August 03
2021
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Dolores Utrilla
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25th May 2020
Institutional law

Insight: “Boosting the fight against ‘revolving doors’ in the EU in times of crisis” by Dolores Utrilla

In recent years, the flow of politicians and public staff members between the public and the private sector (a phenomenon usually described as ‘going through the revolving door’) has led to growing concern at the European and the national levels, giving rise to urgent calls for enhanced transparency and accountability. At the EU level, this is a major issue in the midst of the close relationship between the EU institutions, agencies and bodies (mainly the European Commission and the European Parliament) and the lobby industry.

Post-public employment conflicts of interest (one of the dimensions of revolving doors) are considered a malpractice because they offer interest groups the opportunity to reward regulators and decision-makers for past behaviour, thereby opening the door to harmful incentives. This phenomenon is considered to undermine democratic, public-interest decision-making, whilst also diminishing the trust of citizens in public institutions. Revolving door moves can entail risks, such as: (i) conflict of interest, (ii) risks that confidential information may be disclosed or misused, and (iii) risks that former decision-makers may abuse their previous public role through the inappropriate monetising or other exploitation of their insider know-how, privileged contact network and reputation.

The EU has sought to address the challenge posed by revolving doors, albeit cautiously and largely on the basis of institutional codes of conduct subject to weak enforcement mechanisms. Now, recent steps taken in respect of a former senior official of the European Banking Authority (EBA) may constitute an opportunity to reinvigorate the response to this phenomenon and to enhance transparency and public trust in EU decision-making. As recalled earlier this month by the European Ombudsman, Emily O’Reilly, ‘the public’s right to an administration of the highest standards takes on a role of utmost importance ahead of a global economic crisis’.

A fragmentary legal framework

EU primary law contains provisions on which to erect a solid corpus of rules to mitigate the risks stemming from the use of the revolving door. Article 298 TFEU sets out that the institutions, bodies, offices and agencies of the EU, in carrying out their missions, shall have the support of an ‘open, efficient and independent European administration’, and instructs the European Parliament and the Council to establish provisions to that end. Article 339 TFEU imposes a duty of professional secrecy on the members of the institutions of the EU, the members of committees, the officials and other servants of the EU, even after their duties have ceased. For Commission members, Article 245 TFEU sets out a duty of integrity and discretion as regards the acceptance, after they have ceased to hold office, of certain appointments or benefits. Moreover, the risks posed by revolving doors may be contrary to the requirements of impartiality and fairness stemming from the right to good administration under Article 41 of the Charter. The fact that measures to fight this matter may restrict the fundamental right to engage in work and to pursue a freely chosen or accepted occupation under Article 15(1) of the Charter does not prevent their adoption, as long as these restrictions are (i) necessary to achieve a legitimate public interest and (ii) proportionate.

In spite of the clear wording of these Treaty provisions, and although post-public employment and ‘revolving door’ conflict-of-interest situations are a problem common to all EU institutions, bodies, offices and agencies, EU law still lacks a unified and comprehensive body of binding secondary legislation efficiently addressing the problem.

For EU officials, Articles 16 and 17 of the EU Staff Regulations merely set out some basic principles regarding staff leaving the institutions, including provisions on the prevention of conflicts of interest. Article 16 governs the situations in which former staff have to inform an institution if they plan to take up a job within two years after leaving the EU civil service, and enables the EU institution to turn down a former official’s request to take a specific job if it considers that restrictions are not sufficient to protect the interests of the institutions. EU institutions must also prohibit their former senior officials, for the 12 months after leaving the service, from lobbying the institution’s staff. Article 17 makes clear that, after leaving the service, officials continue to be bound by the prohibition to disclose information received in the line of duty.

Moreover, both the European Parliament and the European Commission have put in place their own codes of conduct for staff, providing guidance on the application of Articles 16 and 17 of the Staff Regulations and setting out additional requirements. These are mainly the Code of Conduct for officials and other servants of the European Parliament of 7 July 2008 and Commission Decision of 29 June 2018 on outside activities and assignments and on occupational activities after leaving the service. The latter establishes, for example, that senior officials are prohibited from engaging in lobbying or other advocacy vis-à-vis the Commission for 12 months after leaving office, on matters for which they were responsible during the last three years in the service.

These rules also apply to the staff of EU agencies. Furthermore, some of them have developed their own policies and procedures for management of post-employment conflicts of interest (see for example the European Food Safety Authority, EFSA). Blocking the revolving door is especially necessary in EU agencies because of their reliance on temporary and contract staff. Another specific feature of agencies is that members of management boards, external members of boards of appeal, and experts are not bound by the Staff Regulations, which limits enforcement of post-employment obligations upon them. Some agencies, such as the European Securities and Markets Agency (ESMA) have tackled this problem through internal rules extending post-employment obligations to non-staff members.

In addition to these staff-related provisions, both the European Parliament and the Commission have adopted rules regarding their own (former) members. Article 6 of the Code of Conduct for Members of the European Parliament (MEPs) sets out that any former MEP who engages in professional lobbying or interest representation directly linked to the EU decision-making process should inform the European Parliament thereof and may not benefit from the facilities granted to former MEPs. The new Code of Conduct for the Members of the European Commission (which came into force in February 2018 and replaced the Code of Conduct of 2011) limits the activities of former Commissioners for the first two years after ending their term (three years in the case of former Commission Presidents). If the Commission concludes that the professional activity to be undertaken is related to the former Commissioner’s portfolio, he or she will be barred from engaging in the activity at hand until an independent ethics committee settles the issue.

A defective enforcement system

It seems that this fragmentary legal machinery is defectively enforced. According to a Report by Transparency International EU, in early 2017 more than 50% of ex-Commissioners and 30% of ex-MEPs who had left politics were working for organisations registered with the EU Transparency Register. A persistent obstacle within the Commission and the Parliament is the lack of an independent external body that can enforce conflict of interest rules, as in both cases enforcement is undertaken by internal committees (the Independent Ethical Committee at the Commission, and the Advisory Committee on the Conduct of MEPs at the Parliament).

On 30 March 2017, the European Parliament adopted a Report on transparency, accountability and integrity in the EU institutions, calling on all EU institutions to strengthen the fight against revolving door moves by: (i) implementing Article 16(3) of the Staff Regulations through annual publication of information about senior officials who have left the EU administration, as well as a list of conflicts of interest, (ii) defining clear cooling-off periods, and (iii) attributing the decisions on former institution members and senior officials to an authority appointed as independently as possible of those affected by its decisions and made up of independent experts from outside the concerned institution.

As regards EU agencies, in 2012 the European Court of Auditors (ECA) issued a Report identifying a number of shortcomings in the policies and procedures for the management of revolving door situations in the European Aviation Safety Agency (EASA), the European Chemicals Agency (ECHA), the European Medicines Agency (EMA), and the EFSA. The ECA Report found a general failure by these agencies to perform a thorough assessment of post-employment cases, in order to anticipate and prevent revolving doors conflict of interest situations. A recent broader Study on EU Agencies published by the European Parliament shows that there had been no significant improvements in practice by the end of 2019, although some agencies had already adopted new rules to that end.

On 16 January 2020, the European Parliament adopted a Resolution on institutions and bodies of the Economic and Monitoring Union (EMU) containing a set of recommendations to prevent post-public employment conflicts of interest. The Resolution stressed the need for a unified legal framework to efficiently address revolving door issues and called on the ECA to undertake a comprehensive analysis of the approach of bodies and agencies in the EMU regarding the management of this kind of situation and to identify best practices. It also called on the Commission to assess whether it is appropriate that the EU agencies concerned decide for themselves on the enforcement of the relevant rules.

The role of the EU Ombudsman

The shortcomings in the current enforcement mechanisms of revolving door rules make the actions of the EU Ombudsman in this field all the more relevant. Since taking up office in 2013, EU Ombudsman Emily O’Reilly, has increasingly been active in the area, in particular since the case of former Commission President José Manuel Barroso, who was appointed as non-executive chairman of Goldman Sachs International in 2015. In accordance with her role as guardian of good administration in the EU, the EU Ombudsman has started a campaign to push for tightening provisions on revolving doors, advocating for the introduction of longer ‘cooling-off periods’, and has carried out several inquiries into potentially problematic revolving door cases.

Between 2017 and 2019, the EU Ombudsman carried out an extensive Strategic Inquiry (OI/3/2017/NF) on how Article 16 of the Staff Regulations was being applied to fight revolving door moves in a range of EU institutions, bodies and agencies. One of the results of this assessment was the Report of 28 January 2019 on the publication of information on former senior staff so as to enforce the one-year lobbying and advocacy ban. This Report signalled that while much work had been done, there was still room for a more ambitious and harmonised approach in terms of how the EU institutions meet their obligations, and contained a set of recommendations aiming at enhanced transparency regarding the enforcement of Article 16 of the Staff Regulations. Likewise, the Ombudsman concluded that a more robust approach should be taken by the Commission in cases involving senior officials.

The EBA’s Executive Director case

Earlier this month (on 7 May 2020), the European Ombudsman handed down its decision in 2168/2019/KR, a complaint case concerning the alleged failure of the European Banking Authority (EBA) to mitigate the risks of conflicts of interest when it approved, with restrictions, the request from its Executive Director to ‘go through the revolving door’ to become Chief Executive Officer (CEO) of the Association for Financial Markets in Europe (AFME), a lobby organisation for the financial industry. The complaint was brought before the Ombudsman by Change Finance, a coalition of civil society groups.

Upon an inquiry, the European Ombudsman concluded that EBA had committed acts of maladministration on two accounts. Firstly, because it should not have allowed its former Executive Director to become CEO of a financial lobby association. Secondly, because it did not immediately put in place sufficient internal safeguards to protect its confidential information when the planned move became clear.

The European Ombudsman noted in particular that the EBA was created in the wake of the 2008 financial crash, ‘a crisis, in part, defined by regulatory failure and so-called “regulatory capture” by the financial industry’, and that ‘in allowing its former Executive Director to join a major financial lobby association, the EBA risked perpetuating one of the core regulatory problems it was created to fix’. According to the Ombudsman, ‘public authorities cannot allow themselves to become proxy recruiters for the industries they are regulating’.

The Ombudsman therefore issued a recommendation to the EBA on how it should deal with this kind of situation. Firstly, the EBA should, where necessary in future, invoke the option of forbidding its senior staff from taking up certain positions after their term-of-office, for a limited reasonable period, for example two years. Secondly, the EBA should set out criteria clarifying when it will forbid such moves in future, so that applicants for senior staff positions at EBA are duly informed when they apply. Thirdly, the Ombudsman recommends that EBA put in place internal procedures so that once it is known that a member of its staff is moving to another job, their access to confidential information is cut off with immediate effect.

This decision comes at an arguably suitable time. A reform of the post-employment legal framework in accordance with the experience gained during the past few years and building on the Ombudsman recommendations would be in line with the Political Guidelines of the Commission 2019-2024. In fact, the Commission committed to undertake this review at the European Parliament’s plenary debate of 24 October 2019. It remains to be seen whether the EBA case has a role in invigorating this process.

 

Dolores Utrilla is Assistant Editor at EU Law Live and Associate Professor at the University of Castilla-La Mancha.

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