Luxembourg must act on transparency and anti-corruption rules, Transparency International says, if it wants to prevent further slipping down a corruption index. Photo: Guy Wolff/Maison Moderne

Luxembourg must act on transparency and anti-corruption rules, Transparency International says, if it wants to prevent further slipping down a corruption index. Photo: Guy Wolff/Maison Moderne

Luxembourg lacks legislation on corruption and transparency in several areas, Flora Cresswell of Transparency International said in an interview after the country saw a significant drop in its score in an annual ranking.

Transparency International on Tuesday released its annual Corruption Perceptions Index, in which Luxembourg’s score compared to the year before to reach 77 out of 100. It ranked in joint tenth place with Ireland in the assessment of 180 countries worldwide, down from ninth place last year. Ireland, however, made a significant jump up, from 74 to 77.

“It’s a real blind spot at the moment,” Creswell, the organisation’s regional director for Western Europe, said. “Quite a number of European countries now have proper, full blown laws or strategies against corruption and Luxembourg doesn’t.”

A top concern is the mixing of business and political interests, Cresswell said of the index results. “This could be in relation to concerns of businesses when they’re conducting business within Luxembourg, that they struggle to get contracts, in relation to the risk of bribery, or access to paperwork--essentially harming how competitive and effective they can operate within the country.”

Another weak point are lax revolving door rules on members of government or senior civil servants entering the private sector when leaving public office.

There is no formal cooling off period in Luxembourg although last year mean that members of government must report any private sector activity to an ethics council, which can advise against conflicts of interest and make decisions public should the former member of cabinet not follow the council’s recommendations.  

A lack of regulation means “businesses and experts are more concerned of the risk of corruption that could occur in light of that gap,” Cresswell said. In addition, the country has no freedom of information laws, which further hampers the uncovering of corruption.

“It is crucial to note that the Luxembourg government is continuously taking numerous steps to improve transparency and good governance,” a spokesperson for the prime minister’s office said in an email, citing the transparency register and an open data initiative.

The government is also analysing a circular issued by prime minister Xavier Bettel (DP) last year that aimed to improve access to information for the press but that many journalists say as actually achieved the opposite.

The spokesperson said that no OECD criteria are used in Transparency International’s index. A 2021 report by the multilateral organisation had concluded that the perceived level of corruption in Luxembourg is weak.

“When only a few data sources register a change, this means that it is not yet clear whether public sector corruption has gone up or down in that country,” the spokesperson said. However, Transparency International had specified that Luxembourg’s drop in points was “statistically significant”.

Impact of changes takes time to assess

While Luxembourg has long argued that short distances in administrations and access to decision-makers are a draw for businesses--so-called “kurze Wege”--it plays to the country’s disadvantage when it comes to perceptions of corruption.

“In terms of small countries in relation to concerns of nepotism, of undue influence, that relationship between the business and public--it can be quite stark in smaller countries. We also see it in Scandinavian countries,” Cresswell said. But it’s all the more important in this case to have effective legislation to combat the problem.

Denmark, Finland, Norway and Sweden all outrank Luxembourg in the index. Only Iceland scores lower, in 14th place with 74 points.

It’s not all bad, however. “They’ve implemented a new transparency register, updated lobbying laws… it’s likely in terms of that being enforced that the data hasn’t picked that up yet.” Under a last year, members of government and senior advisers in the government must make meetings with interest groups public.

It’s a kick in the teeth for the whole transparency community.
Flora Cresswell

Flora Cresswellregional director for Western EuropeTransparency International

The government meanwhile is assessing the impact of a 2018 law on transparent and open administration, the prime minister’s office said. Results of a survey are expected in the first quarter of this year “in order to assess whether any changes to the existing legal framework are necessary.”

Luxembourg was also one of the few countries that re-opened access to its beneficial owners register to journalists after a last year saw EU nations put the information behind lock and key, the Transparency International director said.

“It’s a kick in the teeth for the whole transparency community,” Cresswell said of the ECJ decision. Countries like Austria, Cyprus, Ireland and Malta have fully closed their registers, she said. By failing to properly track assets “that are being loaded into Western European countries from kleptocratic countries, countries that are lower on the CPI, Western countries with poor financial secrecy regulations are essential enabling countries corruption in those lower performing countries.”

Preventing further slide

The grand duchy remains in the top ten of the index for now, and Cresswell said it had presented good whistleblowing legislation, improved its code of conduct for parliamentarians and transposed parts of an EU anti-money laundering directive.

“It’s a country that’s still high up on the index,” the director said. It’s score peaked at 85 in 2015 and wavered between 80 to 82 over the following years. This year’s index is the first time, Luxembourg’s score has dropped below 80.

While risks of bribery or embezzlement are generally lower in top-ranked countries, the types of corruption that do occur “are a lot more fragrant.” Countries at the top “need to see and realise that they need to prioritise and not rest on their laurels,” she said. Luxembourg “for several years wasn’t keeping up with its European neighbours.”

The result for Cresswell was not a surprise. A report from September last year showed Luxembourg as one of the weakest countries on enforcing an anti-foreign bribery convention, she said. A 2021 corruption survey by Transparency International showed that 43% of respondents in Luxembourg were concerned about the issue of nepotism in the relationship between business and public officials.

With two elections coming up--local elections in June and national elections in October--Cresswell said she would like to see “an anti-corruption strategy mentioned in the mandates for political parties in the lead up to the elections” that would also formalise cooperation between different authorities.

Taking action will be needed for the country “not to slide further on the Corruption Perceptions Index.”