Tag Archives: European Union

Causes and Trends of Corruption Risk in Europe

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Alina Mungiu-Pippidi and Iva Parvanova just released a report on corruption in 41 European nations, EU members plus those seeking to join the EU and those that neighbor these countries. A joint publication of Bridge//Gap and LUISS, the highlights include:

  • Non-EU states (Norway, Switzerland, UK) outperform most EU members, while Turkey and Bosnia lag furthest behind.
  • Accession countries and new member states perform well on transparency indicators, sometimes better than more developed countries.
  • Oligarchization is on the rise, especially in Turkey, Cyprus and Hungary.

Packed with useful, objective information on trends in corruption and measures to curb it, the authors find the EU still needs to more to assess the extent and nature of corruption across the 41, recommending it “integrate national-level data across Member and candidate states, enabling cross-border tracking of individuals and companies involved in corruption through unified risk indicators.” They urge implementation of a “pan-European disbarment system …to prevent chronic-offender favorite companies from accessing public contracts.” In addition, they emphasize that corruption risks in public procurement should be managed at the contracting agency level “with officials held accountable for transparency and integrity benchmarks” rather than solely relying on after the fact criminal prosecutions.

The full text of the report is at: https://leap.luiss.it/publication-research/publications/a-mungiu-pippidi-i-parvanova-upholding-intergrity-the-causes-and-trends-of-corruption-risk-in-europe-41/.

Guest Post: Italy’s Misguided, and Possibly Illegal, Repeal of the Abuse of Office Offense

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Today’s guest post is from Roberta De Paolis, a post doctoral fellow in Criminal Law at the Sant’Anna School of Advanced Studies of Pisa.

For nearly a hundred years, the Italian criminal code included an “abuse of office” offense. Public officials committed this crime when, in the course of performing their duties, they acted in a way that was otherwise unlawful or entailed a conflict of interest, and in so doing secured a monetary advantage to themselves and/or inflicted monetary damage on others. For example, if a public official rigged a public procurement auction, steering a government contract to a relative or friend, that public official would not only have violated the rules on competition procedures, but would also have committed the crime of abuse of office. But the crime could apply more broadly. For example, if a local official denied a citizen a building permit for self-interested reasons, the official may have committed the abuse-of-office crime.

On its face, the abuse of office offense seems like a potentially powerful anticorruption tool. But it had proved to be controversial. Many, including Justice Minister Carlo Nordio, claimed that the crime was too vague, and potentially too broad. For example, in many small Italian towns, many people—particularly at the elite level—know each other socially and often have family ties, and as a result many decisions that local politicians make could be characterized as helping their friends or relations or otherwise involving a conflict of interest. Consider a mayor who announces a tender for public construction project, and the best bid comes from an acquaintance of the mayor. If the city government accepts that bid, the local political opposition could report the decision to the authorities and assert that the mayor abused her office by favoring an acquaintance in the tender procedure. As a result, according to critics of the abuse-of-office offense, many local public officials were discouraged from implementing socially valuable public works projects, out of fear of ending up under criminal investigation. The critics also pointed out that, despite the large number of prosecutions for abuse of office, these prosecutions rarely produced convictions: the most up-to-date statistics report that about 5,000 criminal prosecutions for abuse of office resulted in only nine convictions. This is suggestive evidence that many of the investigations were meritless, and possibly politically motivated tools of harassment.

That, at least, is what critics of the law argued, and this past August, those criticisms carried the day: Parliament voted to repeal the abuse-of-office offense. But was that the right decision? Many experts say no. Notably, the President of Italy’s National Anti-Corruption Authority, Giuseppe Busia, asserted that repealing the abuse of office offense leads to impunity in cases of conflict of interest like favoritism in public competition or tenders. Similarly, a spokesman for the European Commission claimed that the repeal of this law “decriminalizes an important form of corruption and may have an impact on the effectiveness of the European fight against corruption.” (Indeed, it is worth noting that 25 of the 27 EU countries have criminal laws prohibiting abuse of office.) Supporters of the repeal respond that these concerns are overblown because other provisions of the criminal code, as well as Italian administrative law, still apply to the egregious cases. But that is not obviously true, and, worrisomely, the repeal of the criminal abuse of office offense has not been counterbalanced by the introduction of new administrative offenses to address the problematic conduct. Continue reading →

When Did EU Anticorruption Conditionality Work, and When Did It Fail?

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When countries apply for membership in the European Union (EU), the EU has substantial leverage to insist on various economic, political, and governance reforms—including anticorruption reforms. The EU has used this leverage, mandating (among other things) various anticorruption measures as a condition for accession. Has this worked? Does this form of conditionality help galvanize meaningful improvement in the corruption situation in candidate countries?

One of the most systematic attempts to answer this question, a 2014 study by Mert Kartal, compared corruption trends from 1995-2012 in Central and Eastern European (CEE) countries that did and did not apply for EU membership. The study found that applicant countries made significant progress during the accession process—but after accession, these countries’ anticorruption performance tended to deteriorate substantially. This is perhaps not surprising, given that the EU loses its leverage after accession takes place. Nevertheless, the finding is disheartening, in that it casts doubt on whether the EU was able to spur meaningful, lasting anticorruption reform. Notably, though, the results were not uniform across the twelve applicant countries studied: In some, the improvement that occurred prior to accession almost completely reversed after accession, but in others, the improvements appeared more sustainable. Diving into individual stories of accession suggests several factors that may have played an important role in the success or failure of EU attempts at using the carrot of membership to spur sustainable anticorruption reform. Continue reading →

Guest Post: How the Azerbaijani Government Corrupts Western Democracies with “Caviar Diplomacy”

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Today’s guest post is from Aram Simonyan, a Calouste Gulbenkian Foundation Scholar at the University of Sussex.

Artsakh, or Nagorno-Karabakh, is an autonomous region primarily populated by ethnic Armenians. (That the region is part of Azerbaijan rather than Armenia is due to a 1921 decision by the USSR central government.) In 2020 Azerbaijan, with outspoken support from Turkey, gained power over notable territory in Nagorno-Karabakh. Then, in December 2022, the Azerbaijani government closed the Lachin corridor (the only land route between Nagornon-Karabakh and Armenia), thereby cutting off 120,000 ethnic Christian Armenians in the contested enclave from the outside world—and from food, medicine, and other primary goods. And in September 2023 Azerbaijani military, with the apparent support of the Turkish president, forces swept into towns and villages, killing, shelling, and bombing civilians—evoking trauma of the Armenian Genocide among the population.

Yet the reaction from the West has been shockingly muted. It’s hard to ignore the striking contrast between the round-the-clock media coverage of the Gaza conflict and the scarcity of news on Nagorno-Karabakh even when Azerbaijan was bombing Armenian hospitals, schools and beheading people. Critics have also pointed out how European institutions and Western companies have continued to do business as usual with Azerbaijan, notwithstanding its aggression.

Part of the justification for this may be that Azerbaijan helps meet the EU’s need for natural gas. (In July 2022, European Commission President Ursula von der Leyen referred to Aliyev as a “trustworthy partner” for gas supply to the EU, though since Azerbaijan imports gas from Russia, it’s not at all clear why the EU wanted to involve the Azerbaijani government in the supply chain.) But another reason is that Azerbaijan has made use of what critics have dubbed “caviar diplomacy”: the use of strategic bribery (direct and indirect) to corrupt and curry favor with Western governments and institutions. Continue reading →

New Podcast Episode, Featuring Daniel Freund

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A new episode of KickBack: The Global Anticorruption Podcast is now available. In this episode, host Dan Hough interviews welcomes back to the podcast Daniel Freund, a Member of the European Parliament and former Head of Advocacy for European Union Integrity at Transparency International. The interview focuses on different dimensions to the EU’s fight against corruption, beginning with a discussion of the struggle to protect EU institutions from undue influence, a problem illustrated by the “Qatargate” lobbying scandal. The conversation also explores the challenges of building institutional resilience to corruption within potential accession countries as well as EU member states themselves–most notably the question of how the EU should be responding to autocratic regimes like Viktor Orbán’s government in Hungary. You can also find both this episode and an archive of prior episodes at the following locations: KickBack was originally founded as a collaborative effort between GAB and the Interdisciplinary Corruption Research Network (ICRN). It is now hosted and managed by the University of Sussex’s Centre for the Study of Corruption. If you like it, please subscribe/follow, and tell all your friends!

The European Court of Justice’s Invalidation of Public Beneficial Ownership Registries: A Translation

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One of the most important developments in the fight against corruption—and other forms of organized criminality—over the last couple of decades has been the push for greater transparency in the ownership of companies and other legal entities. An increasing number of countries now require artificial legal entities (“legal persons”) to provide information on their true beneficial owners—that is, the actual human beings (or, in the language of the law, the “natural persons”) who own or control the entity—to the government and to potential investors or potential business partners who need to conduct due diligence on those entities. Many anticorruption activists believe that there should be even greater transparency in corporate ownership, and that the information in these so-called beneficial ownership registries should be made publicly available.

These pro-transparency advocates achieved an important but partial victory back in 2015, when the European Union issued its Fourth Anti-Money Laundering (AML) Directive. The Fourth AML Directive instructed EU Member States not only to collect beneficial ownership information in a central register, but to make that information available to anyone who could demonstrate a “legitimate interest” in accessing the information. In 2018, pro-transparency advocates scored an even bigger victory when the EU issued its Fifth AML Directive. The Fifth AML Directive dropped the requirement that those requesting beneficial ownership data show a “legitimate interest”; the directive instead required Member States to make corporate beneficial ownership information publicly available, unless an individual beneficial owner could show an exceptional interest in keeping his or her ownership interest confidential.

Just last month, though, the push for corporate ownership transparency suffered a setback at the hands of the European Court of Justice (ECJ). The ECJ ruled that the provision of the Fifth AML Directive that required the provision of corporate beneficial ownership information available to any member of the general public was invalid because it violated two provisions of the European Union’s Charter on Fundamental Rights: Article 7, which states that “[e]veryone has the right to respect for his or her private and family life, home and communications,” and Article 8, which provides that “[e]veryone has the right to the protection of personal data concerning him or her,” and that “[s]uch data must be processed … on the basis of the consent of the person concerned or some other legitimate basis laid down by law.”

Many anticorruption organizations condemned the ECJ’s decision, though there appears to be some disagreement about just how consequential the ruling will turn out to be. (The ECJ issued a subsequent clarification—also released on LinkedIn—that journalists and civil society organizations concerned with money laundering, corruption, terrorist financing, and related issues would have a “legitimate interest” in accessing beneficial ownership information, and should therefore continue to have access under the terms of the now-reinstated Fourth AML Directive.) I have my own views on the underlying policy dispute—I’ve come out tentatively in favor of making corporate beneficial ownership registers public (see here and here)—but I thought I should read the ECJ opinion carefully to better understand the rationale behind the decision, and what space (if any) it leaves for moving in the direction of greater corporate ownership transparency.

I may try to weigh in on that latter question in a future post, but in this post, I want to focus on the ECJ decision, and I want to do something a bit unusual. Here’s the thing: The ECJ opinion is terrible. And I don’t mean that it’s terrible with respect to the outcome. Though I disagree with that outcome, reasonable people can debate the merits of public beneficial ownership registries, and how to balance the interest in transparency against the interest in privacy. I mean that the opinion is terrible as a matter of reasoning and craftsmanship. The writing is just godawful—full of unnecessary verbiage, awkward phrasing, circumlocution, and obfuscation. And the terrible writing obscures the shocking thinness of the legal reasoning. If I were grading this as a final exam, it would be a B-minus at best, and that’s only because of grade inflation.

It occurred to me that other people who want to better understand and evaluate this decision might find the opinion even more impenetrable than I did. So I decided to take the liberty of translating the ECJ’s decision from English into English. I didn’t bother with all the prefatory material in the first 33 paragraphs of the decision—my translation exercise focused only on paragraphs 34-88, which contains the court’s legal reasoning (such as it is). I’ve also interjected a few snarky comments throughout in italics. Again, this is my paraphrase of the court’s opinion—if you want to see the original, you can find it here. But in all seriousness, I thought it would be helpful to others to have a more readable version of the court’s opinion, so they can draw their own conclusions. And now, without further adieu, here’s my translation: Continue reading →

The Anticorruption Campaigner’s Guide to Asset Seizure

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Anticorruption campaigners have long argued that Western governments should be more aggressive in freezing and seizing the assets of kleptocrats and corrupt oligarchs. While targeting illicit assets has been part of the West’s anticorruption arsenal for many years, attention to this tactic has surged in response to Russia’s invasion of Ukraine. Almost as soon as Russian troops crossed the border into Ukrainian territory, not only did Western governments impose an array of economic sanctions on Russian institutions and individuals close to the Putin regime, but also—assisted by journalists who identified dozens of properties, collectively worth billions—Western law enforcement agencies began seizing Russian oligarchs’ private jets, vacation homes, and superyachts.

Many people who are unfamiliar with this area—and even some who are—might naturally wonder about the legal basis for targeting these assets. And indeed, the law in this area has some important nuances that are not always fully appreciated in mainstream media reporting and popular commentary. Continue reading →

Why Italy Should Not Prioritize Anticorruption in Spending Covid Recovery Funds

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The Covid-19 pandemic has been an economic disaster as well as a public health disaster, and massive public spending will be needed to promote recovery. In Europe, the EU is projected to spend up to €1.8 trillion on pandemic recovery. One of the biggest recipients of these EU funds will be Italy, the EU’s hardest-hit member state. Currently, Italy is poised to receive €123 billion in loans and €69 billion in grants between now and 2026. Provision of these funds has already started; the first tranche of €25 billion arrived this past June. This funding will support Italy’s Covid recovery plan, known as the Piano Nazionale di Ripresa e Resilienza (PNRR), which—in the name of territorial cohesion—will allocate 40% of the funds to the Italian south.

If history is any guide, a massive amount of that money will be misallocated, misspent, or outright stolen by corrupt public officials colluding with organized crime groups. The mafias have a long history of bribing Italian officials for lucrative public contracts. Between 2014 and 2020, Italy received €77 billion from the EU for use in structural and investment funds; 60% of those funds were “fraudulently requested or obtained,” often by organized crime, with the 85% of that fraud occurring in the South. Much of the fraud occurs when illegitimate companies request funds in the form of loans and grants; the companies either don’t exist or are liquidated upon receipt of the funds.  

But we needn’t look only to history: Italy’s three most powerful crime syndicates—Cosa Nostra in Sicily, the Camorra in Campania, and the ‘Ndrangheta in Calabria—are already bribing Covid response officials, winning fraudulent contracts, and plundering businesses in receipt of PNRR funds. As the EU money pours in, we can expect that these mafia groups will use their corrupt networks to siphon off a staggering percentage of the EU Covid relief funding.

What should European policymakers do in response? It’s tempting to insist—as anticorruption activists have in this and other contexts—that the EU and Prime Minister Mario Draghi’s government adopt enhanced oversight and transparency measures, to better ensure that funds are spent appropriately. But that would be a mistake. Right now, the priority must be on promoting a swift economic recovery. Attaching burdensome anticorruption requirements to the public spending needed to support that recovery will slow the process down too much. This is, I realize, a bitter pill to swallow. Many readers will instinctively resist the idea that the EU and the Italian government might bankroll Italy’s most powerful mafias (to the tune of up to €200 billion). But if Italy is to recover from the economic effects of the Covid-19 pandemic, the priority must be the swift delivery of recovery funds, even if this means that much of the money will be intercepted by the mafia.

Continue reading →

The “Big Government Causes Corruption” Zombie Shambles On

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I don’t make a practice of responding to opinion columns in mainstream newspapers, especially when they’re not specifically or primarily about corruption. But the opening of Bret Stephens’ piece in yesterday’s New York Times caught my eye, mainly because the column used corruption in the Greek health care system as the “hook” for an argument that President Biden’s ambitious plans for an expanded social safety net will lead to American decline. Here’s how Stephens opens his column:

Years ago, Alexis Tsipras, the party leader of Greece’s Coalition of the Radical Left, surprised me with a question. “Here in the United States,” the soon-to-be prime minister asked me over breakfast in New York, “why do you not have this phenomenon of passing money under the table?”

The subject was health care. Greece has a public health care system that, in theory, guarantees its citizens access to necessary medical care.

Practice, however, is another matter. Patients in Greek public hospitals, Tsipras explained, would first have to slip a doctor “an envelope with a certain amount of money” before they could expect to get treatment. The government, he added, underpaid its doctors and then looked the other way as they topped up their income with bribes.

Take a close look at any country or locality in which the government offers allegedly free or highly subsidized goods and you’ll usually discover that there’s a catch.

What is the point of opening with this anecdote (other than not-so-subtly alerting the reader that the author is the sort of important person who has chit-chats with world leaders)? The implication, so far as I can tell, seems to be that countries that provide free or heavily subsidized social welfare benefits tend to be more corrupt.

There is, however, an important problem with this argument: It’s not true.

Continue reading →

New Podcast Episode, Featuring Daniel Freund

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A new episode of KickBack: The Global Anticorruption Podcast is now available. In this week’s episode, my collaborators Nils Köbis and Jonathan Kleinpass interview Daniel Freund, a German representative in the European Parliament, where he serves on the Committee on Budgetary Control and co-chairs the Parliament’s Anti-Corruption Intergroup. Mr. Freund discusses the risks of corruption (or other forms of misappropriation) of EU funds and how to close these loopholes, as well as the use of conditionalities to promote the rule of law. Much of the interview focuses on the challenges posed by states like Hungary, where the Orban regime’s suppression of media freedom and judicial independence has created a situation in which Orban and his cronies are looting the state and enriching themselves to the tune of over one billion Euros per year, as well as entrenching their own power through a system of favoritism and crony capitalism. Mr. Freund discusses the challenges that the Hungarian situation poses for the EU, and the institutional mechanisms that the EU might use to respond this and similar situations.

You can find this episode here. You can also find both this episode and an archive of prior episodes at the following locations:

KickBack is a collaborative effort between GAB and the ICRN. If you like it, please subscribe/follow, and tell all your friends! And if you have suggestions for voices you’d like to hear on the podcast, just send me a message and let me know.