauer et al., 2021; Corporate Europe Observatory, 2018). In contrast, non-compliance with lobbying regulations in Canada can result in a fine of up to $50,000 or a sentence of up to 6 months in prison and, if proceeding by indictment, up to $200,000 or up to 2 years in prison (Chari et al., 2019). In the US, possible penalties involve a fine of up to $200,000 or a sentence of up to 5 years in prison (Miller et al., 2016). Lobbying entities in both the US and Canada have also faced more regular sanctions for breaches of regulations in recent years than in the EU (Chari et al., 2019).

Sizable penalties are an important means for incentivising compliance with lobbying regulations, with an OECD survey of lobbying actors finding only 12% of respondents questioning the effect of penalties in this area (OECD, 2021). Without the introduction of more substantial penalties, the EU remains vulnerable to cases of purposeful misreporting or under-reporting by lobbying groups. Similarly, if penalties are known to be weakly implemented, the threat to non-compliant lobbyists is irrelevant and, as such, the EU’s enforcement mechanism is unlikely to have any tangible effect on discouraging malpractices (Chalmers, 2018). The EU should therefore adopt harsher penalties for non-compliance with its lobbying rules and pay more attention to ensuring these are enforced when breaches do occur.

Conclusion

This article has identified a number of ways in which EU lobbying rules can be improved by comparing them with regulations found in Canada and the US. With regards to disclosure, the article suggests that the EU increases its requirements for financial disclosure of lobbying entities and strengthens its registration obligations by requiring more information on individual lobby actors. With regards to enforcement, the article suggests that the EU introduce an independent oversight body responsible for the enforcement of regulations and instigate harsher penalties for non-compliance by lobbying groups. These changes are essential to ensuring transparency and accountability within the EU lobbying system and are likely to play a key role in preventing future corruption and malpractice in this area.

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