As the European Commission finalises plans for its public affairs register, set to be introduced next spring, EPACA chairman José Lalloum told EURACTIV in an interview that the system must be mandatory and common to both the Commission and the Parliament if it is to be a success.
José Lalloum is chairman of the European Public Affairs Consultancies’ Association (EPACA).
In August, EPACA said it would boycott next year’s proposed voluntary public affairs register being put together by the Commission. It also said it would not join the register if it required detailed disclosure of the monies it receives from its clients. Has your position evolved since?
We never used the word ‘boycott’. We just said that a voluntary system, requiring financial disclosure, in our profession will undoubtedly distort the market.
On this basis, we did not see how we could recommend our members to register when they will suffer one way or the other. The legal assessment that was conducted by McKenna Long & Aldridge LLP shows that in a voluntary system, some will suffer because they have registered and some will suffer because they haven’t registered.
Today, we don’t know what the impact will be. EPACA does not want to ‘boycott’ the ETI and has always tried to help the Commission in developing the initiative, with the idea being to build trust with the citizens. That is very important for us. We just said that we could not, as it stands, recommend to our members that they register.
What would make you recommend your members to register then?
Initially, financial disclosure was not in the dialogue that we had with the Commission. The dialogue we had with the Commission before the release of the ETI showed that financial disclosure would not be part of the ETI.
Our point is that if – IF in capital letters – the Commission and the Parliament believe that the voluntary approach that we have used so far – and we have gone quite far in terms of the voluntary approach, with the code of conduct and the professional practice panel to review the activities of our members – if this is not enough, in their view, to build trust with the citizens, and if we need to go as far as financial disclosure, then the system needs to be mandatory. Having a mandatory system would be the only way not to have market distortion, as there would be a level playing field.
EPACA has voiced concerns in the past that law firms may not be allowed to disclose their clients’ names due to legal obligations to protect their identities, particularly during merger cases at the Court of Justice.
You said this would threaten the ‘level playing field’ as it would put consultancies, NGOs and trade unions at a disadvantage compared to law firms.
How do you see the current situation for law firms, and how will it evolve in the light of Kallas’s proposed solutions?
The ‘level playing field’ is essential. Law firms are competitors to public affairs consultancies in the field of interest representation, and for this activity, therefore, there certainly needs to be a level playing field.
Legal representation in court is obviously a different matter.
As is often the case in European legislation, it is the borderline aspect which is problematic, and the borderline is what you have addressed: competition cases.
Indeed, lawyers claiming that the rules should not apply to them while they are involved in competition cases leaves them with a lot of room for manoeuvre, and possibly disguises their actual activity.
On the other hand, a number of EPACA members are also involved in competition cases for clients, and at some point find themselves in the same predicament as that highlighted by law firms.
It would be counter-productive for them to put on their website which company they are working for, just because they are preparing a merger or competition case. So this needs to be taken into account.
Does that mean that some consultancies might try to reclassify themselves as law firms? Are some of your members are currently considering this?
I don’t have any elements on this.
But you are saying that they pursue similar activities at times?
They are not similar activities. You are right to ask the question, and to clarify what I meant, public affairs consultants work on competition cases, but on the public affairs dimension of a competition case, very often alongside lawyers, who themselves are working on the legal aspects of the competition case.
In the same way as the lawyer would say “I should protect my client’s identity, reputation etc. when I work on competition cases”, the public affairs practitioner who is involved in a competition case, and may or may not work alongside the lawyer, should also be able to keep the name of his/her client confidential.
Of course, our code of conduct currently says that if I were to go to a Commission official, I should disclose whose interests I am representing, but in the case of the ETI, we are talking about putting this information on a website for all to see. This is where the problem lies.
With regard to your question, however, I am not saying that public affairs consultancies are going to reclassify themselves as law firms.
That being said, whatever the hurdles being raised, public affairs consultancies will find solutions. Nevertheless, at the same time we want to ensure that the solutions for business are along the same lines as the principle objective of the ETI, which is transparency. This is what we are looking for.
What I would hate to see is a piece of legislation or a communication, on a voluntary basis, which goes against transparency because of the perverse effects of the way it is worded, because it has not been thought through enough.
So you are saying that under the new rules, you can claim the same kind of protection that law firms enjoy for clients whose identities you currently have to disclose to the Commission, and thus keep that information to yourselves?
Not at all. What I am saying is that the consultancies who have signed our code of conduct have accordingly agreed to inform any Commission official or elected member of the Parliament – indeed any decision-maker – of the client on whose behalf they are being approached. Our members have no problem in doing so.
But you were saying that you might not be able to do so anymore?
No, we will continue doing so. The difference is putting on the website, for the outside world, the name of a client when it is a competition case, because then you are sending a message to the market.
Regarding financial disclosure, EPACA has said that disclosing clients’ fees would be a problem. ALTER-EU, representing transparency NGOs, said at the hearing that clients’ fees would be too much, and annual figures on lobbyists’ fees and income would instead be enough.
Would you be prepared to provide annual figures on lobbying expenses and income for an entire firm, rather than on a client-by-client basis?
At the hearing, I understood that ALTER-EU was not necessarily interested in knowing the precise fee that we charged per client, which is news for me. Indeed, the first drafts of the ETI were asking not only for our overall income from lobbying activities (with a very broad definition of lobbying, as you know, and which would in fact mean that anything we do is lobbying), but also a breakdown of percentage per client, which equates to saying how much that each client is paying.
The survey which we conducted with our members showed that disclosing client fees was a red line for them, and particularly so if such a disclosure were to be on a voluntary basis.
Would it be OK on a mandatory basis?
It would still be tough, but at least there would be a level playing field. If the European institutions are serious about requesting financial disclosure, then they should do so on a mandatory basis. Indeed, whether NGOS and other critics like it or not, EPACA members are the ‘good guys’ in the profession.
I believe the main concern is those who do not bother joining a trade association. If a mandatory system is not put in place, they will undoubtedly not register, and they will benefit from commercially sensitive information regarding their competitors.
You are talking about individual lobbyists not working for a specific consultancy or a corporate representation office in Brussels?
Not necessarily. The number of individual lobbyists may be high, but these would not necessarily have the will or the finances to pay a membership fee of a trade association. On the other hand, you have a whole raft of small companies which have not yet joined EPACA. We cover 75% of the market, there is therefore still 25% which remains.
That means that you think it would potentially be problematic for the 25% which are not covered?
No, this is not what was meant. I said that some of our members may be criticised and some of our members may be seen as faulty in the future. Of course I hope not, but we have systems in place to cater for that.
I was just responding to your question – is mandatory going to be better from that point of view? At least from the point of view of capturing everyone, it is certainly a better system. You don’t have all the good guys from EPACA needing to walk naked in an environment where some other people are still going to keep their suits on.
The Commission and Parliament apply different rules.
For example, Parliament’s register does not currently apply to the Commission, and
Commission conferences and meetings are usually by invitation, whereas Parliament is more of an ‘open house’.
Parliament’s rapporteur on the transparency initiative, Alexander Stubb, has suggested that the Commission’s intended common system applicable to all EU institutions could be problematic.
As a consultant, where do you currently stand on this?
The ETI currently only covers the Commission. It cannot cover the Parliament. I think that this is one of the weaknesses of the system. Why have more than one system? It may mean more work, and possibly having to go through a co-decision process of some sort, but it would certainly be better to build a system that applies to all the EU institutions.
At the moment, the ETI’s voluntary system – the ‘carrot and stick’ – just doesn’t work. Where is the ‘carrot’ in the system? Commissioner Kallas noted that those who registered would receive an email every time that there is a consultation from the Commission of interest to them. This is not a very appealing motivation to join a register. Any consultant would know better.
Besides, consultants generally do not have to respond to consultations, bar maybe the ETI as it directly affects them. It is their clients who need to respond to consultations, and as they would receive an email, they would know.
As for the ‘stick’, it seems to me that it is entirely undemocratic to consider a response to a consultation from a non-registered party as “one individual”.
It is important to remind everyone that there are two other important parts within the ETI. A very important part of it is improving the way the Commission consults interested parties, and Mr Kallas’s ‘carrot and the stick’ goes completely against this principle.
The other chapter focuses on the financing of NGOs, and their use of EU funds. But on the consultation front, it is certainly much better to do this than what the Commission is doing, and this aspect of ‘carrot and stick’ for registering goes against one of the chapters of the ETI itself.
If one looks at the Parliament, the motivation for me to register is that I receive an access badge. This is an interesting motivation. That being said, I remember the time when to enter Parliament premises, all one needed to do was go to the registration desk and say what committee one wanted to follow and a badge would be given to you instantly.
This has changed, for security reasons, possibly including terrorism, but also for enhanced security in terms of the workplace. In my view this is an important enough ‘carrot’.
When you set up a voluntary system, in order to attract people, it is crucial to make sure the motivating factor is a real one, and that the hurdles you are asking people to overcome are straightforward enough. Reachable in terms of the ETI and those affected.
It is clear that in terms of financial disclosure, we are being asked to do something impossible for a very limited advantage – in fact, for no advantage at all.
That is also the reason why – I am talking about consultation and better regulation – we question the Commission’s decision not to conduct an impact assessment on the ETI, while it is obvious that it has the potential to at least distort our market.
It is certain that the Commission willl propose the register in spring, so Parliament must decide how it wants to be included.
Can the same rules can be applied to the Commission and Parliament within the scope of this proposal, and what is the biggest obstacle to this?
The biggest obstacle is that the ETI was not designed to be an inter-institutional scheme. This is a pity. If you are building a house, you try to make it big and solid enough for your family and friends. If it is a small house built with fragile materials, then you won’t be attracting many. It seems that the design from the start was not for an inter-institutional scheme.
What aspects are you thinking about in particular?
First, there was no consultation with Parliament on this. Parliament has had to draft own-initiative reports on the communication from the Commission. So it is fairly obvious that from the start, the idea was not to ask Parliament whether they wanted to be a part of this.
Secondly, it is miles away from the current system in the Parliament. Some may say that the current Parliament system could be improved – maybe there could be more transparency regarding who does what, maybe there should also be more transparency about what MEPs do – and this is one of the difficulties that Kallas is running into.
It may be improved, but at the moment Parliament is so far from what Kallas is proposing that I don’t see where a compromise could be reached between the two systems.
In your view, what sort of system would be practicable for both Parliament and the Commission? What can be learned from the US system?
The US system applies to all its institutions, whether that be the executive or the legislative bodies. However, there are large disparities between the US and EU systems. Richard Corbett, in particular, was quite vocal on this during the hearing on the 8th October.
The importance of money and the financing of political campaigns in the US is clear. At European level, it is highly regulated, and there are no such thing as “European campaigns”, as there are no European political parties.
In a few words, if we want to go further than a voluntary system, and if the institutions absolutely want to go beyond that system and get into some sort of financial disclosure, then it has to be a mandatory system, and that is where the US system is probably better than the EU one. It doesn’t mean that we should just translate the US system into the EU reality, because the realities are very different.
‘Mandatory would make it more practicable in terms of inter-institutional settings’. Is that what you are saying?
Mandatory would make it better in terms of a level playing field. I am not sure about the inter-institutional aspect. But what we hear in various circles and political groups in Parliament – and this is speculative because Parliament is currently working on it – is a trend of ‘What is the point in adding another voluntary system to the existing voluntary system?’
In a nutshell, if we want to go a step further, let’s make it mandatory. This seems to be what the majority in Parliament is saying today.
Could we then already be heading for a mandatory system from spring 2008?
It depends on the speed at which the institutions wish to move on this one, and whether they see it as a priority.
Would you be happy with that?
What we are talking about here is perception. We are talking about the citizens’ perception, and building trust with the citizens, and we are talking about the perception of public affairs consultancies and their image. There is nothing more important for each of us in EPACA (and others) than our reputation, so the last thing I want to see happen is a system which could damage my reputation.
If we have a level playing field and a mandatory system, at least I will not have a choice and will have to adapt. In this case, it is very difficult as whatever way you approach it, registering or not registering, there will be criticisms.
What are your main concerns right now, and what are your main messages to Commissioner Kallas and to Parliament as is examines the report?
To Mr Kallas, it would be to listen to the Commission’s own rules in terms of better regulation and consultation. I don’t think that the ETI as it stands corresponds to those guidelines and rules that the Commission is setting in terms of better regulation and the principle of proportionality, as well as consultation. Indeed, the consultation process was not exemplary for the ETI. No impact assessment was carried out.
I think that at the moment, Parliament is asking the right questions: Do we need such a system? How can we make it a success in terms of building trust with citizens? I believe this is very much what MEPs have in mind.
I am very much looking forward to the outcome of the parliamentary process. Interestingly, you will also note that Parliament doesn’t just focus on lobbyists. There are other aspects of the Commission’s ETI which are of very high importance, such as the way the Commission consults, as well as the way EU money is being spent and the transparency of it all.
You may have heard of the contest organised by a group of NGOs about the ‘Worst EU Lobbying Awards’. EPACA has been nominated for one of the awards, specifically because they say that you are trying to block the voluntary register. What is your reaction to this?
I was sitting next to Erik Wesselius at the hearing, and after he mentioned his ‘Worst Lobbying Awards’ scheme, I told him publicly that I sometimes find it difficult to convince my clients that it is not a good thing to be nominated. I hope we get the prize.