Defining conflicts of interest for Holders of Public Office (HPO)

Consequently the EP and the ECJ have no code of ethics. In both cases, neither the protocol of the Statute of the Court of Justice nor the rules of procedure of the EP can be considered as a code of ethics. Normally rules of procedure regulate organisational, financial and technical aspects within an institution. As to the European Parliament some issues which are regulated in the annexes of the Rules of Procedure regulate ethical issues. Because of this we have decided to treat the EP Rules of Procedure as

“rules and standards” within the meaning of our study.

2. Defining conflicts of interest for Holders of Public Office (HPO)

“Conflicts of interest” is a social, political, economical, cultural and legal concept. It is full of controversy and ambiguity. Conceptions about what should be defined as conflicts of interest are constantly evolving. “In the last several decades, the public standard of morality has become much stricter...Previously accepted conduct...is now deemed unethical and previously unethical conduct is now deemed criminal”²⁶. Consequently, the policies on conflicts of interests and the discussions about needs for reforms have become more open and more complex but also more driven by scandals and media interest.

Conflicts of interest of the HPO involve a conflict between public duty and private interests, whereby the HPO has a private interest which could improperly influence the public interest, activities and decisions. In this context a conflict of interest is not necessarily corruption or fraud. However, it constitutes an “abuse of public office for private advantage” and may hold a potential for unfair behaviour. Normally, all governments in the world provide for conflicts of interests standards and norms of the

different categories of HPO determine (to a certain extent) the nature of conflicts of interests.

More governments have moved from managing conflicts of interests through top-down approaches (prohibitions, restrictions, criminal and administrative sanctions) to more complex approaches including education, training, transparency requirements and better monitoring systems.

Nowadays the common standards in the field of conflicts of interests comprise:

– A body of rules, codes, standards and principles. Mostly these instruments enumerate a number of prohibitions and restrictions (e.g. not receiving gifts of over 250 euros). Here, important differences exist as to the number of prohibitions, restrictions and obligations.

– Disclosure policies and registers of interests that require the HPO to register potential conflicts of interests and other interests. Here, differences exist as to transparency requirements, the level of detail of reporting obligations and specific obligations (e.g. whether spouse’s activities should be registered or not) etc.

– Monitoring and enforcement mechanisms. Here important differences exist regarding powers and resources of ethics committees and ethics commissions which have the task to advise on ethical questions and/or to monitor and control the development of conflicts of interests within their organisations. Also important differences exist as to (criminal and administrative) sanctions in cases of ethical misconduct.

– Training and education requirements (e.g. Is training compulsory for Holders of Public Office?)

The particular difficulty in regulating and in managing CoI results from the high number of potential conflicts. Conflicts of interest can arise at any time and may range from avoiding personal disadvantages to personal profit seeking. They can have financial or non-financial reasons and include many social and professional activities and interests.

For example, a minister, judge, legislator etc. may be a Member of a board, or have personal contacts with lobby groups, NGOs or simply friends. Any of these relationships could be the source of conflicts of interests that could conflict with the public interest of the HPO.

Therefore, most policies in the Member States divide conflicts of interest into two types:

pecuniary and non-pecuniary.

Pecuniary interests involve situations of financial profit or financial problems.

However, financial property or financial interests do not need to change hands for an interest to be pecuniary. People have a pecuniary interest if they (or a relative or other close associate) own property, hold shares, have a position in a company bidding for government work, or receive benefits (such as concessions, discounts, gifts or hospitality) from a particular source.

Non-pecuniary interests do not have a financial component. They may arise from personal or family relationships, or other activities. They include any tendency toward favour or prejudice resulting from friendship, animosity, or other personal involvement with another person or group.

According to the OECD²⁷, conflicts of interest can be actual, perceived or potential.

– An actual conflict of interest involves a direct conflict between a public official’s current duties and responsibilities and existing private interests – A perceived or apparent conflict of interest can exist where it could be

perceived, or appears, that a public official’s private interests could improperly influence the performance of their duties – whether or not this is in fact the case

– A potential conflict of interest arises where a public official has private interests that could conflict with their official duties in the future

There are two other situations that Governments should be aware of when establishing a framework for managing conflicts.

The first situation is where a Holder of Public Office has multiple roles and could be said to wear two hats. In most Member States this may be the case with legislators²⁸ who are allowed to exercise professional activities next to their position as Parliamentarians.

However, wearing “two hats” (in the sense of having conflicting interests) can also be the case if a Judge, Director of the Court of Auditors, Central Bank etc. is an (honorary) member of the board of an agency, NGO or company. Generally said, where individuals have more than one official role it may be difficult to keep the roles separate.

Another situation, which often arises, is the problem of insider dealing which means that Holders of Public Office acquire confidential information that could be useful in relation to other clients or relationships. The corruption risk in this situation is that the Holder of Public Office may be tempted to use the information improperly, to give advantage to another organisation, lobbyists or person or create bias against or prejudicial treatment of another group or person. Mostly these conflicts concern Members of Government and Directors of banks and Directors of Audit Offices more than Judges or legislators.

In total, potential conflicts of interests concern different issues such as:

– Violating general principles while exercising public office – Receiving gifts

– Receiving other benefits – Political activities – Lobbyism

– Securing the appointment of relatives and friends

– Memberships of boards, NGOs, companies and non-profit organisations – Affiliations with trade unions or professional organisations and other

personal interests

– Involvement in secondary employment that potentially conflicts with an official’s public duties

– Relationships (such as obligations to professional, community, ethnic, family, or religious group in a personal or professional capacity, or to people living in the same household)

– Possession of important information

– Representing and acting for foreign countries – Misuse of own position for private gain, – Misuse of government property

– Other professional activities – Post-employment

– Future employment – Financial interests

– Different responsibilities to different actors – Honorary positions

– Invitations for holidays, diners, speeches, participation in events

Looking at the (still growing) number of potential conflicts of interests one may question whether the “Pursuit of Absolute Integrity”²⁹ is possible at all or whether this is an illusion. Despite the inherent limitation to regulate “behaviour”, some countries establish impressive lists of prohibitions and restrictions. These restrictions concern different issues such as:

– absolute prohibition to accept gifts

– regulation or restriction of political activities – prohibition of the appointment of relatives

– restricted membership of boards, NGOs, companies and non-profit organisations

– no affiliations with trade union or professional organisations and other personal interests

– no involvement in secondary employment that potentially conflicts with an official’s public duties

– no undertakings and relationships (such as obligations to professional, community, ethnic, family, or religious group in a personal or professional capacity, or to people living in the same household)

– disclosure of public information

– interdiction to represent and act for foreign countries

– rules on the use of own position for private gains, misuse of government property and information

– resignation requirements – others

In addition to these prohibitions and restrictions, the different countries and institutions implement new measures as to disclosure duties, general transparency requirements, monitoring and control instruments (such as ethics commissions), and training and awareness policies and reform their administrative and criminal law statutes.

Despite these common trends, the Member States of the EU, the European institutions and Canada and the US differ widely as to the degree of transparency policies, powers of the different ethic commissions and committees, training (obligatory or non-obligatory) and disclosure requirements (e.g. declaration of personal income, declaration of family

As can be seen the area of conflicts of interest is a field of extraordinary complexity and political and legal sensitivity. Only the principle as such is easy to define. However, to resolve a conflict and to distinguish between actual, apparent, real, and potential conflict situations usually requires legal, technical and managerial skills and a fundamental understanding of the many issues and points of view involved. Moreover, the language is confusing: “having an interest” is not the same as being interested in an issue.