REGULATING LOBBYING CONTINGENCY OR SUCCESS FEES

Under a contingency lobbying contract, as opposed to a flat fee or hourly compensation arrangement, the lobbyist is paid only if the governmental decision he or she is attempting to influence is resolved in favor of the client.

In the United States, the U.S. Supreme Court, in several older opinions, has found that such arrangements are against public policy based on the concern that a lobbyist may be tempted to resort to any means necessary to achieve his goals when his compensation is at stake. The concern is not based on the amount of compensation, but on the fact that the lobbyist will not be paid unless he is successful. There is the additional concern, when the contingent fee is based on a percentage of the funding received from the government entity, that the lobbyist may seek to obtain more funding than is actually needed, at the expense and to the detriment of the taxpayer. Improper influences could take many forms ranging from the use of personal influence to bribery. Even if no illegal tactics are employed, the financial pressures caused by the contingent arrangement could lead to more subtle activities such as embellishing or hiding pertinent facts in an attempt to influence a decision maker.

Although there is no general federal law expressly barring all contingency fees for successful lobbying before Congress, there is a long history of judicial precedent and traditional judicial opinion which indicates that such contingency fee arrangements, when in reference to “lobbying” and the use of influence before a legislature on general legislation, are void from their origin (ab initio) for public policy reasons, and therefore would be denied enforcement in the courts.

Federal regulations governing contractors who lobby for government contracts specifically prohibit contingency fees on the grounds that they may induce lobbyists to exert "improper influence" on public officials, in other words, inducing someone to act on any basis other than the merits of the matter. On the state level, 43 states prohibit the practice.  A majority of legislators seem to agree that legislation should be prompted solely from considerations of the public good, and agreements for compensation contingent upon success suggest the use of corrupt means for accomplishing the desired end and undermine the public confidence in government

Impact of ban on Contingency Fees

• Incentives for lobbyists to exert undue influence to secure contracts is removed, or substantially ameliorated, increasing public confidence that contracting processes of Government are fair, competitive and delivering value for money.
• Increase in public confidence regarding access to Government. The ban on success fees clearly communicates that access to Government is possible without having to pay success fees to lobbyists to ensure that your interests are presented.
• More ethical lobbying industry. Banning success fees reduces incentive to use unethical methods significantly, as the financial pay-off from using unethical methods is reduced. Client engagement may therefore be undertaken more ethically in the industry.
• Increased public confidence and the likelihood of better public policies and decisions across government activities generally.
• More level playing field in policy making and politics: Improve public perceptions of the neutrality of Government when dealing with varying stakeholder interests. A more level playing field in policy making and politics is achieved by removing the incentives for some lobbyists to exert undue influence. By removing these incentives, the ability of all stakeholders to present their input into policy making and politics whether using a lobbyist or not is improved.
• The general community, parties dealing with Government (such as tenderers and lobbyists) and Government benefit from a more level playing field in policy making and politics because there is less risk of distortion of decision making based on exploiting contacts in an unethical manner. The importance of neutrality and accountability of government and the public perception of neutrality and accountability is demonstrated by the government funding directed to institutions dedicated to integrity, transparency and equity of Government and public policy.