Ostermann Ivancic Managing Partner Mojmir Ostermann and Divjak, Topic, Bahtijarevic & Krka Attorney at Law Dominik Glavina look at Croatia’s new lobbying law and the challenges it poses for businesses engaged in regular talks with public organizations.
A Long Time Coming
“The subject of lobbying regulation is not new in Croatia – in fact, it has been on the legislator’s radar for over a decade,” Ostermann begins. “Additional incentives came from the recommendations of the European Commission and the Group of States against Corruption, but many find that the ultimate impulse was from the OECD and the eagerly awaited joining of Croatia to that organization.”
Ostermann emphasizes that the main goal is to make the decision-making process more transparent. “Who are the members of expert groups in the legislative procedure; whose interests are taken into account while passing laws; how and with whom do the authorities make deals; based on which criteria is public money is invested in private companies – all of these matters and many more have been mostly hidden from the public.”
Glavina adds that this is the first time that lobbying activities have been regulated in Croatia. “The main reason for such regulation is the implementation of the Croatian Government’s Anti-Corruption Strategy 2021-2030, which identified the areas of lobbying activities and conflict of interest in public bodies as the ones in which the integrity of the public officials should be strengthened.” He notes that, in line with international standards and recommendations, “Croatia adopted the Lobbying Act representing an important step forward in the implementation of anti-corruption policy and preventive anti-corruption action.”
Lobbying or Daily Business
While the law aims to promote transparency, certain aspects may pose challenges for businesses in interpreting and complying with the new regulations. “An important challenge with the new act is that the definition of lobbying can be interpreted in more than one way,” Ostermann points out. “For this reason, some companies may not be sure whether their planned or current activities even fall within the scope of the Lobbying Act.” For example, he outlines that “it is currently unclear whether pharmaceutical companies should be subject to the Lobbying Act in the process of determining the list of medicines covered by health insurance.” Advising caution, Ostermann stresses that “companies which ultimately determine they are in fact subject to the Lobbying Act should be aware that, in relation to the competent authority, the lobbyists cannot refuse to provide information about lobbying by invoking professional secrecy.” Glavina echoes these concerns. “Since the Lobbying Act prescribes a broad definition of lobbyists, there are a lot of aspects that businesses should now take into account as there are industries – mostly regulated ones – in which communication with public officials is occurring as part of its daily business.” He emphasizes that businesses will face challenges in understanding what actions would be considered as lobbying as well as which persons are considered as lobbied persons under the act.
Importantly, understanding how Croatia’s law stacks up internationally can provide context and help businesses prepare better. Ostermann notes that “Croatia was one of the last countries in the region to officially regulate lobbying. Slovenia has regulated the profession since 2010, Montenegro since 2012, Northern Macedonia 2008, and Serbia since 2019.” Highlighting some of the differences, he says that, “same as in Croatia, registration and reporting in Slovenia is obligatory for all lobbyists. However, unlike in Croatia, lobbyists in Slovenia are obligated to include financial information in their yearly report (amounts received by the client, donations to political parties).” And, in Montenegro, “all lobbyists are required to pass an exam with the Agency for Prevention of Corruption.” Ostermann suggests that for Croatia to fully meet international recommendations, “some find it necessary to include the obligation of lobbied persons to keep records of their meetings with lobbyists, which should be publicly available, as is the case with the officials of the European Commission and representatives in the European Parliament.”
Glavina observes that the act could be considered part of the group with stricter lobbying provisions in the EU. “It has a broad definition of lobbyists, the mandatory framework includes both executive and legislative branches, prescribes mandatory reporting of interactions with lobbied persons, however without their publication, and has set up independent authority oversight.”
Ambiguities Causing Compliance Concerns
The ambiguities of the act may ultimately affect compliance. Identifying specific issues, Ostermann notes that an “ambiguity can be found in the obligatory content of the lobbyist’s report, which, among other information, must include the ‘indication’ of the lobbied person, which makes it questionable if the lobbyist should state the name of the contacted public official or including only their position is sufficient.” He also notes that “The act does not specify whether the content of the lobbyists’ reports will be made public and, if so, to what extent, nor does it indicate how the competent authority will verify the accuracy and completeness of the reports. The competent authority has not yet published any guidelines with regards to these issues.”
Agreeing that ambiguities will hinder compliance efforts to a certain extent, Glavina adds that “this especially applies to businesses in regulated industries since their daily business consists of their communication with the public officials that might be caught by the definition of the lobbied persons under the Lobbying Act.” He expects that the Commission for the Resolution of Conflicts of Interest, as the competent authority, will provide interpretations. “Once the Commission identifies the ambiguities of the act in practice, we believe the provided interpretations should be reflected as amendments to the act.”
Staying Ahead of the Curve
Navigating the new lobbying landscape requires proactive measures and strategic planning. Ostermann advises that “it is important to keep in mind that the Lobbying Act prescribes obligations not only for professional lobbyists, but also for in-house lobbyists and professional associations.” He suggests that companies should “make a thorough analysis and seek legal advice if they suspect that the act could apply to them and their employees or associates.” Despite the relatively low financial fines, “the reputational risk is certainly not negligible.” Moreover, he recommends “keeping track of the competent authority’s opinions.” Given that lobbyists cannot invoke professional secrecy when prompted for additional information by the competent authority, “it is probably a good call to review what information is given to the lobbyist and if any of it constitutes professional secrecy which is not really necessary for their activities,” he adds.
“Businesses should first assess their position in terms of their interaction with the public officials,” Glavina says, suggesting a strategic approach. “Following their assessment, the businesses should decide whether they will engage the professional lobbyists, or they will instruct their employees to register as in-house lobbyists – this decision mostly depends on the level of interaction between the businesses and the public officials.” He adds that for businesses with daily interactions, it should be operationally easier to “register their employees as in-house lobbyists in order to be compliant while remaining business-oriented.”
This article was originally published in Issue 11.11 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.
