Foreign interference in EU democracies has intensified in recent years. To counter this, the European Commission has proposed mandatory national transparency registers for third-country lobbying. In the European Parliament, this proposal has sparked political division. As negotiations on the draft legislation progress, concerns about potential negative consequences for civil society organisations have not gone away. In addition, it is unlikely that the new transparency measures would meaningfully address malign foreign interference.
Introduction
Foreign meddling in EU democracies has been ramping up, with Russia in particular ostensibly if not blatantly increasing its interference. At EU level, the ‘Qatargate’ and ‘Huaweigate’ scandals have revealed the extent to which foreign powers are willing to go to influence the European legislative process. In response, the European Commission has made defending EU democracies from foreign interference a priority on its agenda. A key legislative element of its 2023 ‘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 foreign governments. Under it, national supervisory authorities would be empowered to investigate possible non-compliance, request information from organisations and ultimately impose sanctions.
On 16 October, the European Parliament’s Internal Market Committee (IMCO) is set to vote on the ‘transparency of third-country interest representation’ proposal. The text, however, has divided centrist forces. The centre-right EPP wants to progress the initiative and appears ready to gather support thereto not only from liberal Renew members but also far-right parliamentarians. The Socialists have strongly criticised this approach as “risking to create an EU-approved template for the suppression of NGOs” with the help of the far-right. They propose broadly expanding the initiative’s scope to cover all lobbying activities, regardless of the origin of funding. The Greens and the Left reject the proposal entirely in its current form but are ready to support the Socialists’ démarche.
This policy paper offers a brief analysis of the most contentious amendments on the table. It argues that while there may be some benefits from setting minimum transparency standards for lobbying in the EU, none of the proposed measures will address foreign meddling in a meaningful way.
A European Foreign Agent Law? Three points of contention
The proposal was met with strong opposition from the outset because of concerns that it might take after a Russian-style ‘Foreign Agent Law’. When the Commission first presented the initiative in 2023, civil society organisations (CSOs) were quick to express concern that the law could have a stigmatising effect on those receiving any kind of foreign funding and could thus “damage democracy”. They fear that it could resemble the ‘foreign agent laws’ that are a staple of the authoritarian playbook. These laws such as the ones Russia and Georgia have in place, or Hungary is considering, usually place strict reporting and labelling requirements on groups in receipt of overseas funds so as to make their operations more difficult.
These concerns have divided the centrist forces on how to best design the law. The conflict lines between the Commission, the EPP, supported by Renew and potentially the far-right, and the Social Democrats, supported by the Greens and Left, run along three issues: First, the question of minimum or maximum harmonisation; second, the kind of sanctions that can be imposed; and third, the scope of application.
- Minimum or maximum harmonisation?
CSOs are concerned that, even if the law itself did not place any outsized obligations on groups receiving foreign funding, it could still have a chilling effect on civil society. In particular, they see a risk that it could serve as a vehicle for member states to ‘gold-plate’ the proposal and add stricter rules. It could also lend legitimacy to discriminatory foreign agent laws such as the Hungarian proposal.
To counter these concerns, the Commission’s initial proposal envisaged maximum harmonisation to prevent member states from ‘gold-plating’. ‘Gold-plating’ refers to the member states’ practice of extending the scope of EU directives when transposing them into national law. To prevent member states from adding stricter, potentially discriminatory obligations to the directive, the Commission proposed to set maximum standards. This prompted fears amongst MEPs that the law would force member states with higher existing transparency requirements to lower their standards for lobbying on behalf of third countries alone. This could inadvertently result in foreign-funded lobbying being subject to laxer transparency standards than lobbying financed domestically.
To avoid this, the EPP supports the introduction of minimum transparency standards but with strong safeguards. The rapporteur for the EPP, Adina Vălean, proposes minimum standards instead of maximum harmonisation. This way, member states with no or less strict rules would have to adapt their transparency register but member states with higher existing rules could keep them. To prevent any chilling effect on civil society or discriminatory application, safeguards figure in the Vălean proposal. These safeguards include explicit references to respect for fundamental rights, requirements for the Commission to assess fundamental rights risks in transposing and implementing the Directive, and the stipulation that national supervisory authorities must possess the “necessary expertise to assess compliance with this Directive fairly and impartially.”
Moreover, Vălean proposes an EU-level central access point for national transparency registers to facilitate oversight. As there are vastly different register models across member states, with several maintaining multiple registers at different levels of government, a central access point could make information easier to access and thereby more transparent. This could make it a tool for researchers and lawmakers to analyse and react to broader trends in foreign influencing within Europe.
Introducing minimum standards is likely the better route for marrying new European rules with existing transparency standards. It carries a lower risk of creating unwanted negative consequences than maximum harmonisation as it is uncertain whether member states would feel the need to resort to the EU Directive as a vehicle to put undue burdens on civil society. As Hungary has shown, they are quite capable of doing that on their own. However, the progressives in the European Parliament are not convinced this approach will be sufficient to obviate a stigmatising effect.
- Appropriate sanctions for non-compliant organisations
Another point of contention is what sanctions to impose in cases of non-compliance. Whereas the Commission has only allowed for administrative fines, not criminal sanctions, Vălean’s proposal leaves the decision on what constitutes ‘proportionate’ sanctions to member states. Progressives regard criminal sanctions as a red line, worrying out loud that if member states opt for disproportionate penalties, the threat of criminal liability for failing to register and keep records could deter some CSOs from accepting foreign funding. Vălean’s wording, however, references Ireland’s recently strengthened legislation where the circumvention or avoidance of lobby rules is now a criminal offence and sanctions include potential imprisonment of up to two years.
Criminal sanctions may not be automatically disproportionate, as progressives in Parliament claim, but could be viewed as unavoidable in countries with a high level of evasion if they are to ensure deterrence. They do, however, open the door for misuse if they are not applied fairly and impartially. In member states with rule of law issues, it will be difficult to guarantee the independence of the state-appointed supervisory authority and ensure access to independent judicial review. This issue is an example of how difficult, and with potentially unintended consequences, it is to legislate in this area when not all member states have governments committed to and enacting democratic principles. The final legal text should reflect this and spell out that the severity of sanctions should stick to what is strictly necessary to be effective.
- The scope of application
The third point is the question of the scope of application: Socialists & Democrats propose extending the proposal’s scope to cover all lobbying in the EU. They consider that legislation restricted to entities receiving third-country funding creates a risk for civil society, regardless of drafting specifics. Instead, they want to expand the law to be a general transparency act for all lobbying to avoid singling out foreign-funded organisations, and to make law-making as a whole in the EU more transparent.
This step would completely change the character of the proposal. In the Impact Assessment presented by the Commission, the total number of entities that carry out interest representation activities in the EU is estimated at around 3.5 million, most of them CSOs. With the scope of the new law being limited to groups receiving foreign funding, as few as between 712 to 1068 entities could fall within the scope of the draft directive.
Figure 1: Estimated number of entities affected, mixed source years. Source: European Commission Impact Assessment, own representation.
If the scope was extended to cover all interest representation activities in the EU, all 3.5m would be covered by the new rules. The impact would in this case be much more extensive than previously anticipated. It could impose an additional administrative burden on millions of CSOs, potentially leading to the unintended consequence of complicating their operations and adding financial pressure. With such a large number of organisations affected, it is questionable whether this would be the right avenue to introduce general EU transparency standards, without a full impact assessment and a public consultation process. The law would also no longer justifiably serve the purpose of ‘defending EU democracies’ from foreign interference but would have far-reaching general transparency goals.
This is not to say that there may not be benefits in the idea of introducing general minimum lobbying standards in the EU. The European Commission itself has often recommended member states to improve their lobbying standards in its past Rule of Law Reports. However, it would completely change the law’s nature and fail to achieve the Commission’s stated purpose. If Parliament approved this version of the text, the Commission could potentially even withdraw the whole proposal because of how much it would depart from the original.
The usefulness of a transparency register: Unlikely to be an effective defence against foreign interference
Overall, introducing minimum transparency standards for foreign lobbying can be helpful. Member states currently have vastly diverging rules on lobbying, with nine member states without any mandatory requirements on lobbying at all.1 While that may not have been a problem in the past, there is a strong case to be made for all 27 to introduce or improve rules here given the increasing foreign meddling in European law-making. In the EU’s multi-level governance structure, vulnerability to foreign influencing in one member state turns into vulnerability for all. Making such foreign influencing more transparent overall, and gather information on it across member states, could be beneficial and pave the way for further action in the future.
The problem is, however, that the proposal – in whatever form it may be adopted – will be unable to meaningfully address malign foreign interference in full. As argued above, there is a good reason for the EU to act. However, introducing minimum transparency standards, whether just for foreign funded or all lobbying, is unlikely to be an effective policy response to the problem it aims to address. Malign foreign actors rely on a variety of influencing strategies: These range from financial interference such as donations or loans to political parties to gifts and other bribes via 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. With this proposal, transparency on legal lobbying at member state level would be enhanced but this is likely only a minor aspect of foreign influencing operations. All other avenues of influence, including lobbying at the EU-level, would remain unknown and unaddressed.
At the same time, CSO concerns about their potential chilling effect are valid. At the very least, the law would add to their administrative burden and in that way make their operations more difficult. In the worst case, the law could be misused as an instrument to harass organisations that receive foreign funding. A vibrant civil society is an important component of a healthy democracy: Civil society organisations are often educators and human rights defenders; they represent minority interests and hold those in power to account. In many EU member states, civil society is already under pressure – the EU has recently recognised the shrinking civic space in Europe with its announcement of an EU Civil Society Strategy.
Conclusion: Shining a light on foreign influence – but at a risk to civil society
Common rules on the transparency of third-country interest representation can shed some light on how foreign countries influence policy-making in the EU. In this way, they would contribute to the transparency of EU law-making and have some, albeit limited, benefits for addressing malign foreign interference. These benefits, however, have to be weighed against the potential risks. Those most affected will be CSOs as they are the most common type of organisation engaged in interest representation, as part of European democracy. Their operations could be made more difficult by the new law. Given the currently vastly diverging approaches, it remains to be seen what ultimate position MEPs adopt regarding the contentious parts of the law. In any case, it is essential that the parties of the democratic centre reach a compromise among themselves. A law to defend democracy cannot be passed with the votes of anti-democratic actors.
1Bulgaria, Denmark, Estonia, Croatia, Hungary, Netherland, Portugal, Slovakia, Sweden.