Image: Dragon at the boundary of the City of London. Credit: Pixabay
Since the British voted to leave the EU, corporate lobbyists have been working to ensure any future EU-UK trade deal delivers maximum benefits and as little disruption to them as possible. Not least financial sector lobbyists, who have been lobbying hard to influence a future EU-UK trade deal that serves the sector, not just in London but across Europe as well.
Their proposals include plans that would lead to weakened regulations and specific threats to the public interest, such as ‘special courts’ that allow banks to sue governments if they adopt rules the financial sector finds unfair, such as attempts to introduce a small tax on financial transactions.
Ten years after the financial crisis, a major cause of which was the lack of robust regulations, any weakening of rules, or mechanisms that privilege corporations, would not be in the public interest. It is imperative, then, that negotiations between the EU and UK are open, so that the public can see who is influencing the talks and what is being proposed.
As our research shows, however, the early signs aren't promising. Financial sector lobbyists have been granted enormous access to key officials, but information on their discussions is being withheld by both the UK and EU. In part this mirrors the secrecy of previous trade negotiations, such as the EU-US Transatlantic Trade and Investment Partnership (TTIP), which were themselves the cause of much public concern. If anything, though, there is even less transparency today than with TTIP.
Privileged access to negotiators
Politicians and officials in both Brussels and the UK have engaged heavily with financial services lobbyists since the June 2016 referendum.
UK Brexit ministers, for example, held nearly 20% of their meetings with finance lobbyists in the early stage of the discussions (56 meetings in total, between October 2016 and June 2017). To put this into context, more meetings were held on finance with corporate lobbyists than with all of civil society, on any issue.
The lobby group, TheCityUK, for example, which has coordinated the drafting of some of the City's proposals, has had over two dozen meetings in eighteen months with Ministers and senior officials in just the Department for Exiting the EU (DExEU) and the Treasury to discuss Brexit. This access is supplemented by over a dozen meetings, dinners and receptions attended by Ministers hosted by the City of London Corporation.
Individual financial sector firms have also enjoyed significant access to government. American investment bank Goldman Sachs, for instance, has had over a dozen solo meetings with ministers and officials, including two private dinners with Chancellor Phillip Hammond, our Freedom of Information requests have revealed.
A similar picture emerges in the EU. From the beginning of 2017 till March 2018, the EU Task Force leading the negotiations, headed by Michel Barnier, had nearly 70 meetings with financial corporations or lobby associations They include three meetings with Deutsche Bank, two with BNP Paribas and other big financial corporations on the continent, as well as many big names from the City of London such as Barclays and Lloyds, and US banks like Citigroup, JP Morgan Chase, Morgan Stanley and Goldman Sachs. It also includes many powerful financial lobby groups, such as TheCityUK and the Association for Financial Markets in Europe (AFME).
Less transparent than TTIP?
Both sides of the negotiations have publicly promised that discussions on future trade deals will be transparent, so that any interested parties, not just corporate interests, can be involved and comment on proposals before decisions are taken.
As UK trade Secretary Liam Fox put it last year, negotiators do not want to get into the same position as they did with the TTIP deal between the US and EU “where a huge amount of work is done only to find the public won’t accept it.” People, he said, now take a 'much bigger interest in trade agreements' than previously. He promised that the public would be consulted.
The EU side, too, promised the Commission announced the negotiations would be conducted under “maximum transparency during the whole negotiation process”.
However, our research shows that both Westminster and Brussels are resisting formal access-to-documents requests to disclose even the most straightforward information on lobbying by the financial sector.
The Brexit departments have the worst transparency records in government. According to research by Unearthed, DExEU responded fully to just 17% of freedom of information requests in 2017 and the Department for International Trade (DIT) answered in full just 21% of requests.
Behind these figures are decisions that go against not only the government's requirement to disclose and the public's right to know, but both sides' recent commitment to transparency. Without this, we lose our ability to understand the deals that are being done behind the scenes with financial sector lobbyists.
Off the record discussions with UK government
In late 2017 Corporate Europe Observatory (CEO) filed a simple request for minutes of meetings between DExEU officials and corporations including HSBC, Rolls Royce, PWC, Barclays, CBI, BP, KPMG, Standard Life, GSK, Prudential, BT, Caterpillar and Mitsubishi. We wanted to know, and think the public has a right to know, basic details of what is being discussed in relation to Brexit.
DExEU considered this request a 'fishing expedition', decided that it had no purpose, and refused to disclose any information. Even after the request was narrowed, it refused to release any information on the grounds that it would take too long.
So, we asked for the basic records of just six meetings between DExEU and financial services companies. It turns out that in five of the six cases, no minutes were taken. And the notes from the only meeting recorded, with TheCityUK, we aren't allowed to see, because to make them public would 'set an unwanted precedent'. For 'optimal' policy development, discussions with corporations needed to be 'confidential', said DExEU. To release details of discussions with finance lobbyists 'prior to [Brexit policy] decisions being made' would damage the interests of the UK, it argued. The interests of the City, however, are quite different from wider public interests, and these can only be protected is there is public scrutiny of what is being discussed before decisions are taken.
Our work with other official UK bodies confirms the trend. The office of the UK’s Permanent Representative to the EU has rejected a straightforward request for a list of organisations with whom it has met since the referendum. Even appearing on a list of meetings could scare them off, it is argued.
EU keeping shtum
While the Brussels' team promised 'maximum transparency', it is no more open than UK authorities.
It released a list of meetings with the financial sector covering the first half of 2017, in response to a request for information, but is refusing to disclose details of what was discussed at these meetings, including any minutes, or details of what these banks, hedge funds, and other financial sector giants are lobbying for in relation to Brexit.
A cache of emails between financial sector lobbyists and the EU Taskforce, released by the latter in response to our request, shows the frequency and extent of their communication with the sector, but again, provides no meaningful information. The 186 pages of correspondence are heavily redacted, leaving only courtesies and administrative communications visible. The Taskforce has deemed that we can know how meetings are arranged, but not the substance of them.
The reason for secrecy? Besides some standard remarks on protection of ‘commercial secrets’, the core argument is that ‘public disclosure would …. risk upsetting the negotiations” and that the Commission “needs to preserve a ‘safe space’ for confidential preliminary exchanges.”
Less transparent than TTIP
What is clear from this year-long research project is that there is no willingness on the part of either Brussels, or the UK to share the content of exchanges between decision-makers and the financial sector. On the EU side this represents a major setback on transparency.
While the negotiations on the Transatlantic Trade and Investment Partnership (TTIP) between the US and the EU were not known to be transparent, reports of minutes between negotiators and the EU were released on request, albeit always edited. Edits were in the main about negotiators keeping their cards close to their chest, not about what the positions lobbyists were pushing at meetings. This includes meetings with the financial sector. During the TTIP debate a single request could lead to the disclosure of not only dozens of minutes but meeting documents as well, including position papers from different branches of industry.
In these early stages of talks over a future EU/UK trading relationship, financial sector lobbyists will have been pushing their agendas with officials on both sides and helping to shape official positions. While transparency rules do allow for exemption of information that would undermine international relations, they do not provide for the kind of blanket rejections we see here.
The stakes are potentially very high. In recent years, the financial sector has lobbied for proposals that have met stiff public opposition, including the introduction of ‘special private courts’ to settle disagreements between a state and investors. An Investment Dispute Settlement System (ISDS) could in future be used to prevent states from adopting rules on finance that are in the public interest, or lead to governments facing massive fines. Rules such as a Financial Transactions Tax (FTT), which the City has lobbied fiercely against for years. Proposals currently being put forward by lobby group UK Finance, for example, whose members include megabanks BNP Paribas, Deutsche Bank, Barclays and Lloyds, if adopted, could lead to an FTT being fought in special courts and perhaps defeated.
Should a trade agreement be negotiated under the present conditions, it would help the two sides hide the fate of controversial proposals and perhaps present them only when a final deal has been reached. Such a scenario is undemocratic. Those fences must be torn down before trade negotiations take off for real.
This article was written as part of an ongoing collaborative research on Brexit and lobbying involving CEO, SpinWatch, LobbyControl and Observatoire des multinationales, within the ENCO (European Network of Corporate Observatories) network. A longer report will be out in a few weeks.
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