The EU's Defence of Democracy Dilemma: The example of third country lobbying

The European Commission has made defending EU democracies from foreign interference a priority. A key legislative element in its democracy agenda is the ‘Directive on Transparency of Interest Representation on behalf of Third Countries’. The proposed directive would establish transparency registers in each member states for entities lobbying on behalf of third country governments. The initiative, however, is unlikely to substantially address the issue of foreign meddling. This brief argues that the directive as its stands is emblematic of the Commission’s structural limitations when it comes to an effective defence of European democracy.

Introduction

As geopolitical tensions mount, hostile foreign governments have been ramping up their efforts to interfere in the democratic decision-making process within EU countries. Foreign governments employ a wide range of strategies to influence that process, including cyberattacks, disinformation campaigns, covert funding of political parties, lobbying, and bribery.

The European Commission has made defending EU democracies from foreign interference a priority on its democracy agenda. A key legislative element of its ‘Defence of Democracy package’ is the ‘directive on transparency of interest representation on behalf of third countries’. The proposed directive would establish harmonised transparency registers in all 27 member states for entities lobbying on behalf of third country governments.

From the moment of its announcement, the initiative has met strong criticism from civil society organizations (CSOs) that fear the legislation could be abused as a Russian-style ‘Foreign Agent Law’ to delegitimize their work. It is now the topic of controversial  discussions in the European Parliament, adding to seething tension between the pro-European political groups. A plenary vote initially planned for mid-September has been postponed to allow for additional deliberation on the proposal.

This policy brief examines how the proposed directive measures up to its stated aim of defending European democracy. It argues that the initiative is not an effective response to the problems it aims to address. This is largely due to the Commission’s structural limitations when it comes to defending European democracy effectively. This initiative is emblematic in that regard – so much so that lawmakers will need to weigh carefully the risks and potential benefits of the reform put before them.

Overview of the Defence of Democracy Package

“Autocrats are targeting our own countries”, Ursula von der Leyen said in her 2022 State of the Union speech. She announced she would present a ‘Defence of Democracy package’ to “better shield ourselves from malign interference”. The initiative would aim to uncover covert foreign influence and shady funding. The main legislative piece of that  package is a directive on transparency of interest representation on behalf of third countries. This aims to introduce harmonized transparency rules for lobbying activities funded by third countries in member states.

The initiative was initially planned to be published in the second quarter of 2023, without any impact assessment. The Commission’s call for evidence in February 2023, however, was met with intense criticism by civil society organisations and compared to a ‘foreign agent law’, a typical instrument authoritarian regimes use to stigmatise and oppress civil society organisations that receive foreign funding.[1] Even the United Nations High Commissioner for Human Rights sent a letter to Ursula von der Leyen to express concerns. Publication was then postponed and an impact assessment conducted.

The Commission ultimately presented its proposal in December 2023. The new law would require member states to establish new or modify existing national transparency registers for persons that lobby on behalf of third country governments or linked entities. Such lobbyists would need to keep a record of their activities for four years. Some data would be made publicly available, such as the country sponsoring the lobbying activities, their main goals and the annual amounts received.

The scope of the proposal covers all kinds of entities that engage in interest representation to influence the democratic process in the EU: lobbyists and public relations firms, think tanks, research institutes, consultancies and civil society organisations. Entities that receive funding from third countries but are not connected to the countries’ governments would not be covered by the law.

The Commission has given repeated assurances that the law  is, in fact, “not a foreign agent law”, since it does not ban or prohibit any activities and thus lacks the typical, oppressive characteristics of such a law. Criticism from CSOs and academic institutions that  it could even so have a chilling effect has continued – many CSOs still label some provisions of the law too vague. It could also disproportionately place additional administrative burdens and liability risks on CSOs: The Commission estimates that there are about 3.56 million interest representation providers in the EU – 3.48m of which are CSOs. Even if they do not ultimately fall within the scope of the law, the often short-staffed CSOs will incur familiarization costs. If they receive funding from outside the EU, they will have to ensure that that funding is not connected to a third country government – or risk sanctions.

The proposal has also aroused controversy in the European Parliament, where it is now before the Committee on Internal Market and Consumer Protection. The Committee was set to vote on the proposal on 15 July 2025, but this has been pushed back to September due to continued disagreement between the political groups: The Greens and the Left reject the proposal entirely but support the Socialists’ suggestion of expanding its scope to cover all lobbying activities, regardless of the origin of any funding. The EPP and Renew consider this broad extension unfeasible. Against this backdrop, Socialists and Greens are warning the EPP against passing the proposal by relying on votes from the far-right groups in the Parliament – adding to tensions already running high within the pro-European von der Leyen coalition over the EPP repeatedly seeking to win majorities by combining with far-right forces.

With centrist lawmakers split down the middle on their support for the proposal, it is useful to take a closer look at what the initiative is intended to achieve.

The two problems the initiative is supposed to address and why it is unlikely to solve either

In its proposal and related communication, the Commission puts forward two problems the directive is intended to address: First, improve the functioning of the internal market for entities that lobby on behalf of third countries, create a level playing field across member states and prevent regulatory arbitrage in this area. This is the initiative's main aim. Second, it is supposed to shed light on the currently unknown magnitude, trends and actors of third country lobbying[2] in the EU. While it is unlikely that the first problem represents a significant hindrance for the proper functioning of the internal market, the second one is unlikely to be significantly dealt with by the proposed legislation.

Harmonising the non-existent internal market for cross-border lobbying on behalf of
third country governments

There are currently 18 member states[3]  with some kind of rules on lobbying. Most of these also have transparency registers. Nine member states[4] have no legal restrictions on lobbying. No member state[5] has rules specifically on third country lobbying in place. In its impact assessment, the Commission states that its main aim is to introduce common transparency standards to improve the functioning of the internal market for interest representation activities so as to create a level playing field and reduce unnecessary costs for lobbying firms acting on behalf of third countries. This is also supposed to prevent regulatory arbitrage and forum shopping that different legal requirements in member states can create.

This reasoning can be broken down into three separate issues. First, the argument that interest representation firms, in so far as they represent third country governments, are prevented from providing their services across borders because of the administrative costs of having to comply with different transparency regimes. This is not very convincing. While there is no data on how many entities provide cross-border interest representation services to third country governments, the number is likely rather low.[6] Lobbying is a highly context-specific activity that requires language skills, deep knowledge of a political system and policy framework and personal contacts. The latter are to all extents and purposes much more fundamental hindrances to lobbying across borders than different transparency requirements. In addition, the new law would only harmonise requirements for services provided to third county governments. For other clients, lobbying firms would still have to comply with a variety of different transparency requirements.

As for the second argument, the issue of forum shopping or regulatory arbitrage does not appear very plausible either. In this regard, the Commission cites concerns that lobbying activities could move to less regulated member states and present an opportunity for third country actors to evade transparency requirements. This scenario appears fairly implausible. A third country government would normally have a specific goal in mind such as influencing a new piece of legislation. This makes forum shopping unlikely. If a third country government wants to influence a new environmental law in Germany in a way that benefits its own industry, say, it will not shift its activities to Denmark because of supposedly lower transparency standards there.

Forum shopping appears to be a realistic concern only where a third country aims to influence EU policy making through national representatives. Here, a member state with lower transparency standards is a potentially cheap and attractive avenue to influence EU policies. Nevertheless, factors like the political weight, cultural ties and political leaning of a member state's government would still make the transparency requirements just one factor – and not the decisive one in all probability – when a third country government decides where to focus its lobbying activities.

To sum up: Neither reducing the administrative burden of entities that provide interest representation services for third country governments nor preventing forum shopping is a plausible justification for this initiative.

Covert foreign influencing of democratic processes
 

The second problem the initiative is supposed to address is that the magnitude, trends and actors of third country lobbying[7] in the EU are unknown. At the same time, it is suspected that third country governments increasingly rely on lobbying to promote their interests. There has, for example, been a significant increase in the number of registrants under the US Foreign Agents Act in recent years. There are also studies indicating that authoritarian regimes, most notably China and Russia, have stepped up their efforts to influence democracies around the world, especially in the last ten years.

Notably, this malign interference and efforts to win noxious influence rely on a variety of strategies: These range from financial interference such as donations or loans to political parties to gifts and other bribes; to information manipulation such as online advertising and disinformation campaigns; to cyberattacks. They tend to be covert in nature, often even illegal. Malign foreign regimes frequently rely on straw donors and shell companies to advance their interests covertly. One study found more than 200 cases of ‘malign finance’[8] in the EU between 2010 and 2022.  Russia, China and other regional powers such as the United Arab Emirates and Iran were behind most cases.

While the proposal on the table is not limited to lobbying by malign foreign governments, it is arguably in the area of hostile, covert foreign influencing campaigns where more transparency is needed. Even though the covert nature of malign foreign interference makes it impossible to know its exact nature and extent, the Commission proposal would in any case address just one aspect of the issue at hand. It would only increase transparency on legal lobbying at member state level, leaving all other avenues of influence unaddressed, thereby curtailing its usefulness in addressing the broader problem. This usefulness is further limited by the obvious fact that malign foreign actors keep their activities hidden from public scrutiny and there is thus a lot of scope for evasion.

Foreign influencing is undoubtedly an issue for open democratic societies, especially in a multi-level governance system such as the EU that offers malign actors plenty of access opportunities. More transparency in third country lobbying, and more information on the issue, could be useful for future initiatives. Most aspects of foreign malign interference, however, would remain in the dark.

The initiative is emblematic of the EU’s structural struggle to defend European democracy

This initiative and its shortcomings are emblematic of the structural limitations of the EU in trying to defend European democracy against the background of rising geo-political tensions and increasing authoritarianism, both within and outside the EU. In the EU’s closely tied multi-level governance structure, any vulnerability to foreign influencing in one member state turns into a vulnerability for all. That is why the EU is right to act. Yet, as an actor it is not ideally placed to defend European democracies. There are several structural limitations that make it difficult to formulate and enforce suitable policy responses to issues such as covert third country lobbying.

The EU’s limited competence in the area of democracy
 

The rule of law, fundamental rights and democracy are the EU’s foundational values laid down in Article 2 of the Treaty on European Union. These foundational values, however, come with very limited legislative competence, which restricts EU policymakers’ capacity to address democracy issues in member states. In addition, member states are generally hesitant to support EU measures that affect what they perceive as matters of national sovereignty.

That is why the Commission has relied on Article 114 of the Treaty on the Functioning of the European Union (TFEU) for some of the legislative items[9]  on its democracy agenda; this is the general legal basis for harmonising the internal market. When using Article 114 TFEU, however, the Commission has to focus on issues where the risks to EU democracy and the functioning of the internal market overlap. Depending on how much this overlap captures, that often makes it difficult to formulate fitting policy responses from a democracy perspective. In this case for example, the provision of interest representation services for third country governments is an element of the internal market and can thus be legislated based on Article 114 TFEU, but captures only a small aspect of foreign interference.

The Commission’s security lens and its focus on external threats
 

The EU’s approach to democracy has shifted in recent years. During the Juncker era, it focused on making the EU institutions more democratic. Ursula von der Leyen has instead made how to defend EU democracies from foreign malign interference her priority. Russia’s invasion of Ukraine in 2022 made this ‘securitising’ of democracy appear even more urgent.

From a security perspective, the openness of democratic societies is a vulnerability that can be exploited by foreign influence operations. This has become apparent as the global political landscape has become more adversarial. Yet from a democracy perspective, not all existing challenges can reasonably be subsumed under the security agenda.

In the present proposal, the focus on third country governments risks creating loopholes for such bodies to circumvent the transparency requirements by working covertly via shell entities within the EU. It is also questionable whether this insider/outsider logic is a useful representation of the political realities in the EU: There are many actors within the EU that have interests aligned with that of third country governments and that seek to covertly influence democratic processes in other member states.[10] The EU’s security focus thus risks overlooking democracy issues that fall outside this framing.

The danger of abuse by illiberal actors within the EU
 

One of the strongest criticisms of the proposal has been that  it could stigmatise civil society organisations (CSOs). As some member states have in recent years targeted such organisations through legislation and made their operations  more difficult, there is concern that some member states could misuse the proposal. They could ‘gold-plate’ the law in a way that would stigmatise CSOs or indeed make it more difficult for them to operate. ‘Gold-plating’ refers to the practice of extending the scope of EU directives when transposing them into national law. With the current proposal, member states could require additional data from registrants – and potentially misuse that data. There are also concerns that some member states would be unable to guarantee the independence of the national supervisory authority that enforces the directive – opening the way for potential abuse.

This concern presents a general EU predicament as an actor to defend democracy: To ‘defend’ democratic principles from external threats, it relies on the cooperation of member states and their enforcement of measures. This is unlikely to work when there are illiberal actors in power in some member states that have a vastly different view of what democratic principles are and from whom they need to be defended. In the worst case, a legislative tool intended to protect democracy can be misused by illiberal actors to unduly limit fundamental freedoms and political participation rights.

The Commission tried to build in safeguards against potential misuse in its proposal. To prevent ‘gold-plating’, the proposed directive requires full harmonisation of transparency requirements. Unlike when a directive sets minimum standards, this would mean that member states could not add more extensive transparency requirements when transposing the directive into national law. However, for safeguards to work, a country needs to exhibit a reliable adherence to democratic principles and the rule of law. For example, the proposal requires member states to name an independent supervisory authority to enforce the directive – but ensuring this independence would be difficult in a political system where rule of law and democracy principles are already being undermined.

In addition, full harmonisation comes with its own downsides. Some member states[11] already have stricter rules for lobbying in place. If member states are not allowed to introduce or maintain any rules diverging from the directive for lobbying on behalf of third country governments, this could create a situation where lobbying for external governments is subject to lower transparency standards than internal lobbying.

Continuing unwillingness to reform at EU level
 

Another factor that inhibits the EU’s ability to defend its democracies is its unwillingness to undertake reform at EU level. Policymaking at EU level is uniquely attractive for third country governments to lobby because of its broad impact. In addition, a lot of the policy areas that third country governments have an interest in such as trade, climate and tech are decided at the European level. That makes the EU level a prominent target for influencing campaigns.

The 'Qatargate' and 'Huaweigate' scandals are vivid examples of this. In the ‘Qatargate’ scandal in 2022, MEPs appear to have accepted money or gifts in exchange for promoting the Qatari government’s interest in EU policies. More recently, 'Huaweigate' has brought to light how the Chinese technology company apparently bribed law-makers in the European Parliament in an attempt to keep their market access in Europe.

The need for ‘defence’ at EU level is apparent – not only because of these corruption scandals but also because EU institutions have a reputation for lacking commitment to transparency and other democratic principles when it comes to their own affairs. And yet, the Commission‘s Defence of Democracy package only targets lobbying activities at national level. Some MEPs requested the Commission to fast-track a review of the EU’s own transparency register to address loopholes for non-registered lobbyists and diplomatic staff. The EU’s transparency register, in contrast to the Commission proposal for the national level equivalent, is generally voluntary for interest representatives.[12]

Von der Leyen, in her response, referred to the register’s scheduled review for 2025. She stressed that the register was not designed to address criminal acts such as bribery or fraud in any case. Other reform steps in response to the foreign interference scandals have also stalled: While the European Parliament took some steps to tighten its internal rules of procedure, one of the more significant reforms proposed has not yet been implemented: In April 2024, the European Parliament approved the creation of a new EU ethics body after decades of debate. The ethics body would be an interinstitutional body for independently enforcing the ethics and integrity rules of participating EU institutions.[13] Its creation, however, has stalled because the EPP sided with far-right groups to reject the necessary update to the Parliament’s rules of procedure.

This reluctance poses a serious problem: if the EU wants to be perceived as a credible actor when it promotes good governance principles vis-à-vis third countries and member states, its own transparency standards should at the very least not be lower than in member states. And this is all the more so because the EU level of governance is particularly vulnerable to interference.

Conclusion

In a globalised world with increasingly diverging interests, foreign powers have an interest in influencing European policies. In the EU’s tight multi-level governance structure, vulnerability to foreign influencing in one member state turns into vulnerability for all. That is why the EU is right to act. But the proposed directive is unikely to be an effective policy response for the problem it aims to address. This is largely because of the Commission’s structural difficulties in defending European democracy effectively. This initiative is emblematic of these drawbacks.

Ultimately, when deciding on the proposal on the table, EU policymakers will have to gauge whether the potential benefits outweigh the potential risks. Its main benefit would be greater transparency in third country lobbying and more insight into the trends and actors in this field. It could make the law-making process and any role of foreign interests therein more visible to citizens. Other foreign interference strategies, however, would remain unaffected and unknown. At the same time, there is a risk that the law could add to the administrative burden of CSOs and be misused to stigmatise their work. It could also feed into a political climate of distrust towards CSOs – EPP lawmakers recently accused the Commission of paying NGOs to lobby other institutions on its behalf – and further drive a wedge between the centrist groups in the European Parliament.

Making lobbying on behalf of third country governments more transparent is one step towards ensuring the integrity of democratic processes in the EU. To defend European democracy more effectively, however, the EU should pursue a more comprehensive approach that includes reforms at EU level and both, internal and external threats.

_{Photo: CC Asif Mohomed, Source: Unsplash}