Grayling AcTrend Report 2015

1 - Grayling AcTrend Report 2015

GRAYLING

AcTrend

Grayl ing's report on legislative changes

across Central & Eastern Europe

30th September, 2015


Contents

Report methodology ..................................................................................................... 3

The political environment across CEE and Russia .............................................................. 3

The legislative processes in CEE ..................................................................................... 7

Grayling’s AcTrend report: The key findings ..................................................................... 8

Outlook ..................................................................................................................... 13

Further data .............................................................................................................. 15

About Grayling ........................................................................................................... 16

Contact ..................................................................................................................... 16


Report methodology

This report was prepared by Grayling Central & Eastern Europe (CEE)’s Public Affairs Practice

Group and examines laws passed in six CEE countries (Bulgaria, the Czech Republic,

Hungary, Poland, Romania and Slovakia) between 1 August 2014 and 1 August 2015.

Furthermore, for the first time, the report provides an update on the Russian political

environment. Grayling's Public Affairs teams used publicly available data (mainly Parliamentary

websites) for the research and the report covers acts of Parliament only. In terms of media

coverage, Grayling’s teams did not make a quantitative analysis of the coverage generated by

each piece of legislation; if an article focusing on the act in question appeared in one of the most

respected and/or widely-read media titles, it was categorised as an act which generated

“significant” media coverage.

The political environment across CEE and

Russia

Bulgaria

The legislative year just gone was less productive than 2013/14 – fewer than 100 laws were

adopted. This was due to the early general election held in October 2014. Parliament therefore

did not operate for part of the reviewed period. Once the new National Assembly was in place,

the governing coalition consisted of four political parties, which has tended to prolong the

negotiations on legislative changes. The newly elected Government was, however, very active

and authored two thirds of all adopted laws, but the obstacle of the diverse parliament remains

crucial. In the early months of its term in power, the coalition focused on its elections promises

such as ensuring stability in both the public finances and in the energy sector. After the CorpBank

insolvency, from 2014 the new coalition introduced a series of new finance-related legislation.

Rising electricity prices for households and industry were also addressed through legislative

amendments. This is the reason that these were the areas in which the highest number of changes

were made. Agriculture, Healthcare and ICT were also industries affected by a large number of

new regulations. The Bulgarian media has followed the changes in these key areas very closely.

Czech Republic

Autumn 2014 saw the approval of the first budget that had been completely prepared by the

current government, elected in autumn 2013, or more precisely by the current Finance Minister,

Andrej Babiš. More attention, however, was directed to the new Act on the Civil Service. Pushed

by the European Commission, the Government had intended to approve it earlier, but the

opposition successfully obstructed the proceedings, which resulted in a new round of negotiations

among all of the political parties. An amended version was then approved by a cross-party

majority in the Lower Chamber, finally ensuring the stability of the public administration. A period

of relative calm in the first half of 2015 was interrupted regularly by the discussion of the alleged

conflict of interest of Andrej Babiš, who besides his key role in government is also the owner of


several Czech companies. The debate flared in particular when Acts

dealing with agriculture and food production laws were under

discussion. Just before the summer break in 2015, the Lower Chamber

also voted to close down the second reformed pillar of the pension system (approved by the

previous centre-right government), effectively returning the country to a ‘fully flowing’ (pay as

you go) system.

Hungary

After the general election in May 2014, the governing Fidesz-KDNP party alliance retained its two

thirds majority in the Parliament. Their popularity started to erode soon afterwards, and their

supermajority shrunk to a simple, but still strong majority of 65.7% as a result of three by-

elections.The government’s main goal during the spring and summer was therefore to regain its

popularity and retain control of the most significant political issues.

Between August 2014 and August 2015, Parliament approved 214 acts in total (75 in 2014 and

139 in 2015), which is higher by 61 than in the previous 12 months; the most high profile issues

were the forex loaners and the legislation related to migrants.

Poland

The period between August 2014 and August 2015 was marked by several significant elections in

Poland. The first of them, the local government elections, was conducted in November,

immediately after Ewa Kopacz was sworn-in as Prime Minister. These elections showed the

weakness of the state, accused of unreliability following a series of problems with the vote-

counting system. This also proved to be the beginning of a collapse of the ruling Civic Platform

party, which since then has been losing support every month. Despite the fact that Ewa Kopacz’s

government fulfilled most of the commitments that had been made in her initial manifesto (e.g.

the act on oncological services and the anti-violence convention) and the fact that she replaced

several ministers as a result of the tape scandal in the middle of 2014, Civic Platform now has

little prospect of rebuilding its political power any time soon. That was confirmed in the

presidential election in May, which was surprisingly won by Andrzej Duda from the main opposition

party, the conservative Law and Justice – who had been an unknown MEP only two months earlier.

Everything points to the fact that following the upcoming general election in October, the next

government and parliament will be dominated by Law and Justice.

Romania

The presidential election held in November 2014 brought the surprising victory of centre-right

candidate Klaus Iohannis over incumbent Prime Minister Victor Ponta, leader of the Social

Democratic Party (PSD), the largest party in the ruling coalition. Several months after his defeat,

Ponta resigned the leadership, but the ruling coalition, led by PSD, still enjoys a solid majority in

Parliament. In September 2015, the Romanian Prime Minister was officially indicted on charges


of forgery and money-laundering. Already wounded by his defeat in the

presidential election, Ponta has resisted calls to resign, enjoying so far

the backing of his leftist party and its smaller allies in the cabinet

(Progressives-UNPR and Liberal Democrats-ALDE). In September, the Parliament adopted the

new Fiscal Code, a rare occasion when the ruling coalition and opposition found themselves on

the same page following months of political bickering. After pushing through this controversial

tax-cutting programme, the Government is currently under public pressure to adopt significant

increases in public sector wages. The opposition’s (PNL) political activities, on the other hand,

lack coherence and are hardly convincing: so far, the main centre-right party has not been able

to present any significant political initiative or project. There are several scenarios to be taken

into consideration for the end of 2015, including a government change that could either end with

a new PSD-led Cabinet, or an opposition-led government, supported by UNPR. We expect a hectic

political environment this autumn as all of the political parties jockey for position ahead of the

local elections set for June 2016, and the parliamentary elections planned for autumn 2016.

Russia

In quantitative terms, over the last 12 months, the State Duma slightly increased the number of

bills passed (542 vs 489) but the gap might have been much larger had it not been for the start

of the geopolitical crisis during the 2014 spring session. Compared to the pre-crisis situation,

26.5% fewer bills were approved in autumn 2013 than in autumn 2014. The speed of scrutiny

also increased, with some politically driven bills passing expert discussions and hearings in a few

days (e.g. the Waste Management Law and the Unwanted Organizations Law).

In qualitative terms, state Duma discussions were dominated by anti-Western sentiments and

the urge to promote import substitution and national producer support in every walk of life. Due

to this, several bills and laws adopted during this period were aimed at showing Russia’s

independence from Western products and ‘warning’ the West about the consequences of further

restrictions. Although some obviously populist bills were not passed (e.g. the Bill on Countries –

Aggressors and the Bill on Deeming Sanctions as Force Majeure), other legislative initiatives

detrimental to foreign business were more successful. Two good examples are the Personal Data

Law and the Unwanted Organizations Law. The former, obliging all companies to store the

personal data of their users/employees in Russia, was rescheduled twice before finally being

brought into force on 1 September 2015 and presents a serious challenge for some companies

that had previously used offshore data centers or clouds. The latter gives the authorities an

opportunity to shut down any NGO (the term being used in a broader way to include business

entities too) that is considered a threat to the constitutional order or the defense capabilities and

security of the country. Furthermore, in the face of the economic crisis, Parliament made another

attempt at returning capital to Russia by declaring an amnesty for the capital of Russian citizens

who moved out of the country to tax havens if it is returned to Russia in 2015.


Slovakia

In Slovakia, the governing party SMER-SD continues to dominate the political scene. The latest

pre-election polls suggest that it will win the March 2016 election by a significant margin – they

are currently polling 32-36%. Given the political climate, it is likely that SMER-SD will seek to

create a coalition with at least one other political party. This is mainly a strategic move to

decrease the reputational risk for the party in case of the need for unpopular decisions in the

next election cycle. The political right continues to be fragmented in opposition, the only notable

exception being the newly formed party Siet, which is now supported by approximately 10-12%

of right-wing voters according to pre-election polls.


The legislative processes in CEE

Earlier this year Grayling prepared its latest eye-catching educational tool allowing those who are

interested in the law-making process across Central and Eastern Europe to better understand

how laws are made in this region. The infographic gives a useful overview of the main stages by

which new legislation is adopted in seven CEE countries: Bulgaria, the Czech Republic, Hungary,

Poland, Romania, Slovakia and Russia.

The infographic aids professionals across the CEE region, who will now have instant access to

intelligence on the similarities and differences in legislative decision-making – and therefore an

understanding of how best to build advocacy programmes to influence these processes.

The data shows that the countries have much in common, with the procedure usually consisting of

three main stages and many points of similarity in the details. Furthermore, the consultation process,

which usually precedes the first reading in the Parliaments, is a vital stage in terms of influencing

decision-making across the region. It is also the least transparent stage since negotiations behind

closed doors dominate the process in all seven countries.

The parliamentary stage in each country is characterized by work in specialist committees, with every

parliamentarian across the seven CEE countries – with the exception of Russia’s Federation Council

(Upper House) – being directly elected. A final point of similarity is that, in the final stage, all draft

Acts must receive Presidential assent, with every CEE President having the power of veto.

However, the infographic also reveals several important differences across the region. For example,

while most CEE countries tend to skip the consultation process to accelerate the pace of law-making,

in Romania it is mandatory to submit all draft laws for public consultation, no matter who has initiated

the draft legislation. Furthermore, Bulgaria, Hungary and Slovakia are the only countries with a

unicameral system, which means there is only one parliamentary chamber.

A final factor which has an important impact on advocacy campaigns is the number of ministries in

each country, which varies significantly. Bulgaria, for example, the second smallest country of the

seven analysed, has 17 government ministries, compared with Hungary, which has consolidated down

to just nine.

Please view the infographic by clicking here, or download it directly from the Grayling website.

http://issuu.com/graylingpublicaffairs/docs/grayling_public_affairs_-_lawmaking

http://grayling.com/news/grayling-introduces-a-new-visual-guide-to-legislative-processes-in-central-eastern-europe/


Grayling’s AcTrend report: The key findings

The most active lawmakers: Romania, Poland and Hungary

1,041 acts were approved in the 6 CEE markets (Bulgaria, the Czech Republic, Hungary, Poland,

Romania and Slovakia) over the course of the 12 month period, which is nearly 17% more than

last year, when 891 act were approved. On average, nearly three acts were approved every day.

This trend is primarily a consequence of the activities of the three most active markets: Romania,

Poland and Hungary. These countries alone adopted 165 more acts than last year, while there

were no significant changes in the other CEE markets.

95 96

214

249

290

97112

94

153

178

257

97

0

50

100

150

200

250

300

350

Bulgaria Czech

Republic

Hungary Poland Romania Slovakia

Approved acts: 2014/15 vs 2013/14

2014/2015 2013/2014

1


Romania and Bulgaria lead the publicity 'contest'

Every third law (34.7%) generated significant media coverage in the region; this is nearly 15%

higher than last year. Romania and Bulgaria led the way (48.6% of approved acts in Romania

and 45.3% in Bulgaria fall into this category), while the Czech Republic (15%) and Slovakia (13%)

were at the bottom of the list.

Romania recorded the biggest increase in media attention for acts generated in the period under

review (+40% compared to 2013/2014). The explanation lies in the pre- and post-electoral

context, given that one of the candidates in Romania’s 2014 presidential election was the

incumbent Prime Minister, Victor Ponta, leader of the Social Democrats, the largest governing

party. The acts were tracked and reported by the press as part of his effort to connect legislative

changes with the presidential race.

In Bulgaria, the media is following the legislative process closely because the ruling coalition is

slightly unstable and each piece of legislation may create a conflict, which could easily escalate

and provoke a government reshuffle.

45,26%

15,63%

32,71%

31,73%

48,62%

13,40%

42,86%

19,15%

44,44%

11,24%8,56%

8,25%

0,00%

10,00%

20,00%

30,00%

40,00%

50,00%

60,00%

Bulgaria Czech

Republic


The proportion of acts which generated significant media attention

2014/2015 2013/2014

2


The agriculture and financial services sectors faced the most new

regulations in CEE

45% of the approved acts (468 out of 1,041) had a direct impact on business. This is a very

similar result to last year (43%), but due to the larger volume of acts, 86 more acts had an impact

on business. More than a third of these impacted the business sector in general (36%). Of the

sector-specific laws, the largest number were focused on agriculture (68 acts) and the financial

sector (65 acts). Energy, industrials and ICT were among the least impacted sectors across the

region.

Agriculture

14%

Energy

7%

Finance

Sector14%

General

business36%

Health Care

9%

ICT

4%

Industrials

6%

Service sector

10%

68

3165

168

43

19

2747

34

33

93

12023

10

20

53

0 50 100 150 200

Agriculture

Energy

Finance Sector

General business

Health Care

ICT

Industrials

Service sector

Impacted sectors compared to last year (number of approved acts)

2013/2014 2014/2015

3


16% of acts with an impact on business were submitted by MPs

Although governments introduced most of the acts related to the business sector (83%), 16%

were submitted by MPs. Similar to last year, Bulgarian, Hungarian and Romanian MPs were the

most productive on this front.

In Bulgaria, the complicated structure of the governing coalition (two conservative parties, one

nationalist party and one socialist) means that most of the decision-making process happens in

Parliament. Cabinet experts still propose bills, but the texts have to be preliminarily discussed

and agreed upon at a political level or they will fail in the House, which has happened on many

occasions with the new coalition over the past 12 months.

In Hungary, where the Government continues to avoid discussion of certain sensitive issues (e.g.

closure of shops on Sundays), several bills were submitted by governing coalition MPs rather than

ministries. Although the rate of amendments submitted by representatives was lower than a year

ago, there were many cases of government excluding industry or public debate.

In Romania, there has been a 50% increase in bills with an impact on business being introduced

through MPs' legislative initiative. The situation is explained, on the one hand, by the 2014

electoral context; on the other, as a general rule, when approaching the mid-term, lawmakers

become more active in submitting legislative initiatives that can boost their visibility ahead of the

next election. Also, as a rule, if such actions are not consistent with the Government's view, the

acts are usually rejected by the parliamentary majority.

30,00%

12,24%

22,62%

1,72%

21,55%

11,63%

28%

5%

27%

19%

14%

17%

0,00% 5,00% 10,00% 15,00% 20,00% 25,00% 30,00% 35,00%

Bulgaria

Czech Republic

Hungary

Poland

Romania

Slovakia

Proportion of acts submitted by MPs

2013/2014 2014/2015

4


17% of acts with an impact on business were approved through

an extraordinary procedure

Across CEE, 17% of approved acts were passed by an extraordinary procedure. This was the most

common method in Romania, where 55% of acts were approved using the Government

Emergency Ordinance (GEO). Even if, overall, the Romanian Government’s emergency ordinances

decreased by 7% over the last year, several NGOs claimed that the Government adopted a new

strategy in order to reduce the extraordinary procedures and at the same time continue to ensure

the swift implementation of new provisions. This strategy consists in regulating several different

sectors through a single GEO.

(N.B. In the case of Bulgaria, there is no official urgent or ‘extraordinary’ procedure through which

legislation can be adopted.)

0%

6%

10%

3%

55%

7%

0%

10%

20%

30%

40%

50%

60%

Bulgaria Czech

Republic


5


Outlook

Bulgaria

In Q4 2015, the Parliament will have to focus on a series of bills related to the State Budget

2016. The process is usually slow. This year the complicated structure of the governing

coalition, with four parties in power, will make the whole process even more complicated. The

Government is pushing for higher taxation – higher social security contributions will be

introduced in 2016. The Government has proposed a new “unhealthy food” tax that will be

decided in the upcoming month. The Cabinet even proposed the increase of corporate and

personal income tax, currently set at a 10% flat rate, but shortly afterwards backed up and

abandoned the idea.

Local elections will be held at the end of October. The results will indicate if the parties in the

governing coalition still have sufficient public support to govern. A poor showing from the

governing parties at the local elections might bring instability at a national level.

Czech Republic

The Czech government is now halfway through its term, with the next general election in the

autumn of 2017. By the end of 2015, the government is determined to pass its flagship draft

Act on Electronic Sales Register, which is the Finance Minister’s cornerstone in the fight against

the shadow economy and tax evasion. The Lower Chamber is also expected to discuss the new

Act on Protection against Addictive Substances such as alcohol and tobacco, perhaps banning

smokers from restaurants for good. The much awaited regulation of hazard is at the top of the

parliamentary list for 2015/2016, as well as the adoption of the streamlined Act on Public

Procurement. Looking further into the future, over the next two years the Ministry of

Environment is planning to revise legislation on environmental protection and waste

management in order to reflect updated EU legislation. The Act on Food and Tobacco Products,

which is being drafted by the Agriculture Ministry, is also supposed to be submitted next year.

Hungary

The next general election is expected in 2018, so until then consolidation and economic recovery

had been the priorities for the third Orbán government. The migration crisis, however, has

overridden their plans. Government and parliament have switched to crisis management mode

and legislation has been subordinated to the defence of Hungary’s borders. This means that

legislative procedures affecting everyday life will be secondary and sectoral reforms (healthcare,

education etc.) are expected to slow down. Another factor that could cause the failure of any

fundamental regulatory change is that, due to the lost supermajority, the governing parties need

the support of other MPs to pass any act which requires a two thirds majority.


Poland

Poland is awaiting its parliamentary election, which will take place on 25th October, with a mix

of uncertainty and curiosity. According to the recent opinion polls, it is almost certain that after

eight years in power, the centrist Civic Platform- Polish People’s Party will have to leave

government, with a new government being formed around the conservative Law and Justice

party, which leads the polls on 39%, 17 points ahead of the Civic Platform. The question now

seems to bewhether Law and Justice will manage to form a single-party government, or will

need to search for a coalition partner – and, if so, which partner it could be. Other political

parties striving for seats in Parliament are: United Left (a coalition of Democratic Left Alliance,

Palikot’s Your Movement, Greens and Labour Union) with 8% support; The Modern PL (6%); the

Polish People’s Party (5%) and Kukiz (4%). In order to win a seat in Parliament, parties must

reach a treshold of 5% ; the treshold for the United Left coalition is 8%. Law and Justice’s hand

has been strengthened by the migration crisis, the common fear of immigrants in Poland, and

by the fact that they have the clear support of their own successful candidate in the presidential

election, Poland’s new and popular President Andrzej Duda.

If Law and Justice wins the election, as the polls predict, we can expect significant changes for

many sectors of the business community: new taxes will be imposed on banks and

supermarkets, taxes will be lowered for small companies and there are likely to be changes in

public procurement law. It is also very likely that social security will be strengthened, with a

higher minimum wage, and creating 1.2 million jobs and extra money for families with children.

Romania

As Romania approaches the 2016 elections, a number of centrifugal political movements will

stimulate the repositioning of the ruling coalition’s main parties. At the governmental level,

Victor Ponta will most likely aspire to carry out his mandate until 2016 through policies and

decisions aimed at helping his party obtain a good result in the forthcoming elections. However,

the scenario in which he loses political support in Parliament or decides to step down from office

voluntarily, amid intensified corruption allegations against him, needs to be taken into account.

Slovakia

Based on the current state of play, we should not expect major changes in the aftermath of the

March 2016 general election in Slovakia, SMER-SD is likely to win comfortably. The only change

might be its plan to have at least one coalition partner - this is likely to be one of the weaker

political parties (the most likely candidates are the nationalistic SNS or Christian Democrat

KDH). However, in terms of the legislative process and strategy, we do not expect the

Government to change course in any significant way.


Further data

Sectors Bulgaria Czech Republic Hungary Poland Romania Slovakia Total

Agriculture 8 5 11 18 17 9 68

Energy 5 1 6 11 7 1 31

Finance Sector 9 7 15 13 10 11 65

General business 26 23 22 38 48 11 168

Healthcare 4 6 3 12 12 6 43

ICT 4 3 9 2 1 19

Industrials 2 1 1 15 5 3 27

Service sector 2 3 17 7 17 1 47

Total 60 49 84 116 116 43 468

8

5

11

18

17

9

5

16

11

7

1

9

7

15

13

10

11

26

23

22

38

48

11

4

6

3

12

12

6

4

3

9

2

1

2

1 1

15

5

3

2

3

17

7

17

1

0 20 40 60 80 100 120 140

Bulgaria

Czech Republic

Hungary

Poland

Romania

Slovakia

Impacted sectors by country (business related acts only)

Agriculture Energy Finance Sector General business

Health Care ICT Industrials Service sector


About Grayling

Grayling is a leading global communications network founded in 1981 to deliver data-driven

strategies for Digital Marketing, Public Relations, Government Affairs, and Investor Relations.

Grayling operates from 54 offices in 26 countries worldwide across Europe, North America, the

Middle East, and Asia. The firm works across multiple sectors including Energy, Environment &

Sustainability, Healthcare, Technology, Consumer Brands, Financial Services, Transport &

Logistics, and Government & Public Sector. For more information visit www.grayling.com

Grayling is part of Huntsworth plc (www.huntsworth.com) an international consultancy group

focused on public relations and integrated healthcare communications.

Contact For further information please contact:

Gergely Ábrahám

Head of Public Affairs Practice Group

Grayling CEE

phone: +36 (1) 266 7833

mobile: +36 (20) 319 9550

e-mail: [email protected]

@gergelyabraham

http://www.grayling.com/

http://www.huntsworth.com/

callto:+3612667833

callto:+36203199550

mailto:[email protected]

https://twitter.com/gergelyabraham

Grayling AcTrend Report 2015

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