March 8 — Why would Goldman Sachs Group Inc. contribute 500,000 British pounds ( about $710,850) to a British ballot measure campaign aimed at keeping the U.K. in the European Union?
Goldman, a New York-based financial giant, has declined to comment publicly on its recent, widely reported contribution to Britain Stronger in Europe—the main U.K. campaign committee opposed to exiting the EU. British voters are set to decide on the referendum in a national election in June.
Despite Goldman's tight lips on the matter, it's easy to see that a British vote to leave the EU—a move known by the shorthand term Brexit—could hurt the big bank's bottom line.
Goldman's large London office is a gateway to doing business throughout Europe, which could be shut—or at least narrowed—by the upcoming referendum. In fact, other big U.S.-based financial firms, including JPMorgan Chase & Co., Morgan Stanley and Bank of America Corp., all are said to be making or considering similar campaign donations to try to keep Britain—and their big London offices—inside the EU.
Harder than the “why” question, according to attorneys that advise politically engaged companies like these, is how. How do U.S.-based companies with limited experience in foreign political activities get involved in the Brexit referendum campaign or other major policy debates abroad without getting tangled in a fast-growing thicket of foreign campaign finance and lobbying rules?
That's where lawyers like Charles Borden come in. Borden, a partner in the Washington office of Allen & Overy and leader of the firm's political law practice, told Bloomberg BNA in a recent phone interview that more and more companies are asking about how to navigate rules governing political spending in Europe and elsewhere outside the U.S.
“We’ve been talking with clients” about how to engage on the British referendum on EU membership, Borden said. He's been working closely with Allen & Overy’s political law team in Britain, helping them “build off of our U.S. experience” to advise clients on compliance with complex lobbying and campaign finance laws.
The debate over the Brexit referendum is being viewed as a possible major catalyst for increasing corporate participation in political debates abroad and thus for increasing interest in setting up compliance programs for interested companies.
In addition to financial firms, other big companies with a significant U.S. presence could feel major effects from the U.K. referendum, the campaign on which is just gearing up following the announcement of the June 23 vote date.
Companies that decide to participate in the referendum debate will have to navigate British campaign finance rules, administered by the U.K. Electoral Commission, which differ significantly from U.S. laws. A key factor is that British and other foreign laws, unlike U.S. laws, impose limits on campaign spending—something the U.S. Supreme Court ruled unconstitutional 40 years ago in the landmark Buckley v. Valeo case.
“You don't have our First Amendment case law in Britain or elsewhere in Europe,” Borden said—a fact which leads to the possibility of “very restrictive” campaign finance rules. While such rules have not yet been subject to significant criminal enforcement, criminal prosecutions are possible, he added.
In the U.S., partisan and ideological divisions at the Federal Election Commission have led to perceived weakness in the FEC's ability to enforce U.S. campaign finance laws, but regulatory agencies overseas are newer and more of a wild card in terms of how they will exercise authority. Regardless of enforcement issues, the laws overseas can be very strict and have the potential for major consequences for engagement by interested companies.
The Brexit referendum will be subject to complex spending rules, requiring selection of a designated lead campaign committee for both sides of the contest. The British government will provide a public grant of 600,000 pounds ($853,020) to help each lead committee get out its message. Each side will be able to collect money from other sources but will have an overall spending limit of 7 million pounds ($9.95 million)—a fraction of the hundreds of millions of dollars currently being spent on the U.S. presidential campaign.
Strict spending limits will apply to any groups seeking to influence the U.K. referendum and even to individual companies spending money independently on campaign-related activities.
The growing interest in the U.K. referendum highlights a trend that has been building for several years—a trend toward engagement of U.S.-based companies in regulated political activities overseas, according to Borden and other political law attorneys. While nearly all big U.S. companies have long had political action committees and lobbying programs that advocate for their interests before the U.S. federal and state governments, most have only recently thought about setting up systems for political activity—and regulatory compliance—in other countries.
Borden's firm highlights on its website a “global network” that includes 44 offices in 31 countries to help clients operating overseas.
Others picking up on the trend include Dentons, which has offices around the globe and describes itself as the world's largest law firm in terms of number of attorneys.
Stefan Passantino, a veteran adviser to U.S. candidates, political groups and donors, heads the political law practice in the Washington office of Dentons. Passantino emphasized in a recent phone interview with Bloomberg BNA the driving factors behind U.S.-based companies' growing interest in lobbying and political activities overseas.
Companies are seeking new markets, new manufacturing sources, and in some cases, have merged with foreign companies and relocated their headquarters to pursue the tax advantages of inversions. Increased international activity has faced foreign tax, trade and other rules and thus has required American companies to confront foreign lobbying laws if they want to advocate for their interests overseas.
One of the former candidates Passantino has advised is former House Speaker Newt Gingrich (R-Ga.), who sought the Republican presidential nomination in 2012. Gingrich, though not a lawyer, is now a senior adviser at Dentons.
Last fall, instead of getting ready to run for president again, Gingrich set his sights on global developments while participating in a Dentons webinar on lobbying and advocacy rules in the EU, U.K., Canada and the U.S.
“You're going to see more and more sophistication in societies trying to regulate those who have power,” Gingrich said during the webinar. He noted a worldwide trend toward greater transparency and accountability to combat political corruption.
Since 2014, transparency supporters in the EU have pushed to strengthen and make more comprehensive a voluntary system of lobbying disclosure. The EU has increased requirements for lobbyists to register before they can meet with top officials of the European Commission, the executive branch of the EU, and is now looking to expand lobbying disclosure.
The EU is moving to effectively regulate lobbying of lower-level officials, such as members of European Parliament and a wider array of European Commission officials, according to Passantino. U.S. companies' interest in this trend, meanwhile, is being driven by their increasing engagement in Europe.
Passantino told Bloomberg BNA the current trends overseas are a few years behind previous developments in campaign finance and lobbying laws in the U.S. These included the strengthening of U.S. lobbying and ethics laws a decade ago in the wake of the Jack Abramoff lobbying scandal through the enactment in 2007 of the Honest Leadership and Open Government Act.
Passantino said that a more robust, mandatory EU lobbying disclosure system was promised to be in place by the end of last year, but the target date slipped to this year. He added, however, that a tougher disclosure regime either has arrived or is well on its way for both the EU and individual countries, including the U.K., Ireland and others.
“We can see a wave coming,” Passantino said.
He said U.S. companies operating overseas could benefit from the experience of seasoned American advisers who “have been through the Abramoff era.”
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