Committee on Legal Affairs II
Chaired by Raphael Gross-Chartuni (NL)
The rise of giant tech companies and innovative business models has cast gloom on the EU. Exploitation goes unnoticed and lobbyists move freely in the shadows. Platform workers are met with dire working conditions while often being categorised as self-employed, thus robbing them of the rights and protections all labourers are entitled to. The Commission has proposed a Directive to address this, but it was met with heavy resistance from corporate lobbyists. These lobbyists exercise disproportionate amounts of power and heavily affect European decision-making, all while corporations are evading taxes through aggressive tax planning to generate more profit and deprive welfare systems of the Member States of their needed funding.
- 5.5 million platform workers are recognised as self-employed and do not benefit from the labour rights they are entitled to;
- Corporations have spent millions to stop the proposed Commission’s directive on protecting platform workers;
- Civil groups and NGOs’ financial and political power is incomparable to that of the corporate lobby;
- The EU loses EUR 170B annually due to complex international forms of tax evasion;
- Minimal action has been taken to identify and stop European Member States that function as tax havens, such as Luxembourg, Ireland and the Netherlands.
The current ambiguity within the gig economy has greatly impacted the well-being of workers in the EU. While major unionisation has occurred and national jurisdictions are amending current frameworks on worker status identification, the struggle to push an EU-wide and effective proposal is a product of the corporate lobby. While the EU houses many large corporations, which employ millions and generate billions, significant amounts of tax money are lost as the EU is home to several tax havens and a multitude of Member States with weak taxation systems.
The Treaty of Lisbon, the legal foundation of the EU, introduced a new dimension of lobbyism, where large groups could have a direct effect on the law-making process of the EU. Many discrepancies in lobbying power are seen between corporations and civil groups or NGOs; this disparity calls into question the validity and consequence of the corporate lobby in Europe.
Corporate exploitation in Europe is a controversial topic with much legislative potential. However, attempts to regulate corporate industries are met with an opposing force. Pending regulations are closely discussed with lobby groups, who receive the contents of legislation before most news outlets, while many EU politicians start their careers in corporate lobbying after leaving the EU. Therefore, the question of how the EU should tackle corporate exploitation and evasion of social responsibility remains unsolved.
Corporate lobbyists are defined as entities which aim to influence legislators. Corporation contract lobbyists direct or hire firms to represent their interests to political organs, such as the Commission or Council.
Tech corporations are companies which sell technological products or services. As the EU is innovation and technology-dependent, these corporations can generate massive amounts of wealth and hire corporate lobbyists.
The European Commission is the executive branch in charge of creating, proposing and enforcing legislation. The Commission is the only EU body with legislative initiative1. It is additionally set up in Directorate-Generals (DGs) which are specific departments with their respective purviews. They work on and propose legislative acts, such as the Platform Directive, which is currently in development and discussion between the Directorate-General for Employment, Social Affairs and Inclusion (DG-EMPL) and various stakeholders, before it is proposed to the Council of the European Union and the European Parliament.
NGOs such as the Corporate European Observatory, Oxfam Novib and Lobby Control are non-governmental organisations which address social or political issues. In the case of this topic, the aforementioned NGOs are largely relevant as these investigate the effects of lobbyism and corporate power.
OLAF (European Anti-Fraud Office) is an EU body founded by the Commission. It aims to combat fraud affecting the EU budget, investigate internal corruption and develop anti-fraud policies. These goals are accomplished through independent investigations. However, its actions are only on an administrative and investigative basis, meaning that it can only recommend adequate action to relevant parties.
Legal Framework/Measures already in place
The European employment strategy (EES) consists of several comprehensive frameworks regarding labour protection and regulation, entailing protections on working conditions and workplace safety. These regulations mostly fall under the principle of proportionality and shared competence, meaning that the EU cannot exceed what is necessary to achieve the objective of a treaty while Member States can only pass laws in areas where the EU has not, or decided that it will not.
Base Erosion and Profit Shifting (BEPS) is an umbrella term for practices that international corporations use to avoid taxes through the usage of legal loopholes in taxation systems. As a response to this, the Organisation for Economic Co-operation and Development (OECD) set up the G20 Project to facilitate the anti-BEPS legislation. In 2016, the Commission proposed the Anti Tax Avoidance Package (ATAP) which aimed to align tax laws across all Member States through a series of recommendations and legally–binding measures to block the most common methods of BEPS. Multinationals are required to fully disclose the financial pipeline through all countries while adhering to a set of criteria, including tangible assets, employee count and paid taxes. Quickly afterwards, the Anti Tax Avoidance Directive was activated, updating the previous legislation.
The EU enforces a ‘’list of non-cooperative jurisdictions for tax purposes’’, which blacklists recognised tax havens; currently consisting of 12 different nations. Nations which do not comply with the set taxation criteria are identified as tax havens by the European Council.
The Joint Transparency Register (JTRS) is an online registry for lobbyists who engage in business with the EU. The registry catalogues the lobby expenditures, the topic of discussion, members and time, while lobbyists agree to comply with a code of conduct on fair lobbying practices. The register, however, is optional for lobbyists. In 2021, the JTRS was updated and the first mandatory signing procedure was activated for rapporteurs, shadow rapporteurs and committee chairs to publicly list their lobby meetings.
Hire and fire
The current labour market is noticeably changing. The casualisation of the workforce has shifted a predominant portion of this market to non-traditional forms of labour. Such is the stand-by or 0-hour contracts which are rapidly gaining popularity. Interestingly, labour facilitated through online platforms has massively increased due to its efficiency and ease of use. However, major drawbacks have arisen as platform-dependent workers are exploited. In the last few years, the news has become saturated with lawsuits against companies like Uber, as the employees were unlawfully recognised as self-employed and performing labour under dire circumstances.
Labourers with the recognised status of ‘’worker’’ receive protective regulation on equal pay, working time, maternity and paternity leave and pay, health and safety information, consultation and collective redundancies in the EU. Estimates show that around 5.5 million workers are at risk of being misclassified as they are using digital platforms for labour utility, meaning that these workers do not receive the aforementioned protection they need. The general casualisation of labour has complicated access to social or employment rights due to the intermittent and informal nature of stand-by and 0-hour contracts, often through digital platforms. Additionally, many contracts involve third parties, which makes it more difficult (for the worker) to identify the correct employer.2
The inaccessibility to worker status bears dire consequences in most Member States, as many basic social instruments are provided from employer to employee. The absence of this status leads to higher labour-related risks and insufficient access to the aforementioned social instruments. This removes the safety nets that workers would otherwise be eligible for, in case of work-related injuries, sickness or paid leave.
A nation without taxation
Over the past few years, a flood of tax-evasion scandals has covered the EU. Where the Panama papers set foot, the Pandora papers took off. Many of these publications3 involve Member States and their role in syphoning billions in tax money, thereby shedding a light on the corporate corruption which massively takes place in and out of Europe.
As a response to the numerous scandals and increasing economical damage behind BEPS, the commission set up a taxation blacklist, containing tax havens which are prohibited to EU corporations. However, this list has faced scrutiny as it contains only a fraction of all the current tax havens, while simultaneously whitewashing European havens.
Out of the 31 countries with zero or almost no corporate taxation, only 12 are blacklisted. A recent study shows that these 12 nations only account for two per cent of all global tax losses, while European Member States account for 36 per cent, thus totalling an annual $154B. Oxfam Novib highlighted the hypocrisy behind this blacklist, as at least five Member States do not meet the criteria imposed on non-EU countries. These States, together with Ireland, also account for an annual loss of EUR 42.8B from the remaining 22 other Member States. Oxfam Novib identified 18 (out of 31) Member States with potentially harmful tax practices, which is more than half. Important to note is that international corporations have adapted to the legislation implemented after the scandals, as they changed their tax structures to accommodate newer tax havens, such as Ireland or the Netherlands.
The revolving door
The EU has put great emphasis on lobbyism, or rather European interest representation. The ability of interest groups to directly participate in the legislative process is an intended effect of the Treaty of Lisbon. The validation and integration of lobbyism have transformed European politics, as the effects are direct and early stage, with corporate representative meetings before the publication of a draft directive.
While this could potentially pave the way to the enhancement of democracy, the exact opposite is what the status quo entails. There exists a major discrepancy4 between the representation of corporations and that of NGOs or civil society platforms, as 75 per cent of all meetings regarding the Digital Services Act Package with the Commission were conducted by the Big Tech lobby, while less than 20 per cent were from NGOs. Lobbyists also exercise their influence through a myriad of alternatives, such as the usage of biassed think tanks, academic research and high-level names.
Many EU representatives and politicians, once out of office, promptly receive well-paid and powerful positions in corporations and lobbying organisations, as is evidenced by Reinald Krueger’s consultancy in the Vodafone Group or Aura Salla – the former head of disinformation and social networks in the Commission – who changed careers to Facebook, thus highlighting potential conflict of interest and the sharing of sensitive and classified information, or by half of former Commissioners who were hired by powerful lobby groups after their tenure in in 2014. Additionally, over 70% of all lobbyists from google and Meta have previously worked for governments.
The commission is currently developing a new Directive that seeks to define several criteria for employment identification. These relate to the specific relation a labourer has with their contractor by following the primacy of facts. Meaning that meeting at least two out of five criteria will resolve the self-employment status and grant the labourer worker status, where the employer and employee are subject to both local and European jurisdiction on these matters.
The Directive further aims to enforce transparency on automated services within the platform, as these can be subject to data privacy or personnel mismanagement. However, there exists much discussion on the direction that this Directive should take, with certain proponents for strict regulations and corporations which lobby for more market freedom.
- Corporate lobbying influence over the Council of the EU. – article on the effects and presence of corporate lobbying in the Council of the EU.
- Revolving doors — The dirty downside of lobby politics in Brussels – opinion piece on corporate lobbying in the EU and its negative effects on European democracy.
- Kroes-ing through the revolving door – piece on the Dutch ex-Commissioner Neelie Kroes and her controversial departure to Uber.
- Missing Profits – an interesting and interactive website displays all the financial losses and gains from tax havens.
- The Gig Economy’s Days in Europe Are Numbered – Wired article about the gig economy in the EU and its potential short-lived existence.
- Two steps forward, one step back: the EU’s plans for improving gig working conditions – a critique against the proposed Directive on platform work.
- Knowledge nugget: The Commission works under three different competencies:
1) Exclusive competence entails full control of the EU on areas like monetary policy, meaning that only the EU can pass laws.
2) Shared competence in areas such as employment and consumer protection, where the Member States can legislate in areas the EU has not legislated before.
3) Supporting competencies are those that the EU has no legislative power over, such as culture and tourism.
- Recent years have highlighted the rise of new labour contracts within digital platforms, where workers are identified as self-employed. However, platform workers are still subject to the same corporate hierarchies and regulations through non-compete clauses and terms of payment while under heavy moderation through AI.
- Through the Openlux investigation, it was revealed that over 80 per cent of 5 trillion dollars in foreign investments have failed to declare the profiteers, which is illegal as it enables money laundering. Almost all companies in Luxembourg that have beneficiaries are foreign-controlled, thus highlighting the role it plays in attracting foreign investment and enabling BEPS.
- Knowledge nugget: The Register displays a 30% growth in lobby expenditures among the biggest corporations, showcasing an increase from EU 90M to 120M in 2015 and 2022 respectively. Meanwhile, the top 50 NGOs declared 40% less, thereby exemplifying ever-growing discrepancy between corporate and civil lobbies