Can Europe Make It?: Analysis

Behind closed doors: secret deals in the Council of the EU

Important legislative measures are blocked or delayed indefinitely by member states able to hide behind a veil of secrecy.

Juliet Ferguson
7 December 2020, 4.20pm
Ursula von der Leyen, President of the European Commission saluting Antonio Costa, Prime Minister of Portugal. January, 2020.
Nicolas Economou/PA. All rights reserved.

“Blame Brussels.” This familiar response from politicians can be heard all over Europe, with policy-makers from Sweden to Poland, from Germany to Greece, shifting responsibility for unpopular or controversial legislation to a faceless, decision-making body stifled by bureaucracy. The UK found so much to “Blame Brussels” for, that in 2016 the country made the decision to leave the EU altogether.

When pointing their accusing finger at the ‘EU’ what many people don‘t realise is that the politicians are actually pointing at themselves: the Council of the EU, the EU's main legislative body is comprised of representatives from the now 27 Member States. It is responsible – often but not always together with the European Parliament – for all law-making within the European Union.

Investigate Europe (IE) has spent recent months looking into the workings of the Council of the EU, Europe's most powerful and secretive legislative body, and finding that governments often (mis)use their power to indefinitely delay important initiatives.

The Council of the EU — also known as the Council of Ministers — is the least transparent element in the political machinery of the EU. Nearly all meetings happen behind closed doors and the Council’s default position appears to be one of secrecy — “an almost automatic stamping of ‘limité’ on the documents,” according to European Ombudsman Emily O’Reilly, who spoke with IE of her concerns about the lack of transparency. ‘Limité’ denotes a document that is for internal distribution only. It is not a classification level, although it is often perceived as such.

There have been many calls and recommendations — not least from the European Ombudsman — to improve the transparency of the legislative process over the years. These recommendations have especially asked that the positions taken by EU member states be recorded.

Call for more transparency

‘The Council of the EU — through practices that inhibit the scrutiny of draft EU legislation – undermines citizens’ right to hold their elected representatives to account.’ This was the conclusion of Emily O’Reilly’s detailed 2018 inquiry into the lack of transparency in the Council.

As O’Reilly explained to Investigate Europe, “If you don’t know that your country was directly involved in making a decision about something which may not be popular back home, then it can be easy for government ministers to deflect attention from their active participation and acceptance of a particular law and talk about the famous faceless bureaucrat.”

The report echoed criticisms made a year earlier by the Association of the EU Committees of the National Parliaments (Cosac). “If our citizens don’t have access to what is going on in their government, how can they possibly cast an informed vote?” asked the Dutch Cosac-delegation, who authored the paper 'Opening up closed doors: Making the EU more transparent for its citizens' calling for greater legislative transparency in the Council.

Cosac called on the Council to adopt four recommendations that would facilitate this, notably: “a comprehensive agenda must be distributed for each meeting in which legislation is discussed. Furthermore, the minutes of the meetings must provide details on the files discussed, the points of discussion, submissions made by the Member States and any voting results, either formal or interim/informal, even if no progress was made.”

The European Parliament and the European Court of Justice, along with civil society organisations such as Transparency International, have joined this call for more openness. But in spite of broad support for full legislative transparency, national governments (for it is the national governments that can make this change) have yet to improve the openness of Council processes.

They did not even respond to the letters from O’Reilly, Cosac and the resolution of the European Parliament, thus demonstrating both the weakness and arrogance of the legislators who hide behind this veil of diplomacy.

‘Stuck’ in Council

The European Parliament’s legislative database shows the status of legislative files as they progress towards becoming law. As of October, there were 30 draft laws that have not made any progress in three or more years, and have become ‘stuck in Council’. Meanwhile the commission has withdrawn 16 of them. Of the rest, member states have been unable to reach a compromise that would allow them to progress. Ironically, one such proposed law, the recast of Regulation (EC) No 1049/2001 — currently ‘stuck’ in Council — is the revision of the EU law on access to documents. It aims to enhance transparency and accountability by promoting good administrative practice.

Ironically, one such proposed law, the recast of Regulation (EC) No 1049/2001 — currently ‘stuck’ in Council — is the revision of the EU law on access to documents.

There is no time frame on which the Council is obliged to make a decision on proposed legislation, and presidencies only put proposals to a vote when they can expect a sufficient qualified majority: 65% of the represented population and 15 Member States. At the same time, a vote on the behalf of 35% of the population or 13 governments is sufficient to block new laws.

Because of this lack of transparency, citizens, journalists and lobbyists don’t know which governments are blocking an issue and so can‘t influence it. There is hardly any pressure on the governments that make up the blocking minority.

At the same time, big lobby groups have the capacity to gather information about what happens in the Council beyond what is available in public documents. And for big lobby groups that want to stop or water-down proposals they don’t like, the blocking minority is the perfect instrument, sources tell IE.

“The secrecy in the council means that there is little or no pressure on individual EU governments, which allow them to put off difficult decisions,” says Emily O’Reilly, giving the recent example of a French environmental NGO which was denied access to member states’ positions on an issue regarding pesticides and bees.

Of the 30 proposals currently ‘stuck’, here are a few that IE believes merit further examination.

Country by country reporting

International companies such as Google, Facebook, Amazon and Apple register their profits in countries such as Ireland, where tax rates are particularly low. They do this despite most of their turnover coming from elsewhere. Although perfectly legal, the EU Commission says such aggressive tax planning costs EU countries up to €70bn a year in lost tax revenue.

For four years, EU governments have been negotiating a draft directive — public Country-by-Country Reporting (pPCbCR) — to make this tax avoidance more visible by distinguishing which activities relate to a specific country.

After making swift progress (adoption of the proposal by the European Commission in 2016, and approval by the European Parliament in 2017), it arrived in the Council, where it was blocked by several states and its progress has ground to a halt.

It has been reported that Germany was the leader of the blocking minority, because the German Minister of Economics sided with the transnational companies arguing that they would lose competitiveness due to the forced publication of alleged business secrets. But for years, the other blocking member states were unknown.

That only changed in October 2019, when German Green MEP Sven Giegold managed to get hold of information that had, until then (and in-line with Council practices) been a well-kept secret: the countries that were blocking the law.

Some of the names came as no surprise: Ireland, Luxembourg, Hungary, the Czech Republic, Malta and Cyprus have rules that attract multinational companies looking to shrink their tax bill. What was a surprise was the appearance of Sweden and Portugal, two countries with Social Democratic governments that had publicly promised to fight tax avoidance.

Investigate Europe wrote about the list in November 2019. Sweden argued that the law about tax transparency should be adopted in the same way as tax law — with unanimity, although IE can show that the Swedish finance minister had opposed PCbCR before the actual legal proposal, thus before the voting procedure was known. But the reaction from Lisbon was less clear. In a brief written statement sent in response to questions from IE, the Portuguese Ministry of Foreign Affairs stated: “in the context of this discussion, Portugal has taken a stance of attentive observation of the arguments of member states and the Commission, and there has been no position taken so far, nor any matter to which it has been opposed.”

But in practice, this ‘attentive observation’ resulted in opposing the draft law in the Council negotiations. This had been going on for over two years, while at the same time the Portuguese government was publicly proclaiming that “the increasing sophistication and globalisation of tax evasion and avoidance mechanisms make greater European and international cooperation indispensable.”

And not only that, the Portuguese Government had promised parliamentarians “to fight for greater tax justice on a European scale, combating the erosion of tax bases between different states, tax evasion and unfair competition.”

For Ana Gomes, a Portuguese former Socialist MEP, there was a "total contradiction between what was said in the government’s programme and the country’s position in the Council. Either there’s total political insensitivity, or it’s worse... This shows how a fundamental political issue is dealt with by leaving the worst powers to decide."

According to German MEP Sven Giegold, Portugal too seems to advocate unanimous approval of the pCbCR directive — an unrealistic goal, given the position of countries such as Ireland and Luxembourg. “With its legal concerns, the Portuguese government is protecting tax evaders,” he stated. “The concerns expressed about the legal basis are in fact killing the Commission proposal.

The unanimity of EU Member States for public tax transparency for large companies will never be achieved, and is not necessary. For banks, the EU has already introduced public tax transparency on a country-by-country basis under the qualified majority voting procedure. This transparency has been working for years and has not given rise to any legal problems," added Giegold.

It was only after IE questioned Portugal's position that the government changed its policy and the legal doubts were overcome. Until then, there had been no national debate about the issue, as the Portuguese government's position in the Council was not known.

In November last year, Portugal voted alongside the countries defending the directive, but the directive did not pass, and is still “stuck in the council”.

"To the question of principle, there is also a problem of method, since this whole process of (not) taking a position by the Portuguese government and aligning with the arguments of the countries opposing the directive has occurred in an opaque manner,” said Portuguese MP Mariana Mortágua.

This was the point previously made in Emily O’Reilly’s, official report that proposed that “the Council should systematically record the identities of Member States expressing positions in preparatory bodies.” Portugal, it seems does not share this view. In its blocking of the pCbCR directive, it is not known who decided the country’s position, why, or for what purpose.

According to a survey done by IE, there is now a qualified majority for the proposal. And yet, it has not been adopted because the German government, during its position as holder of the Presidency, refused to put the vote on the agenda of the competent ministers' meeting.

It is the country with the Presidency that decides which proposals to work on or put to a vote in the Council. The future of the pCbCR directive and of corporate tax transparency will soon be in the hands of the Portuguese government, when it takes over as Council president in January.

The future of the pCbCR directive and of corporate tax transparency will soon be in the hands of the Portuguese government, when it takes over as Council president in January.

Quota for women on boards

It’s good for equality, it’s good for society and most importantly it’s good for business. So why has a directive proposing measures to promote gender balance – aiming for a minimum of 40% women as non-executive members on company boards – been languishing in the Council for eight years?

Germany and the UK, supported by some smaller countries, were the two main blocks. Their argument wasn’t against the idea of quotas – Germany recently announced a quota for women in senior management positions in listed companies – they blocked it using the common legal argument that this was not a matter for the EU, but should be decided and implemented at national-level.

All very well if this is the case, but data indicates that the EU scores low when it comes to equality in decision-making, and that the gap between member states is widening, which is why it came to be an EU issue in the first place.

With the UK gone from the EU, it would only take “two small countries” to change position for the file to pass, according to an EU diplomat. Germany isn’t budging, but what about the ‘small countries?’ It’s not made public who these countries are, but knowing this, according to Irish Green Party MEP Grace O’ Sullivan “would allow feminist groups in those Member States to organise a targeted campaign on it. This might be particularly effective in the run-up to national elections.”

The German Federal Government will not reveal who the blocking countries are. Nor will the General Secretariat of the Council provide any information about them.

This blocking minority is, the IE has gathered through diplomatic sources, an unholy alliance made-up of socially-conservative governments in Eastern Europe and liberal governments in northern Europe. The latter don't like the EU to take action in anything that concerns the labour market. But exactly which specific countries belong to the blocking minority is not public.

Liberal governments in northern Europe… don't like the EU to take action in anything that concerns the labour market.

This argument was supported by Manon Deshayes, Policy and Campaigns Assistant for the European Women's Lobby, who told us it would just take "one or two Members States to unblock the position." In a follow-up email she confirmed that at the moment the information about the countries opposing the directive seems to not be mentioned in any written statement, although it could reach the general public through the intelligence gathering work of MEPs, CSOs, etc.

Caught in the net – fishing quotas

The post-Brexit trade deal isn’t the only negotiation that’s struggling to reach an agreement regarding fishing quotas. And where fishing is concerned the stakes are high; overfishing damages biodiversity and marine ecosystems and ‘puts the long-term sustainability of EU fish stocks and the viability of fishing fleets on the line’, according to a joint report by Corporate Europe Observatory and Seas at Risk.

The reformed 2013 Common Fisheries Policy (CFP) couldn’t have been clearer: all member states should stop overfishing, and aim to achieve fish stock sustainability by 2015, or by 2020 at the latest. But member states aren’t following the scientific advice regularly setting totals for annual catches that exceed sustainable levels. And this is where a lack of transparency can really be felt, as the negotiations into how these quotas are decided are all behind closed doors in the Council.

With no record of what is said, of member states’ positions and views, nor of the people representing the member states, it is impossible for anyone to scrutinise the logic of decisions that appear to fly in the face of science.

After the environmental NGO ClientEarth filed a complaint against the Council, Emily O’Reilly started three separate inquiries into the lack of transparency in the decision-making process, one of which concerned the annual setting of fishing quotas. “The famous all-night meetings of ministers in Brussels are completely behind closed doors and yet make important decisions for the sustainability of fishing stocks and of jobs in fishing communities around Europe,” she said in the press release that accompanied the announcement of the inquiries.

When the conclusion was published, it included a call for the Council to ‘proactively make available documents’, and found that “the documents relating to the adoption of the annual TAC [Total Annual Catches] Regulation fall within the broad definition of ‘legislative documents’ in the EU rules on public access to documents, and should, accordingly, benefit from the wider access to be granted to such documents.”

Again, the Council did not follow the recommendation.

Member states aren’t following the scientific advice regularly setting totals for annual catches that exceed sustainable levels.

The rule of law

In October this year, the Council, Parliament and Commission held several trilogue meetings — tri-party negotiations where the Council and the Parliament try to merge their respective positions on the draft law into a compromise, with the Commission working as a facilitator. The task at hand was the negotiation of new EU rules on “rule of law conditionality”. This would allow EU payments to be withheld if the recipient country is found to be in breach of the rule of law. The law was drafted and proposed by the EU Commission in 2016, but for two years, the Council negotiated with no progress. Only now, with the need to decide the EU’s new seven-year budget and the recovery fund to support countries through the Covid-19 recession, has it been given a greater urgency.

After one of the trilogue meetings, one of the two parliamentarian rapporteurs, Petri Sarvamaa, held a press conference on Facebook. And the European Parliament’s budget committee sent out a press release with an update on the progress of these inter-institutional negotiations.

But for a journalist to see for themselves where the negotiations are going through the ‘four column document’ is not possible. When Investigate Europe asked the committee press secretary for the document, we were referred to the ‘access to documents website’ where this document can be requested. One such request was placed on October 21, but the documents only received on 2 December.

While everyone knows that Budapest and Warsaw have been strongly opposed to making the rule of law a condition of European funds, few – not even the best informed MEPs and commentators are aware that these were not the only ones taking this position.

Our source, who had access to the official documents of the German delegation in the Council, provided us with a document which revealed that Portugal's government claimed, from the start of the negotiations, that a mechanism linking the rule of law to the payment of funds would not be necessary.

Although Portugal never threatened to block this mechanism in the Council, it helped postpone its approval and this has had consequences: allowing the discussions to drag out (more than two years behind closed doors in the Council) has given Hungary and Poland a much stronger hand now that there is an urgent need to approve emergency aid for the Covid crisis.

According to the Polish politicians we spoke to, it seems that Hungary had found an unlikely ally in Portugal, whose negotiators were ready to support Hungary in its attempts to remove the requirements of the rule of law, as long as Hungary was ready to accept that the rescue package was needed more by southern European countries than other member states.

Interestingly, it turns out that Portugal also negotiated the rule of law with Poland. Former Polish Foreign Minister Witold Waszczykowski explained: “Sometimes the opposition accuses us of supporting only one country, Hungary, and we know that the Visegrad Group and several other countries, such as Slovenia, Latvia and Portugal, have played together with us.”

As was the case with the European tax transparency law, the Portuguese government’s position on the rule of law negotiations was not known in Portugal prior to IE’s publication.

Pushing for transparency

The Council, and indeed the European Union, are hybrid in nature. The Council is a legislative body, writing and adopting laws, but also a negotiating body between member states. This could go some way to explaining its tendency towards the culture of secrecy that is associated with international negotiations rather than the greater degree of openness associated with a democratic legislative process.

A commitment to openness is clear from Article 10,3 of the Treaty of the European Union, which links it with democratic participation: ‘Every citizen shall have the right to participate in the democratic life of the Union. Decisions shall be taken as openly and as closely as possible to the citizen.’

Maarten Hillebrandt, a post-doctoral researcher in European law at the University of Helsinki, wrote his dissertation about legislative transparency in the Council. “It’s an accessible institution,” he told us, and said that Council insiders were happy to speak, although often only confidentially. “But when it comes to showing the documents, in many cases that is more complicated,” he added.

Hillebrandt explained that, since 2001, the EU has an access-to-documents regulation. According to the law, EU institutions should, in principle, make documents accessible, with exceptions clearly defined. Institutions are also required to set up a register for these documents. But for some member states, when it became obvious what they had actually had signed up for, it came as an unpleasant surprise.

In 2017 and 2018 – the time of the Ombudsman’s report – there was a big push for increased legislative transparency in the Council. In addition, case law against the practices of the Council was starting to build-up.

During the Finnish Council Presidency in autumn 2019, changes to Council practices were discussed. A year later, under the German Presidency, some new practices were adopted, the main one being that the Council position ahead of trilogues should now always be made public. But these still fall short of demands.

When it comes to legislative transparency, the EU treaties are clear that work should be conducted ‘as openly as possible.’ And the principle of the widest possible public access has been confirmed by a growing number of court cases; challenges have come from environmental organisations and transparency advocates. Pressure for greater openness in the EU’s main legislative body, the Council is coming from many directions. A report by Transparency International, due out this week, is the most recent in a long line of calls for the Council to lift its veil of secrecy.

What happens next, under the Portuguese Presidency, is something we at Investigate Europe will be watching with interest.

Investigate Europe is a team of journalists from nine countries who jointly research topics of European relevance and publish the results across Europe. In addition to the author, Harald Schumann, Sigrid Melchior, Cécile Andzejewski, Wojciech Ciesla, Thodoris Chondrogiannos,
Ingeborg Eliassen, Maria Maggiore, Paulo Pena and Elisa Simantke worked on the research.

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