5.3.1 EU Lawmaking and the Role of Interest Groups

E.U. lawmaking is a complicated and time-consuming process that involves three key players at the E.U. level, as well as individual Member States and a host of other players. Legislative initiatives at the E.U. level are generally taken by the European Commission, the executive branch of the European Union. European laws are ultimately passed by the Council of the European Union, which consists of representatives of the govemments of the Member States, and in many cases also require approval by the European Parliament, which consists of representatives of E.U. citizens. Before laws are passed, the European Commission will usually have drafted several proposals, taking into account the responses to its proposals by the Council, the Parliament, and others. After laws are passed, the Commission will often have to adopt detailed implementing measures, a complicated process in itself that involves committees consisting of Member State representatives.1

Given the potentially far-reaching impact of European legislation and the involvement of so many different players, one would expect E.U. lawmaking to be subject to interest group polities. Indeed, as Luca Enriques has argued, "[European] corporate law matters as an active and growing lawmaking enterprise, first and foremost to those involved in supplying it, and second to those who may gain or lose from new mies and therefore lobby for or against them."2 On the supply side, one of the reasons why politicians and bureaucrats at the European level might favor legislation that benefits specific interest groups is "to increase their power and prestige among such groups, possibly with a view to jobs in the private sector later on."3 With regard to those who may gain from new rules and therefore lobby for them, Enriques observes that:

Finally and importantly, in terras of those who may lose from new rules and therefore lobby against them to maintain the status quo, Enriques observes that incumbents have usually resisted attempts to harmonize areas of law in a meaningful way.5

The extent to which interest groups are able to determine the outcome of the legislative process naturally depends on the extent to which they are able to influence that process. Making unsolicited contacts with lawmakers and pressuring elected officials are particularly important channels through which interest groups may be able to influence the process.6 Such contacts may occur at the E.U. level, but also at the Member State level, with the aim of persuading national government officials to pressure E.U. officials.

Two alternative channels through which interest groups may be able to influence the legislative process are by participating in expert groups and responding to public consultations. These channels are particularly relevant for the present analysis because they generate publicly available information. From this information one can derive the positions taken by the various interest groups and get a rough sense of how these groups may have influenced the legislative process. Stated differently, the information offers an interesting opportunity to have a look behind the scenes of E.U. lawmaking.

First, consider the participation in expert groups as a channel through which interest groups may be able to influence the legislative process. Reports prepared by expert groups have long formed a basis for the European Commission's policy in the areas of company law and securities law.7 Indeed, one need only look at the relevant web sites of the European Commission to get a view of the large number of expert reports accompanying policy initiatives in these areas.8 At the base of recent policy initiatives in the area of securities law, for example, stands the Report of the Committee of Wise Men on the Regulation of the European Securities Markets,9 while the basis of policy initiatives in the area of company law is formed by the Report of the High Level Group of Company Law Experts on a Modern Regulatory Framework for Company Law in Europe.10 In keeping with this tradition, the European Commission's response to the current financial crisis is based to a large extent on the recommendations of the High-Level Group on Financial Supervision in the E.U.11 The people that make up these expert groups typically have a strong academic track record or are drawn from the relevant industry—hence the opportunity for interest group politics.

Next, consider responding to public consultations as a channel through which interest groups may be able to influence the legislative process. In 2001, the European Council encouraged the Commission "to make use of early, broad and systematic consultation with the institutions and all interested parties in the securities area, in particular strengthening its dialogue with consumers and market practitioners."12 The Commission's initiatives in the areas of securities law and company law are now frequently preceded by public consultations. These consultations usually serve the purpose of gauging where there may be a need for new laws or amendment of existing laws, or obtaining feedback on draft proposals for legislation. Of course, respondents to the consultations are free to respond in a way that reflects their interest, which does not necessarily need to be aligned with the interest of society at large. Thus, here too, an opportunity for interest group politics exists.

In sum, while involving market practitioners in the legislative process certainly has benefits (such as providing policymakers with technical, industry-specific information that is essential to drafting effective laws), it also increases the risk of interest groups influencing the process in order to achieve an outcome that favors them.13 Interestingly, the European Parliament has acknowledged this risk: in a 2002 resolution on European govemance, the Parliament explicitly stated that "consultation of interested parties with the aim of improving draft legislation can only ever supplement and can never replace the procedures and decisions of legislative bodies which possess democratie legitimacy.”14