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Rules and potential pitfalls of engaging with the UK Government and public officials

Financial institutions can play an important role in helping inform UK policy and legislation; this is particularly pertinent with Brexit given the huge task faced by the UK government. As the content of the EU Withdrawal Bill becomes somewhat clearer, many organisations understandably, and rightly, wish to have their say on the new laws that will affect their future. There are various ways in which financial institutions can engage with the UK government make their policy standpoints known, but there are important rules and potential pitfalls that should be taken into account when doing so. For example, the need to appreciate the obligations on government officials themselves and the important rules requiring transparency around engagement with the private sector. In this article we consider the rules in England and Wales on: the routes to direct and indirect lobbying to convey an organisation’s position to government; the circumstances in which former or serving public officials can be hired and the limitations on the activities that they can perform; the rules on conducting an effective and lawful media campaign; and what to bear in mind when making political donations.

Having an appreciation of the public affairs toolkit available to your organisation and the relevant legal landscape will ensure that a chosen strategy is effective, lawful and (to the extent possible) low-risk. A key feature of UK political law in this area is that there are relatively few “hard” rules that apply to businesses as opposed to the public officials themselves. However, as well as ensuring that activity does not stray into actual or suspected efforts to exert an improper influence on decision-makers, it is important to consider the potential reputational risks of engagement given the intense public scrutiny of Brexit campaign activity. This is particularly relevant to financial services given the media’s focus on the impact and influence of this sector on the Brexit debate.

Given the variety of ways to engage with government and the numerous sets of rules applicable to different public officials and in different time periods, this article provides a broad overview of the key points to note for engagement in England and Wales. For any specific activity you should refer to the rules applicable to your proposals and also to the public officials in question. This is especially relevant if you are considering engaging with the EU institutions or in another member state.

A further complex set of rules applies in the period prior to an election or referendum, which can impact on an organisation’s interactions with government and their public affairs campaign more widely. These specific rules are outside the scope of this article but should be considered at the relevant time.


What is lobbying?

Lobbying has long been recognised as a legitimate way of raising issues with government and can be a key element of financial institutions’ political engagement. Indeed, the UK’s Committee on Standards in Public Life has noted that “the democratic right to make representations to government and to have access to the policymaking process…is fundamental to the proper conduct of public life and the development of sound policy”.

What lobbying means in practice can vary significantly. It is generally shorthand for the various ways of engaging with government to seek to influence a particular issue. However, not all engagement with public officials is lobbying; particularly in highly regulated sectors such as banking and finance, such interaction is required on a day-to-day basis. For example, as part of your Brexit preparations, you may be meeting with senior officials at the Treasury or at the FCA to discuss how a proposed policy or negotiating position might affect your organisation. You may also be discussing the practical implications with key public sector customers such as local authorities.

The applicable rules vary depending on whether the lobbying activity is outsourced to an external lobbyist such as a public affairs consultant, or is kept in-house or conducted through membership of an industry body. In all contexts it is important to tow the correct line and not to stray into activity that breaches the lobbying rules or risks affecting your ability later to contract or meet with public officials. Potential reputational damage is also particularly significant as it can result even where activity is lawful but its appropriateness is called into question by the public.

Instructing external lobbyists in England and Wales

Brexit is a potential boon for the UK lobbying sector as a flurry of activity was expected from businesses keen to have access to government. At the same time, there is an increasing number of ex-government advisers and other civil servants leaving the public sector for more lucrative careers as lobbyists.

England and Wales has a relatively new statutory lobbying regime in the form of the Transparency of Lobbying, Non-Party Campaigning and Trade Union Administration Act 2014 (the Lobbying Act). It is now a criminal offence to engage in “consultant lobbying” without being entered on the register of consultant lobbyists. However, only a narrow range of activities falls within this definition as it requires a written or oral communication directed at very senior government officials, made on behalf of another, in the course of business and in return for payment. Notably, in-house lobbyists are de facto exempt from this regime.

The statutory lobbying regime is relevant if your business engages external lobbyists as they are likely to be a “consultant lobbyist” and required to disclose their clients’ names, which will be published online. Importantly, consultant lobbyists do not need to disclose the nature or value of their work for clients.

There are currently just over 150 registered consultant lobbyists with almost 2000 disclosed clients. Given the breadth of reported clients, a business’s presence on the list may not be a cause for concern but whether it would be welcome publicity is something that your organisation should consider.

In addition to the statutory regime, there is also a UK lobbying register maintained by the Chartered Institute of Public Relations. Registration is voluntary but registrants agree to be subject to a code of conduct and, like the consultant lobbying register, will disclose the name of clients but not the nature or value of their work.

Lobbying by your in-house team

A financial institution’s internal public affairs function may also conduct lobbying. As already mentioned, in-house lobbying is outside the statutory regime although some organisations sign up to the voluntary UK lobbying register.

In this context it is important to bear in mind the transparency and conflict of interest rules applicable to public officials. For example, information regarding Ministerial diaries (such as meetings with external organisations, hospitality, overseas travel and gifts) should be published online. Similarly, most senior public officials’ interests (particularly gifts, hospitality and financial interests) will also be declared and publically available. The UK media keeps a close eye on these records and often reports its findings such as the frequency of a particular organisation’s meetings with key departments or decision-makers.

The provision of corporate hospitality can also be a potentially complex area to navigate. At one end of the spectrum there is the Bribery Act 2010 which, although it recognises the importance of entertainment and hospitality as an aspect of doing business, has the potential to impose liability on both donors and recipients where gifts and hospitality stray into a corporate bribery offence.

At the other end of the spectrum, there are typically significant restrictions on public officials’ ability to accept gifts and entertainment – generally where to do so would reasonably be seen to compromise their personal judgment and integrity and also where specifically restricted by applicable codes of conduct; particular caution will be exercised for offers from existing or potential counterparties. Often both offers of hospitality and gifts made as well as those actually accepted will be declared and published. Financial institutions should therefore carefully consider the rules applicable to a particular public official before making an offer of hospitality or gifts.

Engaging through industry bodies

A common route for engaging with government in the UK, and one which may lead to greater access to more senior officials and increased publicity, is through membership of a trade association or industry body. Generally industry bodies are in the same position as in-house lobbyists considered above and they should also have regard to the rules around conflicts of interest, gifts and entertainment and publicity.

Later in this article we consider the concept of “political donations” under the UK Companies Act (requiring prior shareholder approval and subsequent reporting by UK companies). Notably, a membership subscription paid to a trade association is not a political donation and will not engage the Companies Act rules.

Hiring serving or former public officials

The months following the referendum saw a number of former public officials take on significant roles in the private sector, often acting as Brexit consultants or senior employees. While this can provide financial institutions with useful first-hand intelligence, there are a number of restrictions on former senior public officials and potential reputational issues which any new employer should take into account.

Post-employment restrictions on former public officials

It is beyond the scope of this article to detail all post employment restrictions in the UK, particularly because they vary depending on the role of the particular former public official. Notably, in all cases the obligation to comply falls on the former public official themselves. Nonetheless there are potential reputational consequences for employers who (knowingly or otherwise) employ or engage former public officials in breach of the relevant rules.

As a starting point, if your organisation is considering hiring a former public official you should consider the following headline points and also check the terms of any approval granted to them to take up employment or a consultancy with your business. You could also include compliance with the applicable rules and other relevant public law obligations as part of the employment or consultancy contract.

  • Government Ministers (ie the Prime Minister, Deputy Prime Minister and UK government Ministers) should obtain permission from the Advisory Committee on Business Appointments (ACoBA) for appointments/employment for two years after leaving office.
  • In addition, former Cabinet Ministers: (i) must wait three months before taking up any new employment (although this period can be waived or extended); and (ii) are prohibited from lobbying government for two years after leaving office (lobbying in the general sense rather than the narrower “consultant lobbying’ considered above).
  • For other civil servants, the period during which they must have permission from ACoBA for new appointments/ employment depends on their seniority and is generally one or two years accompanied by a ban on lobbying government on behalf of their new employer during that period.
  • Senior civil servants are also subject to a three-month restriction before they can take up any employment and are also prohibited from lobbying government for two years.

As has been the subject of much recent criticism in the UK, there is no liability on former public officials or their new employer for breach of these rules. The intended sanction is public opinion and reputational damage, although there have been a number of calls for tougher sanctions in light of recent instances of high-profile failures to comply.

Engaging serving public officials as consultants

There are also rules and restrictions to bear in mind if you are thinking of engaging a serving public official as a consultant.

While serving public officials such as MPs and Members of the House of Lords can act as paid consultants, they have an overriding obligation to act in the public interest and not to profit from their roles. Notably, they cannot lobby on businesses’ behalf or act as their paid advocate or exercise parliamentary influence for profit or other reward, nor can they advise on how to lobby government.

If your business is considering hiring a serving public official, you should carefully consider the rules applicable to them. These vary according to their role (eg whether they are an MP, Member of the House of Lords, civil servant or some other public official). Common features are that senior officials will need to publically register the engagement, declare gifts and entertainment received, and declare the interest where relevant. Again, while the burden of these rules falls upon the public official, in light of the potential reputational consequences of breach, businesses should also consider making compliance with them a condition of any consultancy contract.

Public campaigns and use of social media

As well as traditional “direct” lobbying, since the referendum and 2017 general election there has been a rise in the UK of businesses and other organisations using traditional and social media to further their public affairs objectives. This is often a low-cost and low-effort strategy with potentially high returns, albeit the intense recent government, regulatory and public focus on the use of social media campaigning in particular has highlighted the negative scrutiny and publicity that can result.

As it stands, media campaigning is not regulated by UK political law outside an election or referendum campaign period. However, if your organisation is engaged in this activity it should also note other relevant UK laws such as those concerning libel and confidentiality.

You should also consider whether spending on such activities constitutes “political expenditure” for the purposes of the UK Companies Act. The Act requires prior shareholder approval where a UK company plans to incur any political expenditure. Further, amounts over GBP 2,000 must be included in the directors’ report. Political expenditure is defined widely and includes activities capable of being reasonably regarded as intended to affect public support for a political party, organisation, election candidate or the outcome of any referendum. Given the breadth of this definition and the liability of directors to make good the amount of any unauthorised spending (also relevant for political donations discussed below), it is important that the necessary corporate approvals are in place before incurring any political expenditure or making political donations. In practice, financial institutions often pass standing resolutions to provide for any inadvertent engagement of the rules.

Political donations

Financial institutions can also pursue their public affairs objectives by donating to political parties, politicians or other political organisations. The key points to note concern transparency (that the donation will likely be reported by the recipient and published online) and obtaining any necessary corporate approvals.

Particular election law rules apply to donations to election candidates, MPs and party members and parties themselves (stemming from the Political Parties, Elections and Referendum Act 2000 and the Representation of the People Act 1983). In this article we consider the rules from the perspective of the donor and, again, outside an election or referendum context. Broadly the onus of complying with these rules falls on the recipient but if your organisation wishes to ensure that its donation can be accepted, it must be a “permissible donor” (broadly, a UK entity or individual). You should also note that the donor’s name and the amount of the donation will be disclosed and published on the Electoral Commission’s website.

Similarly to political expenditure, the Companies Act applies to “political donations” which includes donations to political parties, election candidates and political organisations. Prior shareholder approval is required for donations exceeding GBP5,000 but all donations, regardless of their value, should be included in the directors’ report.

Include public affairs in your business planning

For your current and future public affairs strategy, be it in the Brexit context or otherwise, you should consider what steps could be taken to ensure that your organisation’s interests and concerns are heard by government. However, it is important that you also check that your organisation’s activities comply with the relevant rules and that you manage your exposure to the laws in this area.

Further information

This article is part of the Allen & Overy Legal & Regulatory Risk Note, a quarterly publication.  For more information please contact Karen Birch –, or tel +44 20 3088 3710.
Legal and Regulatory Risk Note
United Kingdom