Income Declaration as an Alternative to Asset Declaration

1. Income Declaration as an Alternative to Asset Declaration The German System: Strengths and Weaknesses University of Cologne

2. Structure of the Presentation • Asset declarations: Conceptandjustification • Income declaration: Background, rules, analysis • Enforcementof Rules: Conceptandanalysis • Further stepsandquestions University of Cologne

3. Types of Public Officials • Appointed public officials • Elected public officials, in particular: • Members of the federal parliament or • Members of the parliaments of the states (Bundesländer)  The policy approach is roughly the same. Presentation concentrates on MPs as they imply particular legal problems University of Cologne

4. ‘Repressive Transparency’ As distinct from asset declarations is ‘repressive transparency’: In case of a suspicion of a crime, e.g bribery of elected public officials (§ 108e German Criminal Code), • law enforcement bodies may search documents and access bank accounts • MPs: Waiving of immunity necessary University of Cologne

5. Concept of Asset Declarations • Asset Declarations: preventive instrument • No suspicion needed, the duty to disclose assets is solely linked to the assumption of a public office • Well-established objection: Puts public officials under general suspicion  Constitutional rights of MPs and third persons require particular justification University of Cologne

6. Asset Declaration: Justification 1. Asset Declarations (cf. EU Anti-Corruption Report, p.11) • consolidate accountability (for what?) • enhance transparency (as an end in itself?) • facilitate detection of potential cases of illicit enrichment, conflicts of interests, corruption • These arguments might raise concernsthat public officials are put under a general suspicion. University of Cologne

7. Alternative Justification 2. Focus on Preventing Conflicts of Interests: • Asset declarations are not a means of detecting an assumed criminal behaviour. Instead, they work preventively as they keep public officials/MPs away from business relationships that could cause a conflict of interest • This is a “weaker rhetoric” and therefore a more persuasive justification model, politically spoken. University of Cologne

8. Policy in Germany • The mere possession of assets or financial interests is not notifiable: No declaration-duty. • Exception for shareholdings in enterprises: If a MP holds more than 25% of the voting rights, he/she must declare that.  This threshold is being criticised as too high  Shareholdings of spouses and relatives should be incorporated, critics say. University of Cologne

9. Reason for the Lack of Asset Decarations in Germany • Constitutional rights of MPs/third persons prohibit a law based on a general suspicion Too blanket. - Why do German laws e.g. prevent MPs from employing relatives in their offices funded by the parliament? This is based on a general suspicion (relationship was decisive for employment; relatives do not work as much as they are paid for). • No need for asset declaration: Since corruption is no pressing problem in Germany and since compensatory rules work well, further asset declaration rules are disproportionate and therefore conflict with the constitutional rights of MPs. University of Cologne

10. Income Declaration as Compensatory Strategy • Policy Approach: The prohibition of certain commercial activities as well as the obligation to declare secondary income compensate asset declarations • Consequence: As long as these rules work efficiently, Germany can go without a system of asset declarations University of Cologne

11. Legal Framework for MPs and Members of Government • Members of the federal government: are not allowed to have a paid secondary employment • MPs may have such an employment, but • must provide the President of Parliament with information on their activities and income • rough scope of secondary income is made public • The same applies to donations University of Cologne

12. Underlying concept • MPsmust disclose financial relationships from which a conflict of interest could derive to the President of Parliament. Provides for an internal control. • The information declared are collected in a database. • Publicity of secondary income provides for a external control by voters + party-members. University of Cologne

13. Donations • Prohibition of donations • from public corporations, • from political foundations, • from unidentified donors (exceeding 500 €), • from abroad (exceeding 1.000 €), • made in in the expectation of political advantages • MPs must keep separate account for donations and disclose donations. University of Cologne

14. Analysis GRECO Eval IV (2014) para 59 • Strengths: • „quite detailed rules...provide a satisfactory regulatory framework.“ • Weaknesses: • Donations up to 5.000 € from one donor in one calendar year must not be disclosed; donations from up to 10.000 € from the same donor are not made public. • Possibility of small cash donations University of Cologne

15. Pre-Mandate Activities § 44a Member of Parliament Law with specifications in Code of Conduct • MPs must disclose “activities predating the acceptance of the mandates” (2 years before mandate), in particular: • the last occupation practised • activities as a member of a management, supervisory, administrative or advisory board or of another body of a company or enterprise in another legal form, or public institution • Information will be published (cf. infra) University of Cologne

16. Activities During Mandate§ 44a Member of Parliament Law with specifications in Code of Conduct • Activities concurrent with the exercise of the mandate which may indicate combinations of interests with implications for the exercise of the said mandate shall be disclosed and published. • In particular: • all remunerated activities, • activities in bodies of enterprises, institutions etc., • agreements whereby the MP would be assigned certain activities or receive pecuniary benefits after mandate University of Cologne

17. Secondary Income § 44a Member of Parliament Law with specifications in Code of Conduct • During mandate all income must be disclosed • that exceeds 1.000 € within one month • or 10.000 € within one year. University of Cologne

18. Fact Findings (Hönigsberger H., Aufstocker im Bundestag, 2014) • In 2014, some 25% of all Federal MPs have secondary income (mostly to a minor extent). • Tendency: “With the mandate comes the secondary income”. By the end of the legislative period it could be up to 40%. • Most of them are lawyers. 75% of all MPs, who are also lawyers, have secondary income. University of Cologne

19. Publication § 44a Member of Parliament Law with specifications in Code of Conduct • All disclosed activities, clients and income are published in the official handbook and on the website of the Bundestag. • The income not in concrete figures, but in form of income brackets. • Since 2013 there are ten brackets: Category 1 (over 1.000 € up to 3.500 €), category 10 (over 250.000 €). Before 2013: only three brackets University of Cologne

20. Analysis GRECO Eval IV (2014) para 79-81 • Some NGOs, academics and political parties call for the disclosure of exact amounts of income. • This could conflict with the constitutional right of data protection of the MP and third persons (cf.supra). • If the MP works as a lawyer, the height of his/her fee is covered by the special protection of the lawyer-client-relationship. • That spouses or dependent family members are‘nt covered hampers identification of conflicts of interests. University of Cologne

21. Enforcement (Rule 8 Code of Conduct) • President of Parliament is in charge of investigations concerning breaches of parliamentarian rules exist. (In case of a suspicion of a crime: public prosecutor.) • He has to hear the MP. • Minor infringements: The President reprimands MP. • Graver cases are handed over to the Presidium of the Parliament (formed by representatives of all parties within the parliament) University of Cologne

22. Enforcement (Rule 8 Code of Conduct) • Breaches of disclosure obligations: • MP can be fined • Fine must be proportioned and must not exceed the half of his annual earnings as MP • Acceptance of inadmissible donations: • Donation must be handed over, but: NO FINE. • Publication of the Presidium`s finding in offcial paper of the Bundestag (not web). University of Cologne

23. Practical Enforcement • In their investigations the President and the Presidium get support from the administration of the federal parliament. • Media report frequently on cases of high secondary incomes or possible conflicts of interests. • Leadership of party and party members in election district exert control as well. University of Cologne

24. Analysis GRECO Eval IV (2014) para 95-96 • System „adequate on paper“. • „Lack of effectiveness of administrative control mechanism“. Declarations are frequently not submitted on time, sanctions are rarely applied. • Control administration to close to power? Independent control commission? University of Cologne

25. Overall Assessment • The German model: Best practice or area of concern? • On paper, the system is a good alternative to asset declarations • The lack of effectiveness however is an area of concern and calls for a reform. • Such a reform is possible; turning to another system seems not necessary yet. University of Cologne

26. Questions for Discussion • How can the lack of effectiveness be cured? More detailed rules? Enforcement by an institution separated from the Bundestag? • Transparency: “bracket”-model vs. concrete figures and names? • Necessity for system change? Asset declarations, prohibition of secondary employment? University of Cologne

27. Further Questions • With regard to appointed public officials, the policy-approach is roughly the same.  No duty to disclose assets, but • duty to disclose secondary employment • possibility to prohibit this employment • Reasons for stricter rules for appointed public officials? Or shouldn't’ t they be treated stricter than MPs? University of Cologne