The German Lobbying Register Act (the Act) became effective at the beginning of the year, aiming to bring more transparency to lobbying activities. The Act also establishes a publicly accessible Lobbying Register with the intention of increasing public confidence in the democratic process. The Act has received much public attention, with commentators applauding the initiative for bringing more light into German lobbying activities, as well criticising the Act for falling short of having a real impact.
To date, the Register has nearly 5,000 entries, including nearly all 40 DAX-companies, disclosing among other things the financial expenditures and the number of persons employed for lobbying activities of the registered entities. The Act requires the update of the disclosed information on different deadlines throughout the year. With the first deadlines currently being relevant we look at the key aspects of the Act and its disclosure requirements.
A. Recap: The German Lobbying Register Act
Following a transitional period which ended on 28 February 2022, all those representing so-called ‘special interests’ towards specific actors in German politics are obliged to disclose their activities and register in the Lobbying Register.
The current Act requires the disclosure of the scope and direction of lobbying activities towards Members of the German Parliament as well as high-level members of the Federal Government. This requirement is expected to be tightened during this legislative term as stated by the governing parties in their coalition agreement. In particular, it is expected that the scope of any representation of interests via-á-vis policy advisors of federal ministries will be expanded.
I. Which lobbying activities fall within the scope of the Act?
Lobbying, or ‘representation of special interests’ is defined as establishing contact ‘for the purpose of directly or indirectly influencing the process of formulating aims or taking decisions conducted by the bodies, members, parliamentary groups, or groupings of the German Bundestag or the Federal Government.’ Any natural person, legal entity or third party, or other organization carrying out – either directly or by commission – such activity is obliged to register in the Lobbying Register. The group of targets in the Federal Government is broad and includes the ministries’ parliamentary state secretaries, state secretaries, directors-general, or deputy directors-general.
II. What information must be disclosed?
The Act requires representatives of special interests to provide a summary of the lobbying activities, information on the identity of any client for whom the representation of special interests is carried out, and information on annual financial expenditure for the lobbying activities. General information such as the representatives’ name, business category and legal form, contact details, areas of interest, and a description of their general activity is also required. In addition, more detailed information, such as an overview on legal representatives and on employees who directly carry out lobbying must be disclosed.
III. Which sanctions are to be expected?
In case a registrant does not update its entry correctly, completely or in a timely manner, the register authority can impose a fine of up to €20,000 in case of a negligent violation or up to €50,000 in case of intent. Besides financial sanctions, restrictions on participation in political activities could be imposed, including admission rights to the Bundestag, participation in public hearings or a publicly viewable violation notice in one’s entry.
In addition to the legal text of the Lobbying Register Act, the Federal Government and the Federal Parliament agreed on a code of conduct as an annex to the Act. The code defines different lobbying principles based on openness, transparency, sincerity and integrity under the Act, a significant infringement of the Code of Conduct can be published in the Register if the registry conducted an appropriate audit procedure and found such infringement by a representative of special interests.
Even if it does not constitute an administrative offence, such reference would nevertheless have potentially far-reaching consequences. Registrants could be barred from using the designation ‘registered representative of special interest,’ access permits to the buildings of the German Bundestag might not be issued and participation in public hearings might be restricted.
Representatives are obliged to refer to their register entry upon initially contacting politicians and administrative officials. A reference of non-compliance with the Code of Conduct in the entry could have a detrimental effect on the contact with policymakers, who may act more cautiously as to the scope of interest representation or even refuse the contact in general. In addition, the reputational damage that follows from such a reference is likely to be high.
B. Update Obligations of the Act – Overview
As the Act has already been effective for some months, the focus is now shifting from the initial registration towards the updating obligations. These can be divided into four categories of update: (1) ad-hoc; (2) end of quarter; (3) six months after the end of the fiscal year; and (4) annual.
I. The ad-hoc update
This update will mainly target professional representatives of special interests, that must update any information on the identity of their clients immediately. Necessary arrangements with the clients of interest representation should be made to ensure that relevant information is available and can be entered in the register without undue delay.
II. The end of quarter update
Currently, there is a high number of entries being updated due to the end of quarter update deadline. The Act requires the natural person, legal entity, or other organisation to update the disclosed information in case of changes no later than the end of each quarter following the occurrence of the change. In this regard, a natural person must submit an update if the name, address, or electronic contact details have been amended. Legal entities or other organisations are affected likewise if, for instance, the company name, address, legal form, details of legal representatives, or the employees carrying out the representation of specific interests have not remained the same.
III. The six months after the end of the fiscal year update
The update that is required six months after the end of the fiscal year is the second obligation that is expected to remain and, in some cases, gain increased prominence in future. This obligation requires updated information on annual financial expenses for the representation of special interests, government grants, subsidies, donations from third parties, as well as annual financial statements. As the individual fiscal year regularly corresponds with the calendar year, many half-year updates have already been made. However, looking to the exemptions in the national commercial and tax regulations, different calculations of the fiscal year also need to be considered and could lead to further updates soon.
IV. Looking forward – the annual update
Preparations around the annual update are expected to become more important from early 2023. Being the most complex update obligation, natural persons, legal entities, and other organisations must update all information disclosed in the initial registration process on an annual basis. The person’s or entities’ name, address, area of interest, number of employees or annual financial expenses for the representation of special interests must either be modified or confirmed. In this regard, the register authority is expected to send a reminder four weeks ahead of the deadline and three weeks after passing the deadline. However, it is recommended that preparations begin significantly in advance in order to prevent financial and reputational consequences.
C. A side note: the European Transparency Register
The European Transparency Register served as a model for the German Lobbying Register and came into operation in 2015. It applies to lobbying activities vis-à-vis the institutions of the European Union and requests representatives of special interests to disclose in-depth information on its lobbying activities, such as a list of contributions to public consultations or a list of meetings with the European Commission. Like the German Lobby Register, it is publicly available and aims to create more transparency concerning the representation of social and economic interests in the political sphere.
Despite having a prominent model, the German legislature did not to fully adapt the approach taken at the EU level. Unlike the EU Transparency Register, the German register asks for a less detailed set of information as it is neither requiring contributions of the registering entity to public consultations, meeting lists, or data on the precise revenue generated from each client for the representation of special interests.
D. What should companies do now?
The specific internal measures to be taken will depend on the individual circumstances of each entity. However, the following steps will likely be appropriate for most parties concerned:
- Companies should clarify which update obligations are applicable and at which time certain information needs to be submitted.
- Companies should further review their group wide business model, internal processes, and lobbying activities, for example by setting up internal questionnaires and preparing in-depth explanations of the Act’s critical parameters. This would be particularly useful for the end of the fiscal year and annual updates.
Freshfields Bruckhaus Deringer advises clients on the German Lobbying Register Act and can also conduct the entry if desired. The German Regulatory and Public Affairs group can be contacted in case of any question.
In addition, Freshfields Bruckhaus Deringer’s multinational public law practice advises on Lobbying Register-related questions in inter alia France, the United Kingdom and on European Union level.