The Legislative Lobby

The German legislative process has a reputation for being slow, thorough, and consensus-oriented. That is true — for certain laws. For others, the opposite applies. The machine is excellently oiled. It just needs the right fuel. And that fuel has a name: organized influence.

I. How Laws Really Come About

The textbook explanation of the legislative process runs as follows: a social need arises. Politics takes note of it. A draft is prepared. Associations are consulted. Parliament deliberates. The law takes effect. The whole process typically takes one to three years.

In important cases, reality works differently. The social need is defined by well-organized interest groups. Politics takes note because it is intensively prompted to — through lobbying offices, consulting mandates, party donations, revolving doors between business and administration. The draft is occasionally formulated by the same people who will benefit from the law. The associations that are consulted are those with the budget for hearings. And the timetable depends not on the thoroughness of deliberation, but on the strength of the pressure.

This is not an accusation. It is an empirical description. The following cases illustrate how the system works in practice — and what it costs when it does not.

II. Case 1: The Financial Market Stabilization Act 2008

On 28 September 2008 it becomes publicly known that Hypo Real Estate faces collapse. The shock runs deep: HRE is not just any bank — 83 billion euros in unsecured loans from major banks, insurers, regional banks and pension funds are attached to it. Deutsche Bank, Allianz, HUK Coburg, KfW — the list of creditors reads like a who's who of German finance. Deutsche Bank CEO Josef Ackermann warns the Chancellor: if HRE falls, no German bank will be standing the next morning.

On 13 October 2008 the federal government announces the Financial Market Stabilization Act. The law passes through parliament in an emergency procedure: first reading, committee deliberation, second and third reading — all on a single day. The Bundesrat approves it in an emergency session the same day. On 18 October 2008 — just five days after the announcement — the law takes effect. It spans a liability framework of 480 billion euros. For comparison: the entire federal budget that year amounted to 284 billion euros.

Who wrote this law? Not civil servants from the Finance Ministry — they had no contingency planning. The draft was written by the law firm Freshfields Bruckhaus Deringer — the same firm that had shortly before handled Hypo Real Estate's acquisition of Depfa Bank. The transaction that contributed substantially to the collapse. The same firm whose clients were among the beneficiaries of the rescue. The Finance Ministry long refused to disclose the fee. Only a lawsuit compelled it: 163,744 euros — for a law that mobilized 480 billion, whose authors simultaneously represented the interests of those being rescued.

No stakeholder process. No public hearing. No parliamentary debate of substance. Five days.

III. Case 2: Cum-Ex — The Law as Accelerant

Cum-Ex is the systematic raid on the public treasury. Multiple actors coordinate share purchases around dividend record dates so that the tax authority refunds capital gains tax multiple times — to recipients who never paid that tax in the first place. It is not a loophole. It is organized fraud using the law as a tool.

The practice has been known since 1990. In 2002 the banking association itself writes to the Federal Finance Ministry — not to flag the abuse, but to ensure that any legislative measures against it create no liability risks for banks. In 2007 politics responds and gets everything wrong. The draft wording for the new law is taken directly from the banking association — verbatim, without a single comma changed. The loophole is not closed. It merely looks different.

This is made possible by Arnold Ramackers, a finance judge seconded twice to the decisive department IV C of the Federal Finance Ministry between 2004 and 2010 — while simultaneously on the payroll of the major banking associations. The Bundestag investigation committee later describes him as the “mole of the Cum-Ex actors.” A banking association employee writes internally that Ramackers' salary is a “sound investment” that he has “already demonstrated through his positive influence in the past.”

The 2007 law that was supposed to curb Cum-Ex becomes an accelerant. A banker writes triumphantly of a “giant barn door” for Cum-Ex deals. The transactions shift to foreign banks — and run at full speed until 2012. Only on the third legislative attempt are they stopped; Cum-Cum transactions are not even restricted until 2016.

“Those who wrote it into law at some point no longer understand what kind of machine they built.”
— A Cum-Ex insider, later before a court

The total damage in Germany: at least 31.8 billion euros according to calculations by tax professor Christoph Spengel. Worldwide, including related transactions, possibly 150 billion euros. It is the largest tax theft in European history — made possible by a law formulated by those who profited from it.

IV. Case 3: The Nuclear Plant Extensions 2010

In 2000, the red-green coalition had agreed the nuclear phase-out with the four major energy corporations — RWE, E.ON, EnBW and Vattenfall. In 2010, with a new CDU/CSU-FDP coalition, the corporations begin to reverse it. The method: intensive and well-funded lobbying. RWE CEO Jürgen Großmann is reported to have spent twelve hours a day on the phone during the summer of 2010, recruiting friends from politics and business for a pro-extension campaign — until he was hospitalized with heart problems.

On the night of 5 to 6 September 2010 the federal government negotiates by conference call with the boards of the four energy corporations. On the morning of 6 September Chancellor Merkel steps before the press and presents the extension as part of an “energy concept” — without mentioning that a written agreement with the corporations had been reached the previous night. The paper only becomes known when an RWE board member lets it slip at a press conference.

Opinion polls show 77 percent of Germans oppose an extension of 15 years or more. 48 percent oppose any extension. In October 2010, 100,000 people demonstrate outside the Bundestag. The law passes regardless — with the votes of CDU/CSU and FDP.

The epilogue is expensive: after Fukushima, the federal government reverses the extension in 2011. The Federal Constitutional Court rules that the corporations must be compensated for unused residual electricity quotas. In the end the taxpayer pays around 2.43 billion euros — for profits that had been promised to corporations in a single night's negotiation, and that they ultimately could not realize.

V. The Counterexample: The Company with Asset Lock

Since 2019, entrepreneurs, legal scholars and business associations have been pushing for a new legal form: the company with asset lock (Gesellschaft mit gebundenem Vermögen, GmgV). The concept is simple: profits remain in the company, cannot be distributed, the company serves its purpose — not the short-term capital interests of its owners. For medium-sized businesses with succession problems, for values-oriented founders, for social enterprises, this would be an urgently needed option.

The 2021 coalition agreement promises the introduction of a corresponding legal form. Not implemented. The 2025 coalition agreement between CDU/CSU and SPD promises it again. In March 2026 Justice Minister Hubig and Finance Minister Klingbeil present a framework concept — explicitly described as a “discussion proposal not yet coordinated within the federal government.” No draft law, no timetable, stakeholder consultation still pending.

Support is not lacking: more than 20 business associations have taken a position, the Conference of Justice Ministers and the Conference of Economics Ministers of the federal states have called on the federal government to act, and three leading economists — Hüther, Fratzscher and Feld — are publicly unanimous in their support, which in Germany is a rarity.

What is missing is the fuel. The GmgV has no lobby telephoning twelve hours a day. No law firm writing a draft in a single night. No Ramackers in the ministry. No 83 billion in unsecured loans threatening the system.

But there is something else that is missing — and this is the decisive point: there is a lobby working against the GmgV. And it has plenty of budget, networks and access.

VI. The Unspoken Argument

The official criticism of the company with asset lock runs: tax privilege, inadequate governance, a kind of foundation without foundation supervision. These arguments are advanced by business associations, by parts of the CDU/CSU parliamentary group, by the Scientific Advisory Board of the Federal Finance Ministry. They sound technical. They are not.

The framework concept of March 2026 has explicitly ruled out tax privilege: the GmgV is taxed like a GmbH. The governance question is addressed through cooperative law and an audit obligation. The foundation supervision analogy is wrong — a GmgV is not a charitable body, but a commercial enterprise with a different ownership logic.

The real argument is never stated — because it would be too honest. It is: unfair competition.

A company structured as a GmgV does not have to distribute profits. It has no return pressure from capital owners. It can reinvest every euro earned — in research, in personnel, in pricing. With otherwise equal conditions it is structurally better positioned than a conventional capital company: it thinks longer, invests more, needs to deliver no quarterly results. For a family entrepreneur who must pay out returns to his owners, a competing company with an asset lock is not an equivalent competitor. It is a structurally superior one.

That is what must be prevented. Not because the GmgV harms the common good — but because it harms private interests. CDU/CSU, traditionally the political home of family entrepreneurs, allows itself to be harnessed to this cause. The official objections are the disguise. The motive is protection of the existing capital model from competition.

The evidence is in plain sight: Mondragón. The Basque cooperative group, with over 80,000 employees, is the largest industrial conglomerate in the Basque Country and one of the most successful corporate networks in Europe. The core of the model: profits are not distributed to external capital owners, but remain in the system — as capital reserves, as investment in new business areas, as insurance against crises. The result is structural competitive strength: Mondragón can invest longer, price more aggressively and weather crises better than comparable capital companies. Those who oppose the GmgV know this. That is precisely why they oppose it.

That is the real dishonesty of the debate. Not that a law is slow to progress — that is normal in Germany. But that those who are delaying it pretend to do so for reasons of constitutional law or fiscal prudence, while in reality protecting their own market position. The machine is working here too — only this time not to create a law, but to prevent one.

VII. The Structure of the Machine

The three cases look different at first glance. Bank rescue, tax fraud, energy policy — different sectors, different mechanisms, different timeframes. But they share a common structure.

First: the legislator does not possess the necessary knowledge itself. It purchases it — from the same experts who represent the interests of those being regulated. Freshfields writes the bank rescue law. Ramackers formulates for the banking association what the Finance Ministry should write into the Cum-Ex legislation. Energy corporation representatives sit on the working groups preparing the energy concept.

Second: the power to establish urgency is decisive. Banks can threaten the system. Energy corporations can call energy security into question. This creates genuine urgency — and a climate in which critical questions seem like a luxury. Who asks who wrote the law when the system is collapsing?

Third: the revolving door between business, consulting and administration is not an exception but a structural feature. Since 2017 the federal ministries have collectively spent more than one billion euros on external consultants. In 2023 alone it was 239.4 million euros. These consultants come from the same firms that simultaneously advise the companies to be regulated. This is not an accusation against individual people. It is system logic.

Fourth: transparency is actively prevented. The Finance Ministry refuses to disclose the Freshfields fee. The agreement with the energy corporations in the nuclear night is concealed. The Cum-Ex cases go unpursued for years, relevant information is not passed between authorities. In each of these cases the result was that the beneficiaries had more time to profit.

VIII. What the System Costs

The direct costs are measurable. The bank rescue: at least 21 billion euros from taxpayers. Cum-Ex: at least 31.8 billion euros stolen. The nuclear compensation: 2.43 billion euros for promises negotiated in a single night.

The indirect costs are harder to calculate. What does it cost when medium-sized businesses wait seven years for a legal form that would solve their succession problems? What does it cost when renewable energy investments are held back for years by artificially extended nuclear plant lifetimes? What does it cost when trust in the legislature erodes, as more and more people understand how laws are really made?

These costs are not visible. They are distributed across millions of people, across years, across unrealized possibilities. They appear in no balance sheet. That is precisely why they are tolerated.

IX. What Would Need to Change

The diagnosis is clear. So is the solution — though not easy to implement.

First: those who write laws may not have conflicts of interest. Law firms that represent financial corporations may not simultaneously draft financial market legislation. Consultants who advise energy corporations may not simultaneously shape energy policy. This is not merely an ethical demand. It is the precondition for laws that serve the common good — rather than the interests of those who wrote them.

Second: transparency must be the standard, not something extracted by court order. Those who contributed to a law must be named. Who was paid for what must be public. The lobbying register that has existed in Germany since 2022 is a first step — but it captures only a fraction of the influence, and it has no consequences.

Third: urgency may not be a blank cheque. The Financial Market Stabilization Act was passed in five days without anyone asking who profits and who pays. In retrospect it became clear: the beneficiaries are the financial institutions. The payers are the taxpayers. A minimal transparency obligation — who worked on this law, whose interests do they represent — would have been possible even in the rush, or could have been made mandatory retroactively.

Fourth: the state must build its own knowledge — and stop purchasing it from the same consultants who simultaneously represent those being regulated. This costs money. It costs less than the alternatives.

The machine cannot be switched off. But it can be regulated. The question is whether those who are supposed to regulate it have an interest in doing so — or whether they are themselves part of the machine.