Legal reform Research

Foreign Lobbying in the European Union: The Limits of Transparency Regulation?

In today’s hyperglobal and networked world, laws created by regulatory superpowers can have legal effects across the world. It is no surprise, then, that those affected are keen to ensure that their voice is heard in rule-making. But is the EU prepared for such foreign lobbying activities? Emilia Korkea-aho argues that compared to another global regulator, the US, the EU remains one step behind where it comes to regulation and disclosure rules.

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In today’s hyperglobal and networked world, lobbying, just like other contemporary human activities, transcends national and supranational borders. The reason for the global reach of lobbying is simple. Lobbying follows rule- making that has long been undeterred by the frontiers of territorial sovereignty. Take for instance the EU whose rules apply thousands of kilometres away from its physical borders – the development referred to as the Brussels Effect. If the EU sets rules for those not in its immediate jurisdiction, it is no surprise, then, that those affected by its regulatory superpowers are keen to make sure that their voice is heard in rule-making.

The globalisation of lobbying has given rise to several scandals and controversies, both in the EU as well as beyond. In Europe, German authorities investigated a former EU ambassador-turned-lobbyist for Gerhard Sabathil spying for China. In another case involving China, a group of China-friendly members of the European Parliament had a gathering at the Parliament’s Strasbourg premises in October 2019. The Chinese EU mission paid for drinks and snacks at the gathering. According to Politico, no public record of the sponsorship exists. An NGO Corporate Europe Observatory published a report in 2019 on how MSL Brussels – part of the French media conglomerate Publicis Groupe – has been contracted to represent the government of the Kingdom of Saudi Arabia in the EU from at least October 2015. Saudi Arabia’s influence was in the headlines in the earlier case involving the College of Europe, too. In the US, Paul Manafort failed to register under the Foreign Agents Registration Act (FARA) for the work he did for the Government of Ukraine. He was sentenced to 73 months’ imprisonment. In another case also involving the Ukrainian government, the high-profile Washington lawyer Gregory Craig was found not guilty of making false statements to the Justice Department in relation to FARA requirements.

Lobbying follows rule-making that has long been undeterred by the frontiers of territorial sovereignty

Are these headlines a result of lack of regulation? Or is the problem that we have simply not realised that there is a need for enhanced transparency over third-country influencing operations? Does the EU regulate foreign lobbying, and what can we perhaps learn from the US?

The EU Transparency Register (EUTR) is geographically blind. It applies to all lobbyists trying to lobby the EU institutions irrespective of their location, and the EUTR currently involves 1800 lobbyists (approximately 15% of all registrants) without an office in an EU country. The largest groups of non-EU registrants come from the United Kingdom (998), the US (438), and Switzerland (275). These lobbyists are in-house lobbyists, business and professional associations, professional consultancies and NGOs.

The listings do not involve foreign governments. This is because there is an important exception to the global scope of the EUTR: paragraph 15 of the Interinstitutional Agreement (IIA) to the EUTR states that ‘[t]he register does not apply to Member States’ government services, third countries’ governments, international intergovernmental organisations and their diplomatic missions’ (emphasis added).

The rationale for the exemption is to ensure that the EU’s diplomatic relations with countries both in the neighbourhood as well as beyond its immediate borders are not affected by lobbying regulation. As the EUTR expressly speaks only of governments, this means that corporations, NGOs or professional associations residing in third countries must register and disclose the details of their EU lobbying. This has led to tricky boundary policing work in cases where third country governments have joined forces with their industries, as happened with lobbying activities in relation to EU Chemicals Regulation REACH and as is currently happening with Big Tech’s lobbying in the EU.

Does the EU regulate foreign lobbying, and what can we perhaps learn from the US?

Much of lobbying occurs through intermediaries such as public affairs consultants. This is also true of foreign lobbying. Consulting firms have tapped into the opportunities provided by the globalisation of lobbying, establishing offices in Brussels, London, Washington and Hong Kong. Many regulatory issues have parallels in all jurisdictions, and simultaneous presence in several global cities gives these firms a distinct advantage. The EUTR requires consulting firms and others that provide lobbying services to disclose their clients, and this applies to both EU and third country clients. The above mentioned third country government exemption has, however, applied to intermediaries that have not disclosed any work they have undertaken for non-EU governments. For instance, the above mentioned MSL Brussels, despite having an entry in the EUTR, has not included Saudi Arabia in its list of clients.

The EU reached an agreement on the new IIA just before Christmas, and one change concerns the disclosure of third government clients. The new IIA, still pending the final approval from the institutions, now states that the following activities are exempted:

‘public authorities of third countries, including their diplomatic missions and embassies; with the exception of legal entities, offices and networks representing such authorities without diplomatic status or through an intermediary’ (emphasis added).

This means that in the future, EU public affairs consultancies need to disclose the work they do for the public authorities of third countries. This is the first step to bring the EU on par with the US.

In the US, the 1938 Foreign Agents Registration Act (FARA) – originally enacted to require the disclosure of Nazi propaganda in the US – requires that those who are doing public relations work on behalf of a foreign entity must register with the Justice Department. Agents who register must disclose their agreements with foreign principals, report the amounts and sources of funding they have received, and provide a log of all activities they have performed on behalf of foreign principals. Agents must also label informational materials they disseminate to disclose their agency relationship, and file copies of those materials with the Justice Department’s FARA Unit.

The FARA’s definition of foreign principals includes foreign governments, political parties, corporations, individuals, and NGOs. The range of covered activities is also broad, encompassing attempts to influence Congress, federal agencies or public opinion in the US.

In the interest of avoiding overlaps, FARA includes exemptions for lobbyists who register under the Lobbying Disclosure Act, meaning that disclosure through the general lobbying registration system is enough. However, this exemption is not available to agents of foreign governments or foreign political parties, indicating that foreign governments and political parties are perceived as posing a higher risk to democracy. Indeed, FARA is explicitly tied up to the protection of the democratic process. The marketing brochure at the Justice Department website notes how FARA ‘helps protect the integrity of American democracy by combating covert foreign government influence in our political process’.

The law has been loosely enforced for years. The past decade has seen increased FARA enforcement activities, but given its various tricky distinctions (‘political’ versus ‘non-political’, ‘private’ versus ‘public’ as in the exemption concerning the representation of foreign governments in real estate acquisitions: ‘as long as that representation does not directly promote the public or political interests of the foreign government’), enforcement officials have struggled to breathe life into FARA.

In a global comparison, the EU remains a step behind

The EU’s new lobbying register does not create an US style FARA, but what it does is that it recognises – for the first time – the role that foreign governments may have in shaping EU policies. In a global comparison, the EU remains a step behind. The recently inaugurated Biden called during his campaign for a ban on those lobbying on behalf of foreign governments. Indeed, he did not call for more transparency on foreign lobbying but suggested an outright end to such activities. His proposal, if realised, would effectively make it illegal for Americans to lobby on behalf of foreign governments. He also called for a concomitant ban on those lobbying on behalf of foreign companies that are linked to foreign governments.

Whatever the fate of Biden’s proposal is in the new administration, the EU should open the debate on two issues.

First, Biden’s proposal openly asks the question that we in the EU have been avoiding: Are there limits to transparency-enhancing regulation? At what point does (foreign) lobbying become such a threat to democratic decision-making that transparency is not enough to offset the risks involved in interest representation activities?

Second, to aid such debate, the EU should see – as the US does – lobbying and its regulation as a matter of the highest priority to ensure the integrity of the democratic process as well as something to be taken seriously by constitutional, EU and international law. In a recent article, Jens David Ohlin contends that the US can help shape global norms supporting democracy by stating that foreign election interference breaches international law. He enumerates several measures that the Biden administration should take, such as imposing economic sanctions on foreign actors that engage in election interference or enacting new legislation to criminalise solicitation of foreign interference.

Are there limits to transparency-enhancing regulation?

The European Parliament seems to be taking the first steps to increase scrutiny of foreign countries’ influence on EU law-making and politics. French MEP Raphaël Glucksmann, chair of the Special Committee on Foreign Interference in all Democratic Processes in the European Union, told EU Influence that he has asked for the mandate of the committee to be extended until March 2022. He gave no details on whether the committee will cover lobbying, but noted that the process ‘can lead to recommendations’ on foreign lobbying. The FARA does not provide a ready-made template on which to act, but a transatlantic exchange of views would aid the EU to develop such recommendations.

Emilia Korkeo-aho is an Associate Professor of EU Law and Legislative Studies at the University of Eastern Finland and Academy of Finland Research Fellow.

This article appeared earlier on EU Law Live as part of a special issue on EU transparency law.